Development Traps in Thailand

The kingdom of Thailand,(formerly Siam) also known as the land of smiles is a hot, humid country located centrally in the  Indochinese Peninsula. Currently, the nation Is a constitutional monarchy and has suffered political turmoil for years, switching between parliamentary democracy and military Junta at various points. The latest coup was in 2014 led by Prayut Chan-o-cha leader of the National Council for Peace and Order and the current prime minister.(NESDB 2014) The Thai economy ranks amongst some of the worlds highest, ranking 20th by GDP and PPP.  Thailand is considered to be an emerging economy with it being listed as a newly industrialized country. This means that the country has outpaced its developing counterparts, but has not as of yet in a macroeconomic sense reached the economic level of a fully developed country(ONESD 2013).Thailand is one of the ‘tiger cub economies’ along with Indonesia, Philipines, Malaysia, and Vietnam. These are the five dominant countries in Southeast Asia. The name ‘tiger cubs’ comes from the four ‘asian tigers, namely: Hong Kong, South Korea, Singapore and Taiwan. These are the four countries with the highest developed free market economies in Asia. The ‘tiger cubs’ attempt to follow the same export driven and developed economies of the ‘Asian tigers.’ (Asian Market Research 2013). Thailand has come a long way and overcame much political and economic turmoil for the country to be where it is now. The World Bank recognized Thailand as “One of the greatest development success stories” in social development indicators.(World Bank 2012). Thailand has now however reached a standstill as Thailand is facing a number of development traps.

 

Development traps are common in developing countries , and according to Paul Collier,  it is where they ‘ got caught in one or other of the traps’ that can impede development.(Collier 2008). It can be seen in a country such as Thailand that it is not any one development trap alone that has held Thailand back but rather the interconnectedness of a number of traps working together to suppress growth. Issues such as poverty, governance, geography, demography, and conflict. Many of the poverty traps are  interconnected for example when it comes to the demographics of a country it shows the relationship between poverty and fertility has much to do with ‘trapping a country’ in poverty. A high population growth leads to deeper poverty, and deeper poverty contributes to higher fertility rates. (Sachs 2005) Therefore countries are left with both high mortality rates and are unable to feed the children sufficiently that they do manage to have. The demographic trap comes into play because of the geographical trap which shows how a countries geographical locations affect it in a number of ways. This can be seen when a country may be landlocked and must rely on neighbouring countries for dealing in the overseas trade. Even if a country is not landlocked, then there is still the issue of living in a very hot environment as Kay said in 2003 ‘productive economies are cooler … there are no rich states in the tropics’.(Kay 2003) This is due to a number of reasons such as how the chance to efficiently farm is seriously diminished due to the bacteria in the soil working faster. People working in hot climates also face a number of diseases and even if they are unaffected they still have to work in the hot and humid location of their country. It is proven that human productivity declines as heat rises.

 

 

Thailand has met many of these development traps in a number of ways. Due to political unrest and the coups in 2006 and 2011.The GDP growth was brought down for years and was therefore the country was unable to develop many initiatives that were planned during those times. There was also the ‘rice scandal’ between 2011 and 2014 which severely affected farmers. With 40% of the Thai GDP being contributed by agriculture this was a harsh blow for Thailand. This, in turn, led to another coup which affected economic growth even further. It shows that poverty traps in Thailand lead to governance and conflict traps which affected the poorest in society even further. Some of the  people that suffered most were the farmers in Isaan for example,Isaan is  known as the least developed part of Thailand. The farmers in Isaan were already suffering from poverty, geographical and demographics traps. Now the main development trap facing Thailand is the ‘middle-income trap, this is a term which has become popular over the last several years and refers to an invisible ceiling that developing countries often hit.(Tamaki Kyozuka 2016).In Thailand, this means that its wages have become too high for it to compete against other low wage, low-income nations. This, in turn, has led to low investments, slow growth, limited industrial versification and poor labor market conditions.(Wharton,2017).The government is planning to combat Thailand ‘middle-income trap with deep government investments and offer incentives in infrastructure in the hopes of luring foreign investment, thus leading to a range of top-down initiatives and ‘Thailand 4.0’. (Wharton,2017).

 

Thailand has been facing numerous development traps for years. There needs to be significant roles played by both the market and the state in Thailand to help people climb out of them. The movement towards Thailand 4.0 is a bold initiative by the government. Thailand 4.0 is an economic model without much basis on how to get over Thailand’s ‘middle-income trap.’ Thailand will need the support of foreign specialist to make 4.0 a reality. Professional associations in Thailand among others totally oppose this, however, wishing to keep professional jobs for Thais only. The state must also have much stronger anti-corruption policies, as corruption has plagued the country for years; holding the country back in numerous ways. The market also plays a vital role in helping people to escape these traps by ensuring the coordination of any innovation. Both the supply and the demand. As well as providing the opportunity cost of any action is not too high. People from all communities must also be able to access the market easily. Most importantly of all though people must have trust in the market, that is essential.

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