Strengthening Productivity Analysis for Policymaking in Thailand

Some productivity slowdown is expected as Thailand converges towards higher income levels. However, several structural factors weigh on the productivity of the Thai economy. High market concentration, driven by the presence of large conglomerates and ownership networks, impedes competition and business dynamism (Apaitan et al., 2020[3]). High regulatory barriers to foreign market entry in some industries and relatively high service trade restrictiveness undermine the attraction of foreign direct investment (FDI) and worsen conditions for integrating higher value-added activities of global value chains (OECD, 2023[1]; OECD, 2020[4]). Domestic private investment has been low for a long time driven by firm financial constraints, weak growth prospects and heightened uncertainty (Limjaroenrat, 2016[5]), limiting potential gains from capital deepening and the modernisation of the capital stock. Public investment, both in physical and human capital (e.g. through education spending), has also been below target or on a declining path (OECD, 2023[1]). Additionally, high exposure to climate change and rapid population ageing compared to peer countries will contribute to a challenging environment in the long term.

The government is conscious of the need to step up efforts to raise productivity to accelerate economic growth and development, as highlighted in the 13th National Economic and Social Development Plan for 2023-2027 (NESDC, 2023[6]). The Plan places a strong emphasis on industrial development strategies, linking ambitions to revive productivity growth with sectoral transformation towards advanced manufacturing and higher value-added services. However, other policy instruments to boost productivity tend to be overlooked. For instance, little attention is given to incentives and policies aimed at strengthening the capabilities of average and laggard firms and to enable a more efficient reallocation of labour and capital resources.

Thailand is not alone in confronting a productivity slowdown. Most OECD countries have faced weak productivity growth since the early 2000s. Efforts to understand and address this decline have led to the recognition that its causes are multifaceted, requiring action across various policy areas (OECD, 2015[7]; André and Gal, 2024[8]; Andrews, Criscuolo and Gal, 2016[9]). In many OECD countries, the complexity and interdisciplinary nature of the productivity challenge prompted the establishment of dedicated pro-productivity institutions that closely monitor productivity trends, gather data and conduct analysis to identify key drivers and policy implications (Cavassini et al., 2022[10]). Based on these insights, some of these institutions develop recommendations to guide policy actions. Such a pro-productivity institution is currently lacking in Thailand.

Thailand has several analytical institutions within key economic bodies and ministries that conduct productivity analyses and are connected to the policymaking process (hereafter referred to as pro-productivity institutions). However, the absence of a single analytical expert body with a clear productivity mandate leads to knowledge and data silos, analysis gaps and diluted attention to productivity and its drivers among policymakers. Existing pro-productivity institutions need to strengthen their cooperation on data and analysis, generate more in-depth evidence on productivity trends and drivers and increase the relevance and visibility of their policy advice to policymakers.

Thailand should set up an expert body, hereafter referred to as productivity council, bringing together experts from the pro-productivity institutions including the Office of the National Economic and Social Development Council, the Bank of Thailand, including the Puey Ungphakorn Institute for Economic Research, the National Statistical Office, the Division of Labour Economics, the Office of National Higher Education Science Research and Innovation Policy Council, the National Research Council, the Office of Industrial Economics, the Thailand Productivity Institute and the Office of Agricultural Economics. The council could be chaired by a senior adviser from one of the member institutions on a rotating basis or by a lead academic to help bridge policymaking and research. The council would complement and enhance the work of existing committees that have broader mandates and decision-making power but currently lack the necessary expertise and focus on productivity analysis

The productivity council should be supported by a secretariat, which could be housed within one of the member pro-productivity institutions. The secretariat could periodically or permanently integrate technical experts from other member institutions, as well as academics, to provide the council with stable analytical capacity and better connect the expertise currently spread across pro-productivity institutions (Figure 2).

Pro-productivity institutions produce several reports, mostly on an ad-hoc basis and covering productivity developments at an aggregate and/or industry level. Limited resources and barriers to accessing and linking data weaken the analysis of productivity dynamics and drivers, leading to ‘blind spots’, particularly for service sector firms. Policy advice remains unspecific and many reports are produced for internal use within ministries, resulting in limited attention across institutions, knowledge-sharing and use.

