Analysis on the Macroeconomy and Industrial Policies toward Industrial Upgrading in Thailand and Policy Recommendations

This paper, based on analysis on the macroeconomy and industrial policies in Thailand, discusses the industrial structure to which Thailand should aim toward in transitioning into a high income country as well as the necessary policies for industrial upgrading, which is a critical issue in the Thai economy that is facing the risk of a "middle-income trap." The analysis on industrial structures in Thailand shows that both productivity and employment at the country-level can be improved by shifting more resources from the agriculture sector to the manufacturing and service sector. Through the analysis on the past and current industrial policies, we stress the importance of introducing industry-targeting policies which are based on the market-oriented policies generally pursued by the Thai government hitherto. More concretely, we discuss the importance of incorporating infrastructure and supporting industry development to the cluster policy adopted under the current Thai government in a more consistent manner and propose necessary measures for development of the automobile industry taking into consideration of the current Japan-Thailand economic cooperation.