Thailand fighting for comeback

It slips into New Zealand’s “Top 10” trading partner status list, as number nine for 2023, reporting total trade of NZ$4billion, including $1.4 billion worth of exports from New Zealand.

A recent media familiarisation trip courtesy of the Royal Thai Embassy in Wellington provided an excellent opportunity to better understand a nation that shares some strong trading ties with New Zealand, along with some of the challenges our own, much smaller, country faces internationally.

Journalist Richard Rennie (left) in Thailand at a durian-based cafe. Image: Supplied/Richard Rennie

New Zealand enjoys not one but three free trade agreements with Thailand, with the main Closer Economic Partnership deal having all tariffs eliminated by January 1, 2025. This agreement has a 20-year history and over its lifespan total exports, as of 2023, have tripled.

Dairy predominates in New Zealand’s export trade, accounting for almost NZ$800 million of product. Thailand is Fonterra’s largest dairy ingredients market in South-East Asia, despite not being a traditionally large dairy consumer. 

But by importing Fonterra ingredients and re-processing them for exporting it has also become ASEAN’s largest dairy products exporter.

Perhaps surprisingly Thailand is aging relatively quickly, with the country’s percentage of population over 65 likely to have doubled from 15% today to 30% by 2040, just as its birthrate slides to among the lowest in South-East Asia at 1.3 per woman.

Like many nations, Thailand is facing demographic issues around aging. Image: Supplied/Richard Rennie

Its population is predicted to peak at 65 million in 2028 with its 50 million working population likely to decline to 38 million by 2030.

But unlike its industrial competitors like China, Japan and South Korea, Thailand’s openness to having migrant labour working there means its ability to respond to that aging population is likely to be more flexible as the effects start to bite on the working age population.

For a company like Fonterra that has built some of its branding upon infant formula the shifting demographics demand a pivot from the traditional mainstay of infant formula ingredients.

Its Anlene brand for example is promoting consuming more of the dairy product in the younger stages of life than would normally have been the case, and re-emphasising the value of its consumption as a protein source into an older market.

Thailand is still recovering from the effects of Covid. Image: Wikimedia Commons

Thailand’s shift in demographics is coming as it has continued to struggle to shake off a post-Covid funk in its economic growth.

It has recorded the lowest GDP growth in the region post-Covid, achieving 2.5% and 1.9% consecutively for 2022 and 2023 after a massive six percent contraction over the pandemic. This came on top of the ever-lingering effects of the Asian Crisis in 1998, in which Thailand was Ground Zero and took almost a decade to recover from.

Digital and tech disruption have also partly attributed to Thailand’s inability to ease into a new growth phase the way the likes of Vietnam or South Korea have. Once a key centre for hard drive manufacturing, the move to cloud computing has stolen much momentum from that sector.

Similarly, the move to electric vehicles, many manufactured in China, means Thailand’s conventional internal combustion engine car companies have lost share, and with it need for manufacturing capacity.

A locally-built Mitsubishi L200 as a songthaew in Pattaya, Thailand. Image: Wikimedia Commons

The country is one of the top 10 car manufacturers in the world, and the slide in demand plays into the many supporting manufacturing businesses that sit around the sector. Factory closures numbered 1700 for 2023 compared to 1100 the year before.

Thailand’s economic income sources are also at opposite ends of the processing spectrum. With vehicle manufacturing at one end, food crops are at the other, along with rubber of which Thailand is the world’s largest exporter.

It is the fifth largest rice exporter in the world, and the valued grain is a key food export, accounting for 17% of all food exports. Following this comes chicken, sugar, tuna, tapioca and shrimps, with south-east Asia being the main market for much of its food products.

With a tumultuous political background that includes two military coups in the past 20 years, flooding in 2011, a tsunami in 2000, Thailand has had a tough couple of decades that mean the likes of China have pulled well ahead in per capita income. It is something Thai politicians, when not squabbling, are acutely aware of.

Richard Rennie during a media trip to Thailand. Image: Supplied/Richard Rennie

None of this is however to diminish what Thailand has achieved, almost despite its challenges.

In the past 30 years it has pulled over two thirds of its population from below the poverty line. But its Gini co-efficient, an indicator of wealth inequality, remains the highest in eastern Asia according to the World Bank.

Some major structural changes are required, particularly in the manufacturing sector to respond to the tech disruptions, and a need to add more value to exports where less processed food type products are still dominant.

While physical trade between New Zealand and Thailand is significant, investment between the two countries remains relatively low at about NZ$350 million a year.

The media trip included a Thai-New Zealand business summit, and hope was expressed for growing this investment level.

However, given New Zealand’s own challenges, and desire for greater foreign investment, the two countries may find themselves competing for similar suitors to help boost their domestically challenged capital markets.

Asia Media Centre