The recommended productivity council, with the support of its secretariat, could steer the analytical agenda on productivity and help connect the different policy areas that contribute to boosting productivity. For this purpose, the secretariat could develop a programme of work that builds on the foundation of existing outputs of pro-productivity institutions, defines requirements for ongoing and planned work and sets goals for future joint work at council level.

The secretariat could begin by producing concise ad-hoc bulletins that take stock of existing productivity analysis and insights, formulate measures to strengthen future analysis by disseminating an analytical framework (see details below), and identify priority policy actions for the forthcoming 14th Economic and Social Development Plan.

In an in-depth research cycle, to be taken up once the secretariat has sufficient analytical capacity, the council could produce joint annual productivity reports, examining productivity dynamics and drivers, including in the service sector, more systematically. Generated insights should inform actionable policy recommendations that are directly brought to the attention of policymakers, as explained below.

A productivity framework could support the council and participating institutions by informing the programme of work and structuring the council’s analysis and advice. In particular, the framework could guide the thematic focus of ad-hoc bulletins and in-depth productivity reports, including the choice of sectors, policy areas and productivity determinants to be examined. The framework can also assist in assessing and evaluating productivity-related elements of existing plans, policy settings and instruments. Based on the defined thematic focus, the framework can help structure the analysis by disaggregating productivity developments across aggregate/economy, industry/sector and firm levels, within- and between-effects and business dynamism. Drawing on analytical insights on productivity dynamics and determinants, the framework could help develop actionable policy advice that considers suitable incentive- and capability-oriented policies. Going forward, policy changes and the emerging economic context will provide new needs for research and advice, influencing the future focus of outputs (Figure 3).

Thai pro-productivity institutions produce several productivity indicators at the macro-level, mainly from National Accounts, providing relevant measures of labour, capital and multifactor productivity. They disseminate these indicators through their websites with a mix of regular and/or ad-hoc reports, downloadable data or interactive dashboards. Thailand has also recently established the Government Data Catalogue (GDC), which has improved data dissemination by creating an online data portal gathering information and data from various agencies into one centralised and easily accessible repository, together with metadata. Nonetheless, productivity indicators remain scattered and current analyses do not comprehensively assess productivity regularly. Enhancements to the analysis and dissemination of productivity indicators as well as their measurement would significantly support the productivity agenda.

Thailand could enhance the measurement of aggregate and industry-level productivity by improving the measurement of data required to compute productivity and strengthening the methodology. Improvements needed to measure productivity more accurately concern the measurement of both output (GDP) and inputs, including capital, labour and intermediate inputs which compose productivity indexes. Concerning output, improvements could aim to better measure the informal economy, but also to address challenges related to the measurement of GDP in the digital economy. Regarding inputs, refinements should focus on better measuring employment with a variety of sources and distinguishing changes in volume (i.e. the number of workers and hours worked) and in the quality (e.g. depending on education and occupations) of labour inputs, using measures such as the Quality-Adjusted Labor Input (QALI) index. Refinements should also focus on measuring capital in terms of capital services in addition to the traditional wealth approach used for National Accounts. In the medium term, Thailand could centralise the production of different productivity metrics within a single institution, which could also be responsible for their dissemination.

A more comprehensive assessment of productivity at the macro level, integrating more systematically various productivity measures, levels of aggregation and international comparisons across countries, would greatly enhance the analysis to be conducted by the recommended council and its participating institutions. The analysis of productivity should monitor labour, capital and multifactor productivity, both in levels (when relevant) and trends over time. When feasible, the analysis should take an international perspective, comparing Thailand to relevant benchmark countries. The analysis should dissect aggregate productivity into sectoral and regional performance. Finally, drivers of productivity growth should be examined more systematically in productivity analysis. These dimensions can be incorporated into the bulletins and annual reports of the recommended productivity council and its participating institutions.

