Thailand Needs to Invest in People, Not Rice

Thailand Needs to Invest in People, Not Rice

The search for lessons from lost economic decades has led from Japan to the U.S. to Europe. Now the spotlight turns to Thailand (SET).

This may strike some as odd, considering Thailand’s 5.3 percent growth, its young and expanding population, and the surprising level of political stability in Bangkok. In her two years leading Thailand’s 68 million people, Yingluck Shinawatra has somehow managed to tamp down the virtual civil war that led to the ouster of her prime minister brother in 2006.Look closer, though, at the thrust of Yingluck’s economic policies. Her government has subsidized rice prices, provided handouts to car buyers and favored megaprojects that will enrich the politically connected more than the masses. All this comes at the expense of long-term competitiveness and prosperity: Thailand should instead be investing in its future, especially education, if it wants to break out of the “middle-income trap” that befalls many developing nations.

Yingluck’s U-turn last week on the government’s policy of hoarding rice at above-market rates is a case in point. She had planned to limit a practice that jeopardizes the country’s fiscal position and warps commodity markets. Moody’s Investors Service says the subsidies damage Thailand’s credit rating. Yet she caved to farmers, even firing her commerce minister to do so.

Thaksinomics Redux

Granted, the program isn’t bankrupting Thailand. The country’s $346 billion economy can handle the $4.4 billion the government blew on rice purchases last year. But Yingluck’s recent priorities bear troubling similarities to those her exiled brother, Thaksin Shinawatra, championed from 2001 to 2006. His vaunted “Thaksinomics” never amounted to more than a Tammany Hall-like doling out of cash in return for rural votes.

In January, Yingluck unveiled a plan to lift Thai living standards. She proposed spending about $72 billion over 10 years on transportation, energy and telecommunications projects. Yingluck’s government is pushing an $8.6 billion port-and-industrial-zone project in neighboring Myanmar. Last week in Turkey, she called for a “New Silk Road” rail project to link Europe and Asia.

“We have some very big ideas, concrete ones, to make growth more inclusive,” Transport Minister Chadchart Sittipunt told me last month in Bangkok.

Forgotten in this ambitious building boom, though, is any investment in social infrastructure. It’s even more important to invest billions of dollars in education and in training to improve the quality of the labor force and raise productivity so that Thailand can keep up in the world’s most dynamic region. The country lags not just at the tertiary level, but also at the primary and secondary phases of the education process. Like several other countries in the region, Thailand’s focus on rote learning gives short shrift to creative and critical thinking and English proficiency.

“There is little sign that inadequate investment in human capital and the need for reform of the education system is recognized by the current government,” says economist Peter Warr at the Australian National University in Canberra. He’s done extensive research on Thailand’s economic growing pains.

Thailand matters because it’s a role model in the region. As Myanmar exits decades of isolation and tries to build a healthy economy, it’s looking to Thailand for direction and financing. The same goes for Cambodia, Laos and Vietnam. How Thailand evolves will reverberate around the neighborhood.

Going Nowhere

At the moment, Thailand is walking in place even if its headline growth rates outpace Japan, the U.S. and Europe. To Bank of Thailand economist Piti Disyatat, per-capita gross domestic product tells the story: It has been hovering around 15 percent to 20 percent of U.S. levels for more than 10 years.

This is a precarious moment for Thailand to be stuck at a per capita GDP of about $5,000. Global growth is tepid, China is slowing, and Indonesia, Philippines and Vietnam are winning jobs that Thailand (THGDPYOY) once took for granted. As Thai wages rise, so do production costs. It must move faster up the value chain to build more technologically advanced products in the electronics and automobiles sectors — preferably bearing Thai names, not just Japanese ones.

Building a more entrepreneurial workforce requires big investments and political will, both of which are in short supply. Corruption, among other things, skews incentives. Massive road, bridge and power-grid projects are dripping with opportunities for politicians and business people to line their pockets. “There are few if any kickbacks available from investment in education,” Warr says. “Physical infrastructure is another matter.”

Thaksin’s policy of cash handouts to rural areas was the economic equivalent of a sugar high. It did nothing to strengthen government institutions, build a credible legal system or invest in human capital. The five prime ministers who led Thailand between Thaksin’s ouster and his sister’s victory in July 2011 spent all their time avoiding another coup.

Now that Thailand is stable, it’s time to invest in the future. Pouring more money into people rather than rice farms and construction companies would be a good start.

(William Pesek is a Bloomberg View columnist.)

To contact the writer of this article: William Pesek in Tokyo at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: