This article is a part of Background Paper : A Nation in Decline?, which will be presented in Thailand Future Forum #4  co-organized by Thailand Future Foundation and the Economic Reporters Association on 17 October 2013  at the Royal Meridien Plaza Athenee, Wireless Road


Is Thailand in decline?  3 emerging symptoms

In 1960, GDP per capita in the Philippines was twice that of Thailand but by the end of 2012, GDP per capita in Thailand was twice that of the Philippines.    The divergence between Thailand and the Philippines really took place as recently as the mid-1980s.  Thailand, along with other countries in the region, experienced an extended boom period during the 1980s when its growth averaged 7%, significantly higher than the 2% of the Philippines. 

So is Thailand in decline?   Is the 2010 decade going to be for Thailand what the 1980s were for the Philippines, an extended period of underperformance during which we gradually lose our position?  The short answer is “it depends.”  More precisely, it depends on us.  On what we decide to do (or not to do!).   There   are already some worrisome and reasonably clear symptoms of decline.  But if we are willing to honestly appraise, confront and deal with our problems rather than push them into the future then the decade could be a stellar one.  But if we continue to do what is expedient in the present rather than what is needed for the future then we may look back upon 2010 as another “lost decade.”

Is a country just going through a temporary period of weakness which will reverse itself, or is it only the beginning of a sustained decline?   It is typically not easy to tell until one looks back with the benefit of hindsight, and by then it is too late.   In the case of Thailand, to use a medical analogy, while we might not know what and how serious the underlying illness of the patient is, we can see that it is manifesting itself in the form of at least 3 symptoms which clearly indicate that all is not well with the patient’s health.  

  • Symptom 1: Shrinking share.  One early sign of a company in decline is shrinking market share.  While a country is not a company, we can take a look at the country’s share in world trade and investment to see how our global footprint has evolved.  If we look back over the past 20-plus years, Thailand’s overall share of global exports decreased from 1.7% to 1.3% between 1990 and 2012.    We went from the 15th exporter in the world to the 22nd.   While we have done quite well in some new areas like auto parts, our traditional export mainstay, rice, has seen its share drop from 69% to 21%.  

    In foreign direct investment (FDI), the picture is less sanguine.  Thailand’s share of global FDI dropped from 1.2% in 1990 to 0.6% in 2012, the same as that of Vietnam.  Keep in mind that Vietnam’s economy is still only a third that of Thailand, and that just 20 years ago FDI into Thailand was over 13 times that of Vietnam.   This lackluster performance reflects our declining relative attractiveness as a FDI destination.

  • Symptom 2: Lagging our counterparts.  Aside from looking at market share, it is standard practice for companies to benchmark themselves against their key competitors.  The short message: while we seem unable to close the gap with Malaysia, Vietnam has done a better job of trying to catch up to us.

    Thailand v.  Malaysia.  In 1990, Malaysia’s GDP per capita in USD (constant 2005 PPP) was about 1.7 times that of Thailand.  In 2012, it was still 1.7 times higher.  There are several reasons for this, but one worth highlighting is that Malaysia has done a better job on the technology and R&D front.  Malaysia managed to increase its spending on R&D as a share of GDP from 0.2% in 1996 to over 1.0% in 2009, about 4 times that of Thailand (0.24%).  It also has over 3 times the number of researchers per labor force as Thailand.  Malaysia’s ability to pay more attention to such longer-term issues probably has to do at least in part with its far greater political stability.  While all of Malaysia’s Prime Ministers have come from the same party since 1957, Thailand has had 6 different governments over the past 10 years alone.     
     
    Thailand v. Vietnam.   Vietnam’s GDP per capita went from less than a quarter of Thailand’s in 1990 to well over a third by 2012.  Again, while there are numerous reasons for this, we would like to highlight just one.  Vietnam has done quite a commendable job in the area of education for its level of income and development.  It spends a higher share of GDP on education (6.6%) than Thailand (3.8%).  
  • Symptom 3:  Areas where we excel.  How are we doing relative to the broader region and the world?  Despite all the hype about getting ready for the AEC, Thailand still ranks 53rd (out of 54) (1) in English language skills.  Despite all the rhetoric about moving up the value chain and becoming a knowledge economy, we rank 62nd in R&D spending as share of GDP (2).  Despite all the billboards exhorting us to fight corruption, we rank 88th out of 176 countries in corruption perception index (3).  And we rank an astounding 168th in energy intensity or how much energy we use to produce our GDP (4).  Only 31 other countries in the world use energy less efficiently than we do.  These include oil producers like Iran, Russia, and Bahrain.  But unlike them we are a country which has to import much of our energy and electricity.

    It can be argued that we might have been uncharitable by picking those areas where we rank low.  Indeed, there are several areas where Thailand excels.  We are #1 in Asia for adult HIV infections prevalence rate (5),    #2  in Asia for income inequality and #2 in ASEAN for teen pregnancies (6) .   #3 globally for deaths from road accidents (7).   And #4 globally for number of military coups (8). 

 

How did we lose our way?  When (and why) did we start losing our attractiveness as a destination for FDI, lagging our counterparts, and generating world-class performance in such areas as inequality and energy inefficiency?    In next article, we will review some of the key developments across different dimensions of the country’s 20-year development experience.



Source:
1)  Ranked by EF (TOEFL test institute), year 2012
2)  web site : wikipedia.org
3)  Transparency International (2013)
4)  Energy Information Administration (EIA)
5)  CIA World Factbook
6)  UNFPA (2012)
7)  Global Health Survey, WHO
8)  Center for Symtemic Peace, refer on www.whereisthailand.info