Asian Angle | Thailand’s ‘China plus one’ successes mask a middle-income quagmire
FDI figures hide the painful truth: an ageing workforce, structural challenges and low-value assembly threaten economic stagnation
Thanks to its established industrial infrastructure, a domestic market of nearly 100 million people and its well-integrated presence in global automotive and electronics supply chains, Thailand is naturally positioned to attract advanced manufacturing firms seeking diversification away from China.
For a nation long mired in the dreaded middle-income trap, these recent shifts seem to offer a chance to escape and join the ranks of developed economies.
International media and financial institutions routinely spotlight Thailand’s rising levels of foreign direct investment, especially in the burgeoning EV sector. These upbeat narratives, buoyed by promising FDI figures and low unemployment rates, paint a picture of technological progress and a bright economic future. The surface impression is one of technological progress and strong growth in the years ahead.
But a closer examination of other indicators – particularly wage growth, productivity and structural constraints – reveals a more complex reality. Will the influx of foreign capital truly lay the foundation for broad-based economic expansion, higher wages and productivity gains? Or does it risk worsening the very structural constraints that have long held the Thai economy back?
Thailand’s position as a regional manufacturing hub, especially in automotive assembly and electronics, makes it a logical destination for corporations grappling with rising costs in China, trade tensions and supply chain vulnerabilities exposed by the pandemic.