Rethinking Thailand’s Development Model Amidst the New Geoeconomic Landscape

1. The triple grand challenge

Thailand stands at a critical juncture in its economic development. After decades of strong growth—averaging around 7 percent annually in the 1990s and slightly over 5 percent in the 2000s—the country has experienced a prolonged period of sluggish expansion, with growth rates lingering below 3 percent so far this decade. This persistent slowdown has reignited debates over the need to reconsider Thailand’s development model. Compounding this situation are three transformative global forces: intensifying geopolitical tensions, accelerating climate change, and rapid advances in disruptive technologies, particularly generative AI.

1.1 Geoeconomic realignments

Thailand's role in the global economy has been significantly shaped by the escalating US–China trade war. Initially, the conflict seemed beneficial as it spurred the relocation of manufacturing facilities from China to alternative destinations such as Mexico and South-East Asia, including Thailand. Consequently, Thailand’s foreign direct investment (FDI) inflows peaked at $24 billion in 2024, with considerable relocation in high-tech sectors such as electric vehicles (EVs) and semiconductors.

This shift boosted Thailand’s trade surplus with the United States from $10.2 billion in 2015 to $35.4 billion in 2024. Meanwhile, its trade deficit with China widened from $17.3 billion to $45.4 billion. This was primarily due to Chinese manufacturers relocating to Thailand while continuing to source raw materials and components from China rather than locally. In the EV sector, dominated by Chinese firms, Thai suppliers report limited involvement in the supply chain—restricted mostly to plastic and peripheral parts.

Thailand's growing trade surplus with the US has drawn scrutiny. Alongside China, Mexico, Vietnam, Malaysia, Indonesia, and Cambodia, Thailand has been labelled by Washington as one of the "Dirty 15" and faces heightened tariff risks. In April 2025, Thailand was officially subjected to a 36-percent so-called reciprocal tariff by the second Trump administration. Furthermore, restrictions on Chinese exports by Western countries have led to a surge of Chinese goods in Thailand’s domestic market, intensifying pressure on local industries. In addition, there has also been a significant increase in inflow of Chinese consumer products through e-commerce platforms offering low-cost products.

These developments necessitate a reassessment of Thailand’s trade policy and its historically export-led growth model.

1.2 Climate change

Thailand has pledged to achieve net-zero carbon emissions by 2065 under the Paris Agreement, a target significantly behind those set by many countries; a total of 63 countries, including Malaysia, Vietnam, and Laos, have committed to net-zero by 2050, while China aims for 2060. Thailand’s national target also lags behind commitments made by many global producers already located or planning to locate in the country, such as Western Digital, Seagate, and Delta Electronics, who have each stated that they aim to use 100 percent renewable energy by 2030.

Although Thailand accounts for less than 1 percent of global greenhouse gas emissions, it is highly vulnerable to climate risks. The Global Climate Risk Index ranked Thailand as the 9th most vulnerable country from 2000 to 2019, having endured 14 extreme weather events in that period, costing around $7.7 billion annually. With global cooperation on emissions reduction weakening—exacerbated by the US re-withdrawal from the Paris Agreement—Thailand faces increasing risks from rising sea levels, coastal erosion, floods, droughts, and heatwaves.

Thus, climate change is set to disrupt not only Thailand’s development trajectory but also the daily lives of its citizens.

1.3 Technological disruption

The rapid rise of disruptive technologies, especially generative AI, poses risks to both low-skilled and professional jobs, necessitating mass reskilling efforts. However, Thailand’s education sector is ill-equipped for this transformation. The Programme for International Student Assessment (PISA) tests of the Organisation for Economic Co-operation and Development (OECD) reveal a growing gap between Thai scores and the OECD average. The tests also show that the share of Thai students deemed functionally illiterate in reading rose alarmingly, from 33 percent in 2012 to 65 percent in 2022.

