Bangkok Dangerous

Can Thailand become the next global tech economic powerhouse?

Bangkok at Night

“You want SIM card? Memory?”

A set of bright, florescent plastic boxes are thrust into my line of sight and break my reverie in a series of wild waves. Instead of focusing on the sale at hand, I’ve been entranced by a gorgeous tri-SLI gaming computer at the nearby overclocking store.

She’s beautiful: an unusual but economical array of 3 Nvidia GTX 970s threaded through a workhouse Intel Core 2 extreme via a carefully architected lattice of liquid cooling that hums near-silently as it churns blue flourescent light. The mall we’re in is overcooled by a winter of air conditioning, but I can’t help but feel a flutter of heat thinking about the frames I could be getting on ARMA 3 with that beast.

“Hey! Memory? SIM card?”

The chips are once again thrust in my face and waved. “Sorry, I don’t need either please.” The woman shrugs and hands me back my credit card and a freshly wrapped tablet.

My newly Sandy Bridge-core Windows tablet costs about 3,200฿ or $90 US at current exchange rates. It is dirt cheap compared to a comparably-specced HP or Dell tablet, owing to the fact that the factory that made many of its components is likely not very far from where I’m buying it.

Like most of the technology in the eight story IT-focused mall I’m shopping in, my tablet is a Thai export. Over the past ten years Thailand has become the industrial origin of many of the components of the world’s consumer electronics, with many critical internals like memory and storage being wrought and assembled within Thai factories.

The global price of 3.5" SATA 7200RPM 1TB HDs spiked over 180% in one month after the Thai factories manufacturing their production for various global tech brands was flooded during the 2011 Thai monsoons. The Thai floods also temporarily increased the global prices of computers and smart devices using Thai-manufactured components.

For example, many of the hard drives in the world (both spinning disk and flash memory) are made in Thailand. Thailand’s industrial monopoly over hard drive creation is so great that in 2011 when the country was devastated by heavy flooding due to Tropical Storm Nock-Ten that the global price for storage spiked: doubling and even tripling the cost/GB for some types of hard drive types and speeds.

Such a price increase was reflected in a score of consumer electronics brands, leading to a one year spike in prices for everything from Apple computers to technology-equipped Ford cars and trucks.

Thail and Vietnamese industrial electronics exports grew markedly during the Great Depression, with Vietnam largely driving Asia’s industrial growth for the sector during the period

Thailand is by no means the only tech industrial power in Southeast Asia. Vietnam is quickly beginning to steal Thailand’s thunder, providing a cost-effective industrial alternative as wages rise in Thailand due to Thailand’s last decade of growth.

Vietnam’s minimum wage is approximately $6.15 a day vs. Thailand’s $9.14 at the time of writing. Vietnam’s electronics exports were only $2.8B in 2009. But by 2014 Vietnam’s annual electronics exports rose to over $37B, surpassing Thailand’s 2014 exports of $33B.

Both Thailand and Vietnam grew markedly throughout the Great Recession, growth driven by ideal labor economics matched with growth-hungry capital from Singapore and China. Today the ASEAN (the Association of Southeast Asian countries) community has become the world’s electronics production base, the feeder for major assemblers and design bases such as Taiwan and China.

In fact Thailand and Vietnam share many macroeconomic variables with China in the 90’s. Both are recently industrialized economies with a well educated populace and an increasingly powerful / socially-mobile middle class. Both have historically pro-business governments who are looking for ways to convert foreign capital interest in using their countries as a manufacturing base as a means to propel domestic development. Both are mobile first economies who are not tied down by pre-existing infrastructure to legacy communications networks.

The question now is whether or not these Southeast Asian nations can mirror China’s rise and use their meteoric growth to develop powerful, fully developed domestic economies via their high tech industrial base.

Unfortunately the answer to that question isn’t so clear. And in the case of Thailand, continued access to foreign capital necessary to stake domestic projects and the necessary renovation of their tech industrial base has become a serious issue in the past two years.

Thailand has found itself plagued by a one two punch of increasing economic and political instability. The kingdom recently saw a third year of net exports loss, seeing a heavy drop of 5.78% in 2015. This mirrored the ASEAN region as a whole, which in 2015 saw the first decline in exports in almost a decade.

Thai soldiers patrolling the streets. In 2014 Thailand’s government was replaced in a military coup, a move that has helped to further complicate the country’s ability to convert its rapid economic growth into lasting domestic prosperity

Much of Thailand and Southeast Asia’s economic woes last year come from financing and demand issues from their largest trading partner, China. But Thailand is also grappling with a serious political crisis. In 2014 Thailand’s government was replaced in a military coup d’état that saw the existing prime minister and her administration ousted and in some cases even jailed.

General Prayut Chan-o-cha, Thailand’s current premier state official, has partially repealed the existing constitution and declined to establish a public timeframe for a return to civilian power. His government has also harshly cracked down on freedom of speech, and the Thai military has established courts to strictly prosecute lèse majesté cases against people publicly critical of the state. Such prosecution is serious enough that I’ve waited until leaving Thailand before publishing this post, and the situation has only been exacerbated by the death of the country’s beloved but venerable monarch.

With China’s equities markets volatile due to the country’s new regulatory impositions and conetntious position with the Trump administration, traditional Asian capital in China and Singapore seem increasingly less likely sources for financing private or public ventures in Thailand and in the ASEAN community as a whole. Thailand’s coup has unfortunately also stymied hopes for western capital to pick up the slack within the kingdom. The United States, for example, has cut all of its existing military aid contracts to Thailand and even warned to its citizens to not visit the country immediately after the coup.

With Thai/US relations cooling due to Thailand’s military coup, Thailand has increasingly turned to Russia for military aid and trade. But with Russia’s economy struggling due to sanctions, it’s unlikely whether Russia can serve as a major source of foreign capital investment

Such a cooling in relations has pushed the Thai government to turn to Russia in response. For example, the Thai military is attempting to replace US-based defense contracts with Russian contracts, and is actively looking at replacing its aging fleet of transport helicopters with Russian-made MI17 choppers (NATO reporting name: “Hip”). Russia is also looking to increase its purchases of rubber from Thailand, and both Russia and Thailand have agreed to continue to increase bilateral trade between the two countries.

Russia may serve as a reliable source for Soviet and post-Soviet defense equipment. But with strict capital and economic restrictions constraining that country’s economy due to their actions in Ukraine, it’s unlikely that Russia can afford to serve as a major financier or supplant the foreign capital support lost from a slowdown in China and Singapore.

Thailand has a lot of questions to answer and complicated straits to navigate before it can become the next global technology powerhouse. But the kingdom has many of right elements for success, and Thailand is already well on its way thanks to a decade of tech-focused economic growth.

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