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Thailand’s fairytale economy is reliant on migrant workers

Thailand’s economic development could be called something of a fairytale. Much of that fairytale is thank’s to its exports, Its GDP per capital is now eight times what it was in 1980. The people of Thailand are now expected to live fifteen years longer than they did in 1970, the people are now better educated and many are employed in higher value jobs. Family planning has improved as well with eighty percent of the reproducing population now using birth control compared to only fifteen in 1970.

This might go some way to explaining why Thailand’s unemployment rate is the lowest among the world’s major economies at just only 0.9%

Thailand unemployment

One thing to consider however is that in order to keep growing Thailand desperately needs cheap labor and these days with better standards of education there are too few Thai’s willing to do menial jobs.
The solution to this problem is migrants, however the problem is that the cheapest migrant work force come undocumented andare often trafficked and forced into labor from Myanmar and to a lesser extend Laos and Cambodia.
A classic example is Thailand’s shrimp peeling business. In a recent report the Environmental Justice Foundation, a non-governmental organization pointed out that shrimp production is a critical industry for  Thailand, which typically produces one quarter of the 2.6 million or so tones of the planet’s annual shrimp output. 90% of that production is sent overseas making Thailand the world’s biggest exporter of shrimp. In 2011 those exports brought in $3.5 billion a figure that is just short of 1% of the GDP.

Most of the exported shrimp have already been beheaded, gutted, deveined and peeled, which is great for the importer but not so great for the badly paid staff that laboriously work in what are known as peeling sheds.

It comes as no surprise to find that Thai people have long since stopped taking job such as this with the long hours, noxious smells and dreadful pay. However Migrants from Myanmar can earn more in Thailand doing jobs such as this than they can back home and often take these jobs in order to send money home for their families.

Thailand’s estimated 3 million migrants make up 10% of its workforce, but in seafood processing the make up 90%.

The down side here is protecting the workers and that is an expensive business that threatens to make Thailand’s prices rise. Reports in the EJF suggest that in Samut Sakhon at a major seafood processing center one third of their labor force were trafficked and fifty seven percent of the workers had been subjected to forced labor practices.

However it is not just the shrimp industry, according to Human Rights Watch export competitiveness in construction, fishing, manufacturing and agriculture depends on migrants.

Thailand’s labor productivity has started to stall,  largely due to the fact that companies that have grown used to cheap labor do not bother to upgrade their technology, and this stall will become more obvious as we head towards 2017, the  year that Thailand’s working population will start to shrink.

Thailand demographics

When the local population falls the demand for migrants will intensify. That will put up their wages and cripple margins, or exacerbate trafficking which could invite sanctions against Thai exports, something that would be disastrous for the country. Another risk is that the labor pool will dry up as Myanmar’s rapidly liberalizing economy starts to pick up.

What this means in real terms is at some point, and not too far ahead, Thailand may find that its superb growth may just begin to splutter, let’s just hope there is a plan b in place!

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