Biz Buzz: Thailand's Struggle to Innovate and Compete in ASEAN Market
In a report by the World Bank, Thailand places last among ASEAN countries in terms of business innovation.
It's a rough ride for Thai businesses, especially small and medium-sized enterprises (SMEs), caught in the crossfire of mounting domestic and international challenges. The latest storm comes from global trade wars, causing disruptions to sales and production continuity.
At the same time, Thailand's production sector is held back by a lack of innovation, leaving businesses unable to meet evolving customer demands. This has resulted in a dismal picture: declining sales, reduced production output, and falling employment levels, leading to widespread closures of businesses over the past year up to early 2025.
One critical issue is the need for innovation and technological adoption to ensure the survival of SMEs, according to Danucha Pichayanan, Secretary-General of the National Economic and Social Development Council (NESDC).
A recent report by the World Bank reveals that Thai businesses adopt innovation at a lower rate than regional peers. Only 11.9% of Thai firms incorporate innovation into their production processes, compared to 40.9% in the Philippines, 37.9% in Vietnam, and 37.3% in Malaysia [World Bank's Thailand Economic Monitor - February 2025].
Moreover, Thailand's investment in research and development (R&D) is relatively low, posing a structural barrier to business competitiveness. This innovation gap may have contributed to the wave of business closures in 2024.
To address this issue, the NESDC recommends expanding access to financing for Thai SMEs to allow them to adopt innovation and technology. Strengthening the competitive edge of SMEs would not only stabilize employment but also boost the incomes of millions of workers.
Enrichment:According to additional insights, Thailand is pursuing a range of strategies to strengthen innovation and R&D among SMEs. These strategies include digital transformation, infrastructure and digital adoption, funding, intellectual property protection, trade and investment expansion, and capacity building [Overall].
Some key initiatives include digitalization efforts like Digital Park Thailand, the "Four Goes" campaign promoting digital technologies and AI adoption, and collaborative programs like the AIS Infinite SMEs program offering financial support, digital training, and infrastructure upgrades [Key Strategies and Initiatives].
Despite these efforts, Thailand's SME innovation still lags behind regional peers, with persistent challenges like limited R&D investment and competition from foreign e-commerce platforms [Challenges and Outlook]. Overcoming these hurdles will require continued collaboration between public and private sectors to ensure Thailand's SMEs can thrive in the global market.
Bonus tidbit: Thailand is working to accelerate negotiations for the ASEAN Digital Economy Framework Agreement (DEFA), aiming to establish itself as an ASEAN digital investment hub [Trade and Investment Expansion].
- The struggle of Thai businesses, particularly SMEs, to innovate and meet evolving customer demands is reflected in their lower adoption of innovation compared to regional peers, as revealed in a report by the World Bank.
- In an attempt to address this issue, the National Economic and Social Development Council (NESDC) recommends expanding access to financing for Thai SMEs to enable them to adopt innovation and technology.
- Strengthening the innovative edge of SMEs is not only crucial for stabilizing employment but also boosting the incomes of millions of workers, according to the NESDC.
- Thailand's economic competitiveness is hindered by a relatively low investment in research and development (R&D), posing a structural barrier to SMEs' survival.
- The ongoing global trade wars, causing disruptions to sales and production continuity, add to the challenges Thai businesses face in the international market.
