Country Analysis Report: Thailand, In-depth

PESTLE Insights
OVERVIEW

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PUBLICATION DATE: Nov 2015
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Country Analysis Report: Thailand, In-depth PESTLE Insights

ML00002-049
MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED

OVERVIEW

OVERVIEW
Catalyst
This profile analyzes the political, economic, social, technological, legal and environmental (PESTLE)
structure in Thailand. Each of the PESTLE factors is explored in terms of four parameters: current
strengths, current challenges, future prospects and future risks.

Summary
Key findings
Thailand follows tough policies to fight corruption, but the militarys increasing powers could weaken
democracy

Under the new amendment to the anti-graft law in July 2015, severe punishments, including threat of
execution, could be meted out to state officials and foreigners involved in cases of corruption. The most
important amendment was that penalties would be imposed on civil servants as well as other state officials
including the prime ministers, the ministers and other officials at local organizations, if they were involved in
any form of corruption. These amendments to the law have been made to make Thailand free of corruption.
The amendments follow the commitment that Thailand has made to the United Nations Convention against
Corruption since its ratification in 2003.
The prime minister, Prayuth Chan-ocha, lifted the martial law in March 2015, and replaced it with a new
order of the interim constitution. The new order gives the military unrestrained power to ensure political
stability and undertake required reforms. Under the new order, military officials have unchallenged power to
search homes, arrest troublemakers, confiscate property, and detain suspected individuals in special
premises for up to seven days without any legal authority. The implementation of the new order, which
could result in greater repression, makes the countrys return to democracy in true sense doubtful.
Thailands tourism is a strong driver of economy; however, rising household debt is a source of concern

Tourism is an important sector in Thailand, contributing significantly to the economy. The tourism industry
suffered a setback due to political unrest post 2013. However, in the latter half of 2014, it began to pick up.
According to the World Travel and Tourism Council (WTTC) report, the contribution of travel and tourism to
GDP was THB2,345.1 billion ($72.2 billion) in 2014. The contribution from the tourism sector comprised
19.3% of GDP in 2014. The sector provided almost 5 million jobs, accounting for 14% of the total
employment in the country in 2014. The money spent by foreign travelers in the country, which forms the
annual visitor exports, has more than doubled in the past 10 years, increasing from $19.4 billion in 2005 to
$40.3 billion in 2014. The rise in tourist arrivals in the first half of 2015 has contributed to 5.4% growth in the
services sector of the economy.
Thai households are among the most indebted in Asia and the official figures understate the problem, as
large sums of money are also owed to loan sharks. As the banks have tightened their lending criteria due to
elevated NPA levels, customers are forced to borrow from loan sharks. Household debt in Thailand was
86% of GDP in 2014, one of the highest among the south-east Asian countries. Research conducted by the
University of the Thai Chamber of Commerce shows that household debt in Thailand has increased
alarmingly in 2015, being the highest in past 10 years. According to the research, each household on an
average has a debt of THB248,004 ($6,938) in 2015, representing an increase of 13% in comparison to the
2014 average of THB219,158 ($6,131). Consumption plays an important role in Thailand and with
increasing household debt, consumption is likely to remain low.

Country Analysis Report: Thailand, In-depth PESTLE Insights

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Although Thailand has a strong social security system, inequality is a cause for concern

Thailand included social protection in its 11th National Economic and Social Development Plan. The
country aims to tackle corruption and drug use, and develop an efficient health insurance system. It also
aims to raise the standard of living through wage increases and tax relief. The government raised the daily
minimum wage of more than 20,000 public sector workers to THB300 ($9.11) in October 2011, while the
Central Wage Committees plan to raise the private sector minimum wage by around 40% has been in force
from April 2012. The former government has embarked upon a strategic plan to acheive universal social
security by 2016.
In 2011, Thailand became an upper-middle income economy amidst political uncertainty and volatility; the
country has made great progress in social issues. However, inequality is high in the country. In Thailand,
poverty is mostly a rural phenomenon with 50.83% of people living in rural areas in 2014 according to
MarketLine estimates. Regions particularly in the North and North-east and some ethnic groups lag behind
in terms of development. According to the World Bank, benefits of economic growth have failed to trickle
down to the masses. Income inequality as measured by the Gini coefficient was above 0.45 as of April
2014. The Gini coefficient score of zero corresponds to complete equality while a score of one corresponds
to complete inequality. Moreover, vulnerable groups like informal workers, displaced persons and migrants
do not benefit from Thailands economic growth. The country needs to take measures to reduce inequality.
Thailand has signed bilateral agreements on science and technology, but high piracy levels remain an issue

