Thailand with a population of close to 70 million people and ranked 50th in terms of global land mass is a relative small country economically. On the brighter side of things it is the second largest economy in South East Asia, a member of the new tier. Over the last 45 years, the Thai economy has undergone a substantial transformation. Agriculture was the largest sector in terms of contribution to the GDP though there was an active contribution from the non agricultural sectors as well. The winds of change were seen during the early 1990’s when the Japanese took a labour intensive approach towards Thailand, the agricultural sector showed a dip in figures and manufacturing products overtook the agricultural sector. (FAO Regional office for Asia and the Pacific 2006, Pg 4)
In recent times the government has come up with a set of measures to enhance economic growth and according to the viewpoint of the economists it would be much better to shore up the demand as long as the situation on the exports front is sluggish. Consumption along with investment should be encouraged which would improve growth on the GDP front. An alarming piece of statistics reveals an interesting story as in the fiscal year 2012 the economic growth was stagnated at 4 %. One has to face the truth of the matter and the reality will bit hard as the country has not been growing for some time now. With increased globalisation and weak potential in the country the Thai companies are more looking to the foreign countries. As a developing nation whose economic growth is decreasing, Thailand is faced with a tricky situation as the capital coming to the country as well as going out are the same.
The economic growth rate in the country has slowed down over the last few years. This is significantly affected by high energy costs and slower demand rates caused by various unfavourable factors like higher interest rates, lower oil prices, turmoil’s in the Middle East and any form of natural disasters. (Andrews & Siengthai, Pg 136) All this brings us to the fundamental question is Thailand still a paradise? The answer is a definite “Yes”. In fact the policies of the country are heading towards the right direction and the ills along with the misfortunes will be a thing of the past in the days to come. (Oxford Business group, 2009) Thailand is widely considered as a model of sustainable development and the encouraging aspect is that from the period of 1961 to 1996 the country did not have a single year of negative economic growth. There are a host of policies which boost the quality of labour and the level of investment that would enhance the country’s potential.
Thailand is the second largest economy after Indonesia in the region of South East Asia and now is a middle income country. The growth in GDP averaged 7.7 % between 1961 and 1996. The Asian financial crises led to a sharp recession and as expectedly Thailand witnessed a slowdown in economic growth with annual growth average less than 5 % between 1999 and 2008. The growth rate in the country has been driven by increasing foreign investment and the reallocation of resources among economic factors. In fact the development has been accompanied by sizeable structures in the size of the economy. From being a major rice exporting nation it has become a main hub of multinational corporations in the electronic and automotive industries. The statistics reveal the true story as the share of these industries almost doubled from 21 % in 1970 to 44 % in 2011 while the share of the agricultural sector fell from 23 % to 12 % during the corresponding period. (OECD, 2013)
Thailand has recently envisioned repositioning itself from a lower income middle economy to an upper income one and beyond. It looks forward to more skilled intensive activities and secures knowledge to secure its competitive edge in the world market. Such an effort is launched against the backdrop of the pressure from new emerging new low wage countries such as China and India. A competitive world market and changing competitive advantage are major trends in the era of globalization. Countries all over Asia are restricting their economies and at the same time upgrading the capacities of the national economies as this will pave them to compete effectively in the world market.
The major factor which stems out is that Thailand experienced considerable economic growth before the declining trend of events in 1997. So how to sustain this economic development to take the country back to the glory days. First and foremost it requires collective action resolution which tends to emerge from the competitive markets. Competition is not only the driving force behind economic development but various institutions have to resolve and address the various problems. The main causes for the economic growth slowing down is the increase in global capital flows and weakness of the various institutions on the domestic front.
