Thailand’s Path Forward: Can Productivism Cure the Sick Man of Asia?

In the early 1990s, Thailand was tipped to be the region’s next economic tiger. Today, it risks being seen as the “sick man of Asia.”

The matter is not just about slower growth. It reflects a deeper policy problem: an economy clinging to an old playbook while the global economy has entered a complicated era marked by geopolitical tensions and structural limits.

The Thai economy, dependent on manufacturing exports and foreign investment, is now facing a truth hard to accept: the old growth model can no longer push the country towards high-income status or better living standards.

If Thailand wants to shake off its decline, it needs not only new measures but also changes in perspective on economic development as a whole.

The old model was built on low-cost labour, foreign direct investment, and large-scale infrastructure such as the Eastern Seaboard. It expanded production quickly and delivered strong growth in the past.

But over time, returns have been diminishing. Foreign investment still flows in, yet much of it sits in low value-added activities. Links with Thai firms remain thin. The state gives up tax revenue through incentives but gains little in creating new economic capabilities domestically. Under this model, Thailand’s growth has lagged behind regional peers such as Vietnam and Indonesia for much of the past decade, reflecting deeper structural weaknesses.

At the same time, inequality is widening.

Headline GDP figures hide the strain beneath. In 2024, the economy grew by 2.9%. Income per head rose to 266,103 baht a year. Yet poverty increased, from 3.41% to 4.89%.

Growth, in other words, does not distribute its benefits equitably.

That is why the real question is not only how to grow faster, but also how to make growth work for more people.

What is missing is not just new policies, but a new organising framework for economic development. One promising approach is “Productivism”, a concept advanced by Dani Rodrik, a renowned scholar of Harvard Kennedy School. The idea is simple in principle, demanding in practice: build an economy that creates good jobs, expands the middle class, and lifts domestic firms.

This requires a proactive state to work alongside business and civil society to drive investment, skill development, innovation, and production, so that growth generates economic opportunities more broadly.

The core of productivism is a focus on the supply side to raise productivity and create good jobs directly, rather than relying on the economy to respond to market incentives and hoping that benefits will automatically trickle down in time.

Instead, it calls for deliberate structural change. Economic policy must help workers, money, and investment move into businesses that create higher value — especially SMEs that employ much of the country’s labour.

Meanwhile, economic growth should not be limited to manufacturing. Technology and automation have reduced manufacturing’s power as a mass employer. For the economy to create good jobs on a wide scale, industrial policy must extend to services as well.

Productivism is not a return to the developmental state model. It does not romanticise the state’s ability, recognizing the state’s limits, especially in developing countries where capacity and information are often constrained. It is not a top-down planning or the old idea of governments “picking winners,” but a shift to a more collaborative and more experimental approach that supports ongoing adjustments.

In practice, policies should be shaped through engagement with firms and other stakeholders. Learning should come from real constraints on the ground, not abstract models. By employing knowledge and experiences from a broader spectrum of the economy, not limited to state orders, adjustment of goals and tools can respond to real needs in time to raise productivity.

This approach is particularly relevant for Thailand, where firm capabilities and domestic linkages remain the binding constraint, rather than capital accumulation alone. This means rethinking industrial policy in several practical terms.

First of all, the focus should be on upgrading firms. Policies should be more targeted, tailored to the needs and potential of different groups, rather than broad schemes with limited structural impact. The aim is clear: to create better jobs, in both manufacturing and services.

The problem has never been a lack of foreign investment. It is the assumption that local supply chains will form automatically. They often do not.

In sectors such as High-Density Interconnect (HDI) Printed Circuit Boards (PCB) or Electric Vehicles, we still face problems in skills, standards, and specialised services. Without intervention, the supply chain linkages will stay weak.

The state, therefore, must step up to build close links between foreign investment and local businesses. It should help build domestic suppliers, support joint research, and upskill labour in concrete ways.

It must also go beyond usual tax incentive measures. What firms, especially SMEs, need is practical government support in areas such as technology extension, standards compliance, skills intermediation, and affordable advisory services. These measures will help SMEs upgrade without having to spend a fortune on consultancy firms.

Coordination is just as critical.

Industrial development cuts across investment, education, research, regulation, and market access. It involves numerous state agencies, but the silos currently observed stall progress. Thailand does not suffer from a lack of committees. It suffers from a lack of problem-solving institutions.

High-level committees on national economic strategies cannot tackle this bottleneck. What is needed is clear leadership in each sector, with real authority to align efforts across state organisations. There must be operational working groups to bring together government, business, and academia to solve problems, track progress, and adjust policies in real time.

To address these challenges, robust metrics matter too. Productivity, domestic linkages, and job quality must be measured and monitored together through reliable indicators and databases. The government cannot act just as a rule-maker. It needs effective indicators and databases to allow adjustments to implemented policies .

Thailand has reached a point where our economic models and tools no longer deliver. Productivism offers a way to overcome current structural constraints that hold the economy back and to rebuild from within.

The label of “sick man of Asia” is not inevitable. Whether Thailand can reverse that trajectory will depend not simply on growth, but on its ability to build a growth model that raises productivity, creates good jobs, and spreads the gains more broadly across society.

Nopparuj Chindasombatcharoen, Ph.D. Is a research fellow and 
Kanlayanee Kaewmee is a researcher at t the Thailand Development and Research Institute (TDRI). Their policy analyses appear in the Bangkok Post on 1 July 2026

Read More

Other People are Reading