Improving a countrys science and technology (S&T) base is crucial for technological innovation and
increasing global competitiveness. This is possible by technology transfer from a developed to a developing
country through bilateral S&T agreements that strengthen markets and the technology base. A 2013 S&T
agreement with the US will provide intellectual property protection, and will facilitate private sector
investment, technology transfer, joint research programs and collaboration between the two governments.
A 2010 study by BSA-The Software Alliance, revealed that a 10% decrease in Thailands software piracy
rate over a four-year period is likely to add $1.3 billion to the countrys GDP and create 2,175 new IT jobs.
According to the global survey by BSA- The Software Alliance, Thailand was among the top 20 countries
with high piracy in 2013. In 2013, the piracy rate was 71% and the commercial value of pirated PC software
amounted to $869 million. In its 2015 Special 301 Report on Copyright Protection and Enforcement, the
International Intellectual Property Alliance (IIPA) urged USTR to maintain Thailand on the Priority List in
2015. The country needs to take measures to control piracy.
Thailands corporate governance is lauded, but curbing internet freedom is a concern

In April 2013, the World Bank (Report on the Observance of Standards and Codes) praised Thailands
reforms to enhance corporate governance, declaring it the regional leaderwith high scores in disclosure
and transparency. The report acknowledged that the reforms have increased investor confidence and
protected their rights. The World Bank further pointed out that information disclosures in listed companies
annual reports were in line with international standards. There has been active participation from private
enterprises in the process of implementing best practices and improving corporate governance. Although
challenges in the form of poor governance in state enterprises remain an area of concern, concerted efforts
by the government are likely to address this problem.
Since 2003, the Thai government has imposed internet censorship mainly to deter the circulation of
pornography and illegal products. However, after the 2006 coup that toppled the Thaksin government,
internet censorship has been imposed on politically sensitive messages and sites that are considered
harmful to national security. According to Google, in the first half of 2011, the MICT had requested the
removal of 225 videos from YouTube that allegedly violated the lese-majeste law. The Lese-majeste law
prescribes imprisonment of up to 15 years for criticizing the king, the royal family or Buddhism. The opening
of the Cyber Security Operations Centre (CSOC) in 2011 was another step towards declining internet
freedom. The CSOC enabled the MICT to shut down and block online content without the need for a court
order. According to the 2013 Internet Freedom report, Thai courts blocked around 21,000 URLs in 2012. In
2015, military courts passed sentences of 50 to 60 years in prison for insulting the monarchy online, which
on confession were reduced to 28 to 30 years. Curbing the freedom of expression through legal measures
may mar the governments democratic image.

Country Analysis Report: Thailand, In-depth PESTLE Insights

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Thailand has an ambitious renewable energy initiative, but environmental activism lacks government support

Thailand aims to increase the use of renewable energy to reduce its dependence on fossil fuels. The
country has the most ambitious energy targets in the ASEANgoals reiterated by successive governments.
Thailand has successfully set up a policy environment that is helpful in raising renewable energy share from
7.6% in 2012 to 25% by 2021. According to the Ministry of Energy, power generation from renewables is
likely to rise by 51% to 13,927 megawatts by 2021 compared to 9,201 megawatts as of June 2013. If the
country is successful in producing 25% of its energy from renewable sources, it is likely to save $19 billion
spent annually on energy imports. According to the new goal approved by the National Energy Policy
Committee, the country will also generate energy from other sources like biomass, biogas, wind,
hydropower and waste.
In July 2011, environmental activist Thongnak Sawekchinda was murdered in the Samut Sakhon province
outside Bangkok for protesting against the transportation of coal, which is used by a range of industries in
the province. A total of $10,000 was reportedly paid to seven men for the killing. The activists friends have
alleged that powerful people with connections to the local businesses and politics ordered the crime. In
February 2013, Prajob Nao-opas, who was fighting against the illegal dumping of toxic waste by various
industrial estates in Chacheongsao province, was murdered in broad daylight. These incidents show the
government has failed to protect those fighting for environmental issues.
PESTLE highlights
Political landscape

Continuous protests since November 2013 and the removal of Prime Minister Yingluck Shinawatra
on corruption charges once again plunged the country into political instability. On May 22, 2014, the
military toppled the caretaker government in a bloodless coup under General Prayuth Chan-ocha.
In August 2014, the new, military-dominated National Assembly appointed Prayuth Chan-ocha as
the new prime minister.

