Endowed with fertile soil, advantageous geography and historically favourable weather cycles, Thailand possesses many of the attributes necessary to fashion itself into one of the premier agricultural powerhouses not just in Asia, but throughout the world. Since before the creation of the modern kingdom of Thailand, farmers have been successfully cultivating a wide range of crops within the area, first for subsistence and later on, for profit. As new crops were introduced over the centuries, agriculture became entrenched as one of the most important sectors of the economy, providing employment for a substantial cross section of the population. The sheer abundance of productive farmland combined with a sizeable and willing workforce have cemented Thailand’s place as one of the world’s most prolific agriculture producers, as well as a leading exporter of key commodities ranging from rice and sugar, to rubber and produce.
Rising To The Competition
While the industry remains an important component of the Thai economy, the priorities of farmers and policymakers have adapted to the modern global marketplace in which market prices and international trade considerations can sometimes outweigh traditional metrics of production, yield and efficiency. Political and social priorities have at times resulted in the implementation of policies that have not always benefited the sector in terms of productivity and long-term viability.
Subsidies, assistance programmes, price support and other market-distorting measures have resulted in short-term financial windfalls for farmers and agriculture businesses over the years, but at the expense of a sustainable business model and global competitiveness.
As a result, Thailand remains one of the more important agricultural exporting nations in the world, but is losing ground to global rivals in terms of productivity, efficiency and global competitiveness. In this respect, Thailand has established itself as a clear outlier within the region; bucking a trend among developing countries in Asia which generally demonstrates that the share of agricultural employment in a country tends to decline as the country’s level of income increases. While this is also true in Thailand’s case, its share of agricultural employment still far exceeds what would be expected for its level of income, compared to modern economies such as Japan and South Korea, as well as developing economies like Cambodia, Vietnam and the Philippines. Furthermore, this pronounced deviation is not a short-lived anomaly; Thailand has been moving broadly parallel to this typical trajectory since the late 1990s and, in fact, increased the gap in the 2010s. Based on its income level, Thailand expects to maintain agricultural employment shares somewhere between those of Malaysia and Indonesia. However, agriculture remains far and away the largest employer in Thailand and its share exceeds that of Malaysia, China, Indonesia, and the Philippines, trailing after only India and Vietnam, both of which have much lower income per capita.
This, in turn, has led to Thailand faring increasingly worse in global competitiveness rankings related to the sector; its worldwide ranking in relation to agricultural policy costs dropped from 13th in 2006 all the way down to 124th by 2014, according to the World Economic Forum’s “Global Competitiveness Report 2006-2016”. Over that eight-year period Thailand’s score for agriculture policy cost declined from a respectable 4.141 (out of a possible maximum of 7) to a low of 3.064. At the same time, ASEAN as a whole increased its average score from 2.890 to 3.572, while the emerging and developing Asia region also overtook Thailand with a score of 3.766 in that same year.
Righting The Ship
This loss of competitivene ss has not gone unnoticed by Thai policymakers, as government, farmers and NGOs have rolled out a succession of assistance programmes designed to boost efficiency and yields, while lowering the cost of production across a number of different crops. Additionally, one of the more encouraging developments to take place in only the past few years is the apparent shift in policy by the government away from wasteful price support schemes for rice, sugar and rubber which benefit farmers in the short term, but create lasting production inefficiencies. Although Thailand is by no means unique in protecting its agricultural industry through various means, such as price guarantees, income support, subsidised insurance, cheap credit and trade restrictions, these measures have had a significantly reduced effect on many advanced economies where the sector tends to make up a much smaller portion of both the labour pool and economic output.
More From Less
Higher yields and greater efficiency are an effective means to boost overall output, but at some point success in these endeavours can become counterproductive for farmers in terms of profitability. This in particular has been one of the most pressing dilemmas for Thai rice producers over the years, as policymakers and farmers have attempted numerous ways to balance global production and pricing. As farmers in Thailand and other countries continued to produce and export more, domestic and international markets reacted with increasingly lower prices, leaving rice growers in the unenviable position of working more for increasingly less money. Although governments in Thailand and other countries attempted to alleviate the financial pain of these farmers in various ways, long-term solutions have yet to outflank simple supply and demand principles and these schemes inevitably fail. For this reason, the Thai government has recently largely abandoned price support for rice and has instead been making overtures to rice farmers to encourage them to grow premium specialty rice strains or switch to growing other, more profitable crops rather than boosting efficiencies in rice production. By growing high-quality rice organically without pesticides or chemical fertilisers farmers are only able to produce around half the yield of standard rice using standard practices but fetch up to 10 times the price. Consumers in affluent markets such as Europe and the U.S. are proving increasingly willing to pay a premium for naturally-grown products, and demand for organic foods continues to increase.
“Currently the government is attempting to convince farmers that higher-price support for sustainable, organic crops is better in the long run, because if you produce a higher-quality product you will get a better market price,” Thawatchai Dechachet, senior professional policy and planning analyst and acting expert on international agricultural policy at the Thailand Office of Agricultural Economics, told OBG.
These chemical-free farming techniques represent a significant departure from mainstream farming in Thailand, which remains heavily dependent on the usage of chemical fertilisers. Overall, organic produce in Thailand still represents a tiny fraction of overall food production, as is the case the world over, and the majority of Thai farmers remain sceptical of the benefits of these cultivation methods. According to data collected in a 2014 survey of vegetable growers in Sam Sung of Khon Kaen Province in north-east Thailand, 55% of respondents classed their knowledge levels of organic farming methods as low, while 45% considered their knowledge to be medium. There were no high-level respondents at all, with the study concluding that farmers’ knowledge of organic farming in the country, especially pertaining to the use of organic insecticides, herbicides and fertilisers, was lacking. Conceptions related to organic farming were also less than positive, with respondents generally holding the opinion that there were less benefits in organic farming. Farmers were still dependent on conventional practices, particularly for pest and disease control.
This currently low uptake of organic farming also provides a significant opportunity for growth, a concept which is not lost on the Thai government and farmers alike. In the US alone, consumer demand for organic produce has grown by double digits nearly every year since the 1990s, as purchases ballooned from $3.6bn in 1997 to $43.3bn in 2015. Sales in the US and Canada are projected to exceed the $50bn mark in 2017, while the market share for organic produce inches upwards into the 7-10% range in numerous western countries, including the US, Germany, Switzerland, Denmark and other neighbouring EU countries.
Seeking to tap into this market, Apiradi Tantraporn, the minister of commerce, told the local press in 2016 that Thailand would itself as the go-to organic hub within ASEAN, and that the ministry and producers planned to increase the country’s share of the world market in the organic sector foreseeing the concept as a sustainable way to help farmers and promote good living. Apiradi indicated that the government had devised a five-year plan to develop organic products and boost the country’s global market share through several initiatives, including assistance with marketing and packaging development. Under the plan, exports of organic products to the world market are forecast to grow by 10% annually, which should help the country gain a foothold in a key sector that is currently dominated by producers in the US, Germany and France.