Value Chains and the Middle Income Trap: The case of the sugar industry in Northeastern Thailand

Abstract

For several decades, Thailand has successfully accomplished economic development. Rapid growth has started since early 1980s and Thailand could be one of the leading countries in the Southeast Asian Region. However, this development trajectory is questioned in various perspectives. One of it is the Middle Income Trap. Even though the term Middle Income Trap is not precisely defined, there are doubts Thailand is whether trapped in the middle income status or not. Another aspect is regional disparity. It is already well known that Bangkok and suburban areas are prospering while other regions, especially Northeastern are lagging behind.

As the Middle Income Trap is usually adopted for macro scale and Northeastern is the most underdeveloped region in Thailand, this paper attempts to scrutinize the Middle Income Trap in another perspective. Sugar Industry which is prevalent in Northeastern Thailand is chosen to analyze how the aspects of the Middle Income Trap are revealed in the industry and region. To research on this subject, Global Value Chain framework is adopted. Specifically, this study focuses on the upstream sugar value chain and scrutinizes the relation between the sugar cane farmers and the millers. Fieldwork was performed at the sugar cane fields, rural villages and weighing stations of Khokpochai and Manchakhiri district.

It is found that upstream sugar value chain can be termed as State-led Markets value chain. Price is highly controlled by government body, so price cannot be a proper signal to coordinate the agents within the value chain. The upstream sugar value chain shares several aspects of the Middle Income Trap

low level of investment and R&D activities, labor shortage and weak institution. Several implications are described for these problems within the value chain. Even though this study cannot be generalized, it is meaningful to think the Middle Income Trap not only in a broad scale but in regional and industrial context.