Re-tooling Thailand to a manufacturing hub as labour force peaks

July 28, 2014

BANGKOK - As Thailand unshackles itself from the constraints of nine months of political stalemate and an economic recovery falls into place, the beleaguered manufacturing sector is not without considerable challenges going forward, according to a research paper by ANZ Bank.

“Japan, whose approach to Foreign Direct Investment (FDI) known as the “China-Plus-One” strategy led to the development of Thailand as a manufacturing base nearly a decade ago, is now moving into a refinement of this strategy, known as the “Thailand-Plus-One” model where labour intensive processes are shifted into the Greater Mekong,” the paper says.
“On the surface, this appears to be a negative for Thailand. However, it is actually an astute reading of the demographic challenges facing the country.
“With the population ageing and surplus labour having been rapidly absorbed, it is likely that Thailand’s working age population has already peaked. Thailand, like many rapidly industrialising economies, now faces the more significant challenge of increasing the value-add and productivity of its existing labour force, rather than merely growing it.
“FDI will be the principal enabler in this critical process. Essentially, a Thailand-Plus-One strategy would entail maintaining production bases in Thailand while outsourcing labour-intensive processes to the CLMV (Cambodia, Laos, Myanmar and Vietnam).”
ANZ says: “The Thailand-Plus-One model will be an important step in the next stage of Thailand’s economic development and offers a further opportunity for Thailand to achieve the escape velocity necessary to exit the middle-income trap.” www.live.anz.com (ATI).