What is stopping us from having an economy based on innovation and invention?

Thai investment bank Kiatnakin Phatra recently published a book commemorating fifty years of its foundation. Admirably, the book is a history not of the bank itself but instead a reference guide for Thailand’s economic history during the democratic era. Contained in the volume is a succinct summary of the current “traps” facing Thailand’s economy.

Firstly, Thailand remains stuck in the middle income trap, unable to advance to becoming a high income country. Old strategies like relying on exports produced by cheap labor without investing in research and development or innovating no longer work, making us uncompetitive when compared to our neighbors. In a similar vein, the dependence on exports and foreign technology means Thailand has fallen into the external dependency trap. In addition, the fragility of depending on tourism has been brutally revealed during the pandemic.

Thailand is also plagued by a debt trap, where households and businesses are saddled with ever-more debt has Thais have found sources of credit easier to access. Finally, despite signifiant achievements in poverty reduction, Thailand is still clearly in an inequality trap where wealth remains concentrated in the hands of the few.

Exiting these traps is a mighty challenge for any government, not to mention one continually experiencing political instability like Thailand’s. Part of the answer will require restructuring Thailand towards a more competitive, innovation-led knowledge economy that can generate sustainable economic growth: something that the government recognizes in its previous efforts to build a ‘Thailand 4.0.’ Certainly it is  easier said than done. 

Warakorn Awutpanyakul wrote an excellent piece in the Bangkok Post that recaps the challenges facing Thailand’s desire to shift to an innovation-based economy. Yet the government’s support for innovation has been insufficient: expenditure on R&D is lower than in peer countries and indeed declining.

To be sure, restructuring an economy takes time — it can’t happen overnight. The government has tried to move forward with structural reform with a variety of policies and projects. Yet many run into similar obstacles: insufficient political will, government support, and lack of funding. Useful tools like government procurement for innovation remain underutilized. Even something that should play to Thailand’s strengths, such as developing the creative economy, is relatively neglected. The Creative Economy Agency, tasked with supporting efforts to develop the creative industries, for example, receives a laughably small budget.

Meanwhile, Thailand’s education system remains ill-equipped at best for producing a skilled workforce that can drive forward the knowledge economy we need. Lifelong learning is also poorly supported. I think often about going on a site visit at one of Bangkok’s skills training schools, ostensibly aimed at providing adults with the skills they need to succeed in this economy, and finding out that fortune-telling classes comprise part of its curriculum. An interesting and perhaps even useful thing to know, perhaps, but surely not what quite we are looking for in a labor force we hope will drive an innovative economy.

How, then, might we bring ourselves out of the innovation trap? It is not enough to simply mouth platitudes like “Thailand 4.0.” We cannot simply fool ourselves into thinking the current government programs intended to drive innovation — which exist, to be sure — are sufficient. We need a competent state capable enough to guide Thailand’s economic restructuring.

But herein lies another obstacle: is Thailand’s state capability equal to the immensity of the challenges that lie ahead? 

In the book Building State Capability by Matt Andrews, Lant Pritchett and Michael Woolcock “Many states,” they argue, “have skewed capabilities — the capability to routinely and repeatedly propose the three P’s [policies, programs and projects], but not the capability to implement them.” They also find that Thailand has been experiencing a “rapid deterioration in state capability.” Not a cheerful finding!

But how can this be fixed? Political scientist Barbara Geddes argued that there exists a “politician’s dilemma.” Politicians have conflicting incentives — they could build a bureaucracy that is competent and capable of advancing long-term national interests. However, they could also sustain a clientelistic civil service that can be used for short-term personal and political gain. It is worth asking: what incentives do Thailand’s politicians have for bureaucratic reform?

Regardless of which political camp ends up in power at the next election, they will face the same structural issues that the current government have been unable to resolve: a society that will get old before it gets rich, unready for many of the transformations that are taking over the world, still stuck with the same sputtering economic engines that are no longer sufficient to propel Thailand into the future. 

Our political leaders must develop the necessary vision and determination to look beyond short-term political gain in favor of thinking strategically about the long-term challenges facing Thailand. Otherwise, these problems will remain unresolved — until it is too late.


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