How Thailand Can Build Resilience Before the Next Shock

Thailand can enhance its economic resilience by selecting strategic roles within global value chains, cultivating domestic suppliers, and aligning industrial policy with national capabilities. Being a member of global value chains, rather than merely having foreign factories present, determines Thailand's resilience. Industrial policy should concentrate on tasks that Thailand can perform competitively, while fostering collaboration between multinational companies and local suppliers and research institutions.

Thailand's resilience relies on its position within global value chains, not solely on the quantity of foreign factories present. Concentrating efforts on industries where Thailand possesses a competitive edge, such as semiconductor fabrication, AI infrastructure, and energy transition projects, is crucial for success. These sectors should focus on developing skills, facilitating technology transfer, and fostering robust local production networks.

The 2026 Annual Meetings of the International Monetary Fund and World Bank Group, themed "Thailand's New Horizon: Empowering People, Building Resilience," present a timely opportunity. Recent flooding incidents have exposed Thailand's vulnerability to recurrent disruptions, including impacts on factories, supply chains, tourism, and small enterprises, in addition to rising energy costs and strained household budgets.

The core issue lies in identifying the most effective strategy for achieving long-term resilience. Experts advise shifting away from broad-based objectives towards strengthening Thailand's role within global value chains. Effective resilience doesn't arise from pursuing numerous sectors, but by pinpointing critical tasks, excelling at them, and nurturing domestic capabilities that make the economy indispensable.

Geopolitical tensions, technological limitations, and disruption to supply chains have prompted international firms to reorganize their operations. Due to these factors, the United Nations Conference on Trade and Development emphasizes the increasing significance of "indispensability," a policy aimed at positioning a country at critical nodes within supply chains that businesses find challenging to bypass.

Rather than attempting to secure every available project in an aggressive race for semiconductor facilities, data centers, battery plants, green energy, and high-tech electronics, Thailand should adopt a focused approach. Pursuing headline-grabbing announcements does not guarantee a lasting competitive advantage. The critical consideration is identifying the specific segments of global value chains where Thailand possesses a unique comparative advantage.

Leveraging existing strengths in automotive manufacturing, component production, electronics, food processing, logistics, and tourism can offer a more sustainable path to resilience than attempting to break into all emerging technological frontiers simultaneously. For example, in the case of semiconductor ambitions, a realistic strategy would be to focus on niche areas like advanced packaging, testing services, power electronics, sensors, automotive microchips, and specialized capital equipment.

While attracting major international corporations through investment incentives, industrial estates, a developed supplier base, and access to regional markets has contributed to Thailand's growth as an automotive and electronics hub, this approach presents structural weaknesses. Foreign entities frequently control technology, product design, procurement standards, and the most valuable components of the supply chain, whereas local firms remain predominantly engaged in lower-value production.

Thailand's investment policy should consider the outcomes of an investment project beyond its headline value. Does it foster local suppliers? Does it train engineers and technicians? Does it create opportunities for Thai firms to provide software, components, maintenance, logistics, or research? Does it assist local businesses in meeting the standards demanded by global customers? These factors hold greater importance than the sheer scale of an investment announcement.

Global corporations like Western Digital, Seagate, Delta Electronics, and Schneider Electric exemplify the value of supply-chain linkages. These firms incorporate domestic supplier networks into their operations. Managing these relationships effectively is essential. Thailand should leverage its influence to strengthen local capabilities by ensuring that lead firms determine what suppliers produce, under which standards, and with the appropriate level of visibility and traceability.

Developing domestic suppliers is vital to achieving resilience. A substantial portion of global value chains comprises small and medium-sized enterprises that offer components, services, maintenance, transportation, packaging, and specialized labor. However, these enterprises often lack the financing, certification, and technology necessary to become dependable partners for multinational corporations.

Consequently, Thailand's vulnerability to disruptions increases when a supplier is unexpectedly affected by an event like a flood, causing an assembly plant to cease operations, despite its own facility being protected. Furthermore, when a foreign firm alters its procurement strategy, local companies may lose their principal customer with little notice.

To build resilience, Thailand must cultivate a more capable base of domestic suppliers. Public resources should be allocated to support supplier development, technical training, digitalization, certification, and access to international markets.