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Thai economy risks falling if technology and innovation industry can't keep up

12 Nov 2020

The role of startups that are outstanding in technology and innovation and are growing in importance around the world. But there are many restrictions on Thai business regulations.

KKP Research by Kiatnakin Phatra revealed that in the past, although the COVID situation has been resolved in many countries, the Thai stock market index has not yet recovered to pre-COVID levels.

In contrast to the situation in many countries, even though the COVID situation is more severe than Thailand, but the stock market recovered faster. In particular, stock markets in economies with high technology development, such as the US, China, Japan, Korea, or Taiwan, have recovered faster.

This difference in recovery reflects the structure of the Thai stock market, which is still lacking among leading companies that focus on technological excellence.

The top 10 largest companies in the Thai stock market can be said that most of them are in the old economy or have strong market power in doing business.

If compared to the major companies in the United States. It has five leading technology conglomerates known as the FAANG, with Facebook, Amazon, Apple, Netflix, and Google (or Alphabet today) at its core.

The proportion of companies in the Thai stock market associated with the development of technology and information (Tech stock) is only 3% of the total market, which is very low compared to other markets in Asia, especially Taiwan. The proportion reached more than 50% of the stock market.

Thailand is being overtaken by its neighbors in technology and innovation. The level of use of advanced technology in the Thai manufacturing sector as a whole has rarely evolved over the past decade.  And Thailand still produces the same products, that began to be unwanted in the changing world market. This is reflected in the recovery of exports after COVID. 

The technological products are increasingly in demand, It making South Korea, Taiwan and Vietnam began to exports return to expand since September last. But Thai exports continued to contract for the fifth consecutive month.

The competitiveness of Thai exports has decreased significantly. The growth rate of Thai industrial products exports continued to decline from the double-digit level to lower than 5% over the past 4-5 years.

While competing countries like Vietnam have grown an average of 20% annually in industrial product exports over the past two decades, the proportion of Thai high-tech manufacturing products has remained. At the same level of 23%, it has been overtaken by Vietnam since 2012, currently at 40% of total exports.

Looking at the readiness for innovation, World Intellectual Property Organization (WIPO) data suggests that Thailand is almost the bottom line in the Asia Pacific region. The overall score level in Thailand has rarely changed over the past 10 years.

Most recently, Thailand's ranking fell to 10th in the region, with Vietnam surpassing it. 

It reinforces to see more clearly that as Thailand continues to develop technology and innovation slowly, but other countries Is accelerating development to become a major competitor and overtook Thailand

The business with high technology and the focus on innovation development has not happened in Thailand, despite pushing a lot.

In the past, the government's concept emphasized and realized the need for technological upgrading and innovation development. But it was not successful or received a response from the private sector as expected.

The latest Thailand 4.0 policy, which has been initiated since 2015, by adopting the Industry 4.0 development model to enhance productivity and create innovation, to add value to Thai products and services. 

Whether it is an extension of the existing S-Curve industry, that has potential such as modern vehicles Intelligent electronics Health tourism Agriculture and Biotechnology And food processing. Including the creation of new S-Curves such as robotics, aviation, and logistics. 

Fuels and biochemicals Digital industry And comprehensive medicine, although more than five years have passed, plans and procedures are not clear and effective.

This is partly due to the lack of fundamental factors in the Thai economic structure to accelerate investment in technology and innovative creation.


KKP Research believes that the Thai economy lacks three key factors to support technological upgrading:

1. Infrastructure: Thailand still lacks technological infrastructure, especially in terms of education and personnel.

2. Investment: Thailand lacks research and development investments and foreign direct investment that will help expand technology.

3. Incentives: The compensation structure and incentives in the Thai economy are not conducive to the widespread innovation of development.


It was found that in many industries there are few players. It has a high barrier to entry and a high concentration of profits.

While the weakness in the protection of intellectual property rights and complicated regulations for setting up a startup business in Thailand, it increases the cost of research and development in the country. 

Intellectual property protection is the weakest link in Thai business law when compared with other regulations. 

While Thailand was ranked at the bottom Of international intellectual property protection reflects the unseen cost of research and development investment. 

The results may be imitated by competitors and thus reduce expected profits.


Also, the role of startups that are excellent in technology and innovation and are becoming increasingly important around the world. Instead, it found many restrictions on Thai business regulations, such as

1. The framing of the business sector that is in the scope of investment promotion to be limited

2. Difficulty hiring foreign personnel in terms of visa formats and the number of potential hires.

3. The tax burden of startups registered in Thailand In particular, the Mergers and Acquisitions (M&A) tax has resulted in Thailand lacking a suitable ecosystem for startups and Thailand still has a relatively small number of startups.


While there is investment capital in startups as the bottom line of ASEAN With investments from VC (Venture Capital funding) of only $ 1.3 billion. There are also no unicorns or startups with a company value of more than $ 1 billion even one company.

 This is far from the goal of the National Innovation Agency, which aims to make Thailand one of the top 20 Startup Nations.


Thai economy risks fall if technology and innovation gaps are not closed

1. Existing businesses that will not change themselves will suddenly die, with the view that the EV Revolution and the Platform economy will change the economy in the manufacturing and service sectors of Thailand. 

2. The Thai economy will attract less foreign direct investment, and the risk of relocating production bases to neighboring countries is increasing. Vietnam is becoming the new FDI destination to move to ASEAN in place of Thailand.

With the benefits of free trade agreements and production bases of electronic products, that are likely to grow with the advancement of technology, ASEAN countries with production chains and markets bonding with both China and the United States became the new target for FDI.

3. Thailand will not be able to escape from the middle-income trap. Beginning in the development of technology and innovation by reducing regulations, liberalizing, and breaking monopoly power.


KKP Research believes that technology upgrades and innovation will be realized as a result of breaking down the three limitations above. Especially in the sector of ​​structural reforms, incentives, and rewards. This is an important condition for R&D upgrading and will catalyze education and personnel structural change. Including effecting subsequent investments

1. It should reduce the market power of the big players and reduce the regulations allowing new players to enter the market.

2. Build a diverse and inclusive education system to create a workforce that meets the needs of

3. Promote investment in technology in the country, especially in industries that are the strength of Thailand.


For industries in Thailand has an advantage and can easily invest in technology and develop innovations to further develop, it is F-A-T-E, which are

1. Food and foodservice (Food)

2. Agriculture and agricultural products (Agriculture)

3. Tourism and wellness

4. E-commerce and EV (E-commerce and EV) covering businesses and related industries in agriculture, industry service, promoting technological investment and innovation development can increase the potential for economic growth in Thai.