Thailand Needs to Invest in People, Not Rice

[CrazyExpat]

The search for lessons from lost economic decades has led from Japan to the U.S. to Europe. Now the spotlight turns to Thailand (SET).

This may strike some as odd, considering Thailand’s 5.3 percent growth, its young and expanding population, and the surprising level of political stability in Bangkok. In her two years leading Thailand’s 68 million people, Yingluck Shinawatra has somehow managed to tamp down the virtual civil war that led to the ouster of her prime minister brother in 2006.

Look closer, though, at the thrust of Yingluck’s economic policies. Her government has subsidized rice prices, provided handouts to car buyers and favored megaprojects that will enrich the politically connected more than the masses. All this comes at the expense of long-term competitiveness and prosperity: Thailand should instead be investing in its future, especially education, if it wants to break out of the “middle-income trap” that befalls many developing nations.

Yingluck’s U-turn last week on the government’s policy of hoarding rice at above-market rates is a case in point. She had planned to limit a practice that jeopardizes the country’s fiscal position and warps commodity markets. Moody’s Investors Service says the subsidies damage Thailand’s credit rating. Yet she caved to farmers, even firing her commerce minister to do so.

http://www.bloomberg.com/news/2013-07-11/thailand-need-to-invest-in-people-not-rice.html