Thailand Per Capita Income Growth

[nigelforbes]

In his column in the Post this week, Chartchai compares three economies and their growth in per capita income, beginning as poor underdeveloped nations in 1960. The countries are South Korea, Malaysia and Thailand. Over the next 62 years, Korean per-capita income multiplied 213 times, Malaysia’s 54 times and Thailand’s 73 times, Malaysia started the race 2.4 times higher than Thailand and Korea’s was 0.5 times higher, so not exactly an even start but we’ll overlook that.

 

Chartchai’s view, and he’s an extremely talented economist and writer, is that Thailand’s growth rates are far too low and that producers have been unable to increase their prices to their required level and produce higher value added outputs. This inability to increase prices means the employer can’t increase employee wages  so  over time their standard of living falls. I think this is probably true but it doesn’t paint the entire picture.

 

I think Chartchai has overlooked some important points. The first is that development of the Korean economy was and still is, strongly aided by the US, even their education system is modelled after the US and its standards and quality are very high. Malaysia has also had external assistance in establishing  its infrastructure and educational and medical environment, firstly from the British, latterly from Singapore. I think there is little doubt that outside assistance has created an uneven playing field in Chartchai’s comparison.

 

The other point I think he overlooks is the means to add value to products and the need to introduce  quality as an important criteria, exactly where that inventiveness will come from is unclear because much of it is dependent on learning and the education system. As far as I can tell, his focus is mostly on closing the income per capita gap and not on the means for doing that by creating high quality, value added products that are competitive in the marketplace. A focus of higher prices alone is not enough. For that to happen, the country needs higher education standards, to move away from wrote learning and to improve its system of learning, several times over. After all, Chartchai earned his Phd from the University of Texas so he’s well ahead of his many of his peers, he surely must see the problem so it's curious he doesn't mention it. Knowing the solution is not enough, first of all you have to acknowledge that there is a problem to be solved and that requires education and experience.

 

I highly recommend reading Chartchai’s column, it’s very good.

[lkn]

I am looking forward to reading the analysis, what has been posted so far is only the prologue of a series of articles about how to “improve” Thailand.

 

And it does mention that investing in education will be part of the plan, and it is a 10+ year “plan”, so unsure what you think he is overlooking (given that so far we just have a rough outline of what to come).

 

But, as Chartchai himself admit, those in power do not seem to care about this, so it’s merely an intellectual exercise.

Edited February 26, 2023 by lkn

[nigelforbes]

8 hours ago, lkn said:

I am looking forward to reading the analysis, what has been posted so far is only the prologue of a series of articles about how to “improve” Thailand.

 

And it does mention that investing in education will be part of the plan, and it is a 10+ year “plan”, so unsure what you think he is overlooking (given that so far we just have a rough outline of what to come).

 

But, as Chartchai himself admit, those in power do not seem to care about this, so it’s merely an intellectual exercise.

I appreciate it is a prologue and that the meat is yet to come. I had hoped to draw attention to it by means of my post on the off chance a meaningful debate might follow. I remain unsure however that his comparative analysis is equal or where the source of the investment to pay for the change comes from either. Being a lone wolf, howling in the wilderness, won'take any plan he comes up with, executable, that aspect needs a solution first.

 

[nigelforbes]

I’ve just read the first instalment of his five part series and I’m disappointed. First the good points:

 

It’s interesting to know that over 60% of consumer loans is short term uncollateralised debt whereas in other countries it might be expected to mostly comprise long term mortgage borrowing which is more stable and is collateralised. That is quite scary.

 

Then there’s the rest:

 

The first instalment is entitled, “the country needs to change” yet he barely touches on that, instead he talks extensively about Consumer Debt, which is in fact the title of the next instalment.

 

He talks extensively about consumer debt and its high levels compared to GDP. But he doesn’t mention that Consumer Debt rose at the time of covid when GDP fell and now that GDP is rising once again, Consumer Debt is once again headed back to normal levels. Below you can see the relationship between rises and falls in GDP compared to rises and falls in Consumer debt, in a  static economy they are

inversely proportional. 

 

 

 

 

 https://tradingeconomics.com/thailand/households-debt-to-gdp

https://tradingeconomics.com/thailand/gdp

 

Next, he talks about what would happen to the banking system if consumer debt tripled, he says this would create banking stress similar to the 1997 crisis. Well yes, if they tripled it probably would but fortunately the BOT has implemented Basel III rules so the chances of that happening are almost non-existent. This is scaremongering, an excuse to mention the the 1997 crisis and a potential bank collapse, I’m very disappointed. He attempts to frighten readers even more by hinting that 1 trillion in 15 of consumer loans are NPL’s which whilst technically correct is very misleading since half that number are merely on watch lists and have not yet under performed.

 

The author knows full well because he mentioned this previously that in the short term, rising consumer debt can actually aid an economy which is what he’s now writing about but with a negative spin. It’s only in the medium term, according to the IMF, that systemic risk arises as a result of this debt and it becomes a drag on economic growth.

 

Finally to add: you can compare anything against GDP because that shows growth against the economy which is a useful measure. The article shows a table that includes public and private debt against GDP which is intended to make the authors point regarding growth. Do not be fooled into thinking that private or consumer debt is a part of GDP, only public debt is. Consumer debt is a useful measure of the economy when viewed along side consumer expenditure but consumer debt is not a construct of GDP.

 

Let me finish by saying I think that the author is an excellent economist and I always look forward to reading what he has to say . On this occasion however I don't think he argued his points very well at all.