Readiness of Thailand Towards the Digital Economy.

• Author: Jongwanich, Juthathip

1. Introduction

   The digital economy is becoming an increasingly important part of the global economy. Different names have been used for the digital economy--Industry 4.0, Industrial Internet of Things (Kiel et al. 2017), Fourth Industrial Revolution (Schwab 2016) and Second Machine Age (Brynjolfsson and McAfee 2014). There is still a lack of a commonly agreed definition of the digital economy (see, for example, OCED 2020, 2012; UNCTAD 2019, 2017; World Bank 2019; IMF 2018; Bukht and Heeks 2017). Despite this, many studies have found that the digital economy has a significant impact on business and society (Porter and Heppelman 2014; Schwab 2016; Klingenberg and Antunese 2017; Bessen et al. 2019; Frey and Osborne 2017; Acemoglu and Restrepo 2019; Jongwanich, Kohpaiboon, and Ayako 2022). Consequently, the transition to a digital economy is a top policy priority for almost all countries.

   Thailand puts great policy emphasis on harnessing the advantages of the new and emerging economic opportunity brought about by the digital economy. This has brought about changes in policy responses at both the national level and at other government agencies. For example, in 2018, the Ministry of Information and Communication (MICT) and the Ministry of Science and Technology (MOST) codeveloped the Thai Digital Economy and Society Development Plan as a digital blueprint to transform government operations, business practices and people's lifestyles towards the digital economy. Not only have policies directly related to the digital economy (e.g., investment strategy, digital infrastructure, rules and regulations) been launched, strategic investment plans and various decrees have been introduced to induce digital transformation.

   This study aims to review digital developments in Thailand and some key policies that have been introduced and changed to promote the digital economy. In addition, this study aims to assess whether such policies have been effective. The paper's organization is as follows. The next section discusses definitions of the digital economy applied in Thailand and presents digital development in the country. The subsequent presents five policy aspects, including those relating to industrial transformation, investment promotion policy, skill transformation, digital plans as well as digital laws. The fourth section evaluates the effectiveness of policies relating to digital plans. Conclusion and policy inferences are provided in the final section.

2. Digital Development in Thailand

   2.1 Definition of Digital Economy

   There has been a lack of a commonly agreed definition of the digital economy. However, the progress towards a commonly agreed definition appears to be promising (OECD 2020; UNCTAD 2019). OECD (2020) proposed the comprehensive definition of the digital economy as "all economic activity reliant on, or significantly enhanced by the use of digital inputs, including digital technologies, digital infrastructure, digital services and data. It refers to all producers and consumers, including the government, that are utilizing these digital inputs in their economic activities." Under this definition, three tiers of measures are proposed to cover activities in the digital economy: (1) the core measure, which includes only economic activity from producers of ICT goods and services and digital content; (2) the narrow measure, which includes the core measure and other activities where firms use digital inputs; and (3) the broad measure, which includes (1) and (2) as well as activities noticeably enhancing by applying digital inputs. (1) OECD (2020) also provided an alternative definition of the digital economy, which is "all economic activity that is digitally ordered and/or digitally delivered". This definition considers the nature of the transaction, i.e., the use of digital technology to order and deliver products.

   The definition put forward by the OECD (2020) is, to a certain extent, similar to that by UNCTAD (2019) and Bukht and Heeks (2017). The digital economy is defined as all sectors that make extensive and intensive use of digital technologies. Under this definition, a three-tiered approach was proposed:

   * Core: Digital (IT/ICT) sector, hardware, software & IT consulting, information services and tele-communications;

   * Narrow scope: Digital services and platform economy; and

   * Broad scope: Digitalized economy, which includes e-Business, e-Commerce, precision agriculture, algorithmic economy, sharing economy, and the gig economy. Note that both UNCTAD (2019) and Bukht and Heeks (2017) defined the digital economy in terms of production method while the OECD (2020) proposed to incorporate both production and transaction activities in defining the digital economy.

