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Clearly, self-awareness isn’t Prayut Chan-ocha’s forte as the Thai prime minister warns of a “black hole of conflict” in what was once one of Southeast Asia’s most promising economies.

The conflict about which Prayut warns is assured if voters support opposition groups in Sunday’s general election, or so he claims. Yet many economists agree that Prayut’s nine years in power have been their own black hole of dysfunction and complacency.

In May 2014, the general-turned-politician led the latest military junta to grab power in Bangkok. Since the 1930s, Thailand has experienced at least 28 coups. And just like most junta leaders who came before him, Prayut had no real plan to improve the efficiency of government or raise living standards.

In fact, the last nine years of political gridlock were preceded, too, by eight years of complacency. An earlier coup, in 2006, showed then-prime minister Thaksin Shinawatra the door. After that, a revolving door of governments came and went with few, if any, upgrades to raise Thailand’s economic game.

This lost period is coming back to haunt the kingdom, regardless of who wins on May 14 — be it Prayut’s United Thai Nation Party or one of the opposition parties. These last 17 years of political turbulence have greatly increased the odds that Thailand is falling into the dreaded “middle-income trap.”

“Thailand is a middle-income economy that risks having its lunch eaten by lower-income rivals competing in similar manufacturing segments —especially Vietnam,” warns economist Vincent Tsui at Gavekal Research.

As generals plotted and politicians dithered, Tsui says, “Thailand has suffered a steady deindustrialization, with both the export and investment share of GDP having fallen, while that for tourism-related services has risen — although badly hit in the pandemic.”

The real black hole to worry about here is how China, India, Indonesia, Vietnam and other competitors got their innovative acts together. The pace at which Indonesia alone is minting tech “unicorn” startups should panic officials in Bangkok.

So should the ways in which Vietnam is arguably the biggest winner from the US-China trade war. Vietnam is winning a disproportionate amount of the factories, jobs and longer-term investment fleeing the mainland.

To understand why Thailand is stuck in place, says economist Peerasit Kamnuansilpa at Khon Kaen University, one has to recognize it’s dominated by central economic development agencies, which provide economic incentives for large businesses, investors and wealthy entrepreneurs in the forms of income and capital gains tax breaks coupled with other indirect benefits such as business protection or market monopolies.

This latest experiment with “trickle-down economics,” though, isn’t working. “Perhaps the most important obstacle to long-term economic prosperity is its institutional weaknesses,” Peerasit notes. “All economic development policies have been formulated and strategic choices have been made by heavy-handed central government agencies.”

Thailand, in other words, is heavy on economic hardware but lacking in the software needed to compete in the 2020s. To address the problem, says economist Upalat Korwatanasakul at Waseda University, the government should “consider policies that can deal with the issues of insufficient knowledge and technology transfer and a lack of local firms’ capacities as they are the primary causes of the limited upgrading.”

The trouble, of course, is that the last several Thai governments have been so busy struggling to keep their jobs that they failed to do their jobs.

Gavekal’s Tsui adds that “Thailand had been an important exporter of electronics products but its global share has shrunk to about 1.7% from 2.2% a decade ago. In the same period, Vietnam has registered fivefold gains to account for 5% of this market.”

Automobiles are a bright spot for Thailand, which remains Southeast Asia’s largest vehicle exporter and the world’s 10th largest with a 2.1% global export share over the last five years. Here, though, there are two big problems.

One, as Tsui explains, the real challenge is that this position is built around the internal combustion engine, and as for many car-producing nations the risk is that China, in particular, steals a march as it comes to dominate production of electric vehicles.

The other: neighbors like the Philippines are lobbying automakers to migrate to the greater Manila area. Indonesia, too, is positioning itself for EV manufacturing in a big way.

True, Thailand has managed to secure investments from Chinese automakers like BYD, Great Wall Motor and SAIC Motor, which are looking to build some offshore production capacity.

“Still,” Tsui says, “Chinese automakers have well-developed onshore supply chains and are less likely to outsource material amounts of production as Thailand does not offer much of a cost advantage. In reality, Thailand’s auto sector is in a defensive crouch and is at risk of losing its existing share and seeing a further wave of deindustrialization.”

