Local investors are streaming out of Thailand to take advantage of preferential trade arrangements in neighbouring countries, the Thailand Development Research Institute (TDRI) reported.
TDRI president Somkiat Tangkitvanich said local businesses are moving to Myanmar, Laos, Cambodia and Vietnam where they can enjoy export incentives for goods sold to the United States and Europe.
Mr Somkiat was commenting at a seminar organised by the TDRI and the Office of Industrial Economics on Wednesday. The TDRI president said the implementation of the 300-baht daily minimum wage nationwide has also pushed some manufacturers across the border.
Mr Somkiat recommended the government establish special economic zones along the border, especially in Kanchanaburi's Sangkhla Buri district, Chiang Rai's Mae Sai, Sa Kaeo's Aranyaprathet and Mukdahan, to persuade firms to stay here.
The zones could have special laws concerning minimum wages and foreign workers. Special economic zones would allow businesses to adapt to rising costs.
The minimum wage increase had hurt many factories in Tak's Mae Sot district, he said. "Special economic zones offering lower labour costs will only be short-lived because labourers always prefer in higher-wage areas," Mr Somkiat said.
The TDRI chief also emphasised the sustainability of local industry lies in the production of Thai brands and value-added goods. The state needs to step up with research and development help, Mr Somkiat said.
TDRI researcher Ploy Thammapiranon said exports of textiles from Myanmar and Vietnam are increasing as many factories relocate there.
Another TDRI researcher, Saowaruj Rattanakhamfu, warned investors of business restrictions in Vietnam. Labour costs continue to rise in Vietnam due to the country's increasing inflation, he said.
This article first appeared in the Bangkok Post on September 5, 2013.