Generative AI has the potential to revolutionize education by enhancing learning experiences, personalizing instruction, and empowering educators. On the other hand, it can also accelerate the spread of misinformation by simplifying its creation and complicating detection. Combatting AI-driven fake news requires cooperation from major tech platforms, which is undermined by the Trump administration’s deregulatory stance. For instance, Facebook parent company Meta has scaled back third-party fact-checking and relaxed restrictions on sensitive topics to align with US political pressures, impacting global information ecosystems and exposing vulnerable populations to misinformation.

Thailand must therefore prepare its people and businesses for the opportunities and risks posed by generative AI.

2. Policy responses

Despite the urgency of these challenges, Thailand’s policy response has been largely reactive. Political discourse remains focused on short-term electoral gains. Campaign promises during the 2023 election, such as cash handouts and the legalization of casinos and marijuana, reflected a lack of long-term vision and urgency.

Thailand has yet to craft coherent trade, industrial, or innovation policies to boost value-added production. The government’s Soft Power initiative, intended to promote the creative economy, suffers from limited funding and outdated execution. The taskforce formed to address Trump’s tariff is composed solely of government officials, with little business involvement. Likewise, innovation efforts are led by technocrats and academics rather than industry players.

Education reform has also stalled. The national curriculum for basic education has remained largely unchanged since 2008. Efforts to implement a new competency-based curriculum have been repeatedly blocked by conservative factions within the Ministry of Education, publishers, and teacher groups.

Climate issues are often seen as long-term and non-urgent, despite recent increases in flood risk. Green energy adoption has been delayed by entrenched interests, namely fossil-fuel and state-owned power companies with ties to political elites. However, momentum is shifting as renewable energy becomes cheaper and more accessible, and as business and consumer alliances begin to form in support of a green transition and cheaper electricity.

Thailand still lacks a transformative vision for its development model. The current model is one of passive adaptation rather than proactive leadership. If this continues, Thailand risks being trapped in middle-income stagnation. The root problem is a policymaking process dominated by politicians and bureaucrats, with limited input from businesses and civil society, resulting in a supply-driven rather than demand-responsive system.

Major Thai conglomerates are increasingly investing in faster-growing regional markets outside the country, while only businesses in non-tradable sectors like real estate and healthcare remain domestically focused. Small and medium-sized enterprises, already struggling with competitiveness and access to technology, face further decline.

This environment has triggered a growing sense of pessimism. According to the Gallup World Poll, the number of Thais with tertiary education who wish to emigrate surged from 168,000 during 2010–2012 to nearly 1.5 million during 2021–2023. In contrast, the number of foreigners seeking to immigrate to Thailand grew only from 164,000 to 626,000 over the same period. This potential brain drain reflects growing disillusionment among Thailand’s educated class and poses a serious risk to long-term development.

3. Rethinking the development model

3.1 Navigating the new trade regime

To address the shifting global trade landscape, Thailand must adopt a multifaceted strategy. First, it should reinforce its commitment to multilateral trade rules to shield against arbitrary protectionism. At the same time, it must expand trade diversification through new free trade agreements, particularly with the European Union, and strengthen regional resilience by boosting intra-ASEAN and ASEAN-India trade. While tariffs in the ASEAN Free Trade Area have been reduced, non-tariff barriers remain a significant obstacle to integration.

Second, Thailand should undertake unilateral reforms to improve trade and investment conditions, such as simplifying regulations, enhancing customs procedures, and encouraging innovation. This will benefit both Thai businesses and foreign investors. According to a study by the Thailand Development Research Institute (TDRI), simply reforming Thailand’s licensing and permit regime could boost annual GDP growth by 0.8 percentage points.

Defensive trade measures must also be applied to counter the surge of Chinese imports. These actions should aim not to restrict legitimate trade but to mitigate damage from unfair practices under global trade rules. Thailand must scrutinize Chinese investments more carefully to ensure they generate substantial domestic value-added. Granting tax incentives to investment projects that provide few high-quality jobs and create few linkages with local suppliers wastes public resources and risks drawing US scrutiny.

