Thailand’s dependence on tourism reaches critical dimensions

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Crowded beach in Phuket, Thailand

The Thai government in its economic review for 2016 said that travel and tourism accounted for 17.7 per cent of the nation’s income last year, a whopping figure given that the share in the past used to be at around ten per cent.

In money terms, the overall income from tourism was close to €71 billion, the bulk of which was spent on hotels, food and beverage, transport, sporting activities and entertainment of various sorts. Of the entire income, around two thirds came from international tourism (which was up by 12.6 per cent), and the remainder from domestic tourism (up 8.27 per cent).

The top five source countries for visitors were China, Malaysia, Russia, UK and US. Overall, more then 30 million tourists visited Thailand in 2016.

This success story is interesting, but also alerting, for various reasons. Industry-wise, Thailand keeps being attractive for ever more tourists despite maintaining a mediocre service level in most touristic segments compared to peer countries which is due to badly trained staff and the fact that the country has one of the lowest English proficiencies and is just not improving.

At the same time, prices have reached international levels in touristic areas and are no longer comparably low as theý used to be a decade or so ago when “affordability” was a main draw for tourists to come to Thailand. The value proposition has clearly been thrown out of balance.

Tourism infrastructure in Thailand is also already stretched to the limits, with overcrowded airports and clogged roads having become the norm. The industry is also poorly regulated, with a large number of unlicensed tour operators and transport companies operating in a grey area which puts travelers in jeopardy of scams and accidents. Thailand also tops the list of the countries with the most congested roads globally.

Chinese tourist group in Bangkok

Economy-wise, Thailand’s reliance on tourism is unhealthy as it seems to be the only organic growth driver for the country under the current military administration, the only other (non-organic) being public project spending. And it is also confined to a few regions, mainly Bangkok, Chiang Mai, Chonburi and the southern islands, which means that distribution of tourism income is highly disproportionate and does neither contribute to rural development nor balance nationwide incomes – instead, it makes already wealthy regions wealthier and exacerbates inequality.

It also covers up the shortcomings in other sectors of Thailand’s economy. Even though tourism income grew strongly last year, overall, Thailand’s economy just expanded by 3.2 per cent, among the lowest in Southeast Asia and below the junta’s own target of at least 3.7 per cent. Growth is also significantly below East Asia’s average of 6.3 per cent as per World Bank figures.

In fact, the current administration struggles to revive what was once one of Southeast Asia’s strongest economies owing to external factors like sluggish demand for Thai exports, mainly vehicles, textiles, agricultural products and food, electrical and electronic appliances and jewelry, as well as domestic problems such as periods of political chaos and, subsequently, a drop in foreign investment confidence, as well as high household debts, a dismal education system and, as a result of the latter, waning export competitiveness because of little focus on of research and development, a stubbornly lowly-skilled workforce and close-to-zero entrepreneurial incentives.

The Thai government’s attempt to take countermeasures so far have turned out to be strategies that many commentators say were just lip service.

For example, Prime Minister Prayut Chan-ocha, when the junta took over in 2014, said that Thailand has a vision top become a developed country by 2025. He often repeated the claim and said the Thai economy, helped by digitisation and innovation, could grow in a way that the country would “become as rich as Singapore,” and other remarks along that line. 

But the much-promoted strategy of Thailand 4.0 to institute a “digital economy” in the country is still not much more than a static PowerPoint presentation in a 1980s design style. And a digital economy does also not mean that 90 per cent of the young Thai population should stare onto their smartphone all day long and send Line massages or selfies to Instagram because they are so bored with their real life in dull jobs. They need prospects.

Nearly three years after the coup, the results are mixed. Without a reform of the education sector and the creation of an ecosystem that supports innovation and economic participation, the outlook remains bleak, analysts say.

In comparison, the Philippines, which currently has a similarly chaotic government, grew 6.8 per cent last year, the highest rate in the region and even higher than China. To a large extent, this has to do with the country’s educated, very well English speaking and internationalised workforce, features that allow them to participate in the global economy bý either taking over outsourcing services at home or work overseas in reasonable jobs and send large amounts of money back home.

In a nutshell, as much as joy over growing tourism numbers in Thailand is understandable, it remains a double-sided sword. Too much confidence that numbers will keep growing bears the risk that other important sectors such as value-added manufacturing, research and development and innovation remain neglected. But we all now that nothing grows forever (except the Universe, but even that’s not sure).

Other risk factors are slowing growth in China which supplies the lion’s share of tourists to Thailand, terrorism, other major negative world events or – Heaven forbid! – US President Donald Trump going nuts.

The World Bank says Thailand could grow between 4 to 5 per cent a year if the economy was managed “properly” – whatever it wanted to imply with that remark.

