Thailand is striving to achieve high-income nation status within the next 12 years, a goal outlined in the 20-year national strategy launched in 2018. This ambitious target requires significant economic growth and structural reforms to move the country beyond its current middle-income bracket.
Understanding High-Income Status
According to the World Bank’s classification, high-income economies are those with a Gross National Income (GNI) per person exceeding $12,736. Upper-middle-income economies, where Thailand currently resides alongside neighbors like Malaysia, Indonesia, Vietnam, and the Philippines, have a GNI per person between $4,064 and $12,736. Malaysia, for instance, is on track to enter the high-income group by 2028.
Economic Growth Targets
To reach the high-income threshold, Thailand’s government aims to raise the average annual income per person to $15,000. Achieving this necessitates a sustained average annual economic growth rate of 5.4%. This is a significant challenge, especially given Thailand’s recent economic performance. The country’s GDP growth slowed to 2.9% in 2024 and is projected to further decelerate to 2.4% in 2025, down from 1.9% in the first quarter of the current year.
The Role of Industry and Innovation
The Federation of Thai Industries (FTI) emphasizes that achieving the 5.4% growth target is essential for escaping the middle-income trap. Business leaders, representing 48 industries under the FTI, agree that this growth rate is crucial. The government has tasked the FTI with developing a joint strategy to foster future industries.
Future-Driven Industries
Under this proposed framework, the manufacturing sector must contribute to driving growth by creating “industries of the future.” These include high-tech manufacturing and electric vehicles, projected to contribute 0.8% to the overall growth target. Another key driver identified by the FTI is “firms of the future,” expected to contribute 0.7% through modernizing trade, investment practices, and business models.
Future Workforce and Cities
An additional 0.7% of annual growth is projected from “cities of the future,” focusing on smart city projects and infrastructure development. The FTI also aims to develop a “future workforce” by upgrading the skills and knowledge of Thai workers to meet global market demands, contributing another 0.4% to annual growth. Pimpattra Lukunarach, Chairperson of the FTI, stated that all these elements must be integrated to achieve the 5.4% average annual GDP growth.
Challenges in Manufacturing and Skills
The manufacturing sector must become more globally competitive while maintaining manageable production costs. The FTI highlights that Thailand’s manufacturing sector faces challenges related to production costs and international competition. To close skills gaps, Thailand needs to accelerate human capital development and improve access to advanced technologies. The success of this strategy hinges on the entire value chain moving forward together, as every part is closely connected.
The Risk of Innovation Without Market Readiness
Pimpattra noted that even if future industries successfully develop innovative products, the strategy could fail if firms are not ready to distribute and market these products effectively. She believes the government is moving in the right direction, and Thailand should aim to join the ranks of high-income economies. Achieving this will bring long-term benefits, making the economy more stable and prosperous.
Harnessing Artificial Intelligence (AI)
The government revealed earlier this month its ambition to achieve high-income status within 12 years, aiming to increase total investment from 32% of GDP to 35% by 2029. Five working groups, including those focused on digital and artificial intelligence (AI), were established to meet this goal.
AI Investment and Infrastructure
The digital and AI groups aim to secure $100 billion in investment for AI chip and semiconductor design by 2027, while increasing AI’s contribution to GDP to 5% through infrastructure development and commercial adoption. Chuchai Srisarakham, Chairman of True Corporation, stated that Thailand needs to harness AI to create new engines of growth that can ultimately help Thailand break out of the middle-income bracket.
Data Centers and Global Players
A key challenge is Thailand’s infrastructure, with the country having data center capacity of around 0.2 gigawatts, compared to 3.9 GW in China and 35.7 GW in the US. Adding 1 GW of AI and cloud infrastructure would require around $3 billion in construction investment. Chuchai suggested that if Thailand can expand its AI and cloud infrastructure to 10 GW within five years, it could generate around $30 billion in investment. Thailand also has an estimated 1,000 AI professionals, needing to rapidly expand the talent pool and attract global technology players like SK Hynix and SAMSUNG, who may consider expanding their supply chains in Southeast Asia. This could strengthen the entire value chain, potentially leading to significant accelerated growth and the transformation of Thailand into an “AI Nation.”
