‘Is Thailand ready for the digital economy?’

‘Is Thailand ready for the digital economy?’

Juthathip Jongwanich

Over the past decade, Thailand has made extraordinary progress in its transformation towards the digital economy. A number of indicators of digital infrastructure and accessibility have shown some improvement for large segments of the population. Thailand’s e-commerce market is one of the fastest growing in Southeast Asia where gross online merchandise value grew by 68 per cent in 2021 and is expected to expand by 14 per cent between 2021 and 2025.

Like other countries, Thailand has put emphasis on the digital economy, including through its industrial transformation policy (Thailand 4.0) and by building a digital park in the Eastern Economic Corridor (EEC). The government also announced new investment incentives in 2017 to attract investors into tech-oriented activities and introduced a national digital blueprint — the 20 year-National Master Plan for Digital Development (2018–2037). Several laws were introduced in the past few years to facilitate, protect and create a secure digital ecosystem for both consumers and digital providers.

While Thailand has made significant progress in digital development, low and highly concentrated private investment, lack of advanced information and communications technology (ICT) skills, slow progress in digital infrastructure and budget constraints impede its progress. Private investment in Thailand’s digital economy was only 4 per cent of GDP in 2019. Digital technology has been more widely applied in the services sector, including in online wholesale and retail trade, mobile phone and internet services, and financial services. Its utilisation in manufacturing and agriculture has been relatively limited.

Private investment has been more prominent in the EEC — the share of investment doubled from around 30 per cent of total investment to 60 per cent between 2017 and 2020. Various infrastructure projects, including those linking the EEC with other parts of Thailand, have been delayed. A clear roadmap for 5G adoption is yet to be announced.

Limited budget allocations across a number of government agencies are also a problem, particularly relatively small and declining funds allocated to the Ministry of Digital Economy and Society and the Ministry of Education and Ministry of Higher Education, Science, Research and Technology.

Policy overlaps and coordination failures among government agencies in digital policymaking add to worries about the digital future. Government agencies, for example, are introducing policies to improve labour skills but without proper coordination.

Thailand’s progress towards a digital future is under question, especially the lack of human capital, as well as insufficient and unevenly distributed digital infrastructure. In 2020, only 1 per cent of the population had advanced ICT skills and around 20 per cent had basic ICT skills. Only 69 per cent of households had internet access in rural areas while in urban areas it was 81 per cent.

The costs of fixed broadband, mobile broadband and mobile cellular services in Thailand have declined noticeably over the past decade. But compared with China, Malaysia and Vietnam, ICT costs in Thailand, measured by purchasing power parity, are still much higher.

To support investment and transform Thailand’s digital economy, tech-based incentives providing privileges to activities involving technology and innovation regardless of location is a better strategy than location-based incentives. Too much emphasis placed on a particular location, such as the EEC, while paying less attention to other places potentially lowers improvement in the country’s productivity and worsens income inequality. Infrastructure development needs speeding up to ensure efficient logistical systems as well as affordable and reliable digital technologies in the country.

Digital transformation plans need to be strengthened, both in terms of consistency of the policy framework as well as policy coordination among government agencies. The Ministry of Digital Economy and Society could play an active role in coordinating digital transformation plans across institutions to avoid policy overlap and avoid policy coordination and enforcement failures.

Adequate budget allocations for promoting hard and soft digital infrastructure need to be prioritised. With the rapid pace of digitalisation in the economy, established rules and regulations should be closely monitored and modernised to address public concerns. Deepening regional cooperation in terms of regulatory compatibility is important to facilitate business in the region as well as to protect consumers from both privacy and security concerns.

To mitigate the adverse impacts of digital transformation, especially potential job losses, governments need to act as facilitators in reducing friction in the labour market and smooth the movement of workers from one place to another, in addition to supporting upskilling and reskilling. Cooperation with the private sector is necessary to disseminate information related to job creation and redundancies across firms and industries.

Juthathip Jongwanich is Associate Professor at the Faculty of Economics and the International Competitiveness Research Cluster, Thammasat University.

The post ‘Is Thailand ready for the digital economy?’ appeared first on The Frontier Post.