Amidst many critical transitions, the speed of these changes, and a number of structural issues that we are facing, what has got us here will definitely not get us where we want to be in the future. Indeed, we will not know with certainty what the Thai economy will look like in 2025, but we know the major trends that will have significant implications for the 1  future landscape in which we operate. Today, I will highlight five major trends: demographic change, climate change, changes in value chains, digital transformation, and global excess liquidity with historically high leverage. These trends will have big implications for Thailand. While most people would think of these trends as threats to existing business models, they are indeed business opportunities for those who look ahead and get ready for them. 1. Demographic Change The first trend I’d like to highlight is demographic change. Thailand is aging and is aging fast. We were the third Asian country to become an aging society, and by 2035 we will be the first developing country to become a hyperaged society by the definition of the World Health Organization—meaning 20 percent of the population will be over the age of 65. This change will have implications on at least two fronts, both very important to the business sector: labor force, and consumer spending. Impacts on labor force Let me first start with implications on the labor force. The Thai labor force has already passed its peak in 2013 and will only keep declining.
But even before all these trade tensions started, value chains around the world had begun to change in even more significant ways, thanks in part to the advancement in technology. To this point, I’d like to highlight a few observations by McKinsey Global Institute report earlier this year. 5  First, services are becoming a larger part of the global value chain. Cross border services are growing more than 60 percent faster than trade in goods. The valueadded share of services is increasing as firms around the world today are spending more on brands and intellectual property. Manufacturing firms in many areas start providing leasing services, which add value to downstream processes and blur borders between products and services. In addition, as people’s standards of living increase, they shift their consumption towards services, which could range from tourism, medical services, financial services, and educational services. Unlike trade in goods, trade in services are not the focus of the ongoing trade tension, which makes service-related value chains less vulnerable. The second observation is that global value chains are becoming more knowledge-intensive and are relying more on high-skill labor. This is partly attributed to the first observation, as service-related tasks generally require higher skills than manufacturing tasks. The introduction of technologies such as automation and the rising wages in developing countries diminish the importance of labor-cost differences. Contrary to the common perception that the global value chains are driven by cheap labor in developing countries, today less than 20 percent of global trade is driven by labor-cost arbitrage.