In the mid-nineteenth century, Thailand (then known as Siam) and Japan were in strikingly similar positions: They were the only two countries in Asia to have escaped European colonization, but were subjected to “unequal treaties” with western powers which granted extraterritoriality to western subjects, prevented both governments from collecting tariffs on western goods, and opened up both economies to the world. These treaty conditions severely limited not only political sovereignty, but also economic and fiscal capacities of Siam and Japan. Despite these parallels, the two Asian countries have had vastly different developmental trajectories. While Japan quickly industrialized, became a dominant superpower in Asia, and is one of the world’s largest economies today, Thailand remains a developing country struggling to escape the middle income trap. Scholars in economic history, economic development, and political science have long debated various causes behind the diverging economic development of Thailand and Japan. This chapter has two main aims: First, we question the seeming similarities of nineteenth-century Siam and Japan, and argue that the economic and historical contexts of the two countries are more different than previously thought. The second aim of this chapter is to argue that precolonial governance systems and geography played a central role in the countries’ abilities to effectively centralize their governments, which had implications for industrialization and economic growth.