Reorienting the Thai Economy to Prepare for the Age of Technological Disruptions

Whether Thailand likes it or not, the country will have to face up to the challenges of disruptive technology, which has already radically affected many sectors of the Thai economy, from agriculture and industry, to services and the professions. Unfortunately, it seems Thailand has not been given clear direction about how to confront this challenge.

In 2018 the Thailand Development Research Institute (TDRI), at its annual conference, “Reorienting the Thai Economy to Prepare for the Age of Technological Disruptions”, presented a study that offered advice to all parties involved – government, business and the public sector – about how to prepare themselves for the changes. It was at least partly aimed at helping the government to design public policy in line with the era of disruptive technology.

Dr Somkiat Tangkitvanich, president of the TDRI, started the presentation by saying that computing technology, which includes sensors, big data, artificial intelligent (AI) and cloud computing, is revolutionising the world. He pointed out that last year an advanced AI program called Libratus, an AI computer program design to play Poker, succeeded in out-smarting the world’s three best human poker players and a Chinese robot called Xiaoyi easily passed the country’s national medical licensing exam.

Many countries want to become superpowers in AI, said Dr. Somkiat. Interestingly, they included Asian ones – such as China, South Korea and Singapore. China announced a manufacturing strategy which it called “Made in China 2025”, which became known as the Chinese version of the Fourth Industrial Revolution that fuses the physical, digital and biological spheres of technology. China has poured massive capital investment into this strategy. The TDRI is worried that Thailand does not have a clear strategy and investment plan for AI, Dr. Somkiat said.

Disruptive technology affects different individual sectors at different levels of intensity. It has massively shaken up transportation, energy, telecommunications, media and entertainment. Others, such as tourism, healthcare, manufacturing, finance and retail, have also been jolted hard. But, sadly, public services and education have been only slightly shaken.

The TDRI outlined different scenarios for what could happen to Thailand under the impact of disruptive technology. One scenario was that the Thai government was aware that the country faced disruptive technology. Therefore, it introduced measures to deal with the disruption by announcing the ‘Thailand 4.0’ policy and infrastructure development plan under the Eastern Economic Corridor (EEC) aimed at attracting foreign investment by introducing incentive schemes, just as it had done in earlier years. Dr. Somkiat said he was worried that one mistake of the past that could be repeated was that the lack of highly skilled labour would discourage investment in high-value added projects such as research and development.

He said focusing only on the Thailand 4.0 policy might save Thailand from serious damage caused by disruptive technology, such as limiting the flood of advertising money out of the country into the coffers of global social media platforms. However, it could not adequately respond to all the challenges that the country was facing because it did not include a strategy that would link AI with investment, as Singapore has done. There is no plan to create new jobs for those people whose existing employment is disrupted by technology.

According to the TDRI’s study, in the first scenario, together with the government’s failure to deliver under its ‘Thailand-20-year-strategic plan’ (2017-2036), the country’s GDP (gross domestic product) would average 3.1% per year and income per capita would reach US$10,300. These are below the government’s target of 5% annual GDP growth and $15,000 per capita income at the end of the plan in 2036. This would mean Thailand would not be able to escape the so-called ‘middle income trap’.

In the TDRI’s worst-case scenario, Thailand could not respond adequately to disruptive technology and thus GDP growth would average 2.1% per year over the next 20 years and per capita income would be around $8,600 in 2036 and around 3 million jobs would be lost.

The TDRI proposed a so-called ‘economy for the future’ model involving a clear-cut AI strategy on top of the Thailand 4.0 plan. It should link foreign direct investment to local innovation and create new jobs (around 1.5 million jobs could be replaced by technology according to the previous scenario) based on what it calls the ‘3C economy’ (craft, creative and care). Incomes for new jobs in the 3C economy would jump by five times in 20 years.

In this scenario, together the craft economy (producing high-value added products rather than mass products by robot), the creative economy and the care economy (human touch), the Thai economy would grow 4.3% annually, income per capita would be $12,500 and the country would beat the middle-income trap.

To move toward an ‘economy for the future’ model, according to the TDRI’s study, Thailand would have to make serious changes to many things.

TDRI researchers Supanutt Sasiwuttiwat and Nuthasid Rukkiatwong found that in Thailand there are around 8.2 million people at high risk of losing their jobs, of which more than a half are workers with both low education and low income. They were highly likely to be the most affected by AI technology and robotics. These are mainly retail sales assistants, clerks, drivers, machine operators and manufacturing assembly workers. Even some professionals are at risk of losing their jobs, including lawyers (contract analysis, due diligence and discovery process), underwriters and radiologists. In the United States, it is expected that 47% of the workforce could lose their jobs because of automation.

The researchers re-emphasised that the 3C economy would be the answer, based on the human hand (craft economy), head (creative economy) and heart (caring economy). In addition to that, the government should play an important role in supporting training and encouraging workers to constantly re-invent themselves. In Singapore, for example, the government provided more than 24,000 skills training courses. It subsidised training course expenses by as much as 50-90% and compensated companies that allowed their staff to attend.

