The Asian ‘Tiger’ Economy That Never Quite Roared

Philip Heijmans and Chris Anstey

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Amid all the buzz over friend-shoring and reworking global supply chains, India, Vietnam and Mexico get a lot of attention these days. One nation that doesn’t is Thailand. But it wasn’t always that way.

Four decades ago, Thailand was leaping ahead at a time when China was just starting to emerge from economic ruin. Global automakers were pouring in so much money that the Southeast Asian nation was dubbed the Detroit of Asia.

Thailand stood out for its political stability in a region still working through the ravages of war. A relatively stable exchange rate and attractive tax regime were further pluses. By 1990, it was racking up double-digit growth as a column in the New York Times proclaimed it the next “tiger” economy. There was, it said, “excitement of an emerging economic and political power in Bangkok.”

That exciting time seems long gone. More than 30 years and three military coups later, Thailand seems incapable of breaking out of its status as a middle-income country. Once way ahead of China in per-capita wealth, today it’s notably behind. The reversal of fortunes illustrates how trajectories can change thanks to self-made errors.

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To be sure, Thailand continues to pursue an export-led strategy. It still draws foreign direct investment (FDI), which relative to GDP hit 50% by 2017.

But the bigger picture is that it’s fallen well behind. China’s GDP per capita, for example, has towered over Thailand’s in recent years and could soon double it, with World Bank data from 2022 showing China at $12,720 versus $6,909 for Thailand.

Thailand Lost Its Edge in Wealth Creation

Per-capita GDP shows China now far ahead of Thailand

Source: World Bank, gross domestic product per capita, current US dollar series

There are a host of issues that explain why Thailand is lagging behind. Underlying most of them is the country’s politics.

The relative stability and what seemed to be budding democratic credentials back in the 1990s were wrecked over the subsequent decades. Deep political infighting between the military-backed establishment in Bangkok and pro-democracy parties, often backed by business tycoon and onetime prime minister Thaksin Shinawatra, did deep damage.

A focus on power struggles arguably took the nation’s collective eye away from setting and executing on longer-term development goals. Legal uncertainties and ownership restrictions are chief complaints among investors.

Trade is a key example of this. While most Thai neighbors have inked or are working on new deals, Thailand has fallen woefully behind. Negotiations with the European Union only restarted this year after a 2014 coup brought them to a halt (and even nixed a Taylor Swift tour. Thailand wants to resurrect it). Vietnam inked a deal with the EU four years ago.

And while a host of East Asian economies have joined together in the soon-to-be 12-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership, Thailand remains on the outside.

The lack of commitment has had consequences. Thailand attracts less FDI than regional competitors Vietnam, Malaysia and Indonesia, and last year it posted the slowest growth rate among Southeast Asia’s major economies.

Governance issues are also cropping up in Thailand’s financial markets, with a spate of corporate scandals in recent months. While even developed markets see such incidents, it’s hardly helped the nation’s reputation.

Tourists walk along a beach at dusk in Pattaya, Thailand

Failure to move up the production scale more decisively has left almost one-third of Thailand’s labor force still in agriculture, compared with less than a quarter in China. And its relative reliance on tourism left it almost uniquely exposed to the ravages of the pandemic.

Today, another political showdown is casting a shadow. It’s been nearly two months since a pro-democracy coalition won a majority of lower house seats in a national election, but no new government is in place. Doubts remain over whether the coalition’s candidate for prime minister, Pita Limjaroenrat, will be able to take the government’s reins.

That’s left most businesses freezing new investment decisions until clearer directions from the new administration emerge, Kriengkrai Thiennukul, chairman of the Federation of Thai Industries, said last month. And this against a backdrop of weak exports.

Demographics, in the meantime, aren’t working in Thailand’s favor. Of its 67 million residents, 12 million are elderly. That’s not great when it comes to a manufacturing sector that increasingly depends on a workforce that must handle new and complex technologies.

Manu Bhaskaran, a founding partner of Centennial Asia Advisors, a policy advisory firm in Singapore, says: “Thailand’s bottom-up micro economy has been strong in the past, but we do not see the kind of entrepreneurial energy and start-ups in the tech space that we are seeing in Vietnam [and] Indonesia.”