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Dawn of a New Day - What Economic Policies Can We Expect from Thailand’s New Government?

Thailand’s new government took office this month. Prime Minister Srettha Thavisin, a real-estate tycoon, says revitalising the economy is his top priority. He faces a big challenge. The new administration’s economic stimulus strategies will have an immediate impact on the Thai economy – and recruitment.


Open the Floodgates: The Logjam Is Cleared

It took more than three months of contentious post-election negotiations to form the ruling coalition. During that period of uncertainty, a lot of investment and hiring decisions were paused.

Now that the PM and Cabinet ministers have been sworn in, the private sector can implement plans for the near- and mid-term future with greater clarity. Almost immediately after the new government was announced, we’ve seen a significant increase in requests for new hires from our multinational clients.

Spearheading the push to attract more international investment, PM Srettha courted executives from Microsoft, Google, Goldman Sachs, Tesla, and Estee Lauder during his trip to the USA last week.

Economic Headwinds

Once celebrated as the economic ‘Tiger of Southeast Asia,’ Thailand’s GDP growth rate is now lagging behind its ASEAN neighbours. GDP grew by 2.6% last year, according to the World Bank. By comparison, Malaysia’s 2002 GDP growth rate was 8.7%; Vietnam’s was 8%; the Philippines 7.6%). 

PM Srettha is under pressure to increase GDP growth and boost exports, a mainstay of the Thai economy. The new government is expected to introduce improved incentives for EV manufacturing and other high-tech industries.

Exports to China in Focus

Export volumes to China have been dented, as Beijing tweaks their supply chain for greater self-sufficiency. China’s new strategic direction is impacting Thailand’s exports.

To cite just one example of these impacts: Thai shrimp producers are feeling the pain worse than most.

China’s leadership has built up a two-year stockpile of shrimp – a protein source that is popular and easy to freeze, dry, and store. As a result, demand is softening, and the price of shrimp has dropped precipitously during the past two years.

Thailand’s economic advisors are keenly aware of this issue – in one of his first moves as PM, Srettha travelled to Samut Sakhon to meet with shrimp producers.

Key Policy Initiatives – EV Manufacturing, Full Steam Ahead!

Thailand was one of the first ASEAN countries to offer subsidies and incentives for EV manufacturers and suppliers, putting the kingdom at the forefront of electric vehicle production in the region. Thailand has consolidated its position as ASEAN’s EV industrial hub, attracting leading Chinese car manufacturers like SAIC, Great Wall, BYD, Hozon, Changan, and GAC Aion to establish operations here. Chinese EV manufacturers were among the first to take advantage of the government’s generous subsidies, and enjoy a competitive advantage.

Last week while travelling in the USA, Srettha spoke with Tesla brass, including boss Elon Musk, via videocall to sell the global automaker on Thailand’s incentives package for manufacturing infrastructure. According to a Thai government statement, Tesla reportedly sees “Thai human capital” as “suitable for investment.”

As part of the government’s aggressive push to make Thailand the preeminent hub for EV manufacturing, the previous administration set a goal for EVs to constitute 50% of domestically produced vehicles by 2030. Nearly 10% of new vehicles sold in Thailand during the first half of 2023 were EVs. Thailand Automotive Institute expects EV sales to reach 50,000 units this year from 20,000 in the previous year. Current subsidies amount to around 70,000-150,000 baht per vehicle.

When PM Srettha’s administration rolls out their new EV manufacturing incentives package, it will likely pave the way for EV suppliers and manufacturers to further ramp up their presence in Thailand.

Some Chinese manufacturers are already moving full steam ahead with existing plans to ramp up EV-manufacturing operations in Thailand. BYD is investing nearly $500 million in Thailand to build a new factory that will produce 150,000 EVs for export starting in 2024. Thai EV buyers comprised 24% of BYD's overseas sales in the second quarter, making it the company’s largest foreign market. 

In March, Hozon announced it would set up an ecological smart factory in Thailand. The factory will begin production in 2024 with a capacity of 100,000 cars per year in the first phase, doubling to 200,000 in the second phase.