According to the World Banks 2014 Worldwide Governance Indicators, the country performed
poorly in every single parameter, recording low percentile ranks in terms of voice and
accountability, political stability, government effectiveness, regulatory quality, rule of law, and control
of corruption.

Economic landscape

The Board of Investment expects the value of projects approved in 2015 to amount to THB1.4
trillion ($41 billion) in comparison to THB729 billion ($22 billion) in 2014. The target is expected to
improve because of policy changes made in December 2014, that are aimed at encouraging
investment by offering tax and import-duty exemptions and other such incentives.

Declining employment opportunities in the agricultural sector and high levels of household debt will
continue to hamper the recovery of consumer spending in the country. Apart from that, a number of
factors will continue to reduce merchandise exports like lower global agricultural commodity prices
and slowing demand from China.

Social landscape

According to MarketLine estimates, Thailand had a literacy rate of 97.12% in 2014. According to
MarketLine estimates, government spending on education has increased from $5.89 billion in 2003
to $28.98 billion in 2013 or 7.48% of GDP.

In January 2013, the minimum daily wage policy was implemented where the employers must pay
a minimum of THB300 ($9.11) a day to all employees.

Technology landscape

The number of patents granted to Thailand by the US Patent and Trademark Office increased from
60 in 2010 to 125 in 2014.

Country Analysis Report: Thailand, In-depth PESTLE Insights

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In the 10-year Science and Technology Action Plan (200413), the former government had focused
on fostering innovation. Since August 2015, Thailand offers 300% tax benefits for R&D expenses.
The country aims to increase the R&D spending to 1% of GDP by 2016 and 2% by 2021.

Legal landscape

In the 2016 World Bank Doing Business Report, Thailand was ranked 70th out of 189 countries in
terms of paying taxes. The country was above the East Asian and Pacific region average and was
ahead of countries like Myanmar, Lao PDR, the Philippines and Indonesia.

Thailand is yet to ratify International Labor Organization (ILO) Conventions 87 and 98, instruments
forged in 1948 and 1949 respectively that protect workers rights to set up labor unions and engage
in collective bargaining.

Environmental landscape

In September 2012, the Department of Disaster Prevention and Mitigation (DDPM) and the United
Nations Development Program (UNDP) have collaborated for a new initiative to increase the
capacity of the DDPM to respond quickly to any type of natural disasters. The initiative spread
across three years, amounts to $1.2 million.

In the 2014 EPI, Thailand was in the 78th place out of 178 countries. The country ranked below
Singapore (fourth) and Malaysia, which was in the 51st place.

Key fundamentals
Table 1: Thailand key fundamentals
2013

2014

2015f

2016f

2017f

2018f

2019f

GDP,
230.39
constant
2005 prices
($ billion)

232.01

240.34

249.68

259.90

270.44

281.32

GDP growth 2.90

rate (%)

0.71

3.59

3.88

4.09

4.06

4.02

GDP,
constant
2005
prices, per
capita ($)

3364.71

3479.36

3602.12

3735.02

3870.20

4006.63

Inflation (%) 2.19

1.90

1.28

2.64

2.50

2.41

2.31

Exports,
total as a
percentage
of GDP

74.05

74.83

73.61

72.22

70.66

69.13

67.63

Imports,
total as a
percentage
of GDP

78.76

74.38

75.26

74.86

74.18

73.42

72.59

Mid-year
population,
total
(millions)

68.79

68.96

69.08

69.31

69.58

69.88

70.21

0.82

0.80

0.87

0.89

0.92

0.95

3349.20

Unemploym 0.74
ent rate (%)

Country Analysis Report: Thailand, In-depth PESTLE Insights

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Mobile
penetration
(per 100
people)

139.87

144.25

145.75

146.93

Source: Country Statistics, MarketLine

Country Analysis Report: Thailand, In-depth PESTLE Insights

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147.84

148.56

149.11