Foreign direct investment. Tax incentives. Cheap labour. For decades, this has been Thailand’s industrial playbook for driving economic growth. It once delivered growth. Today, it no longer works—because it traps workers in low-skilled jobs and fails to improve most people’s lives.

The numbers tell the story. 

While the Board of Investment boasts of attracting trillions of baht in investment, people’s well-being is moving in the opposite direction. Household debt has surged to 86.3% of GDP. Unemployment among new graduates aged 20–24 is the highest in the labour market. Small and medium-sized enterprises are increasingly unlikely to survive beyond three years.

The message is clear. Thailand needs a new industrial policy to spread benefits more widely, upgrade workers’ skills for high-value investment, strengthen domestic businesses, and improves people’s quality of life.

Why it fails

Thailand is stuck as manufacturer, producing for others instead of owning technology or building brands. Growth comes from export volume, not value. Skills stay low, wages lag, and the economy struggles to move up the ladder. 

Furthermore, Links between global firms and local businesses are weak. Even global tech firms such as Qualcomm invest in Thailand only in marketing, not in high-value activities like chip research and development. 

Capital may still flow in, but good jobs do not follow. Trickle-down remains a myth.

The problem goes beyond an outdated growth model. Industrial policy is stalled by weak processes for choosing and developing industries. In agriculture, short-term subsidies dominate, with little improvement in competitiveness. In tourism, heavy spending on promotion is not matched by efforts to raise service quality and professional standards.

Meanwhile, the global context has shifted. High-tech investors now prioritise skills, innovation, regulatory quality, ease of doing business, and policy stability over tax holidays. This shift will only accelerate as OECD rules require multinational firms to pay a minimum corporate tax of 15% wherever they operate.

Thailand cannot keep using old tools in a world that has already moved on.

New growth engines

Thailand does need new growth engines, but haste carries risks.

As growth slows, governments rush to pick “new growth engines” without proper feasibility or cost-benefit analysis. The ambition to become an EV hub is a case in point. Domestic parts suppliers were unprepared, leaving high-value components largely imported as demand rose. The proposal to legalise casinos followed a similar path, floated without a serious assessment of economic or social costs.

Big investment figures can also mislead. A 100-megawatt data centre, costing about 33 billion baht, sounds impressive. In reality, most spending goes to imported equipment, from chips to cooling systems. It may employ only about 50 people, while consuming 1,140 GWh of electricity a year — roughly the same as 1.3 million people — and 2.55 billion litres of water, enough for 35,000 people.

New industries are not the problem. Choosing them too quickly without ensuring domestic value and real benefits for people is.

New approach

A new industrial policy must put good jobs at its centre — jobs that pay well, build skills, raise productivity, offer real mobility and strengthen Thai firms from within. 

The tools must also change. Heavy reliance on tax incentives is costly, while small firms do not benefit from them. Policy should instead tackle real bottlenecks faced by firms of all sizes. In return for state support, companies must deliver concrete outcomes such as skills upgrading, technology transfer, and better-quality jobs.

Processes must also improve. Industrial policy needs rigorous cost–benefit analysis that goes beyond direct fiscal spending or lost tax revenue. Indirect costs such as environmental damage, social impacts, and opportunity costs must be counted.

On the benefit side, the focus should be on value that stays in Thailand: wages for Thai workers, profits for Thai firms, and future tax revenue. 

Regular evaluation is essential, along with the flexibility to adjust, or end, what does not work. State agencies must also move in the same direction, with close dialogue with the private sector so policy reflects real economic conditions.

Only then can industrial policy move from attracting capital to creating lasting value at home.

What does this new approach look like in practice? Three industries stand out: printed circuit boards (PCBs) in foreign direct investment, pet food in domestic investment, and wellness tourism in services.

High-tech manufacturing 

Thailand is benefiting from factory relocations and rising global demand for PCBs, driven by AI and advanced electronics. BOI approvals in this field have exceeded 200 billion baht over the past three years. But tax breaks alone are no longer enough when the real constraint is advanced skills.

A smarter FDI strategy would focus on human capital. Government should work closely with investors to identify skill needs, co-invest in training, and negotiate incentives project by project to maximise national benefit. The goal is not just to attract factories but to sharpen skills, strengthen local firms in global supply chains, and raise wages.

Pet food industry

Thailand is the world’s second-largest exporter of dog and cat food, with exports worth US$2.68 billion — up 29% year on year and about 10% of global trade. Yet many firms remain contract manufacturers, producing for foreign brands. 

The reason is weak innovation support. Testing labs, product development services, and branding assistance remain limited, especially for SMEs. 

Here, tax breaks miss the point. What firms need are innovation funding, matching grants, market research, and support to build Thai brands and enter premium pet food markets.

A new approach must shift from volume to moving up the value chain. That means R&D and innovation support, particularly for SMEs, technical and regulatory services, and export assistance to help Thai brands compete globally.

The gains are tangible: quality jobs for food engineers, animal nutritionists, and brand managers; higher profits and tax revenue from stronger Thai firms; and strong agricultural supply chains that raise farmers’ incomes. Done right, jobs and profits stay at home.

Domestic investment policy should focus on industries where Thailand already has strengths, such as food. But success requires tailored support, not blanket tax breaks.

Wellness tourism 

Wellness tourism has strong revenue potential and employs a large workforce. By 2025, the sector is expected to generate 677 billion baht and involve over 90,000 businesses.

Yet most jobs in the sector are still low-paid. Policy has focused on attracting more visitors, not on improving skills or service quality. As a result, Thailand lacks key specialists such as physiotherapists, making it harder to compete at the global level.

The fix is straightforward. Invest in people. Raise professional skills. Set clear service and safety standards, with targeted support for SMEs. Crucially, health and tourism agencies must also work closely with the private sector toward shared goals.

This will cost money for training professionals, upgrading standards, easing pressure on public healthcare as wages rise, and managing environmental risks like waste. But the gains are clear: better jobs, higher wages, stronger firms, more tax revenue, and spillovers to other sectors.

Asking right question

For years, Thailand has asked the same question: which industry should we promote next?  That misses the point. The real issue is how policy is designed and who benefits.A real growth engine is not measured by investment totals but by whether it builds skills, raises incomes, and improves everyday life.

Thailand faces a clear choice: cling to an old model that no longer works, or build a new one that puts people at the centre of growth.

The economy may grow either way. The question is whether Thai people grow with it.

Putthiphan Hirunyatrakul , Ph.D. and Nopparuj Chindasombatcharoen, Ph.D. are Research Fellow at the Thailand Development and Research Institute (TDRI).