Thailand must also avoid providing unfair advantages to Chinese imports, such as granting value-added tax exemptions for Chinese e-commerce before 2024—while domestic sellers pay the full tax. Although consistent with international trade rules, remedy measures such as anti-dumping and countervailing duties remain difficult to apply due to the need for detailed cost data on disputed goods. Instead, Thailand should focus on enforcing industrial, sanitary and phytosanitary standards based on scientific evidence to protect consumers and producers from low-quality imports. Cross-border smuggling and underground trade must also be rigorously curbed.

In short, Thailand must proactively adapt to the protectionist turn in US trade policy and unfair trade practices from China. Trade diversification, regional integration, regulatory reform, and investment screening are essential for mitigating these external shocks, creating high-quality jobs and sustaining long-term growth.

3.2 Coping in a world with less public goods

The second Trump administration is further weakening global public goods by undermining multilateral cooperation, loosening necessary regulations and sidelining science-based policies. This poses significant challenges for developing countries in all areas, including climate change, public health, and digital governance.

Climate adaptation

As previously discussed, Thailand is highly vulnerable to climate change. In a world with diminished global coordination, vulnerable countries like Thailand must prioritize adaptation to a hotter world. This includes investing in disaster preparedness, early warning systems, and climate-resilient infrastructure. In the long run, the economy must shift away from nature-dependent sectors and reduce the exposure of outdoor labour to rising temperatures. For example, tourism may need to shift towards night time or indoor activities.

Health security

The Trump administration’s downplaying of science-based public health approaches has weakened global pandemic preparedness. Reductions in health aid and vaccine funding threaten low-income countries. Thailand must strengthen its domestic healthcare system and develop regional disease surveillance networks to guard against future pandemics.

Technology regulation

The Trump administration’s deregulatory approaches weaken global efforts to hold digital platforms accountable. This fosters disinformation and allows tech monopolies to grow unchecked. Small countries like Thailand cannot address these challenges alone and should seek alignment with partners such as the EU, whose Digital Services Act, Digital Markets Act and Artificial Intelligence Act offer a model for effective technology regulation. Adopting similar standards would improve digital safety and limit platform monopoly power that harms consumers and small businesses.

In sum, the world under the second Trump administration presents heightened challenges for global governance and provision of global public goods. Thailand and other developing countries must build preparedness and resilience in climate, health, and technology governance.

4. Building coalitions for economic transformation

Rethinking a development model is not only a technical exercise, it is an inherently political one that involves many stakeholders. Implementation requires political will and state capacity. Since the benefits of reform generally take time to materialize while the costs are immediate, politicians often lack incentives to pursue long-term reform related to innovation, education reform, and green transition.

Advocacy for change must come from the demand side: that is, citizens, workers, and businesses must collectively advocate for policy transformation. Building coalitions will be key. The emerging alliance for energy transition, which unites renewable energy firms, academia, industrial users, and consumers, could serve as a model for reform.

The coalition for education reform, currently under the Thailand Education Partnership, should be strengthened with a more effective secretariat team to coordinate diverse stakeholders, including teachers, parents, employers, and education innovators.

Innovation urgently needs a similar coalition, which is currently absent. The Joint Standing Committee on Commerce, Industry and Banking, representing the Thai Chamber of Commerce, the Federation of Thai Industries, and the Thai Bankers’ Association, could establish a subcommittee to coordinate and advocate innovation initiatives by working with the “supply side” of innovation.

In conclusion, Thailand stands at a crossroads. The global megatrends of geopolitical shifts, climate change, and technological disruption demand a bold, forward-looking development strategy. The current approach of incremental adaptation risks national stagnation. Without stronger political will, institutional reform, and societal consensus, Thailand will remain reactive, i.e. subject to, rather than in control of, the forces shaping its future. A demand-side reform movement could be the catalyst for a much-needed transformation.