Economist warns of further industry closures
More businesses in the automobile, electrical appliances, and electronics industries are under threat of closure because they are not moving quickly enough to adapt to digital technology and global trends, an economic expert from the University of the Thai Chamber of Commerce has told The Nation.
His remarks are consistent with those of the Federation of Thai Industries (FTI), which warned that more factories in Thailand could close this year due to the upcoming implementation of a standard 400 baht minimum wage nationwide by October 1.
Anusorn Tamajai, UTCC director of the Digital Economy, Investment, and International Trade Research Centre, stated that even if the minimum wage is not raised, the automobile, electrical appliances, and electronics industries are already at risk of shutting down.
The reasons, he said, are due to their delayed transition to digital technology and response to global trends.
Besides, the majority of Thailand's high-tech industry is now made up of contractors who manufacture and assemble products rather than owning the technology, reducing the country's competitiveness.
“Thai export products continue to have a relatively low product complexity index compared to high-income countries. Highly complex export products will add value and increase income. The majority of Thailand's highly complex export products are owned by foreign companies, which use the country as a production base for export," he explained.
Meanwhile, the greater the level of political uncertainty, the lower the confidence in stability, causing more production bases to be relocated to countries with stronger economic and political foundations.
Furthermore, the lack of measures or policies to promote the process of systematic technology transfer, the inability to absorb technology (quality of human resources), and the profit margin of industrial businesses has continued to decline due to the continuous appreciation of the baht over the last several years.
These businesses are also affected by unqualified cheap product dumping from abroad, particularly China.
Even though the closure of more businesses would result in greater unemployment, Anusorn said that the scenario would have no effect on the country's overall unemployment rate in the short term, which is already extremely low at 1.01%.
He noted that such a low percentage could not last indefinitely because of such challenges as an ageing workforce population, which puts the country at a competitive disadvantage.
Anusorn also highlighted the outflow of multinational capital as the country lacks new investment attraction, complicating Thailand's problems. In 2023, the net outflows reached US$1.43 billion, mainly due to net selling in Thai Securities by foreign investors. The capital outflow is still continuing.
However, among the foreign outflows, he highlighted Thai investors' overseas investments, which helped create a production and marketing network for domestic companies. Unfortunately, the move reflects Thailand's declining attractiveness as a production and export base to both foreign and Thai multinational corporations.
He emphasised that all these factors demonstrated Thailand's economic and political structural problems, which make the country unattractive for investment, while production technology is changing so quickly that the Thai industrial sector is unable to keep up. Foreign investors continue to withdraw capital and investments from Thailand's financial markets.
“The deteriorating competitiveness of Thailand's export sector will stubbornly last as restructuring the industry to better respond to the global market is a time-consuming process that requires a stable Thai democracy and political system," he noted.
Furthermore, the lack of measures or policies to promote the process of systematic technology transfer, the inability to absorb technology due to a lack of quality human resources, and the profit margin of industrial businesses due to the continuous appreciation of the baht have all contributed to the country's slow growth over the last several years.
"Thailand should not be pleased with its current recovery, which is primarily driven by the tourism and services sectors, because it will result in a current account surplus and strengthen the baht. This reflects Thailand's deteriorating export pricing ability. Over the last two decades, little money has been invested in increasing productivity. The country must focus on creating new products and invest in research and technological development," he said.
