Thailand ‘stuck’ in middle-income trap


Thailand is at risk of remaining in the middle-income trap for at least another 20 years, despite a likely compound growth rate of 4-5 per cent per year, the Thailand Development Research Institute said.

The TDRI said the country must specialise in either manufacturing or services with a certain development direction to escape the trap. Nonarit Bisonyabut, a TDRI researcher, said there were signs that Thailand would be trapped for a long time. Nonarit said they included a 2-per-cent decline in the medium- to long-term average growth after the 1997 Asian financial crisis and hardly any change in the proportion of value added in the agriculture, manufacturing and services sectors.

He said based on the compound growth rate of 4-5 per cent per year, Thailand was not expected to become a developed nation for at least another two decades, while it also faced internal and external threats such as a global economic crisis and an ageing society that could drag down economic expansion. The country was also in the late period of an intermediate economic restructuring and was experiencing slow growth compared to developed countries, while Malaysia was going to escape the middle-income trap before the Kingdom. Nonarit said that based on a study for economic restructuring in countries, specialising in either manufacturing or services was vital to receiving developed nation status.

The United States, Japan and Taiwan had specialised in service to do that, while South Korea specialised in manufacturing with brands. Spain became a developed country through economic restructuring in manufacturing without concentrating on a single area.

Nonarit said most countries that remained in the middle-income trap after an economic restructuring chose the last example.”The [Thai] government has to select the proper economic restructuring to push Thailand to a high-income country,” he said.He added: “If Thailand wants to be good at everything, there is not much chance of it escaping the middle-income trap.”



First published: The Nation, October 11, 2014