Thailand’s waning competitiveness has voters wondering what Prayut was thinking when he commandeered power in 2014. On his watch, critics argue, inequality rose while many freedoms disappeared. The fruits of Thailand’s gross domestic product (GDP) are being shared by an increasingly narrow elite.

As young Thais fret about their future, past empires are trying to stage comebacks. Exhibit A: the Shinawatra family.

Since his coup ouster in 2006 and later criminal convictions, Thaksin Shinawatra has lived in self-exile. So does his sister, Yingluck, also a former prime minister, who was removed in 2014 by the nation’s Constitutional Court.

Now, Thaksin’s daughter, Paetongtarn Shinawatra, has her own date with destiny. On May 14, she hopes to carry her father’s opposition Peua Thai party to power. And with her, repair the tarnished legacy of her billionaire father who played an outsized role in Thailand’s current chaos.

Thaksin first came to power making a claim Donald Trump would later make to win the US presidency: as a wildly successful CEO, I know how to fix the nation’s problems.

This was back in 2001, as the shadow of the 1997-98 Asian financial crisis hung over Thai politics. Amid great upheaval and economic pain, uber-wealthy Thaksin embraced first nationalistic then populist rhetoric to gain an unlikely, pro-poor folk-hero status.

After five years, voters realized they had elected Thailand’s Silvio Berlusconi. Like the Italian billionaire-turned-prime-minister, Thaksin also weakened government institutions in the service of his telecom empire. He, Berlusconi-style, channeled massive amounts of stimulus money to rural areas to counter the skepticism of urban elites.

But the urban-rural divide that Thaksin exacerbated blew up on him in 2006. Since that coup, a revolving door of governments simply papered over the cracks.

Rather than revive institutions, increase transparency and invest in innovation, government after government juiced up GDP with short-term plans. This sugar high after sugar high did little to prepare Thailand for the digital age now reordering Asia’s economic hierarchy.

When it was Prayut’s turn to give government-ing a try, he forgot what US political guru James Carville said two decades earlier: “It’s the economy, stupid.”

Carville was an advisor to then-US president Bill Clinton, on whose watch the Asian crisis occurred. But nine years on, Prayut is giving coup leaders a bad name for a whole new reason. When generals grab power, they tend to argue the motive is to restore order and get big things done.

Scarcely little reform has taken place since the early 2000s. All the while, troubles are bubbling under the surface that the government is too distracted, or economically inept, to address. Prayut’s Eastern Economic Corridor (EEC) project, which has aimed to lure multinational investment in “4.0” industries has by most assessments been a flop due to a lack of local talent.

Household debt, meanwhile, hit 90% of GDP in 2021, among the highest levels in Asia. All too many past governments promoted household borrowing to consume as a short-term fix to economic headwinds. Now, the hangover.

Economist Bert Burger at Atradius calls the “high level of household debt” a “lingering risk for Thailand’s economy.” He adds that “in the long run,” the “high household debt might affect private consumption and derail the financial sector in the event of rising interest rates or falling income.”

It’s no wonder then that nearly all political parties, Prayut and Paetongtan’s included, are campaigning on populist promises, including de facto cash handouts, they won’t likely be able to implement, legally or fiscally.

Constant electioneering also has been hazardous to Bangkok’s fiscal health, warns Bank of Thailand officials. With inflation near 14-year highs, the government continues to prioritize subsidies to ease the pain of rising living costs over supply-side reforms to increase productivity and economic efficiency.

“We should avoid policies promoting bad incentives,” says economist Somchai Jitsuchon, a member of the BOT’s rate panel.

The bigger-picture problem, though, is that none of the 10 governments that have managed the economy since 2001 tackled the middle-income trap risk that can no longer be ignored. This trap is defined by gains in per capita income stalling out around $10,000. Thailand is now at $8,100, by International Monetary Fund’s numbers.

Another problem: Thailand’s Southeast Asian neighbors are accelerating efforts to increase competitiveness as Thailand walks in place. Raising the temperature further, Indonesia, Malaysia, the Philippines, Vietnam and others are lobbying multinational companies to pivot their way, some of which are major employers in Thailand.

This Thai election should be a moment to plot a new course for the one-time Asian tiger economy. Sadly, it seems the vicious cycle that Bangkok fell into two decades back will continue to dim prospects for the next two.

Shawn W Crispin contributed reporting from Bangkok.

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