Strengthening the dissemination of productivity indicators requires better coordination among Thai agencies and consistent application of harmonised, high-quality standards. The recommended productivity council can become instrumental in supporting this effort. All Thai pro-productivity institutions must ensure that their dissemination of productivity indicators always meets stringent quality standards, also when published through their own websites and reports. Key considerations include timeliness, accessibility and transparency. Moreover, Thai institutions must integrate relevant productivity indicators into a central repository, such as the Government Data Catalogue, to improve the accessibility and visibility of existing productivity data across agencies. The council could help strengthen dissemination of productivity indicators by creating a productivity dashboard. The dashboard could facilitate the communication of key results regarding Thailand’s productivity performance, including trends, international comparisons and contributions of industries to aggregate performance.

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Thai pro-productivity institutions – mainly the Office of Industrial Economics (OIE) and the Puey Ungphakorn Institute for Economic Research within the Bank of Thailand – conduct relevant productivity analysis using rich micro-data. However, data limitations, related to the frequency, coverage and statistical properties still hinder detailed productivity analyses. Thailand still lacks integrated data and insufficiently leverages the potential of administrative data, such as tax records, for statistics, notably through a Statistical Business Register. Addressing these challenges requires a more systematic approach to data exchange, both across pro-productivity institutions and with other agencies and external researchers, and facilitating a common business identification across data sources and agencies. These improvements would enhance the evidence base of policymaking by facilitating the analysis of a broader range of productivity-related indicators.

Moving towards a unique business identifier can bring direct benefits in terms of administrative procedures and enhance data linkages and productivity analysis. A unique business identifier system across administrations can bring direct economic benefits such as simplified administrative procedures for businesses. Simplifications can foster firms’ creation and business registration thereby helping to reduce informality. Besides these direct benefits, a unique business identifier can also facilitate inter-administrative exchange of micro-data and data linkages. The availability of a unique longitudinal identifier is also key to enhance the measurement and analysis of productivity and would facilitate the work of the recommended productivity council, its participating institutions and external researchers. Therefore, Thailand should define a common identifier, for legal entities and their local branches, to be used by all public institutions collecting data on businesses. Such an identifier could be based on an existing one or newly created. To achieve this, Thailand may need to assess and implement the necessary legislative changes (e.g. related to the establishment of the national identification system and the adaptation of registration procedures) and address challenges in the interoperability of data across agencies.

Thailand could more systematically leverage the potential of administrative data to produce business statistics and productivity analyses. Administrative data have emerged as a key source of information for statistical and economic analysis. Thailand could follow international best practices by leveraging this information more systematically for productivity analysis. Thailand may have to overcome legislative barriers to data sharing and modernise its statistical legislation for sharing and using such data for analysis. Using administrative data for statistical and economic analysis also requires the NSO to develop standard methodologies for repurposing administrative sources and integrating them into a structural business statistics system. In economies with a high level of informality, such as Thailand, regular surveys of the informal sector can complement administrative data, allowing for the identification and description of informal firms and those that hire informal workers. This enables the measurement of informality and its contribution to the economy, both in terms of labour input and overall output.

Developing a Statistical Business Register (SBR) can enhance data linkages, support the NSO in conducting business surveys and help develop official business statistics, including on business demography. The NSO could create and maintain an SBR by leveraging the existing common frame already used for the Industrial and Business Service Census and expand its coverage to include missing sources (such as tax records). Thailand should ensure that the NSO can rely on a strong mandate to collaborate with administrative data holders and overcome legislative barriers to share those data (see above). Thailand should ensure that the SBR is available to other institutions, including external ones, to leverage their expertise and conduct firm-level analysis (see the dissemination strategy discussed below). The NSO is in the process of updating its Statistical Master Plan and revising the National Statistical Act to enhance the country’s statistical infrastructure and address legal and institutional aspects to support effective data collection and dissemination. Such ongoing efforts align with these recommendations and should be continued.

