Urban vs. Rural – Trip to Thailand



Juxtaposing the rural situation with infrastructure spending in urban areas, the recovery of the rural economy seems far away. This can be an important swing factor for long-term political stability in Thailand.

In the developing world, addressing income and infrastructure gaps between rural and urban areas has always been on the agendas of policy makers. At times, it is viewed as the next growth driver or social issue to address. Thailand is not much different in this regard. But what makes things more complicated in this Southeast Asian nation is the associated political rhetoric around development priorities and funding transfers. It can be seen as an oversimplified way of dividing the country into two parts. There is some truth to the two-part division: around half of Thailand's population still works in the agriculture sector and only accounts for 10% of gross domestic product. The income gap between the urban and rural areas has widened to the level that average urban income is more than three times the average rural income.

Bangkok, Thailand

Mae Hong Son Province, Thailand


In a recent trip, I spent a few days in Bangkok. After Thailand's military government lifted martial law in April of this year, but still retained broad powers, the atmosphere felt rather subdued. Streets in Bangkok, the capital, were still filled with cars and small street shops that still catered to tourists. I saw a ground-breaking for a mass transit hub station in Bangkok. Around the time of my visit, the government was putting five infrastructure projects, worth 334 billion baht combined, under a fast-track, public-private partnership format to ensure that these projects help jump start the economy again next year. People I met also believe this infrastructure spending will be the primary growth driver next year.

However, when we discussed business conditions in rural areas, it seemed like hope wasn't yet evident. A home furnishing mall operator, who until recently pursued an ambitious rural expansion program, decided to redirect the program to the greater Bangkok area. Rural sales underperformance was a factor, but more importantly, a lack of certainty in rural purchasing power recovery has been the main problem. The Thai government has put some effort into boosting rural incomes. But this time, rather than problematic price intervention policies, such as rice subsidy schemes, which resulted in significant outlays for the government, it announced a short-term stimulus measure: a 60 billion baht loan through the "Village Fund" to rural people. As a long-term measure, the government is preparing a more comprehensive way to restructure the rural economy, with an announcement expected in 2016.

Juxtaposing the rural situation with infrastructure spending in urban areas, the recovery of the rural economy seems far away. This can be an important swing factor for long-term political stability in Thailand. It is true that Thai businesspeople have done a great job sustaining economic development, regardless of the political situation in Thailand, and that will likely continue to be the case. However, the rural economic situation should be addressed in a more structural manner for Thailand to grow sustainably.

The ASEAN Economic Community (AEC) will be implemented toward the end of 2015 to strengthen economic integration among the Association of Southeast Asian Nation countries. These countries seek a greater role in global trade flows. Though still a lot of uncertainties exist around successful implementation, I could hear that more active trading activities are happening in both the region and along its borders. A leading Thai bank mentioned to me that it started to set up branches aggressively near the border areas to address ever-increasing business needs. Thailand is strategically located and can offer much expertise and logistics capabilities to neighboring countries. On the way back, I hoped not only urban but also rural Thailand can participate in this new growth driver. For that to happen, much investment is needed in Thailand's rural areas, not only loan programs but also more fundamental areas such as education and infrastructure.

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