One of the most vibrant economies of the world, Thailand (“Land of the Free”) has witnessed rapid transformation from an agrarian-based economy to a globalized industrial one. The economic growth of Thailand since the mid-1980s has been remarkable. With a growth rate of 10 percent per year, Thailand became one of the Asian Tigers by 1991, along with Singapore, Taiwan, South Korea, and Hong Kong.
A member of the “newly industrializing countries,” Thailand has marched ahead with the new mantra of liberalization. The capital, Bangkok, has transformed a great deal. Social mobility became common, and the employment boom in the decade starting from 1985 resulted in much of the population flocking from rural to urban areas, bringing with them a growth of urbanization. Foreign direct investment (FDI) increased in Thailand. Thai currency, the baht, was attached to the America dollar, and it became cheaper for Japanese corporations to invest, as the value of the dollar went down against the yen.
The Rise And Fall Of The Thai Economy
Thailand’s trade with Japan grew phenomenally. In the beginning of 1994, the Stock Exchange of Thailand (SET) reached a high of 1,753.73. Foreign funds began to surge into Thai financial institutions and banks. Private capital inflows flooded the financial market of Thailand. There was an influx of offshore banks from Japan and the West. The Thai official policy had encouraged FDI. The government also gave all-out support for joint venture investment initiatives. The Thai financial environment for investment had become ripe, with a modernized capital city, excellent communication and transportation facilities, comparatively reasonable real estate rates, and available labor force.
Very soon, the bubble began to burst, and cracks appeared beginning in late 1996. Thailand, a model for economic development, was hit by the crisis leading to currency depreciation, unemployment, inflation, and foreign debts. The Asian economic crisis commenced on July 2, 1997, with Thailand becoming the epicenter of the crisis. The floating of the baht by the Bank of Thailand started a chain reaction. The repercussions were swift across the money market of southeast Asia. The situation in the financial sector became so critical that 56 finance companies had been shut down by the end of 1997.
With an index of 481.92, the SET reached its nadir in 1999. The economic growth rate of Thailand was 5.9, minus 1.7, minus 10.2, and 4.2 for 1996, 1997, 1998, and 1999, respectively. The exchange rate of the baht to the American dollar fluctuated from 24.3 (June 1977) to a low of 52.5 (January 1998). The credit rating of Thailand had gone down, and consequently investment plummeted, with a capital outflow from the private sector amounting to a staggering sum of 645,096 billion baht. The International Monetary Fund (IMF) secured $17.2 billion in loans for Thailand. There was a huge scaling down of expenditures in the government and private sectors. About 2 million people lost their jobs, leading to lowering of the standard of living.
The Thai economic crisis also witnessed a major change in the ownership of companies and financial institutions. Foreign firms and local businesses began joint ventures. There was a considerable increase of shares of foreign companies in Thai banks. Thailand endured the 1997 financial crisis, and recovery began after the government initiated a series of economic reforms pertaining to lending practices, incentives, and corporate governance. The economic recovery was gradual. The Thai government launched an ambitious program of reforms, by which domestic demand was stimulated. Support was accorded to domestic firms, but simultaneously, open markets and foreign investment were promoted. By 2001, Thailand had recovered from the crisis, and its gross domestic product (GDP) was 5.2 percent the following year.
Thailand’s trade and investment abroad gradually improved. Japan, the North American Free Trade Agreement (NAFTA), and the Association of Southeast Asian Nations (ASEAN) countries are the three major zones for Thailand’s import in commodities, such as capital goods, intermediate products, raw material, consumable items, fuels, and lubricants. Thailand began to expand its export with items such as garments, rice, and automobiles, along with auto accessories, canned shrimp, automatic data processing machines, electronic equipment, and so on. Apart from ASEAN, the European Union (EU) and NAFTA are also major exporting areas for Thailand.
Thai exports performed well in 2007, with continued emphasis on high-tech items. It explored new markets in Australia, Russia, and south and west Asia. The Thai outward FDI had reached a peak prior to the Asian economic crisis. The outward investment slowed down, but there was gradual recovery after 2002. The government, the Board of Investment (BOI), Thailand Board of Trade, EXIM Bank of Thailand, and the Federation of Thai Industries gave a helping hand to Thai companies investing abroad. Compared to countries such as Malaysia, China, India, and Brazil, it is not a major outward investor, with a rank of 26 among emerging economy investors. Thai companies such as Amata, Baiyoke, Charoen Pokphand Group, Bangkok Bank, Thai President Foods, Banpu, Loxley, Jasmine, and Saha Union invest abroad mainly in manufacturing industry and services sectors. The major destinations for investment include ASEAN, south Asia, China, ex-Soviet bloc countries, and Africa.
In human development, Thailand has shown tremendous progress. The Human Development Index rate is 73. With a Human Poverty Index rate of 28, the population below the poverty line is only 10 percent, although poverty is still significant in poorer regions and villages. It is hoped that Thailand, a middle-income country, will achieve most of the goals projected by the United Nations’ Millennium Development Goals. It has also made improvement in the business sector, and its rank, according to the Doing Business report, was 15 in 2007. The Thai economy seems strong enough to weather any storm, and its future looks bright.
- Asian Development Bank, Asian Recovery Report 2000 (Asia Recovery Information Center, 2000);
- Chris Baker and Pasuk Phongpaichit, A History of Thailand (Cambridge University Press, 2005);
- Bank of Thailand, Economic Review (Bank of Thailand, 1997);
- Kirida Bhaopichitr, Thailand Economic Monitor–April 2008, www.worldbank.or.th (cited March 2009);
- Timothy D. Hoare, Thailand (ABC-CLIO, 2004);
- Pasuk Phongpaichit and Chris Baker, Thailand: Economy and Politics, 2nd ed. (Oxford University Press, 2002);
- Eric D. Ramstetter and Fredrik Sjöholm, Multinational Corporations in Indonesia and Thailand: Wages, Productivity and Exports (Palgrave Macmillan, 2006);
- Pansak Vinyaratn, Facing the Challenge: Economic Policy & Strategy (CLSA Books, 2004);
- Philip Wylie, How to Establish a Successful Business in Thailand (Paiboon, 2007).
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