Economic Crisis: New Challenges for a Former Tiger

Faced with high unemployment and a resurgency of poverty, the economic crisis has presented new challenges for Thailand in the areas of education and skills development. We spoke to Dr. Ammar Siamwalla, a renowned Thai scholar and former President of the Thailand Development Research Institute (TDRI), the country's leading think tank.

What has been the social impact of the economic crisis in Thailand?

There are many dimensions to the impact. In Thailand, there is a society of the rich and a society of the poor. Everybody has been talking about the poor, but the rich were also hurt quite badly. During the bubble, everyone talked about the trickle-down economy. The rich would get rich first and then it would trickle down to the poor. Well guess what, when the misery came, it was also trickle down. The misery came first to the rich and it was devastating. Then it trickled down to the poor. So there is a trickle-down of the misery now. The poor have been affected by the crisis in many ways. But farmers have benefited in some ways from the crisis, although this was countered somewhat by higher food prices, and they will not benefit this year because of the drought. Now, if you are a worker, or have family members who work for wages, you may be hit in two ways - either through lower wages or unemployment. Unemployment has increased everywhere. But the Northeast has particularly been affected as many of those that migrated to work in other regions have returned home.

What has been the response of the Thai Government?

The Thai Government, together with Thai people, feel that something ought to be done. What exactly should be done, however, is quite problematic. We do not have a social security system and we also do not have the bureaucratic infrastructure on which to create an intervention programme. So, we have to be rather haphazard about it, and indeed various government departments are going around the country trying to help the unemployed. I am a bit skeptical about how effective or efficient it will all be. It is quite difficult because we do not have the bureaucratic infrastructure.

What is the advisory role of TDRI to the Government?

Normally we would do long-term research and advisory services to the government. This time, however, because of the nature of the crisis, we have had to do it quicker. So we have mobilized outside resources as well from the government, business and various sectors.

Does Thailand have the social safety net required to weather the crisis?

If you are employed in the private sector, there is one social safety net that many people do not know about: a labor law that requires that people who are laid off be paid 6 months salary - if they have been working a long time. If you have been working for two months, and then you get laid off, there is nothing. But if you have been working for some time, you have this net. This reliance on individual companies paying compensation, instead of a comprehensive unemployment insurance scheme for the country, has worked quite well for the formal sector. But for those who lost their jobs outside that sector, something has to be done.

You mentioned in a recent paper* that a new approach to development is needed. What kind of strategy is necessary?

Well, with the crisis there has been a sense by some that we need to go back to an agricultural society. However, I question wether this reversal is good. It is true that during the bubble we moved too quickly into the capital-intensive and high-technology phase, and wages went up more rapidly than was really appropriate for the level of Thai workers. There was a labor shortage during the bubble; although labor costs went up, products had to be sold at competitive world market prices. With the real devaluation of the baht, it has already been said that farmers benefited in some ways. And there are some reasons to think that in the short run, Thailand may re-emphasize some industries such as agriculture. But, in the long run, to concentrate in this area is to be in competition with lower-wage countries, which would limit the capabilities of obtaining a higher standard of living for some Thais.

What is the role of human resources development as a recovery mechanism to the crisis?

As Thailand produces things at higher prices than some other countries, these products cannot be sold competitively. Thus for Thai people to reach a higher standard of living, education must be upgraded so that their earning capacity can be enhanced. Skills and knowledge levels must be improved to have a technological upgrading of the industries.

Are there any necessary reforms in the education system of Thailand to address the crisis?

Educational reforms have been placed in our new Constitution. They are already being implemented as we are upgrading to secondary level education. Thailand has relied on the rote teaching system, so these reforms are necessary. Qualitative and quantitative changes are needed. Quantitatively, the number of students attaining secondary-level education must be increased. Qualitatively, there are many more challenges to overcome. In particular, substantially more scientists and engineers are needed. Human resources development must be a major component of any long-term development strategy for Thailand.

* Responding to the Thai Economic Crisis, UNDP Working Paper, presented at the High-Level Consultative Meeting "Policy Response to the Economic Crisis and Social Impact in Thailand", 22 May 1998.

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