Manufacturing productivity is expected to gradually improve in tandem with the country's economic growth after stuttering over the past 10 years, says the Puey Ungphakorn Institute for Economic Research (PIER).
Before the financial crisis in 1997, Thailand's total factor productivity (TFP) for the industrial sector contributed to one-third of the country's GDP growth, but the contribution declined to 0.5% after the crisis, said Archawa Paweenawat, principal researcher PIER, which operates under the Bank of Thailand.
TFP is a measure of the efficiency of all inputs in the production process.
Thai economic growth averaged 8% per year during 1991-96 and fell to 0.3% during 1997-2000 before bouncing back to 3.2% a year during 2008-13. It tallied 2.4% a year during 2014-16.
PIER's industrial survey polled 90,000 factories nationwide and found that TFP has significantly declined since 2008. The government's non-financial and financial assistance measures, which are based on operator size, were blamed for the decline, Mr Archawa said.
The government's incentives typically focus on business size or locations, particularly small business, and this discourages operators from enlarging their business, he said.
The Industry Ministry defines companies with employees of up to 50 and total assets of up to 50 million baht as small businesses, those with 51-200 in employees and 51-200 million baht in asset size as medium-scale businesses, and those with more than 200 employees and above 200 million baht in assets as large businesses.
"With the size conditions, small businesses are not encouraged to grow and some operators prefer spinning off parts of their businesses to another companies when expanding," Mr Archawa said. "That way, they still enjoy incentives from the government."
The analysis found that 75% of small factories and a half of mid-scale factories had no investment, dampening the country's productivity for over a decade.
