5 Things Thailand Must Do to Save Its Economy

With plummeting exports, dwindling spending and worsening confidence, Thailand’s economy is one of Asia’s worst performers. And the military-installed junta has struggled to stem the problem. But after appointing Somkid Jatusripitak as its economics chief, Thailand’s government has a new plan, which resembles some of the pro-poor policies of governments ousted over the past decade. Mr. Somkid was the brains behind many of the programs that helped Thailand recover from Asia’s financial crisis of the 1990s, including cheap healthcare and village funds to help farmers start cottage industries. But he warns today’s challenges are different. Here are five things Mr. Somkid says he must tackle to revive Thailand’s economy.

#1: Increase Stability for Farmers

Some of the biggest decreases in consumer spending have occurred in Thailand’s rural heartland, where farmers have been hit badly by the collapse last year of a state-sponsored program to support rice prices. Stimulating spending among the 20 million people who depend on crops such as rice and rubber is key to restoring vitality to the rest of the country. Mr. Somkid has earmarked around $3.73 billion in soft loans and cash injections to help people start alternative businesses.

#2: Broaden Tourism

Tourism is one of Thailand’s few success stories. If it weren’t for the millions of people who visit each year, the country’s economy would be contracting, economists say. Mr. Somkid says Thailand needs to market the appeal of new destinations beyond the existing hubs of Bangkok, Chiang Mai and Phuket.

#3: Attract Foreign Investment

Foreign investment in Thailand lags behind competitors such as Indonesia and Vietnam. That is partly the result of an ageing population; Thailand has a fertility rate of around 1.6 children per woman, about the same as China. But it is also because other countries, notably Vietnam, have improved infrastructure and increased incentives for foreign tech companies to build plants. Thailand is now trying to catch up by offering an expanded set of tax breaks and perks for investors.

#4: Make Manufacturing Competitive

Thailand is being undercut by cheaper competitors in low-margin businesses such as textiles and footwear. Mr. Somkid says the country’s minimum wage means it can’t compete with Myanmar and Cambodia, so he is encouraging the growth of new special economic zones adjacent to those countries, where companies can hire lower-cost workers who cross the border for the day.

#5: Regain Consumer Confidence

The government needs to win the confidence of ordinary consumers. This is easier said than done, Mr. Somkid acknowledges. But he predicts that if people see his policies begin to have some effect, the economic situation will improve.