Systematically monitoring a broader range of productivity indicators based on micro-data can inform policies. Existing analyses based on micro-data can serve as a foundation for the granular understanding of Thai productivity. To make a better use of these analyses for policymaking, Thai pro-productivity institutions along with the productivity council should build on the recommended productivity framework to consolidate the analysis around three dimensions. First, assessing levels and changes in productivity dispersion and heterogeneity across groups of firms (e.g. by firm size, age, ownership type, legal and registration status), together with determinants of productivity (e.g. related to innovation, ICT use and participation in international value chains) can strengthen the understanding of policy relevant questions and levers to boost productivity. Second, the framework should integrate the analysis of allocative efficiency, the extent to which resources are (re-)allocated towards more productive businesses and the state of competition in the economy. Finally, the analysis of business demography and creative destruction can provide key insights into how business creation, firm selection and exit contribute to productivity and more generally to economic dynamism. To conduct such analyses, Thailand could leverage the expertise of academics and technical experts from relevant institutions (such as NSO, PIER and OIE) as well as the secretariat of the recommended council.

Enhancing micro-data sharing and dissemination, particularly through a centralised data-sharing solution, can strengthen the evidence base on productivity. Following international practices, Thailand could strengthen the access to micro-data, not only for administrative purposes but also across the board for analysis. To this aim, Thailand can develop suitable data-sharing solutions, ideally centralising access to various micro-data, so that relevant users can easily and securely access these sources in one location. This would facilitate the publication of business statistics by Thai agencies and more broadly spur research on productivity. The NSO could coordinate the initiative and, in the short term, set up physical locations to provide access to adequately anonymised confidential micro-data. In the medium term, the objective will be to complement physical locations with remote access solutions and potentially include data collected by other institutions.

Thai pro-productivity institutions provide policy recommendations in a variety of formats and outputs, addressing many policy areas relevant to reviving productivity growth. However, the recommendations tend to focus selectively on certain policies and industries. There is little coverage of productivity determinants such as market structure and resource (re-)allocation, particularly in the service sector. As a result, non-financial incentives based on the analysis of these determinants, such as incentives to strengthen competition and improve allocation efficiency and business dynamism, are rare. Moreover, most policy recommendations are generic and lack clarity on who should implement them. The formulation of recommendations should consider a broader spectrum of available policy options and formulate advice more actionably.

The productivity council and its participating institutions can build on the recommended productivity framework to better link productivity determinants with public policies. The OECD framework could help connecting productivity determinants with incentive- and capability-based public policies, targeting firms of different productivity levels (frontier or laggard firms) or resource (re-)allocation. The productivity council could complement the portfolio of public policies mapped in the standard framework with additional policies relevant to addressing Thailand’s specific economic challenges. Such additions could consider but are not limited to, Thailand’s efforts to strengthen a fair and predictable business environment, economic transformation strategies, informality in the labour market or the need to facilitate climate change adaptation investment. The framework would not be a straitjacket but could help ensure that no relevant policy options are left aside when developing recommendations.

The relevance of policy advice could be further strengthened by formulating more actionable policy recommendations and communicating them more effectively to policymakers and key stakeholders. Recommendations provided in the planned reports of pro-productivity institutions and the suggested outputs at the council level should clearly state objectives, detail policy actions or instruments and identify the institution(s) responsible for take-up and implementation. Relating recommendations to assessments and evaluations of existing policy settings and instruments can further enhance their practical relevance. Moreover, the council should consult with government and other key stakeholders during the development of the recommendations and bring the recommendations directly to the government’s attention upon release, for instance through an official launch attended by all relevant stakeholders.

Thailand’s policymaking is informed by a multi-layer planning system, with the 13th National Economic and Social Development Plan for 2023–2027 as the cornerstone. The plan does not include an explicit and comprehensive productivity agenda and the (sub)strategies of the plan do not link productivity challenges to drivers and policies. The sub-strategies largely focus on enhancing firm capabilities. Non-financial incentives to strengthen competition and resource reallocation are much less frequently mentioned (Figure 4). While this mirrors the selective focus of policy recommendations by Thai pro-productivity institutions, there is no evidence of a systematic connection, as the relationship between policy advice and planning is weakly defined. Furthermore, most productivity-relevant sub-strategies in the plan cover only a small subset of Thailand’s industries and firms, as they are often assigned to milestones focusing on specific industrial strategies (e.g. electric vehicles). Going forward, Thailand should adopt a more explicit and comprehensive productivity agenda in its planning and inform it with relevant policy advice from pro-productivity institutions, connected through the recommended council.

