Wednesday, February 14, 2007

The Thai Economy: Do the Thais Get it?


'The China factor' now looms over Thailand

The pace of economic change in Thailand has accelerated as economic and competitive threats from China have become more pervasive, and Thai policy-makers and observers have recently begun voicing their concern about a phenomenon that economists call "the China factor".

"Private investment has not yet recovered, partly because of the China factor," Bank of Thailand Governor Tarisa Watanagase said recently. She said Thailand's capacity utilisation had been 75 per cent for a reasonable period and that this should have led to new investment like it always had before.

Investors now fear an inability to compete with China, so they are reluctant to put fresh investment into Thailand, she explained.

I don't think the Thais get it. To me it is amazing how China, which was a closed Communist state like North Korea just 30 years ago, is now an economic juggernaut that pulls in billions of FDI and exports billions of dollars worth of goods every year, and sitting on a trillion dollars of foreign reserves to boot. Look at what Singapore and Malaysia have accomplished in the last 50 years and Vietnam in the last ten years. Even Korea and Japan, which were totally devastated after World War II, are first world economies.

Thailand, on the other hand, has had a fairly open economy for the last 150 years, and it hasn't had the same political problems as the rest of Asia, like war and genocide, yet it is considered as something of a back water in many ways. If Thailand had done things the right way instead of the Thai way for the last 50 years or so, it should have become an economic powerhouse on par with Japan and have a higher standard of living than that of Japan and Singapore because there is no land problem in Thailand.

These Thai bureaucrats don't get that it is their myopia that is keeping Thailand in the Third World. Foreigners coming to Thailand have been complaining about the same problems for 200 years: xenophobia, greed and corruption, and the Thais general lackadaisical attitude towards doing business. Further, Thais have a poor education system and bad language skills. If it improved in this area alone, it could probably add a couple more points to their GDP. Currently, many of the educated, competent Thais who have all the qualities that can build the country have emigrated to the West, because they can no longer deal with the "Thai Factor," which is indifference, lack of integrity, and incompetence. I can think of ten middle-class Thai-Chinese families that I know who have emigrated to the US, and they are all even more wildly successful there than they ever were in Thailand, because they don't have to deal with the "Thai Factor."

I think the major problem Thais have is that they never think it is their responsibility for what happens to the country. And that attitude is reflected in this article. It frames the "China Factor" as a threat towards Thailand, as if the Chinese are intentionally being successful so that they can hurt Thailand. How about framing the problems in terms that Thailand should focus on its shortcomings and realize that it needs to get its shit together?

So I would say at the core of Thailand's problems lie two things: Lack of preparation or foresight (Indifference and incompetence) and a no responsibility "I am a victim" attitude (no integrity). If these Thai bureaucrats think that blaming the foreigners for Thailand's problems is going to turn Thailand into a successful country, they should probably reconsider their strategy.


Anonymous said...

In terms of Thailand's core problems, I would add a third point: a rigid social hierarchy in which those at the top feel very little compulsion to nurture, educate, train, or otherwise encourage less fortunate Thais.

Fonzi said...

I agree. The core problem is institutional.

What I mentioned are only products of the institutional problems.

Thais has the potential to have a great nation, but all that potential is waisted by an elite that is concerned with preserving its own political and economic power.