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6 Oct 2022

Econ Digest

In a changing global trade environment, Thai industries must accelerate the development of advantages


        The competitiveness of Thailand’s main export products, especially electronic products declined, while the competitiveness of products remains strong in the categories of automobiles, parts and components, air conditioning, auto tires and fresh fruits, they may face challenges from technological change, trading partners’ rules and climate conditions going forward.

  • The value of Thai exports to the world market grew at a double-digit rate of 17.4% YoY and 11.5% YoY for 2021 and the first 7 months of 2022 respectively. This value was driven by the recovery of demand from trading partners after the easing of the COVID-19 situation, the Russia-Ukraine conflict that drives commodity prices up and the positive effect from the Baht’s depreciation against the U.S. dollar. Thai exports are expected to end this year with continued high growth. However, Thailand’s exports accounted for 1.2% of the world’s total exports in 2021, down from 1.3% during 2017-2020, reflecting that the overall competitiveness of Thai exports has started to decline. Meanwhile, the exports of neighboring countries in ASEAN to the world market, especially Vietnam has been increasing and has already surpassed Thailand, rising from 1.2% in 2017 to 1.9% in 2021.
  • Analysis of Thailand’s top 10 export products (HS 4-digit, excluding refined oil and gold)1 reveals that the share of Thailand’s electronic products such as automatic data processors, integrated circuits, electrical equipment for telephones/telecommunications equipment in total global exports remained stagnant or declined. This runs counter to Vietnam’s growing share of exports due to the fact that Vietnam has been chosen as an electronics manufacturing base by many multinational investors, and as supported by tariff incentives under various free trade agreements. As for rubber exports, although Thailand still retains its position as the world’s largest exporter, the share of exports began to decline, while the share of exports from Vietnam, the world’s fourth largest exporter, has increased.
  • Looking ahead, the US-China tensions will prompt a split in the supply chain investment of high-tech products into 2 standards for separate exports to both markets, and could lead to more difficult or costly sourcing of midstream and downstream electronic products in the electronics and related products sectors. Although Thailand may gain some benefits from the above investment divergence, Vietnam will be in a more advantageous position as an important production base, so Thailand’s competitiveness in the electronics sector may face more challenges going forward.
  • Thailand’s share of exports of automobiles, parts and components, air conditioning, auto tires and fresh fruits are still able to maintain a good or upward trend, and is significantly ahead of its competitors such as Vietnam and Indonesia. This reflects Thailand’s strength as an important regional production base for the automotive industry and air conditioning as well as being the world’s important producer of tropical fruits, especially durian.
  • However, Thai export products with a relative competitive advantage still face challenges in the future, such as:
  • The transition of technology to electric vehicles is becoming more apparent. By 2030, Thailand must catch up and shift from a production hub for internal combustion engine vehicles to a production hub for new generation vehicles or electric vehicles as soon as possible and faster than its major competitors in the region, especially Indonesia. The focus will be market movements for the next 1-3 years.
  • Trading partners are placing greater emphasis on environmental protection rules in line with the greenhouse gas emission reduction targets, such as the Carbon Border Adjustment Mechanism (CBAM) by the European Union (where business operators must begin reporting emissions embedded in their products from 2023 before full implementation in 2026) and the U.S. (which is in the process of approval and may come into force in 2026) and other measures. This will affect the manufacturing process of many industries and may, in the future, cover production supply chains of automobiles and parts, air conditioning or even farming. As a result, business operators must speed up their adaptation to these measures as quickly as possible, while SMEs will inevitably face difficulties.
  • The impact of extreme climatic change on the cultivation season, amount of water and weather, coupled with the fact that many trade partners and competitors such as China, Malaysia and Vietnam have started to develop fresh fruit production like durian, may ultimately affect the orders and competitiveness of Thai fruits.

        KResearch views that the rapidly changing and increasingly complex business environment and trade rules in the future will not only result in the need for industries associated with these key export products to speed up their adaptation, but all Thai industries must be aware and prepared to cope with all round challenges going forward. Therefore, it is necessary to review and adjust the production chain to be as efficient as possible through investment in technology, research and development, products and services upgrade, and most importantly to increase labor productivity, so Thailand can still maintain its competitiveness in the world market.


 1 Exports of these top 10 products account for approximately 29% of Thailand’s total exports in 2021.

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