Business & Industrial
Creative Economy and Middle Income Trap
Published Date : 14 Dec 2017
Resource : TCDC
The importance of creative economy is the new driving engines to boost up Thailand’s economic
In recent decades, a combination of public sector investment promotion plans and low labor costs made Thailand one of the most desirable locations in the world for offshore manufacturing. The influx of foreign capital led to a dramatic restructuring of the national economy as workers moved away from the historically dominant agricultural sector for new opportunities in the industrial sector. Although this resulted in rapid and continuous economic development has come as a result of this transition, it has also posed new challenges. Economic growth and development has driven up wages and the overall cost of labor. Meanwhile, dependence on foreign investment in manufacturing capacity in Thailand has caused the industrial sector to import technologies from abroad and engage in very little technological innovation of its own. Thailand has thus fallen into the so-called “Middle Income Trap”, wherein a country becomes uncompetitive in terms of labor cost but is also unable to raise the level of its industrial development needed to compete with the high technology-driven advanced industrialized economies. The Dynamic Computable General Equilibrium Model (CGE Model) is a tool that can be used to help Thailand get out of the Middle Income Trap. Specifically, the CGE Model is used to evaluate the results of government policy implementation and changes in the creative industries, which provide policy recommendations that will help to increase per capita gross national income and drive economic growth.
Number of Years Thailand Required to Become a Developed Country Based on the GDP
For Thailand, it was estimated that if it is expected to move out from the Middle Income Trap within 15 years, 7-percent economic growth rate was required under good economic condition. Therefore, there is the need for new economic- driving engines to boost up Thailand’s economic growth similar to South Korea, who had successfully accomplished by using “creativity” to develop the country and rapidly increase its income level.