BANGKOK — Dr. Supavud Saicheua, Chairman of the National Economic and Social Development Council (NESDC), gave a special interview to Prachachat Business in which he analyzed urgent issues of economic reform. He suggested promoting the agriculture and food sectors as well as high-end services as new growth engines for the country to create jobs for Thais, thus ending the “Detroit of Asia” concept for Thailand.
He explained that it would be very difficult for Thailand to compete with China in the manufacturing industry. If even the US and Europe are struggling, how could Thailand compete? Japan is also facing challenges.
China currently has the capacity to produce around 40 million cars, but only sells 22 million domestically. The remaining 18 million have to be exported. We see a lot of cheap Chinese electric cars being exported to our country. China also has an eightfold overcapacity in solar cells.
In the meantime, China’s domestic economy is indeed struggling. Many industries in China have collapsed. Chinese manufacturers have to export because competition at home is much more intense. Thailand is naturally becoming a place for them to find new markets.
Where does Thai industry go when facing China ?
Thailand needs to think about how to coexist with China in a good way. We need to focus on agriculture, possibly more high-tech agriculture with higher yields. Have we started that yet? Not really. Even without doing much, Thailand is already the 4th or 5th largest exporter of agricultural products to China, which is not bad.
The most important basis is to increase the per capita productivity of farmers in order to secure them a higher income. If we do not do this, then we are missing an engine of growth. In the past, we neglected the agricultural sector because we had other engines of growth such as tourism and industry.
“We made hard disk drives, but that is no longer profitable because SSDs have replaced them. The concept of the ‘Detroit of Asia’ has been overtaken by electric vehicles. So we need to seriously rethink and stop saying that the agricultural sector is just the “backbone of the country.”
From his point of view, agrarian reform is the greatest challenge. However, nothing has been done in the last 20 years, so structural issues are now urgent. This is the economic structure that we need to address.
Agricultural reform is crucial because Thailand has made no progress at all. Productivity per rai (unit of land) has not improved. There has been no growth in staple crops such as rice, but exports of fruit and vegetables such as durian have increased. The problem is that this has not yet become the “main concept of the nation” because we have always said that Thailand must be the “Detroit of Asia”, which should no longer be said.
The big goal for Thailand must be to no longer be the “Detroit of Asia” but a combination of quality services and agriculture that utilizes good soil, good water, good food, good health and creates a livable, safe country. We can achieve this because Thais are already hospitable, and we need to maintain that.
Dr. Supavud said that the ecosystem of our automotive industry should be preserved, but it cannot remain the same. For example, if we used to make exhaust pipes and radiators, EVs don’t have these parts, so we have to accept that they will disappear. The question is: if the manufacturing industry shrinks, what will take its place and drive the country’s economy? That would be agriculture, which should be upgraded. If you look at the trends, various factors indicate that China could improve its agricultural sector and change the trend of the last 20 years.
China is also currently facing two trends:
1. an aging population, which means that labor resources cannot be used as extensively as before. As the leadership has decided to focus on the manufacturing sector, the agricultural sector — where agricultural technology is quite difficult — will be affected.
2. The Chinese population will become more prosperous. Even if the economy grows more slowly, by 3-5 percent per year, people will consume higher quality food as they become wealthier, which will increasingly challenge the agricultural sector. Thailand can address these issues.
Solutions to attract foreign billionaires
The NESDC Chairman expressed the view that global GDP is currently barely growing, there are more older people and the world is facing an interest rate problem. The question is whether we can survive.
The principle is that we need to increase GDP, to come back to the original question: What drives economic growth? As already mentioned, growth must come from higher value agriculture. Then we need to link it further: if agriculture is good, food is good, healthcare is good, then we can sell wellness tourism and make it more than just tourism — attract billionaires to stay longer, maybe three months.
To achieve this, we need to convey the sense that Thailand is truly livable and safe, with good food, healthcare and medical services. Perhaps we need to think about allowing foreigners to buy houses here, as opposed to the current semi-illegal purchases via nominees.
If we continue like this, we will not attract good quality wealthy people, only those who come to launder money. But if we say that we allow foreigners to buy houses, we will be accused of selling the country.
“This needs to be thought through. If we give land to foreign companies to build factories, we accept it because we see it as foreign direct investment, but it drives up land prices. These things need to be discussed thoroughly. Don’t just claim it’s selling the land and then stop everything. We need to rethink. For example, if foreigners are allowed to buy houses in Thailand, similar to Singapore, with an additional tax of 20-30%, the government could use that money to build houses for Thai people. There are ways to do this. But if we continue to call it selling the country, we can’t move forward.”
US Election as a Significant Event
Dr. Supavud also mentioned that the most important event in the remaining time is the US election, where the polls are very close. If Kamala Harris wins, everything could stay the same. However, if Donald Trump wins, there could be big problems because Trump would further cut taxes for the rich, further increase the budget deficit and quickly push the national debt to over 100 percent of GDP.
This would lead to a rise in long-term US interest rates, which would drive up long-term interest rates globally and also in Thailand. Therefore, the management of government debt in Thailand will be very important as the Thai government often issues long-term bonds with a maturity of 7-10 years, which will increase financing costs.
Another concern is Trump’s aggressive trade protectionism, which would severely impact the domestic labor force. This will be very worrying if Trump comes to power. So we need to think about how best to protect ourselves.
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