Thailand’s role as a regional economic hub is under pressure as the World Bank’s February 2025 Thailand Economic Monitor shows the country trails its ASEAN peers in business innovation. The report highlights an widening innovation gap that threatens jobs, investment, and incomes—especially for the 12.9 million Thais working in SMEs.
For Thai readers, innovation is more than a buzzword; it’s essential for future stability and wellbeing. A strong capacity to innovate can create jobs, attract investment, and raise living standards. Without swift action, communities across the country risk falling behind as global trade becomes more volatile.
The World Bank’s findings reveal that in 2024 nearly 24,000 Thai SMEs deregistered and more than 1,200 factories—mostly small and medium-scale operations—closed. Over 35,000 workers were affected. The manufacturing sector, a long-time driver of the Thai economy, is hit hardest as firms lag in adopting process improvements and new products. Only 11.9% of Thai firms have adopted process innovation, far below peers in the region. By contrast, the Philippines reports more than 40% of firms engaging in process innovation, with Vietnam and Malaysia also showing stronger performance. Investment in R&D remains exceptionally low in Thailand at about 1.1%.
Beyond the numbers, SMEs face cascading risks from currency swings, material shortages, and trade disputes. As noted by a senior policy advisor at Thailand’s NESDC, innovation and technology adoption are vital for the survival and resilience of SMEs.
The World Bank’s regional comparison covers five large ASEAN economies: Thailand, the Philippines, Vietnam, Malaysia, and Indonesia. While Indonesia leads in foreign technology adoption, it still lags Thailand in process innovation and new product launches, underscoring the broader regional gap in Thai innovation performance.
Experts warn that without policy changes, Thailand may struggle to compete for exports and foreign investment against faster-moving neighbors. The manufacturing sector’s productivity growth remains stagnant, threatening regional economic balance and rural livelihoods outside Bangkok and major tourism hubs.
Thailand has shown resilience in other areas, such as tourism and agriculture, when faced with crises. Still, experts say the country’s business ecosystem—dominated by traditional family-owned firms and a conservative credit market—has been slow to embrace technology and risk-taking. This legacy helps explain the current innovation lag and the need for reform.
Policy directions emphasized by NESDC include expanding SME access to affordable financing for technology adoption, and boosting collaboration between industry and universities to strengthen R&D relevance. International bodies also stress the importance of sustained investments in R&D and skills development to bolster competitiveness.
Practical steps for Thailand include:
- Expanding low-interest loans for SMEs to fund innovative upgrades, especially outside major urban centers.
- Encouraging industry–university partnerships to translate research into market-ready solutions.
- Enhancing digital infrastructure and digital literacy so rural entrepreneurs can leverage new technologies.
- Fostering a culture that supports experimentation and calculated risk-taking, a core element of strong innovation ecosystems.
Strengthening innovation is not merely economic; it supports social resilience. Vibrant SMEs sustain local communities, preserve regional cultures, and create diverse employment opportunities. Thailand’s cultural vitality—from Chiang Mai’s crafts to Bangkok’s food innovations—depends on a policy climate that nurtures creativity.
The World Bank’s report presents both a warning and an opportunity. If Thailand seizes targeted reforms—removing regulatory barriers, accelerating talent development, and promoting practical R&D—we can reclaim a leading role in ASEAN’s economic future.
What readers can do: support policies that enhance SME access to innovation finance, back collaborations with education and research institutions, and cultivate workplaces receptive to new ideas. Individuals can pursue lifelong learning, encourage youth to study STEM fields, and back local businesses that commit to quality and innovation.
For further context, the World Bank’s analysis, NESDC policy recommendations, and related international insights underscore the path forward.