The Opportunity for Thailand to Move Toward A High-Income Economy

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Thailand can be developed into a high-income country due to its location in Asia where the economic growth rate has been increasing continuously. It is proven that the 19^th century was known as the “British Century” and the 20^th century was known as the “American Century.”  The 21^st century was predicted to be the “Asian Century” thus giving the Thai economy opportunities to expand in a number of ways.

“An opportunity to reach the big markets”

The Asian Development Bank estimated that Asia will be the biggest economy in the world. The GDP of Asia is likely to increase to 52 percent of the world’s GDP in 2050. Also, the GDP of the new market will triple and accounted for 46 percent of the world’s GDP. The GDP of China and India in particular would represent 30 percent of the world’s GDP.

For Thailand, the opening of the ASEAN Economic Community (AEC) in 2015 which allows free markets will give Thailand a chance to export more products to the Southeast Asian market. The AEC plans to expand the market in China, Japan, and South Korea under the ASEAN +3, and with India, Australia and New Zealand as ASEAN +6 as well. With advance preparations, China has declared the 12^th economic development plan and changed would be made from the dependence on foreign investment policy to reliance on the domestic consumption. This would allow Thailand to gain more chances to expand their market into China using this policy. So, China will become the main market of Thailand replacing U.S. and Europe.

“An opportunity to reach consumers with high purchasing power”

The majority of population in Asia tends to be the middle class having purchasing powers. Many studies claimed that the middle class population will increase to 2 – 3 billion people in the next 20 years from 1.8 billion people in 2009. Of these, more than half are in the Asia-Pacific.

The enlargement of the middle class will be a cause of change in consumption patterns, from consumption for necessity of life to consumption for other purposes. Usually, people demand cheaper goods but now they have begun to desire more high-quality goods. As a result, the market demand for more variety of goods is an opportunity for Thailand. Even though Thailand is losing its advantages in export of primary and cheap products, it can still produce a diversity of goods and the quality of Thai export products has been accepted by its neighboring countries.

“An opportunity for direct foreign investment”

The countries in Asia including Thailand have chances to gain investments from other countries with the following reasons.

Firstly, Asia has an expanding and large market while the Western market has lower growth rate.

Secondly, Degree of openness between Asian countries tend to increase which attracts foreign investors.

Thirdly, Asian investors are more likely to invest in neighboring countries in order to seek new business opportunities and to move a production base to lower-cost locations.

Finally, powerful countries like Japan and China are competing to have more influence in Southeast Asia as we can see Japanese and Chinese government have given financial aids and financial capital continuously for many Southeast Asian countries. At the same time, the U.S also pays more attention to these countries as well.

“An opportunity to develop new economic zones”

The development of the transportation infrastructures to connect between countries will lead to the development of the new economic zones and the development of areas and communities along these lines as well. It is predicted that the AEC will invest in the infrastructures for up to 8 trillion U.S. dollars in the next 10 years. This could be the greatest opportunity for Thailand because these projects will cost a lot of money to build and operate. Therefore, the benefits will be with companies like the consultants, explorers, designers, contractors, construction makers, real estate’s developer company, and small entrepreneurs.

About the transportation infrastructures connection, there are 3 ways of ASEAN to connect.

Firstly, the physical connection such as the infrastructures of transportation plan in ground, water, and air. Also, energy like electricity lines and natural gas tubes and the network of information technology are also a part of the infrastructure of information technology.

Secondly, the connection of laws and regulations. For example, to liberalize and facilitate trade, investment and service, to facilitate cross-border movement of goods and multimodal transport and to simplify the customs declaration procedures.

Thirdly, the link between people. For example, to promote the study of languages in ASEAN countries as the third language, to support the exchange of the education system, the promotion of travelling in ASEAN and the exceptional Visa system.

“An opportunity to become a regional hub”

The AEC makes Thailand a door to ASEAN because Thailand is located in the central of Southeast Asia which can connect many neighboring countries. Thus, Thailand has the potential to be the center in many dimensions such as:

Trade and logistics hub. The development of infrastructures will support Thailand to be trade and logistics hub of this region. Here is an example: 1) the Pan-Asia railway. It consists of 3 main routes which China plans to connect their railway system from Kunming to Myanmar, Lao, Vietnam, and Cambodia. To make a complete and perfect connection, all 3 main roads need to connect to the Thai railway system. 2) The motor ways and the railway connected between Dawei Port and Laem Chabang Port. There is also a plan to expand this route from Vietnam and Cambodia which can shorten the distance of transportation for 3,500 kilometers as shipping don’t have to go through the Strait of Malacca.

Tourism hub. In this area, Thailand has a chance to be the tourism hub because Bangkok has won the best city for tourists for a number of years because of variety of tourisms resources, a unique history and culture, a great service with a low budget tour and the availability of facilities provided. For now, number of tourists in Thailand is in the second rank in ASEAN after Malaysia. Many of the tourists come from western countries. When the infrastructures that connect between ASEAN countries is done, number of tourists in Thailand will increase because Thailand is a center of tourism and travel in this region.

Medical, health and beauty hub. Thailand has the potential to be a central medical, health and beauty hub because there are many first-class medical schools and private hospitals that are successful in providing medical services to many foreign people, the international standard beauty center with the potential doctors, and all comes with great service and a reasonable price.

In conclusion, Thailand has a big chance to be a high-income country. However, will Thailand be able to grab this opportunity depends on the right policy strategy as well as the government with good governance, the strong private sector, and the citizens to work to prepare, plan, and achieve it together.

Kriengsak Chareonwongsak
Senior Fellow at Harvard University’s Center of Business and Government.
kriengsak@kriengsak.com, http://www.kriengsak.com 
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