The embedding and the relationship between political and technocratic are particularly important in countries which are vulnerable to political instability and the vagaries of the global market. International relations have been a key factor to build the modern state and market. The precise fact is that though the country was never colonized, the demands of the British Empire and other western countries greatly influenced the development of market economy. The country has had troubled policies in which extra parliamentary mobilizations having successfully ousted democratically successful regimes over the past few decades. (Raquiza, 2013 Pg 18)
A point noteworthy is domestic institutions influence economic development. Among the ASEAN countries Thailand had a tough decade beginning with a 1997-98 financial meltdown that threatened to wipe out a full decade’s economic gains that send its export industries spinning. The latter half of that decade also produced a festering political conflict between the country’s traditional coalition of rulers and supporters and a low class social movement, identified with former president Thaksin Shinawatra who was ousted in a 2006 coup. Despite all these adversities, however the economy has proven resilient with relative ease.
It is a well known fact that developed countries tend to focus more on industrial transfer rather than on the agricultural domain. In the last decade or so Thailand shifted its economic development policies from import substitution to export led industrialization. The country continues to pursue bilateral along with regional PTAs. At the end of 2011, the country had four bilateral agreements with four countries (Australia, India, and Japan & New Zealand). One of the key challenges which the country faces in its economic reforms is to pursue its local, global and regional strategy.
As with the case of many developing countries Thailand has failed to develop an infrastructure to keep pace with the economic development. The capital market in Thailand though attracting huge interest among investors as well as fund raisers was too ill equipped to support financial innovation so necessary to propel Thailand into an international securities market. (Faruqi & Bery, 1994, Pg 139) On the economic front the non state sector has warned the Thai government about the direct and indirect efforts of globalization. The legal system was not directly influenced by the west through colonization, though it still adapted western forms of law and judiciary. The country was greatly influenced by political and economic pressure from western countries. (Gillespie & Peerenboom, 2009)
The import barriers on capital goods could hamper economic growth because not all capital process is necessary for an efficient production process which might be produced domestically. In hindsight the reduction of trade barriers alone is not sufficient to reap benefits from trade. The absorption capacity of the knowledge has a huge say as it depends to a great extent to which the economy can absorb knowledge. (Bidlingmaier, 2010, Pg 71)
No doubts to the fact that Thailand has undergone a social and economic transformation since 1960’s. The economic miracle of the country thought has its own share of limitations. At the core of the problems is the mismatch between the secondary and tertiary sectors of the economy. This factor needs to be addressed at the earliest for the large parts of the future labour force. A failure to address this human capital problems risks exacerbating short term inflation and stalling long term economic growth. The problem with the labour market of Thailand is its approach to education development over the last three decades. (Cummings & Altbach, 1997, Pg 126) The country maintains an open oriented market economy which encourages foreign direct investment as a means of promoting economic development, technology transfer as well as employment. In recent times Thailand has been a major destination for foreign direct investment and hundreds of US companies have operated successfully in this part of the world. What is more encouraging is that the country continues to encourage foreign investment from all the countries and seeks to avoid dependence on any one country as a source of investment. (Ibp USA, USA International Business Publications, 2007, Pg 158)
FAO Regional office for Asia and the Pacific (2006): Rapid Growth of Select Asian Economies: Bangkok: Food and Agricultural Organization of the United States.
Andrews .T & Siengthai. S (2009): The Changing Face of Management in Thailand: New York: Routledge
Oxford Business Group: The Report, Thailand 2009
OECD (2013): OECD Reviews of Innovation Policy Innovation in Southeast Asia: OECD Publishing
Raquiza. R. A (2013): State Structure, Policy Formation and Economic development in South East Asia, The Political economy of Thailand and Philippines. New York: Routledge
Bidlingmaier. T (2010): The Influence of International Trade on Economic Growth and Distribution in Developing Countries, with a special focus on Thailand: Bochum: Bochum Studies in International Development
Cummings.K.W & Altbach.G.P (1997): The Challenge of Eastern Asian Education, Implications for America’s: State University of America
Ibp USA, USA International Business Publications (2007) Thailand Customs, Trade Regulations and Procedures Handbook: USA: International Business Publications
Gillespie .J & Peerenboom. R (2009) Regulation in Asia, Pushing Back on Globalization: New York: Routledge
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