Last year, for the first time in a decade, Thailand surpassed Malaysia in the IMD World Competitiveness Center's global rankings, coming in second in Southeast Asia behind Singapore, which retained the top spot at the regional level and was ranked as the world's most competitive economy.
Structural Issues
However, structural problems in the Thai economy that affect the country's competitiveness still persist, reflected in a report by the National Economic and Social Development Council (NESDC) that states Thailand's high-tech exports still lag those of Vietnam.
While the government acknowledged the issue over the past decade and consistently discussed the problem of competitiveness, a look at the budget structure categorised by strategic spending across seven strategies reveals the budget allocated to this area declined.
In fiscal 2018, the amount allocated for competitiveness accounted for 16.1% of the overall budget.
Since then, the budget set aside for competitiveness has steadily decreased, falling to 11.3% in fiscal 2024 and 9.7% in fiscal 2025.
Meanwhile, the budget allocated under a strategy to create opportunities and for social equity, covering areas such as universal healthcare, providing quality and standardised education, and ensuring welfare protection for both formal and informal workers, accounted for 11.4% of the budget in fiscal 2018, surging to 24% in fiscal 2024, and edging up to 24.7% in fiscal 2025.
Similarly, the budget allocated for government operations or contingency spending reserved for unforeseen or emergency situations, as well as public debt management, has exhibited an upward trend, rising from 12.2% in fiscal 2018 to 16.2% in 2024, and reaching 18.5% in fiscal 2025.
Call for Strategic Focus
Nonarit Bisonyabut, a senior research fellow at Thailand Development Research Institute, said under the current budget structure, about 70% of the total is allocated to salaries, compensation, and welfare for public and civil servants, interest payments, obligations from past projects, debt repayments, and treasury reserve compensation.
The remaining 30% is available for the government to use for development, investment, or enhancing national competitiveness. Of this amount, the government still has emergency expenses, such as addressing droughts and floods, as well as short-term economic stimulus measures, leaving even less room for long-term competitiveness planning.
He said without reforming the government's budget spending structure, Thailand's fiscal stability could be at risk in the future because less budget would be available for investments aimed at enhancing competitiveness and generating future state revenue, while short-term stimulus spending continues to increase.
Mr Nonarit said improving competitiveness is usually a long-term issue, whereas governments often prioritise short-term concerns first, such as distributing money via the digital wallet scheme, ignoring long-term repairs and development.
Instead of spending money on short-term measures, it should be redirected towards initiatives that build long-term competitiveness, he said.
Mr Nonarit said the proposed restructuring of the budget that involves shifting from the current incremental budgeting approach, which bases the budget on the previous year's allocation, to a zero-based budgeting approach, under which allocations are not tied to the previous year, allowing agencies to propose new projects from scratch, may introduce certain weaknesses.
He said this approach might disrupt the continuity of government investment projects, as initiatives from the previous year may not receive funding in the following year.
The country's budget structure may require a balance between incremental budgeting and zero-based budgeting, said Mr Nonarit.
For example, the government currently has 30% of the budget available for management. A portion of this (5-20%) could be set aside to allow government agencies to propose new projects aimed at enhancing the country's competitiveness, he said.
"The budget allocated for enhancing competitiveness is still fragmented. Simply speaking, we are trying to do everything -- be it agriculture, tourism or the industrial sector," said Mr Nonarit.
"What we lack is a state-led policy approach. We need a strategy that will enable us to have a game changer that can significantly generate future revenue."
Malaysia has a policy focused on developing its semiconductor industry, prioritising this sector so it can become globally competitive, he said.
"Similarly, Vietnam has become part of the supply chain for South Korean industry, such as Samsung. As a result, Vietnam is now a key supplier for Samsung. When Samsung grows on a global scale, the components produced in Vietnam and sold to Samsung also grow accordingly," said Mr Nonarit.
"We should not pursue scattered policies that allocate budget to every area, but fail to make an impact in any.
"Instead, we may need to create a 'special focus area' that requires additional funding but yields exponentially greater results. These types of state-led projects are what draw global attention to a country, but as of now, I haven't seen anything like that here."
IMD Ranking Context
The IMD World Competitiveness Ranking evaluates and ranks the performance of countries and their economic systems in creating and maintaining an environment that enables businesses to be competitive.
In 2024, the ranking covered 67 economies across four key factors: economic performance, government efficiency, business efficiency and infrastructure.
Among Southeast Asian nations, Singapore ranked first globally and remained the most competitive country in the region. Thailand ranked second in the region (25th globally), followed by Indonesia (27th), Malaysia (34th) and the Philippines (52nd).
This marks the first time in 10 years Thailand bettered Malaysia in the competitiveness rankings.
Given Thailand's economic direction, the country should prioritise adding value to key economic sectors by leveraging its existing resource advantages, noted the NESDC report.
The country should focus on building competitiveness in emerging industries that will support long-term adaptability over the next decade, including adopting agricultural technologies tailored to local production methods and geographic conditions; improving value chain management to ensure price stability and maximise value creation; promoting adherence to safety standards; and developing agricultural service businesses, known as agricultural service providers, according to the report.
In the industrial sector, efforts should be accelerated to develop smart electronics industries as a foundation for the advancement of other industries, noted the NESDC report, while measures should be considered to protect domestic industries.
The state planning unit added Thailand faces challenges related to human resources, including an increasing elderly population and a mismatch between labour market demand and the quality of the workforce (skills mismatch).
Other obstacles include creating an ecosystem that enhances national competitiveness, restructuring the economy towards an innovation-based model, and improving institutional factors such as public sector governance, noted the report.
