Thailand’s northeastern economy, among the poorest in the country, is looking to expand trade with neighboring Laos and business in the Greater Mekong Subregion (GMS) as it recovers from a two-year recession.
The downturn was triggered by an end of populist programs heralded by the former government of Yingluck Shinawatra. The May 2014 coup ended her almost three year administration and brought an end to programs led by a rice price pledging scheme.
Under the program, farmers were paid at rates some 50 percent above the global market before the effort collapsed, costing Thai taxpayers more than $14 billion and leaving farmers across the region deeply in debt.
While the good times lasted, funds triggered a boom in retail and commercial investment and spending. Major department stores sprang up in towns such as Ubon Ratchathani and Udon Thani.
A rice farmer collects snails and cleans the rice field near Udon Thani, Thailand, Sep. 15, 2015.
But now retailers report sluggish sales and the Thai central bank warns of growing indebtedness among farmers as rice prices fall to their lowest in six years.
Agriculture accounts for some 20 percent of the region’s economy, followed by trade. Household incomes in the Northeast are the lowest in Thailand, at close to $550 a month, well short of the nearly $1,200 earned per month in the Bangkok region.
But Athikarn Ringcharoen, president of the Chamber of Commerce in Amnat Charoen province, bordering Laos, said the local economy was starting to pick up although still below levels of two years ago.
Athikarn said government policy support and increased cross border trade with Laos, was helping the recovery. He added that despite the poor state of the global economy, the provincial outlook was “OK”.
Infrastructure spending is also set to come to the aid of the region.
Athikarn said plans to upgrade a Royal Thai Airforce airstrip to a regional airport less than 30 kilometers from Amnat Charoen town were also welcome.
Long term infrastructure set to benefit the region includes the $10 billion China-Thai 870 kilometer rail-line from Nong Khai, bordering with Laos, to Bangkok. On the horizon is the Japan-Thailand rail-line from Tak province, bordering Myanmar, to Mukdahan, bordering Laos.
Ubon Ratchathani University political scientist, Titipol Phakdeewanich, said cross border trade ties have helped eased the downturn.
“Many businesses are now more open to customers from Laos. If you go to different malls – they have signs in Lao [language] and when the market is more connected – to some extent – it helps to provide a cushion to the local economy. So the local economy in the area I don’t think it’s entirely dependent on the global market,” said Phakdeewanich.
The military government’s economic czar, Deputy Prime Minister Somkid Jatusripitak, has announced spending of over $970 million in projects directed to 70,000 villages nationwide.
Analysts say the program mirrors similar initiatives under previous governments of so-called “village funds” to boost rural consumption.
The Federation of Thai Industries, while welcoming the programs, say more measures are needed to ensure growth is sustained.
The Federation warns the rural sector remains vulnerable to falling commodity prices that may impact some 30 million people in the farm sector – almost half the national population.