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Getting Thailand Back on Track with Growth and Prosperity for all

Over the past few decades, Thailand has made tremendous development progress. However, Thailand no longer stands out as the pack of other countries has caught up with it on virtually all dimensions.

Olivier Languepin

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A new World Bank report explores how Thailand can restart its economic engine in ways that benefit all people in the country and help protect the environment.

The report, “Getting Back on Track: Reviving Growth and Securing Prosperity for All,” is the first Systematic Country Diagnostic for Thailand, an assessment of the most pressing challenges and opportunities in ending poverty and boosting shared prosperity.

For more than a quarter century prior to the 1997 Asian financial crisis, Thailand’s economy grew at an average annual rate of 7.5 percent, creating millions of jobs that helped pull millions of people out of poverty.

Extreme poverty as measured by the international extreme poverty line (USD 1.90 per day, 2011 PPP) is no longer a concern for Thailand as a whole, falling from a rate of 14.3 percent in 1988 to less than 0.1 percent in 2013.

Today, however, Thailand no longer stands out—the pack of other countries has caught up with it on virtually all dimensions.

“We hope this study will help the government and other partners engage in building the future of Thailand.”

Lars Sondergaard, World Bank Program Leader

“Thailand is a country of vast potential,” said Ulrich Zachau, World Bank’s Country Director for Southeast Asia.

“The report identifies policies that will create more opportunities for more Thais to earn and live productive lives, give children from poor families a chance to grow into a life of prosperity, and develop a smart social protection system to support vulnerable people when they get old, fall sick, or lose their jobs.”

An estimated 7 million Thai people were poor in 2014

An estimated 7 million Thai people were poor in 2014

Inequality remains a major challenge

Over the past few decades, Thailand has made tremendous development progress. Still, an estimated 7 million Thai people were poor and an additional 6.7 million were at risk of falling into poverty in 2014. Inequality also remains a major challenge.

From 1960 to 1996, Thailand maintained a growth rate of 7.5 percent. But growth slowed to an average of 3.3 percent from 2005 to 2015. People’s lives continue improving but slowly – more slowly than in neighboring countries or the Association of Southeast Asian Nations (ASEAN) as a whole.

A decade ago, Thailand ranked above other Southeast Asian and upper-middle-income countries on all dimensions measured in the World Economic Forum’s Global Competitiveness Index. Today, other nations have caught up, the World Bank report said.

A major reason for the recent slowdown in growth is its loss in global competitiveness over other ASEAN countries.

Second, the quality of the bureaucracy has worsened, while it has improved in neighboring countries. The “shock absorber” against political shocks is no longer as effective as it was.

 The quality of the bureaucracy has worsened in Thailand, while it has improved in neighboring countries

The quality of the bureaucracy has worsened in Thailand, while it has improved in neighboring countries

Political instability is hurting growth prospects

There are now indications that continued political instability may start hurting Thailand’s growth prospects.

Based on competitiveness scores between 2006/07 and 2016/17, compiled by the World Economic Forum, ASEAN countries like Malaysia and Vietnam have edged out Thailand on many areas — innovation, infrastructure, business environment, higher education, and training.

“The analyses and literature used in this study were complemented by an extensive nationwide engagement with government and various stakeholder groups in the country, including development partners, private sector, academia, and civil society.”

said Lars Sondergaard, World Bank Program Leader for Human Development and Poverty and Lead Author of the Report.

We hope this study will help the government and other partners engage in building the future of Thailand.”

The report highlights priorities in four areas:

  • Creating more and better jobs by improving regional connectivity with better infrastructure; more competition through free trade agreements; and enabling industries to upgrade and innovate.
  • Providing more support to the bottom 40 percent of the nation’s population by improving the overall education and skills of the workforce; raising agricultural productivity; and building stronger social protection systems.
  • Making growth greener and more resilient by managing natural resources and environment; reducing vulnerability to natural disasters and climate change; and promoting energy efficiency and renewable energy.
  • Strengthening the institutional capability of public sectors to implement reform.

Climate change and environmental degradation, meanwhile, are making Thailand more vulnerable to natural disasters, the World Bank report warned.

Ten years ago, Thailand looked strong and healthy on all the dimensions tracked by the World Economic Forum.

It stood out relative to ASEAN, upper-middle-income countries, as well as its structural peers, and it even looked impressive relative to high-income countries.

Today, however, Thailand no longer stands out—the pack of other countries has caught up with it on virtually all dimensions.

Over the past decade, mega projects that could have relieved infrastructure constraints and made Thailand the hub of ASEAN did not get off the ground.

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