A targeted industrial policy should prioritise creation of good jobs in Thailand rather than focusing solely on attracting high levels of investment, says Thailand Development Research Institute (TDRI).
Nopparuj Chindasombatcharoen and Puttipan Hiranyatrakul, researchers at TDRI, issued a study titled "A New Industrial Policy for Sustainable Growth" that argues the nation's stagnant industrial policy stems from the cumulative effects of three structural factors: an outdated growth model; support measures that fail to develop human capital; and an insufficiently rigorous process for selecting target industries.
In the past, Thailand's growth model relied on a formula centred on attracting foreign direct investment to establish manufacturing facilities in the country, utilising large numbers of low-wage workers.
Economic success was measured primarily by GDP growth and export volume. This approach was underpinned by the belief that as the economy expanded, prosperity would naturally trickle down to the broader population.
In reality, this model is no longer capable of delivering sustainable growth, note the researchers. Thailand no longer enjoys a comparative advantage in low labour costs relative to emerging regional competitors.
The manufacturing sector increasingly requires advanced technologies, skilled labour, innovation and R&D, rather than simply expanding the workforce. Unless Thailand succeeds in upgrading workers' skills, the economy will remain trapped in low-value-added activities regardless of how much foreign investment it attracts, according to the study.
In addition, target industries are often selected before comprehensive feasibility and cost-benefit studies were conducted. One example is Thailand's ambition to become a regional hub for electric vehicle (EV) production and exports. While the policy was announced, the supporting structure for domestic parts manufacturers was not adequately prepared for the transition.
As a result, although EV adoption has increased, many key components continue to be imported rather than produced domestically.
Another example is a 100-megawatt data centre, which requires an investment of around 33 billion baht. Although this appears to represent a substantial investment, much of the capital flows overseas because the majority of the expenditure is devoted to imported equipment, including computers, graphics processing units, cooling systems and cybersecurity infrastructure.
Moreover, such facilities generate relatively limited employment, with a large data centre requiring only around 50 operational staff. These centres also consume up to 1,140 gigawatt-hours of electricity annually, equivalent to the yearly consumption of about 1.3 million people, and around 2.55 billion litres of water per year, comparable to the annual water consumption of around 35,000 people.
Rather than refraining from developing data centres, the study suggests high levels of investment do not necessarily translate into substantial benefits for the Thai economy or workforce.
Without strong downstream industries capable of fully utilising these facilities, such as advanced artificial intelligence model training or autonomous vehicle technology development, the economic spillover effects remain limited.
Thailand's industrial policy should redefine how success is measured, focusing on the creation of good jobs rather than investment value or economic output, said the researchers.
Good jobs are defined as stable, well-paying employment opportunities available to large segments of the population that provide sufficient income, promote workforce skill development and upward social mobility, and serve as the foundation for improving productivity.
Such jobs are essential for increasing value-added production and raising the incomes of Thais sustainably, noted the study.
