The 3Ls Strategy


At a conference between representatives of the International Labour Organization (ILO) and Thai trades unions in February:

“Professor Dr Voravidh Charoenloet, Faculty of Economics, Chiang Mai University stated that it would take longer to recover from this crisis in comparison to the 1997 crisis when the economy recovered in only 2-3 years. This crisis, he observed, had a direct impact on the real economy and was causing an economic recession the world over. Moreover, the economic growth rates of Thailand relied mainly on the 3L Strategies of low wages, low productivity and long working hours. Thai workers are among those working the longest hours in the world, in order to secure sufficient income for feeding the family.”

This 3L strategy is, in my opinion, now no longer tenable, given the impact of the economic crisis on the continuing drain in competitiveness represented by the rise of China and Vietnam. Decreased demand around the world will lead to manufacturing workers in the export sectors losing their jobs (which we are already seeing – unemployment is now being estimated at reaching two million by the end of this year). Thailand is especially vulnerable to external shocks (i.e. unexpected events anywhere in the world) because of its reliance on exports and tourism and the need to import so much oil and gas from overseas. The current government is taking some steps to provide support to redundant workers but the measures appear to be both temporary and short-term in nature. There is not much point in retraining workers for jobs which do not exist, for example.

Back in 2001, the incoming Thai Rak Thai government had a vision for the economy that emphasized promotion of domestic capitalists and regional development as a means of countering the vulnerability to external shocks while still remaining open to the world (the processes of globalization are such that it would be impossible to become a closed society and ruinous to try it). Unfortunately, that vision has been lost owing to the military coup and its supporters on the right such that, now, the current government has no discernible policy for the future of the economy beyond continuing as before. However, the means by which a poor country becomes a middle income country (as Thailand now is), are not the same means by which a middle income country can become a high income country. This is the so-called Middle Income Trap. An example of what to do from here is South Korea – it is not too late to begin to emulate Korean success and increasingly important to do so.