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[caption id="attachment_29529" align="alignleft" width="300"] Crowded beach in Phuket, Thailand[/caption] The Thai government in its economic review for 2016 said that travel and tourism accounted for 17.7 per cent of the nation’s income last year, a whopping figure given that the share in the past used to be at around ten per cent. In money terms, the overall income from tourism was close to €71 billion, the bulk of which was spent on hotels, food and beverage, transport, sporting activities and entertainment of various sorts. Of the entire income, around two thirds came from international tourism (which was up by 12.6...

Reading Time: 4 minutes

Crowded beach in Phuket, Thailand

The Thai government in its economic review for 2016 said that travel and tourism accounted for 17.7 per cent of the nation’s income last year, a whopping figure given that the share in the past used to be at around ten per cent.

In money terms, the overall income from tourism was close to €71 billion, the bulk of which was spent on hotels, food and beverage, transport, sporting activities and entertainment of various sorts. Of the entire income, around two thirds came from international tourism (which was up by 12.6 per cent), and the remainder from domestic tourism (up 8.27 per cent).

The top five source countries for visitors were China, Malaysia, Russia, UK and US. Overall, more then 30 million tourists visited Thailand in 2016.

This success story is interesting, but also alerting, for various reasons. Industry-wise, Thailand keeps being attractive for ever more tourists despite maintaining a mediocre service level in most touristic segments compared to peer countries which is due to badly trained staff and the fact that the country has one of the lowest English proficiencies and is just not improving.

At the same time, prices have reached international levels in touristic areas and are no longer comparably low as theý used to be a decade or so ago when “affordability” was a main draw for tourists to come to Thailand. The value proposition has clearly been thrown out of balance.

Tourism infrastructure in Thailand is also already stretched to the limits, with overcrowded airports and clogged roads having become the norm. The industry is also poorly regulated, with a large number of unlicensed tour operators and transport companies operating in a grey area which puts travelers in jeopardy of scams and accidents. Thailand also tops the list of the countries with the most congested roads globally.

Chinese tourist group in Bangkok

Economy-wise, Thailand’s reliance on tourism is unhealthy as it seems to be the only organic growth driver for the country under the current military administration, the only other (non-organic) being public project spending. And it is also confined to a few regions, mainly Bangkok, Chiang Mai, Chonburi and the southern islands, which means that distribution of tourism income is highly disproportionate and does neither contribute to rural development nor balance nationwide incomes – instead, it makes already wealthy regions wealthier and exacerbates inequality.

It also covers up the shortcomings in other sectors of Thailand’s economy. Even though tourism income grew strongly last year, overall, Thailand’s economy just expanded by 3.2 per cent, among the lowest in Southeast Asia and below the junta’s own target of at least 3.7 per cent. Growth is also significantly below East Asia’s average of 6.3 per cent as per World Bank figures.

In fact, the current administration struggles to revive what was once one of Southeast Asia’s strongest economies owing to external factors like sluggish demand for Thai exports, mainly vehicles, textiles, agricultural products and food, electrical and electronic appliances and jewelry, as well as domestic problems such as periods of political chaos and, subsequently, a drop in foreign investment confidence, as well as high household debts, a dismal education system and, as a result of the latter, waning export competitiveness because of little focus on of research and development, a stubbornly lowly-skilled workforce and close-to-zero entrepreneurial incentives.

The Thai government’s attempt to take countermeasures so far have turned out to be strategies that many commentators say were just lip service.

For example, Prime Minister Prayut Chan-ocha, when the junta took over in 2014, said that Thailand has a vision top become a developed country by 2025. He often repeated the claim and said the Thai economy, helped by digitisation and innovation, could grow in a way that the country would “become as rich as Singapore,” and other remarks along that line. 

But the much-promoted strategy of Thailand 4.0 to institute a “digital economy” in the country is still not much more than a static PowerPoint presentation in a 1980s design style. And a digital economy does also not mean that 90 per cent of the young Thai population should stare onto their smartphone all day long and send Line massages or selfies to Instagram because they are so bored with their real life in dull jobs. They need prospects.

Nearly three years after the coup, the results are mixed. Without a reform of the education sector and the creation of an ecosystem that supports innovation and economic participation, the outlook remains bleak, analysts say.

In comparison, the Philippines, which currently has a similarly chaotic government, grew 6.8 per cent last year, the highest rate in the region and even higher than China. To a large extent, this has to do with the country’s educated, very well English speaking and internationalised workforce, features that allow them to participate in the global economy bý either taking over outsourcing services at home or work overseas in reasonable jobs and send large amounts of money back home.

In a nutshell, as much as joy over growing tourism numbers in Thailand is understandable, it remains a double-sided sword. Too much confidence that numbers will keep growing bears the risk that other important sectors such as value-added manufacturing, research and development and innovation remain neglected. But we all now that nothing grows forever (except the Universe, but even that’s not sure).

Other risk factors are slowing growth in China which supplies the lion’s share of tourists to Thailand, terrorism, other major negative world events or – Heaven forbid! – US President Donald Trump going nuts.

The World Bank says Thailand could grow between 4 to 5 per cent a year if the economy was managed “properly” – whatever it wanted to imply with that remark.

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