Old rules hurting the Thai economy

POLICY FOCUS

- SUPANUTT SASIWUTTIWAT NEWIN SINSIRI

A worker operates a machine at Nissan's battery manufacturing facility in Samut Prakan.

(SATTAPHAN KANTHA)

Thailand needs an economy that delivers better wages, secure jobs, and real competitiveness. But today’s trade and investment rules stand in the way. Without reform, the country risks falling behind in an increasingly cutthroat global economy.

Instead of driving growth, these rules reward low-value industry, protect inefficiency, and weaken competition. They protect the wrong things, at the wrong time. If the economy is to move forward, trade and investment rules must change with it.

The first problem lies in an outdated tax system. Under World Trade Organization (WTO) rules, Thailand’s official import taxes have fallen sharply over the past 20 years, averaging about 10% today. On paper, this suggests a more open economy. In reality, the tax structure still shields key industries from real competition.

For decades, tariffs were used to support export-oriented manufacturing. Imported raw materials were taxed less than finished products. This lowered the cost for local producers and helped Thai factories compete abroad.

The auto industry is a clear example. Imported parts faced low tariffs, while fully built cars — especially from Europe — were taxed heavily. Local assembly became cheaper, helping Thailand grow into a major vehicle manufacturing base.

But that advantage is fading. As free trade agreements expand, the tax gap between parts and finished products has narrowed. The old system no longer protects local assembly. Manufacturers must adapt or lose ground.