Thailand works to upgrade education and technology as population ages

As the first emerging economy expected to become an “aged society”, with more than 14% of the population projected to be over 65 years old in 2022, Thailand is confronting a demographic challenge to its economic development. Faced with rising public health costs and a shrinking workforce, as well as a limited pool of skilled labour, the government is moving to mitigate these problems, with investment in education, digital industries and labour force upskilling set to increase significantly under the auspices of Thailand 4.0 and the Eastern Economic Corridor (EEC), two development agendas that aim to capitalise on opportunities presented by workforce automation and future demographic demand.

Cost of Ageing

Citing the Universal Coverage Scheme, which was intended to deliver free medical care to all citizens when it was rolled out in 2001, an October 2017 Euromoney report calculated that the annual cost of the public health insurance scheme increased from BT55.3bn ($1.6bn) in 2003 to BT165bn ($4.8bn) in 2017 and is on track to jump to BT680bn (19.7bn) – 3% of GDP – by 2024 and to BT1.4trn ($40.5bn) by 2028.

According to the business and finance publication, the number of citizens aged 60 and over will increase to comprise 25% of the population by 2025, while the Bank of Thailand (BOT) reports that more than 14% of the population will be over the age of 65 in the same year. Meanwhile, UN data shows that 14% of citizens were over 60 years old in 2016, more than double the 6% recorded in 1985.

In April 2018 international press reported that the proportion of elderly people in Thailand is rising faster than in China, highlighting a need for increasing investment in infrastructure and technology to enable a smaller workforce to meet the future demand from a large population of senior citizens.

Workforce Challenges

A shrinking workforce and large ageing population has led to a very low and continually decreasing unemployment rate, which has fallen from 1.18% in 2011 to 0.99% in 2012, 0.88% in 2013, 0.72% in 2015 and 0.68% in 2017. The labour force has also become smaller in recent years, declining from a peak of 40.1m in 2012 to 39.55m in 2013, 39.48m in 2014 and 38.9m in 2015, before rebounding somewhat to 39m and 39.1m in 2016 and 2017, respectively. This has led to labour shortages in manufacturing and services, the latter of which accounts for 40% of GDP.

The Thailand 4.0 economic development agenda emphasises technology and innovation, while the EEC Act, laid out in February 2018, should also help boost investment in less labour-intensive manufacturing, in turn preventing future labour shortages. However, the country is facing a serious shortage of skilled labour and its skills gap could create significant challenges in the future (see overview).

Education Upgrade

In order to address this, the government announced plans in June 2017 to dispense an additional BT619m ($17.9m) to bolster vocational training activities, adding to an estimated BT2.73bn ($79m) of annual spending – approximately one-fifth of the national budget – on education (see Education chapter).

The authorities also plan to increase scientific and research funding, publishing a policy statement in September 2014 with five targets: boosting research and development (R&D) funding to at least 1% of GDP and increasing private R&D investment to comprise 70% of that total; restructuring education to emphasise science, technology, engineering and mathematics (STEM); reforming the legal framework to promote decentralised R&D; supporting the use of R&D in national investment projects; and improving STEM infrastructure. Although these measures alone will not be enough to solve the country’s demographic challenges, investing in a skilled workforce offers the most promising long-term solution.