Reviving productivity should become an overarching target for policymaking in Thailand. As highlighted in the OECD 2023 Economic Survey of Thailand, current initiatives pursue a variety of ambitious reforms in areas relevant to productivity, such as attracting skilled labour from abroad, broadening the application of the modernised competition act and facilitating foreign direct investment (OECD, 2023[1]). However, efforts could be intensified in most policy areas and broadened across sectors.

The government should lay out an explicit and comprehensive pro-productivity agenda for the next planning cycle. This agenda, possibly integrated into the next National Economic and Social Development Plan, should address productivity challenges across the economy and systematically map them to relevant productivity drivers and suitable policy options to guide future strategies. It should also leverage policies that may have been neglected in the past, ensuring that productivity gains are realised not only in relation to industrial development strategies but in various industries and across firms with different productivity levels.

The recommended productivity council could support the development and implementation of this pro-productivity policy agenda. The council could provide expert advice during the drafting phase of the forthcoming Plan and disseminate it using the recommended ad-hoc bulletins. Policy advice may be guided by the analytical framework and expert analysis considering the expected impact of reforms, gaps between current policies and best practices as well as implementation constraints.

The council could further substantiate its advice by conducting assessments and evaluations of the policy initiatives and progress made under the relevant milestones of the 13th NESDP.

Increasing the relevance of policy recommendations and strengthening communication channels and consultations between experts and policymakers responsible for planning could help ensure that the productivity agenda in planning becomes more explicit and informed by analysis of productivity trends and determinants.

[8] André, C. and P. Gal (2024), “Reviving productivity growth: A review of policies”, OECD Economics Department Working Papers, No. 1822, OECD Publishing, Paris, https://doi.org/10.1787/61244acd-en.

[9] Andrews, D., C. Criscuolo and P. Gal (2016), “The Best versus the Rest: The Global Productivity Slowdown, Divergence across Firms and the Role of Public Policy”, OECD Productivity Working Papers, No. 5, OECD Publishing, Paris, https://doi.org/10.1787/63629cc9-en.

[11] Apaitan et al. (2019), “Towards a Competitive Thailand: The Role of Market Power and Business Dynamism”, PIER.

[3] Apaitan, T. et al. (2020), Common Ownership, Domestic Competition, and Export: Evidence from Thailand, Puey Ungphakorn Institute for Economic Research, Bangkok, https://www.pier.or.th/files/dp/pier_dp_140.pdf.

[14] Apaitan, T. et al. (2020), Common Ownership,DomesticCompetition,andExport: Evidence fromThailand.

[12] APC (2003), From industry assistance to productivity: 30 years of ‘the Commission’, Productivity Commission, Canberra, https://www.pc.gov.au/__data/assets/pdf_file/0009/195561/thirtyyearhistory.pdf.

[10] Cavassini, F. et al. (2022), “Pro-Productivity institutions at work: Country practices and new insights on their set-up and functioning”, OECD Productivity Working Papers, No. 32, OECD Publishing, Paris, https://doi.org/10.1787/f5a3a2df-en.

[13] Council of the European Union (2016), Council Recommendation of 20 September 2016 on the establishment of National Productivity Boards, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016H0924(01).

[5] Limjaroenrat, V. (2016), “Firm-level Perspective of Thailand’s Low Investment Puzzle”, PIER Discussion paper N.42.

[2] National Strategy Secretariat Office (2018), National Strategy (2018 - 2037), Office of the National Economic and Social Development Board, https://www.bic.moe.go.th/images/stories/pdf/National_Strategy_Summary.pdf.

[6] NESDC (2023), The 13th National Economic and Social Development Plan (2023-2027), https://www.nesdc.go.th/article_attach/article_file_20230615134223.pdf.

[1] OECD (2023), OECD Economic Surveys: Thailand 2023, OECD Publishing, Paris, https://doi.org/10.1787/4815cb4b-en.

[4] OECD (2020), OECD Economic Surveys: Thailand 2020: Economic Assessment, OECD Publishing, Paris, https://doi.org/10.1787/ad2e50fa-en.

[7] OECD (2015), The Future of Productivity, OECD Publishing, Paris, https://doi.org/10.1787/9789264248533-en.