Thailand 4.0: can Thailand emerge from its middle-income trap?

Phuket Resorts, Mangosteen,

The Thai government is working hard to promote its new economic model – Thailand 4.0. If successful, this could push the nation to a high-income country. 


The government of Thailand has pledged to develop the island of Phuket into a high-tech start-up hub. As part of this initiative for Digital Thailand, the Ministry of Digital Economy and Society is pushing a to provide high-speed internet to the island via 1,000 free wi-fi spots. The government plans to create at least 10,000 start-ups by 2018.

This is the fourth economic model adopted by modern Thailand. Model 1.0 was designed to boost the agrarian country and to promote cottage industries. Economy Model 2.0 shaped Thai light industry and imports through natural resources and the cheap labor force. Generation Model 3.0 developed heavy industry, promoted exports and encouraged Foreign Direct Investments (FDI).

Today, Thailand is ready to take on a new challenge. The incentives of Economic Development Model 4.0 go beyond building capacities for security, prosperity, and sustainability. As post-industrial countries shape the future of high-value manufacturing, Thailand’s import of industrial robotised machinery is expected to double by 2018. The country already has a comparative advantage in biotechnology and biomedical sectors and Thailand 4.0 focuses mainly on technological improvement. Hence, Thailand is actively encouraging modernisation and boosting digitalisation to beat the tough competition among the leading players in Southeast Asia.


Smart industry, smart city and smart people

Smart Thailand is built on three elements: smart industry, smart city and smart people. ‘This move will herald a transition from an analog Thailand to a digital Thailand,’ said Deputy Commerce Minister Dr. Suvit Maesincee during a speech at Asian Institute of Technology (AIT). ‘Thailand’s creative economy will be based on the three pillars of Science, Technology, and Information and Communication Technologies (ICT),’ he added.

Thailand aims to become a high-income country by 2025 seems attainable, given that it has an abundance of resources and suppliers and a large pool of skilled labour. However, the country faces several constraints, such as export contraction and an aging society where the number of elderly people is expected to make up 26.6% of the population by 2030. This means robotising the industry is the only solution to recover export indicators and feed the increasing demands of the economy.

Several countries in Asia, such as China, Singapore, and Korea, are already modernising and developing similar sectors. China’s “Made in China 2025” targets spheres which require a vast amount of investment, such as IT, robotics, aerospace, railway, ocean engineering, energy-saving vehicles, power equipment, bio-medicine and agricultural equipment. Singapore’s “Smart Nation” promotes media ecosystem and tech innovation hubs, while South Korea’s creative model is reaching for the nation’s dream of becoming a dynamic, innovative economy. In this environment, Thailand needs to work hard to stand out.

Challenges to overcome

While China, the Philippines, and Vietnam economies grow 6-7% annually, Thailand hovers around 1%. And even the most optimistic scenarios predict just 3%. So can the smart startups on the table take a leading role in GDP growth? Potentially, but it will be a tough fight with neighbouring countries who have already been in the industry for some time.

At the same time, Thailand also faces challenges at home, such as inequality, an imbalanced economy, and poverty in rural areas. But this new 4.0 Model of value-based-economy sets innovation as a top priority. By investing in human capital through educational programmes, encouraging agritech solutions and modernising infrastructure throughout the country, the government can target even the most remote areas and combat disparities between urban and rural areas.

While much of society is unaware of this model, IT spending demonstrates solid double-digit growth this year. This shows that the private sector does indeed welcome innovation in automation and the advancement of systems that would lead to an increase in efficiency. In practical terms, the grand plan calls for this type of action but can smart talent truly raise the efficiency of the economy? Having a self-driven nation is key to progress and in the “land of smiles,” only harmony and unified efforts can lead the country towards the inclusive society that the model demands.