This represents the thrust of a new World Bank study called "An East Asian Renaissance: Ideas for Growth", the final version of which is being fine-tuned.

The study takes a hard look at new economic and social forces at play in a region that proved its resilience by bouncing back strongly from the 1997 economic meltdown. Between then and 2005 it posted average annual economic growth of 9 per cent.

The rebound can be attributed to annual exports of US$2 trillion (Bt69.16 trillion), foreign direct investment with $1.6 trillion in foreign reserves, growing capital markets - they total $9.6 trillion today - and rising income opportunities for the poor.

Equally important is the emergence of the middle class and business-friendly reforms across the region, the World Bank report says.

One of the forces that transformed the East-Asia economic landscape was the effect of economies of scale - which led to intra-regional trade. Sophisticated regional production networks, greater focus on higher-skilled workers making technology products, innovation and healthier banking and credit structures helped.

The report is prepared by the bank's East Asia economic adviser Dr Indermit Gill and Dr Homi Kharas of the Wolfensohn Centre for Development at the Brookings Institution in Washington, DC, and formerly the bank's chief economist in East Asia.

It argues the region is undergoing a renaissance. East Asia is now enjoying the innovative application of culture, learning and skills that contribute to higher living standards, it says.

The report focuses on the challenges facing middle-income economies like Thailand, China, Indonesia, Malaysia and the Philippines, which it says are being squeezed between rich-country innovators above and low-wage, poor-country competitors below.

What should these countries do in order to maintain stable income growth to catch up with richer economies, it asks.

The report suggests that once East Asia becomes successful through global and regional integration, the next challenge is a "third integration", which will occur at the domestic level.

"East Asia is witnessing the largest rural-to-urban shift of population in history. Two million new urban dwellers are expected in East Asian cities every month for the next 20 years. This will mean planning for a building dynamic, connected cities linked both domestically and to the outside world so economic growth continues and social cohesion is strengthened," Gill said.

The report points out that newly emerging economies can be equally successful with manufacturing and innovations, citing the examples of China and India.

Thailand may have arrived at a crossroads - how will it undertake specialisation and innovation to create more economic value? In this regard, it lags behind its peers in terms of research and development, lacks a broad base of specialisation and innovation and has a relatively short period of compulsory schooling (less than seven years).

Having benefited from Japanese investment in the 1980s, Thailand's economy is now dominated by manufacturing (more than 60 per cent), services (more than 20 per cent) and agriculture (more than 10 per cent).

Manufacturing is dominated by multinationals. But Thai people excel in the service sector - evidenced by its a strong tourism and medical-care industries.

The report highlights Thailand's progress in integrating into regional trade and finance networks, which has boosted productivity. But the country faces challenges moving up the value-added chain because of its low research-and-development spending - just one-tenth of one per cent of gross domestic product. Research collaboration between universities and companies is weak.

The report also expresses concern about the limited and slow pace of urbanisation outside Bangkok, which is required to develop more upper-middle income earners.