Structural Problems of Thailand’s Export Sector: Myths and Realities

Thailand’s exports are expected to grow by only two per cent in 2024.  The country’s monthly exports grew by less than five per cent on a year-on-year basis for most of 2023 (Figure 1).  Does this imply that the country’s export sector has a structural problem?  A quick answer is “not really”.

Export growth is often used to measure short-term export performance.  Some have used it as an indicator of structural problems in the sector. Export growth should be interpreted carefully, as exports are affected by both domestic and external factors. 

Trends in export performance between countries and across time yield more meaningful insights. Thailand’s export performance in recent years has been above average in comparison with major Southeast Asian and Asian economies (Figure 1). The country’s export growth has exceeded that of many countries in the region in recent months.

Figure 1. Monthly export growth in selected Asian economies, 2021-2023 (per cent, Year-on-Year)

Trends in Asian countries’ global exports also show considerable variation (Figure 2). In the post-pandemic period, the export market shares of some economies have increased (China, Indonesia, Malaysia) while a few economies have suffered a decline (Japan, South Korea, the Philippines). Thailand’s export market share, like Singapore’s and South Korea’s, has remained relatively stable during this period.   

Figure 2. Selected Asian economies: Country exports as a percentage of global exports,  2018-2023

There is another reason for a more cautious interpretation of export growth. Export statistics often do not capture ongoing economic transformations. Countries’ export portfolios contain an ever-changing mixture of old and new products. Industries are dynamic and diverse; exporters often produce both new and old products simultaneously. Old products are cash cows for these firms, enabling them to survive the early stage of developing and selling new products.  

The highly aggregated industry and trade data do not capture changes in production and trade baskets. Old and new products are not clearly distinguished within the existing product classification system.   For example, plant-based meat and animal-based meat remain under the same product category in the custom duty classification system. 

Hence, we should be more careful when using such trade statistics to diagnose export performance.  This problem is particularly acute in export-oriented industries that are affected by ongoing disruptive technologies, notably the automotive sector (internal combustion engine, EV and hybrids) and semiconductors (legacy chip, advanced chip).  In the case of Thailand, it is unclear whether the recent trends in the country’s export shares in the hard disk drive and automotive industries indicate any long-term structural changes (Figure 3).

These sectors received much attention for their significant contribution to Thailand’s manufactured exports, and their lack of growth in recent years has been a cause for concern. However, the headline data of export values masks positive changes beneath the surface. Despite a dip in 2023, Thailand’s world export share of hard disk drives (HDD) was on an upward trend from 2016 to 2023, despite growing competition from solid-state storage. Beneath the surface, the per unit value of Thailand’s HDD exports to the US has been growing, along with an increase in the country’s share of HDD imports into the US (Figure 4). This would indicate a move up the quality ladder for HDD exports from Thailand.

The true challenge for the export-oriented Thai firms is their ability to utilise emerging technologies efficiently to ensure business survival and growth. 

Thailand’s motor vehicle exports paint a mixed picture. The country’s share of world commercial vehicle exports has declined from 6.8 per cent in 2021 to 5.3 per cent in 2023, following a general uptrend from 2016, while the share passenger vehicle exports has flatlined at around 1.5 per cent. These conditions merit concern, but there is no cause for panic as the long-term prospects remain inconclusive. The automotive industry has experienced multiple shocks, such as the rise of EVs and their applicability to small-size pickup trucks, fierce price competition from Chinese vehicles, along the impacts of the Covid-19 crisis and sluggish economic conditions in key export destinations. What Thailand needs at this juncture is a systematic analysis to understand the downward trend, not a rush to find the next export champion. This is especially true for commercial vehicles whose supply chains are deeply rooted in Thailand. Such a rush could incur enormous adjustment costs for the economy.

Figure 3: Thailand’s share of world exports: Hard Disk Drive, Passenger and Commercial Vehicles, 2016 – 2023

Figure 4. Per unit value of HDD exports to the US from China and Thailand, 2018 – 2023

Changes in Thailand’s export market destinations show emerging trends which also call for policy responses (Table 1).  The United States’ share of Thailand’s exports has increased from 13.2  per cent in 2019 to 18.6  per cent in 2023.  In contrast, the share of exports to China has dropped from 18.2 per cent in 2019 to 16.8 per cent in 2023. Such trends call for greater policy attention amidst the ongoing geopolitical tensions between the two countries. The Thai government should strategically mitigate global uncertainties through export market diversification via the pursuit of new free trade agreements (FTAs).

Table 1: Top-5 Market Destinations of Thailand’s Exports, 2019, 2022 & 2023 (per cent of Thailand’s total exports)

All products
	2019			2022			2023
China	18.2		United States	18.2		United States	18.6
United States	13.2		China	17.5		China	16.8
Japan	10.0		Japan	8.3		Japan	8.5
Hong Kong	5.2		Vietnam	4.6		Hong Kong	4.7
Vietnam	4.8		Hong Kong	4.6		Australia	4.2
Sum of Top-5	51.3		Sum of Top-5	53.2		Sum of Top-5	52.8
Manufacturing
China	17.6		United States	19.7		United States	20.4
United States	13.7		China	15.9		China	14.7
Japan	9.4		Japan	7.8		Japan	8.0
Hong Kong	5.5		Hong Kong	4.9		Hong Kong	5.1
Vietnam	4.7		Vietnam	4.5		Australia	4.5
Sum of Top-5	50.9		Sum of Top-5	52.8		Sum of Top-5	52.8

The true challenge for export-oriented Thai firms is their ability to utilise emerging technologies efficiently to ensure business survival and growth. There is room for the Thai government to catalyse technology-driven industrial transformation by assisting firms in accessing the needed infrastructure and financing, such as testing facilities and long-term financing.  Firms greatly value policy certainty in undertaking investment in high-risk, high-return emerging technologies.  In this regard, the Thai government should not create uncertainties by picking technology winners in its industrial policies.

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