# Thailand’s Path Forward: Can Productivism Cure the Sick Man of Asia?

- Link: https://www.thailand-business-news.com/opinion/319330-thailands-path-forward-can-productivism-cure-the-sick-man-of-asia
- Published: 2026-07-12T20:02:04+07:00
- Author: Thailand Development Research Institute

* Thailand’s sluggish growth, rising poverty, and widening inequality signal that
   its export- and foreign-investment-dependent economic model has run its course.
   Despite 2.9% GDP growth in 2024, poverty rates increased, exposing a structural
   failure to distribute gains broadly or build domestic economic capabilities.
 * The authors propose “Productivism,” a framework developed by economist Dani Rodrik,
   as an alternative path. It emphasizes raising productivity, creating quality 
   jobs, strengthening SMEs, and extending industrial policy to services. It calls
   for collaborative, evidence-based state engagement rather than top-down planning
   or passive reliance on market incentives.

In the early 1990s, Thailand was tipped to be the region’s next economic tiger. 
Today, it risks being seen as the “sick man of Asia.”

The matter is not just about slower growth. It reflects a deeper policy problem:
an economy clinging to an old playbook while the global economy has entered a complicated
era marked by geopolitical tensions and structural limits.

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The Thai economy, dependent on manufacturing exports and foreign investment, is 
now facing a truth hard to accept: the old growth model can no longer push the country
towards high-income status or better living standards.

If Thailand wants to shake off its decline, it needs not only new measures but also
changes in perspective on economic development as a whole.

The old model was built on low-cost labour, foreign direct investment, and large-
scale infrastructure such as the Eastern Seaboard. It expanded production quickly
and delivered strong growth in the past.

But over time, returns have been diminishing. Foreign investment still flows in,
yet much of it sits in low value-added activities. Links with Thai firms remain 
thin. The state gives up tax revenue through incentives but gains little in creating
new economic capabilities domestically. Under this model, Thailand’s growth has 
lagged behind regional peers such as Vietnam and Indonesia for much of the past 
decade, reflecting deeper structural weaknesses.

### At the same time, inequality is widening.

Headline GDP figures hide the strain beneath. In 2024, the economy grew by 2.9%.
Income per head rose to 266,103 baht a year. Yet poverty increased, from 3.41% to
4.89%.

Growth, in other words, does not distribute its benefits equitably.

That is why the real question is not only how to grow faster, but also how to make
growth work for more people.

What is missing is not just new policies, but a new organising framework for economic
development. One promising approach is “Productivism”, a concept advanced by Dani
Rodrik, a renowned scholar of Harvard Kennedy School. The idea is simple in principle,
demanding in practice: build an economy that creates good jobs, expands the middle
class, and lifts domestic firms.

This requires a proactive state to work alongside business and civil society to 
drive investment, skill development, innovation, and production, so that growth 
generates economic opportunities more broadly.

The core of productivism is a focus on the supply side to raise productivity and
create good jobs directly, rather than relying on the economy to respond to market
incentives and hoping that benefits will automatically trickle down in time.

Instead, it calls for deliberate structural change. Economic policy must help workers,
money, and investment move into businesses that create higher value — especially
SMEs that employ much of the country’s labour.

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Meanwhile, economic growth should not be limited to manufacturing. Technology and
automation have reduced manufacturing’s power as a mass employer. For the economy
to create good jobs on a wide scale, industrial policy must extend to services as
well.

Productivism is not a return to the developmental state model. It does not romanticise
the state’s ability, recognizing the state’s limits, especially in developing countries
where capacity and information are often constrained. It is not a top-down planning
or the old idea of governments “picking winners,” but a shift to a more collaborative
and more experimental approach that supports ongoing adjustments.

In practice, policies should be shaped through engagement with firms and other stakeholders.
Learning should come from real constraints on the ground, not abstract models. By
employing knowledge and experiences from a broader spectrum of the economy, not 
limited to state orders, adjustment of goals and tools can respond to real needs
in time to raise productivity.

This approach is particularly relevant for Thailand, where firm capabilities and
domestic linkages remain the binding constraint, rather than capital accumulation
alone. This means rethinking industrial policy in several practical terms.

First of all, the focus should be on upgrading firms. Policies should be more targeted,
tailored to the needs and potential of different groups, rather than broad schemes
with limited structural impact. The aim is clear: to create better jobs, in both
manufacturing and services.

The problem has never been a lack of foreign investment. It is the assumption that
local supply chains will form automatically. They often do not.

In sectors such as High-Density Interconnect (HDI) Printed Circuit Boards (PCB) 
or Electric Vehicles, we still face problems in skills, standards, and specialised
services. Without intervention, the supply chain linkages will stay weak.

The state, therefore, must step up to build close links between foreign investment
and local businesses. It should help build domestic suppliers, support joint research,
and upskill labour in concrete ways.

It must also go beyond usual tax incentive measures. What firms, especially SMEs,
need is practical government support in areas such as technology extension, standards
compliance, skills intermediation, and affordable advisory services. These measures
will help SMEs upgrade without having to spend a fortune on consultancy firms.

### Coordination is just as critical.

Industrial development cuts across investment, education, research, regulation, 
and market access. It involves numerous state agencies, but the silos currently 
observed stall progress. Thailand does not suffer from a lack of committees. It 
suffers from a lack of problem-solving institutions.

High-level committees on national economic strategies cannot tackle this bottleneck.
What is needed is clear leadership in each sector, with real authority to align 
efforts across state organisations. There must be operational working groups to 
bring together government, business, and academia to solve problems, track progress,
and adjust policies in real time.

To address these challenges, robust metrics matter too. Productivity, domestic linkages,
and job quality must be measured and monitored together through reliable indicators
and databases. The government cannot act just as a rule-maker. It needs effective
indicators and databases to allow adjustments to implemented policies .

Thailand has reached a point where our economic models and tools no longer deliver.
Productivism offers a way to overcome current structural constraints that hold the
economy back and to rebuild from within.

The label of “sick man of Asia” is not inevitable. Whether Thailand can reverse 
that trajectory will depend not simply on growth, but on its ability to build a 
growth model that raises productivity, creates good jobs, and spreads the gains 
more broadly across society.

Nopparuj Chindasombatcharoen, Ph.D. Is a research fellow and 
Kanlayanee Kaewmee
is a researcher at t the Thailand Development and Research Institute (TDRI). Their
policy analyses appear in the Bangkok Post on 1 July 2026

[Read More ](https://tdri.or.th/en/2026/07/rescuing-the-sick-man-of-asia-through-the-productivism-paradigm/?rand=86529)