Waiting for the Next Round of EV Incentive Package Announcements

Other companies are holding off on further investment, waiting with bated breath to see what subsidies the Thavisin government will offer to maintain Thailand’s regional EV manufacturing dominance.

Industry Minister Pimphattra Wichaikul told the Bangkok Post she expects a National EV Policy Committee will be formed with the aim of introducing a new package of incentives before the end of the year. One proposal offers a subsidy of 24 billion baht to encourage local battery production, while imposing a tariff on imported cells.

Ms Wichaikul has indicated that interdepartmental talks with the Ministry of Energy may bear fruit in this regard. If the Energy Ministry and other agencies can agree on concessions for charging stations, for example, EV growth could really take off. Limited infrastructure is the main reason why there aren’t enough EVs on the road in Thailand, and the main challenge to the government meeting its EV sales and production targets.

The Need for Greater SME Stimulus

Ms Wichaikul has also, quite rightly in my opinion, expressed the need for greater support of Thailand’s small- and medium-sized businesses. Inflation has driven up operating costs, credit is harder to obtain, and many smaller enterprises are still struggling to recover from the effects of the covid pandemic.  

Small businesses are a critical engine of Thailand’s economy. Increasing access to funding for SMEs and making it easier for ordinary people to start new businesses will help generate GDP growth more than cash handouts.

We should not focus exclusively on attracting investment from big multinationals; Thailand needs to cultivate entrepreneurship and innovation, which are the foundation for a healthy business environment.

Potential Impacts on Business Leadership and Executive Recruitment

With the changing of the guard in Bangkok finally taking effect after a long delay, the new administration understandably feels a sense of urgency to jump start the Thai economy, especially the EV manufacturing sector.

In September and October many MNCs will be planning their budgets and operational strategies for 2024. The shifting political landscape may well become a factor in deciding on who will occupy top levels of leadership moving forward.

When the covid pandemic put the brakes on the global economy, corporate leadership was necessarily preoccupied with survival and financial sustainability. But now that we’ve emerged from the covid-induced slowdown, organisational strategy likely will focus more on growth, increasing competitiveness, and gaining market share, rather than simply keeping the business afloat.

This shift in focus and global dynamics may well necessitate changes in corporate leadership, a pivot to personnel who are better equipped to facilitate accelerated growth at the global and regional level.

If we are prioritising growth, rather than navigating a crisis, a different set of attributes are preferred: MNCs will be looking for leadership who are quick decision-makers, who can enable decentralisation and delegate authority to make companies more agile and competitive.

Given the transformative nature of the manufacturing industry, with the constant introduction of new technology, and new products, I see a greater need for dynamic, more assertive leadership: Executives who are more comfortable operating in an ambiguous environment. Thailand is a different, and in many ways more difficult place to conduct business than Europe: critical decisions sometimes must be made with limited information and less long-term clarity, and not every leader is capable of that.

Sectors in Focus

The majority of advanced tech and manufacturing jobs are concentrated in the industrial Eastern Seaboard of Thailand. A significant amount are located in Ayutthaya and Pathum Thani as well, provinces north of Bangkok that constitute ‘the electronics heartlands’ of the kingdom.

Before the pandemic struck, the Office of National Higher Education Science Research and Innovation Policy Council projected a need to recruit around 60,000 professionals for aviation and logistics, automotive, robotics, AI, defence and security roles between 2020 and 2024.

These targets have not been met, in part due to disruptions from the pandemic, but also because of an ongoing shortfall in domestic talent supply that has not been fully addressed.

This lends perhaps more impetus to changes in leadership. As organisations survey the rapidly evolving marketplace, they need to ask: How will we adapt? Do we need to change course? Can the skill sets we need for a more bold approach be trained? Do we promote from within, or is it necessary to import fresh talent?

If your organisation is searching for the right solutions to these challenges, JacksonGrant is here to help. Reach out to us today. Click