Thai Baht Economy Surges Their Economic Complexity Is Increasing

Here is The Star and Bloomberg.

tough to stop baht from surgingbaht advanced 0.3% on Friday to 30.187 per dollarstrongest level since May 2013gain 7.8% this year, more than peers except Russia’s ruble
Why is baht so strong? Several factors attracting investors to Thailandhaven for foreign money
healthy current account tops them allIMF forecasts surplus of 6% of GDP this year, double Japan
Thailand’s reserves, negligible inflation also provide investors comfort
foreign reserves stands at US$220 billionequivalent of 12 months importsinflation 0.3%, below target of 1% - 4% since June
getting boost from goldThailand hub for bullion tradingbenefited from 17% gain in gold price this year
How much more can baht appreciate? whether baht will breach 30 per dollar
- Bloomberg

My comments :  
The Thai Baht has now appreciated to almost 7:1 against the Ringgit (Oops previously I mentioned 6:1, not true).

Over the past year the Thai Baht has appreciated over 7% against the Ringgit.  You can see the chart here :

Locals say shopping in Danok or Golok is not attractive anymore.  
Thailand is becoming unaffordable for MalaysiansMacam dulu orang JB seronok pi shopping di Orchard RoadNow with the Singapore Dollar worth RM3.07 orang JB cannot even afford to  window shop in Singapore.
Very soon Thais will come to Malaysia to buy things that Malaysians will not be able to afford to buy here. Just wait and see.
There are many things good about Thailand. The Army Junta that runs the country seems to understand that just letting the economy fix itself and move forward is a good thing to do. The government stays out of too much interference in the economy.
The previous Shinawatra business dynasty which ran the country was  too big into cronyism and lining their own pockets - typical for a Third World country with lax institutions and controls. (Hence the importance of having strong and independent institutions in any country).
There is no guarantee that the military Junta now is any cleaner but perhaps they are less sophisticated in white collar shenanigans (compared to the previous bunch). Lets hope they stay that way.
There are other factors. The Thai Chinese business community - which basically runs the Thai economy - is obviously investing more of their money in manufacturing. They seem to have more faith in the future.  This is critical for Thailand. The business people must not be hindered from doing what they know how to do best.

Ok now I would like to thank the reader (obviously an economist or in some related field) who months ago sent me an excerpt of a research paper by Bank Negara Malaysia about some comparative analysis of  Asian and ASEAN economies, including Thailand. I will be referring to some of that research now. 

This paper is by two Bank Negara researchers Brenda Cheah and Mohd Shazwan. It is about what is called 'Economic Complexity'. Here is a snapshot about economic complexity.

Simply put this is talking about value added and linkages (or leveraging on that value added).
Lets take our oil palm and palm oil economy. There is very little technology (on a comparison basis with Singapore, Vietnam and even Thailand.) Just clear the land, plant the oil palms and six or seven years later harvest the fruit.  Press the oil, put it into tanks and ship it out. 
What are the supporting industries or industry sokongan? Lorry drivers, grass cutters, weedkillers, plantation workers (Banglas, Indons), Java Man's brother with Slave Labour Permits to import 1.5 million Banglas etc. Those are the industry sokongan.  Almost no value added (from 50 years ago) and few or no new linkages. So the palm oil industry lacks any real complexity.
The foreign worker permits business still is the biggest useless ripoff that our economy has to face. It still costs RM8,000 to bring in ONE foreign worker. Kula Thengga, LTTE aah? 
Each new level of complexity means new value added in that sector.  Each new level of complexity means new wealth creation.Each new level of complexity means newer, higher paying jobs.
So the more levels of complexity in the economy the more value added and the more advanced economy. If we can downstream process our palm oil to greater levels of complexities we may earn much higher incomes. 
Instead of exporting tons of raw palm oil, why not process the oil and extract all those highly concentrated stuff that goes into so many higher value products like medicines, cosmetics, food etc? Who knows a kilo of the downstream products may cost as much as a ton of raw palm oil. 
Anyway here is a comparison of the Economic Complexity of various countries.

Malaysia is now only one step ahead of Thailand. The Thais are fast catching up. The complexity of the Thai economy is improving. Their economy is having more complex linkages within industry sectors.
I can tell you about their auto industry. Thailand is now the Detroit of South East Asia. Producing over ONE MILLION trucks per annum the Thais are the largest manufacturers of 1 ton pick up trucks in the world. They also manufacture a huge range of automobiles for major world car brands. And now the Thai auto industry has really moved up the value chain where design is also being done fully in Thailand. 
Many foreign car manufactrurers have design bureaus located inside Thailand. There is therefore a complete car industry ecosystem - from design to manufacturing - in Thailand

This is what is meant by complexity. 
Two points to note - the Thais started their car industry AFTER Malaysia and they DO NOT HAVE a Proton Saga

While the Economic Complexity of Thailand, Vietnam, Bangladesh and other countries is rapidly increasing our economy is stuck or moving much less slowly

That is why the Ringgit is now at 7.21 Baht.  The Baht will likely strengthen.Posted by Syed Akbar Ali 

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