A necessary disruption: Creating a digital strategy for Thailand

But what does this mean? More specifically, what could it mean to Thailand? And how much does it matter?
To take the last question first, the answer is: A lot.
Our colleagues at the McKinsey Global Institute (MGI) have suggested that five related technologies – the mobile Internet, big data, the Internet of Things, the automation of knowledge work, and cloud technology – could modernise sectors across Southeast Asia and drive major productivity improvements.
It is possible, for example, to use big data to improve urban planning. Digital learning tools can enhance education, in terms of both training for teachers and access for students. Next-generation building-information modelling could cut the costs of building infrastructure and improve its quality.
For Southeast Asia as a whole, MGI estimates that the most important digital technologies could translate into as much as US$625 billion (Bt22 trillion) in economic impact by 2030 – equivalent to 12 per cent of regional gross domestic product.
Thailand is well positioned to account for a big chunk of this. In the 2015 Networked Readiness Index, the World Economic Forum ranked Thailand 67th of the 173 countries assessed. While that positions Thailand in the middle, the research implied two things. First, Thailand has room to improve, and second, it has an established core of assets and expertise – its highest scores were in skills and affordability – that could help it to do so.
The economic payoffs could be substantial, amid growing concerns of Thailand’s competitiveness among its regional peers. Manufacturing productivity, for example, lags behind that of Malaysia and China. In recent years, Thailand has grown more slowly than its Asean peers while foreign direct investment has fallen.
Getting great in digital could help on all these dimensions. Improving digital capabilities can help Thai businesses modernise and become more agile and resilient. Thai consumers, including those in rural areas, will have access to a wider variety of goods and services, such as digital banking. And Thai workers can benefit by using digital to upgrade their skills.
Thailand already has some digital strengths – in animation, for example, with more than two dozen universities offering programmes. E-commerce, after a slow start, is beginning to take off, and smartphone and Internet penetration rates are rising fast, as is online banking.
For Thailand to make the most of digital, however, it needs to think strategically. That means asking how to create an environment that e-commerce players will find attractive; what digital services are most important to Thai consumers, businesses and government agencies; and which sectors Thailand is most likely to succeed in.
On the basis of these answers, Thailand needs to take action. It is encouraging that the government has named digital as one of the industries it plans to encourage as a “new growth engine”. Among other things, it is launching PromptPay, a national e-payment system, which is scheduled to debut this year.
But this is just a start. Working with the private sector, countries with effective digital strategies have done three things well.
First, they have devised new regulations that clarify the legal status of new digital business models, enforce data and electronic-transaction security, and encourage investment from venture capital.
Second, such countries as Singapore have encouraged large international players to establish regional e-commerce hubs. Hong Kong, too, has sponsored a government start-up fund and lowered business-creation barriers for local e-commerce firms that cater to local consumers.
Finally, markets including Israel have focused on improving the quality of digital talent through tech-start-up immersion opportunities, local programmes (including “boot camps”) and encouraging relationships between education providers and the private sector.
As the term “disruption” implies, none of this will be easy; there will be losers as well as winners. A survey by MGI suggested that four of the top 10 companies in their respective industries would lose their place over the next five years because of digital disruption. But that kind of churn is a reason to embrace, not avoid, the digital future.
Just as was the case with the Industrial Revolution, the digital equivalent is a force that must be reckoned with. Thailand’s economy has room to grow. To reach its aspiration to become a high-income country by 2032, it has to do better. Embracing digital capabilities is one essential element.
Harry Seip is an associate principal of McKinsey & Company, where Shatetha Terdprisant is a senior partner and managing partner for Thailand, based in Bangkok.