Employment Challenges in the AI Era
The primary challenge for Thailand is ensuring that the 300,000 new graduates entering the workforce annually can find jobs, while also creating new career opportunities for tens of thousands of workers who could be displaced by automation each year. Chuchan Wittanachai, President of the AI Entrepreneurs Association of Thailand and Executive Vice President of Synapse (Thailand), noted that while AI is expected to create new job categories, these new jobs are not being generated quickly enough in Thailand.
The Local AI Market and Foreign Competition
The domestic AI market is estimated to be worth about $50 billion, with foreign companies capturing $47 billion of that amount. Local AI startups have expanded rapidly in recent years, but face the risk of being squeezed out by foreign technology providers unless the government provides a more supportive regulatory and operating environment. Chuchan added that although AI is expected to create new jobs, some jobs are being displaced by automation. The number of AI-related companies in Thailand has surged to 776 over the past few years, up from 300-500.
The Tourism Engine
Atta-karn Srisutham, Honorary Secretary-General of the Thai Travel Agents Association, stated that relying heavily on the tourism sector, which contributed 17-18% of GDP in the past, is insufficient to reach the high-income target. As tourism revenue requires higher spending per tourist, focusing solely on tourist arrivals is no longer a measure of success.
Shifting to a “Visitor Economy”
The government’s initiative to shift the tourism economy to a “visitor economy” is a step in the right direction, helping to maximize tourism’s potential. This involves upgrading the quality of various segments, such as medical and health services, technology, retail, and other creative economic sectors, not just hotels and restaurants. Visitors should distribute income to more stakeholders, rather than relying solely on domestic consumption, as was the case in the past.
Leveraging Data for Tourism
The government should also establish a “visitor economy” intelligence platform to share data with the private sector. This platform would provide precise predictive analysis, enabling investors to invest effectively by indicating when and where to invest, leading to increased capacity for the next season. Airlines could plan sufficient seat capacity, and hotels could employ more workers as the demand grows. This data would help industries prepare strategies for the types and numbers of skilled workers needed over the next 5-10 years, working with the education system on recruitment and with the government on good governance, education, and the labor market.
Educational Reform for Future Skills
Ata, a lecturer at the Institute of Economic Studies, Rangsit University, believes Thailand is unlikely to achieve high-income status given its current fundamental issues. He pointed out that large companies have concentrated income among a select group, while most of the population has not experienced a significant income increase, remaining stuck in middle-income levels. “When we discuss GDP growth, we should ask how much more money people actually have,” Ata remarked.
Addressing Economic Structure and Debt
Ata argued that governments have failed to address Thailand’s structural economic problems, instead resorting to borrowing funds for distribution rather than investing in structural reforms to create sustainable income and enhance national capacity. Both public and household debt levels are high, with people falling deeper into debt to make ends meet. He also noted that the country needs to address corruption.
Reforming the Education System
Ata stressed that the education system must be reformed as it is the foundation for developing skilled human resources. Educational programs must adapt to the needs of global industries, especially in specific technical skills. Students should also be equipped to use AI effectively, understanding the core subjects before using AI as a tool or assistant. He added that Thailand should develop a Thai workforce that can eventually replace foreign employees in positions like engineers and managers, enabling the country to compete with other nations and attract more foreign companies to operate in Thailand. This would bring more income to Thailand, allowing the population to remain in the country.
Boosting SME Competitiveness
Ata also urged the government to enhance the competitiveness of small and medium-sized enterprises (SMEs). He noted that SMEs are becoming weaker because they struggle to compete with imported goods and foreign companies. The government’s strategy should consider not only the economic size but also the quality of the process, covering standards in the labor market, education, and governance, in line with the goals of the Organization for Economic Co-operation and Development (OECD).
Conclusion: A Multifaceted Challenge
Thailand’s aspiration to become a high-income nation is a complex undertaking. It requires a concerted effort across multiple fronts, including sustained economic growth, strategic industrial development, significant investment in AI and technology, a skilled and adaptable workforce, and crucial structural reforms in education and governance. While tourism remains a vital engine, diversifying the economy and embracing innovation are key to unlocking Thailand’s full economic potential and achieving its ambitious goal.
