Experts play down expectations of rapid economic gains from Thai-Saudi diplomatic ties

The Thai government has claimed that the restoration of diplomatic relations with Saudi Arabia after 30 years will bring great benefits to the economy.  Several sectors, such as tourism, labour, energy and medical services, are likely to be the big gainers. Observers, however, are cautious about jumping on this bandwagon of optimism.

Three decades ago when the two countries had normal relations, an estimated 300,000 Thai workers were employed in Saudi Arabia and their remittances amounted to more than Bt9 billion annually.

The Prayut Chan-o-cha government believes Thailand could once again export labour to Saudi Arabia, which would not only help tackle unemployment but also boost foreign exchange reserves. The PM, who made a historic trip to Riyadh on January 25-26 at the invitation of Saudi Crown Prince Mohammed bin Salman, has told officials to immediately explore job opportunities for Thais.

Labour shortage

“It is a political statement by the Thai government, which ignores that the economic ground realities in both countries have changed dramatically,” said Lae Dilokvidhyarat, a labour economist at Chulalongkorn University who specializes in studying the labour market.

In the past, Thailand was a net labour-export country, but now Thailand is a net labour-import country, he pointed out. Thailand is importing millions of unskilled labour from neighbouring countries and the country also is facing shortage of skilled labour, he pointed out.

“We do not have much information about the Saudi labour market. The country may have deployed more automation or robots for its manufacturing or construction activities, so Saudi Arabia may not need a large number of labourers,” he said.

Saudi Arabia may need more medical doctors and nurses, but we, too, face a shortage of these skilled personnel in the health sector, Lae added.

As of December 2021, a total of 104,909 Thais worked overseas, and they repatriated Bt215.2 billion back home last year, according to the Overseas Employment Administration and the Bank of Thailand. The top three countries for Thai workers were Taiwan, Israel and South Korea.

However, as of December 2021, only 56 Thais worked in Saudi Arabia. “But there is a possibility of more Thais being able to work in Saudi Arabia in the future as the Saudis are facing labour shortage,” said Pisit Puapan, executive director of the Fiscal Policy Office (FPO)’s macro-economic policy.

Saudi Arabia is not on the list of top 10 high-wage countries, he added.

Big gains for tourism?

The Thai government expects the number of Saudi tourists coming to Thailand to double following the normalization of relations, generating Bt5 billion revenue annually for the Thai economy due to their potential to spend more per head. They also will boost Thailand’s image as a medical hub.

Saudia, the national flag carrier of Saudi Arabia, has already scheduled direct flights to Thailand from May, and has launched advertising campaigns.

Sisdivachr Cheewarattanaporn, president of Association of Thai Travel Agents, predicted that the number of tourists from Saudi Arabia could rise 10-fold in the future, from about 30,000 in 2019, prior to the COVID-19 pandemic.

New chapter in Thailand-Saudi ties: A happy ending to a bitter saga?

Unresolved cases relating to the murders of Saudi Arabian diplomats, a businessman who went missing, and the theft of a precious blue diamond from a Saudi palace – there was a lot that derailed Thailand-Saudi Arabia diplomatic relations. After over three decades, the clouds of distrust have dispersed.

With a population of about 35 million, there are many affluent Saudis who want to receive medical treatment and shop in Thailand, he said.

“Once normal relationship is fully restored, we will start to organize tourism marketing with three major Middle Eastern airlines, namely Emirates Airlines, Qatar Airways and Etihad Airways, said Yuthasak Supasorn, Tourism Authority of Thailand governor.  And if Thai Airways and Saudia have direct flights between the two countries, then it would boost Thailand’s tourism industry, he said.

As Saudia will fly directly to Thailand from May, it is expected to breathe life into tourism during the low season, because tourists from the Middle East like to travel during the rainy season, he said.

The FPO estimates total foreign tourists will rise to 7 million this year, up from 427,869 last year.

Considering only 30,000 Saudis visited Thailand in 2019, before the pandemic, the number is unlikely to increase significantly this year, according to FPO officials.

Investment in renewal energy

As the Saudis are planning to diversify their economy from dependence on oil exports, this could lead to more investment in renewal energy from Saudi investors.

“Currently, there are some joint renewal energy projects jointly invested by Thai and investors from the Middle East. We may see Saudi investors putting money in Thailand in the near future,” said Praipol Koomsup, an independent economist who specializes in energy issue.

They may eye ethanol production as Thailand has a large supply of sugar cane, which is a key raw material for ethanol, he said.

If Thailand could also get more sources of crude oil import rather than from Dubai, then it would contribute to energy stability, Praipol added.

The Thai government has been promoting a sustainable economy under the Bio-Circular-Green Economic model (BCG). The Board of Investment has provided various incentives to investors seeking environmentally friendly activities.

“This will attract investments from Saudi investors,” said Suvit Maesincee, a former minister who helped the Prayut government chart out the roadmap of the BCG.

By Thai PBS World’s Business Desk



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