The researchers said that Thailand’s basic education system focuses too much on knowledge. Basic education for the 21st century needs to focus on attitudes, skills and teamwork. It is important for Thai children to learn about coding from when they are still young. The European country of Estonia’s technology education has become a successful model and Thailand should learn from it. In the latest PISA (Programme for International Student Assessment) tests, Estonia’s score for science ranked third out of 73 countries.

Social welfare systems with regard to work also need to be adjusted in a world disrupted by technology and rapid change.

Dr Worawan Chandoeywit, economics lecturer at Khon Kaen University, the TDRI’s research fellow Dr Wichsinee Wibulpolprasert and Dr Boonwara Sumano Chenpguengpown, said in their presentation that disruptive technology has affected both formal and informal workers. Some formal workers might be able to shift to informal work as disruptive technology allows them to work on an on-line platform, for instance.

Thailand’s 150-billion-baht Unemployment Insurance Fund is enough to cover compensation at the current rate of unemployment for seven years. If jobs are significantly disrupted by technology this period would be shorter.

Thailand does not have a proactive policy on employment and training. Many unemployed people do not look for training to improve themselves while some have turned to freelance work. As a result, Dr Worawan suggested that Thailand should utilise the fund to improve human capital. Unemployed workers should get a chance to attend training courses to improve their skills and get back into the labour market. They would then become taxpayers again. She said the government should encourage and support employers to share some of the risks by employing retrained workers and allowing them to experience their new technology. Also, the government could adopt Singapore’s policy on issuing untransferable training coupons. Both measures cost less than compensating unemployed workers. Moreover, the government should stop compensating workers who resign voluntarily.

The record shows that self-employed workers are reluctant to join the Social Security Fund, they said. Young workers do not have a long-term vision while others found that the welfare provided by the government was not attractive enough. In the future, if unemployment rises because of disruptive technology then the number of workers contributing to the Social Security Fund will shrink too.

Unfortunately, information about informal workers in Thailand is not good. The researchers suggested that the government start collecting data of online platform-based workers (such as Grab taxi and LINE MAN) as part of a pioneer project because those business operators already have databases.

Interestingly, disruptive technology such as blockchain and big data could help the country improve the social security system for the underprivileged and reduce corruption. As has happened recently, there have been many cases of corruption in government schemes because of human involvement. Suttipong Kanakakorn, the co-founder of WS3, said it has been proved that the less cash that is involved, the less corruption there is. Electronic money would go directly to the receiver. With technology, digital IDs could replace physical ID cards. The country plans to launch a national digital ID by the end of this year.

Among many factors, the state sector’s “attitude needs to be adjusted” significantly. Government’s policies and regulations should be designed appropriately, helping other sectors to adjust and cope with disruptive technologies, according to the TDRI study. Dr Deunden Nikomborirak, Research Director, and Tiensawang Thamwanich, senior researcher, said it seemed that the government’s attitude toward disruptive technology was unfavourable. Actually, it could improve the quality of life. Certainly, technology comes with risks, but the old-fashioned attitudes such as looking back and precautionary regulations need to be changed.

Dr Deunden suggested that the authorities should have forward-looking and risk-based regulation. They needed to understand technology and its impact very well. Also, policy makers and regulators need to do some experiments (‘regulatory sandbox’) to design proper rules and regulations which should be clear and up to date.

According to the IMD World Digital Competitiveness, Thailand’s ranking was not good in many significant aspects such as Labor skills , Scientific Concentration and Regulatory framework.

While Thailand is reluctant to deal with disruptive technology properly, for example its failure to arrive at a clear solution to ride-hailing applications, such as Grab Taxi and Uber, other countries in Asean, including Indonesia and Singapore, are quite clear. Indonesia’s government supported Go-Jek, a hyperlocal transport, ride-hailing logistics and payment start-up founded in 2010, while Singapore announced itself to be a hub for self-driving vehicles. Indonesia’s leaders announced that Go-Jek should be legal and made it happened.

According to Ms Tiensawang, there are no so-called ‘Unicorns’ (private start-up companies with value of more than a billion dollars) in Thailand. But there are some in other Asean countries, such as Indonesia, Malaysia, Singapore and even the Philippines and Vietnam. Most are launched in developed countries as well as in India and China.

Dr Deunden touched on ICOs (initial coin offerings), saying they are a tool for start-ups to raise funds since they do not require a proven business performance record. Anyone wishing to issue an ICO could sell their dreams and ideas to investors worldwide. But Thai regulators seem to have negative attitudes toward ICOs. She raised the question about attempts to collect various kinds of taxes on ICOs such as VAT, personal income tax and capital gains tax, saying this would discourage investors.

She concluded that the government should no longer regulate with a “mother/father knows best” attitude. The interests of newcomers are as important as those of old players. The government should have the courage to support technology and introduce only those rules and regulations that are absolutely necessary. It should not introduce price control schemes like in a so-called ‘nanny state’. Policy makers and regulators must be united, she said.