Thailand's Innovation Deficit Threatens SME Competitiveness
World Bank report highlights Thailand's lag in business innovation and R&D compared to ASEAN neighbors.
Thailand ranks lowest in the ASEAN region for business innovation according to the World Bank's latest report.
The country’s small and medium-sized enterprises (SMEs) are facing increasing challenges from both domestic and international pressures, including the ramifications of ongoing global trade conflicts.
These factors have severely impacted sales and production continuity, contributing to a troubling decline in employment levels, business closures, and reduced production output.
The World Bank's Thailand Economic Monitor, released in February 2025, reveals that only 11.9% of Thai firms incorporate innovation into their production processes.
In contrast, the Philippines, Vietnam, and Malaysia report significantly higher rates of innovation adoption, with 40.9%, 37.9%, and 37.3%, respectively.
This stark discrepancy underscores a substantial innovation gap that poses risks to the competitive landscape of Thai businesses.
In the past year, nearly 24,000 SMEs have deregistered, and over 1,234 factories—predominantly small and medium-sized—have closed.
This wave of closures has affected more than 35,000 workers, primarily within the manufacturing sector.
As companies struggle to keep pace with evolving consumer demands, the need for innovation has become increasingly urgent.
Danucha Pichayanan, Secretary-General of the National Economic and Social Development Council (NESDC), emphasized the necessity for Thai businesses to adopt innovative technologies for survival.
The report highlights not only low innovation rates but also Thailand's underinvestment in research and development (R&D), which remains a critical barrier to business competitiveness.
The innovation engagement levels among ASEAN nations show a clear leadership by the Philippines and Vietnam over Thailand, Indonesia, and Malaysia.
The Philippines leads with 40.9% of businesses involved in process innovation and 32.9% introducing new products and services, while their R&D expenditure accounts for 21.9% of business activity.
Vietnam follows closely, with 37.9% participating in production process innovation and 15.7% investing in R&D.
Malaysia reports 37.3% for process innovation but only 3.5% for new products, with R&D at 10.5%.
Indonesia shows strength in foreign technology adoption at 23.7%, but falls behind in process innovation at 11.4%.
Thailand’s small firms report a mere 8.2% involvement in new product development and only 1.1% of businesses investing in R&D, indicating untapped potential for growth through innovation.
The NESDC has recommended increasing access to financing for SMEs to facilitate technology adoption and improve production processes, which could help stabilize employment and enhance incomes for millions of workers.
As of now, SMEs employ more than 12.9 million people across Thailand.
The drive toward strengthening these enterprises is seen as a pivotal step in improving not only individual business outcomes but also the national economy’s resilience against global competition.
The NESDC has called for a concerted effort from both public and private sectors to prioritize innovation within production processes in order to bolster the international competitiveness of Thai SMEs.
The country’s small and medium-sized enterprises (SMEs) are facing increasing challenges from both domestic and international pressures, including the ramifications of ongoing global trade conflicts.
These factors have severely impacted sales and production continuity, contributing to a troubling decline in employment levels, business closures, and reduced production output.
The World Bank's Thailand Economic Monitor, released in February 2025, reveals that only 11.9% of Thai firms incorporate innovation into their production processes.
In contrast, the Philippines, Vietnam, and Malaysia report significantly higher rates of innovation adoption, with 40.9%, 37.9%, and 37.3%, respectively.
This stark discrepancy underscores a substantial innovation gap that poses risks to the competitive landscape of Thai businesses.
In the past year, nearly 24,000 SMEs have deregistered, and over 1,234 factories—predominantly small and medium-sized—have closed.
This wave of closures has affected more than 35,000 workers, primarily within the manufacturing sector.
As companies struggle to keep pace with evolving consumer demands, the need for innovation has become increasingly urgent.
Danucha Pichayanan, Secretary-General of the National Economic and Social Development Council (NESDC), emphasized the necessity for Thai businesses to adopt innovative technologies for survival.
The report highlights not only low innovation rates but also Thailand's underinvestment in research and development (R&D), which remains a critical barrier to business competitiveness.
The innovation engagement levels among ASEAN nations show a clear leadership by the Philippines and Vietnam over Thailand, Indonesia, and Malaysia.
The Philippines leads with 40.9% of businesses involved in process innovation and 32.9% introducing new products and services, while their R&D expenditure accounts for 21.9% of business activity.
Vietnam follows closely, with 37.9% participating in production process innovation and 15.7% investing in R&D.
Malaysia reports 37.3% for process innovation but only 3.5% for new products, with R&D at 10.5%.
Indonesia shows strength in foreign technology adoption at 23.7%, but falls behind in process innovation at 11.4%.
Thailand’s small firms report a mere 8.2% involvement in new product development and only 1.1% of businesses investing in R&D, indicating untapped potential for growth through innovation.
The NESDC has recommended increasing access to financing for SMEs to facilitate technology adoption and improve production processes, which could help stabilize employment and enhance incomes for millions of workers.
As of now, SMEs employ more than 12.9 million people across Thailand.
The drive toward strengthening these enterprises is seen as a pivotal step in improving not only individual business outcomes but also the national economy’s resilience against global competition.
The NESDC has called for a concerted effort from both public and private sectors to prioritize innovation within production processes in order to bolster the international competitiveness of Thai SMEs.