   Other organizations, including the World Bank and IMF, provided both narrow and broader definitions of the digital economy. World Bank (2019) defines the digital economy in two ways: (i) narrow sense in terms of the technology sector or the ICT sector (especially fast-growing technology companies); and (ii) broad sense in terms of the private sector's utilization of digital technologies. The IMF (2018) defines the digital economy in a narrow sense as online platforms and activities that owe their existence to such platforms and in a broader sense as all activities that use digitized data. The broad definitions proposed by the World Bank and IMF are similar to OECD's (2020) definition. A broader definition of the digital economy is also found in other studies such as Global Trend (2013) and UNCTAD (2017). (2) To summarize, although there has been a lack of a commonly agreed definition of the digital economy, many of the definitions proposed by international organizations tend to focus on the use of Internet-based digital technologies.

   2.2 The Digital Economy in Thailand

   There is no official definition of the digital economy in Thailand. However, there are two recent studies on the digital economy in Thailand. The first is the Digital Market Survey and Forecast conducted by the Digital Economy Promotion Agency (DEPA) under the Ministry of Digital Economy and Society (MDES) in partnership with the DVIC Institute. The second study, titled The Digital Contribution to GDP, was produced by the Office of the National Digital Economy and Society Commission (ONDE).

   (a) Digital Market Survey and Forecast: Digital Economy Promotion Agency and Ministry of Digital Economy and Society. In this study, the definition of the digital economy is close to the narrow definition proposed by OECD (2020) and UNCTAD (2019). The survey concentrates on the supply side of digital markets where only firms directly involved in the digital industry are covered, e.g., firms providing system integration and maintenance or ones producing hardware or smart devices, are included in the survey. Other firms which employ/demand digital activities/services, such as firms in automotive setting up IT services, are not included in the survey. In the survey, there are five components, including software, hardware and smart device, digital content, digital services and big data. Table 1 summarizes items included in the digital market survey in Thailand. (3)

   From the survey, digital market value increased in 2017-18 after the Thailand 4.0 policy was announced in 2018 (Table 2). Digital services, especially e-Retail and e-Transaction, increased noticeably during this period while software and hardware industries, including smart devices, grew by about 10 per cent. Big Data grew the least, less than 3 per cent in 2018. The performance of digital services was mixed during the COVID-19 period in 2019-20. While the growth of digital services remained positive in 2019, it jumped to almost 45 per cent in 2020. Other components of the digital economy fell sharply, especially the hardware industry, which shrank by more than 10 per cent.

   The survey also investigated the development of employment in the labour market. In the 2017-20 period, employment in the digital market in Thailand increased noticeably, particularly those employed in hardware industries (Figure 1). In terms of occupational categories, sales managers accounted for the highest proportion of workers in the hardware industries. Employment in hardware engineering, development and IT project managers was still relatively low. Workers in digital services jumped noticeably in 2018-19, growing as fast as the software industry. Almost 70 per cent of all workers in digital services were IT workers while another 10 per cent were sales managers. In the software industry, almost 30 per cent of the employees were programmers, but the proportion of these workers in the industry declined during 2017-20. The proportion of business analysts, system engineers and sales managers increased, though the share of each of these categories was less than 10 per cent. Not surprisingly, firms that were directly involved with digital activities/services were located mostly in Bangkok and central Thailand (Figure 2).

   (b) The Digital Contribution to GDP: Office of the National Digital Economy and Society Commission. In the study to estimate the digital contribution to GDP, the system of national account was utilized to measure digital contributions using three approaches, namely, production, income and expenditure. The broader definition of OECD was used in this study. When it is measured using the production approach, the digital economy in Thailand grew by around 20 per cent in 2018-19. During the same period, its contribution to GDP increased from 8.5 per cent in 2017 to 11.3 per cent in 2019 (Table 3). Digital industry, e-trading, and IT services contributed significantly to the Thai digital economy. Employment income and profits accounted for around 70 per cent of the digital economy when measured using the income approach.

   When the expenditure approach is used to measure the digital economy, trade in digital goods and services made an important...