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Introduction: Thailands Development Strategy

The South-East Asian countries have executed many different development strategies and
results are diverse. Half a century ago Thailand with its neighboring country Myanmar was
economically weak and bankrupt, but, after employing globalizing development strategy it has
prospered while their neighbor is in decay. Countries of South-East Asia provide many learning
lessons as this work will be focused on providing solution to Thailands negative impact of
growth on its economy.
Thailand is different amongst the middle-income developing nations in many aspects. Firstly,
this country was never colonized which has made Thailand fearlessly to adapt deep trade
policies and investment alliances with the rest of the world. Its trade, macro-economic and
investment policies are very open for the business communities.

Long term Economic growth


When the 2nd World War ended, Thailand was one of the worlds poorest nations. For at least
half a century it was in declining state but after opening up to globalizing economy, along with
Korea, Taiwan, Hong Kong and Singapore it was considered Fifth Tiger with its unbelievable
sustainable growth after 1990s achieving macroeconomic stability and reduction poverty
incidence. The process of growth was interrupted by twin currency crises and banking issues in
1997-99 that reduced some gains. However, Thailand recovery has revitalized long-term growth
path. According to the World Bank statistics (1998); Thailands GNP per year was 6.7%
compared to other developing nations with 2.4% rate. Fastest growing economy of the world
was Thailand in the era of 1987-1996. This boom was driven by high levels of investment, both
domestic and foreign capital, the growth rate from 1958-1996 was remarkable not even a single
year of negative progress occurred of real output per capita. This milestone was something for
an oil-importing nation and a perfect example for developing countries. The most credit was
given to Economic institutions especially the Bank of Thailand considered to be epitome of
stable management.
The crisis in 1997-99 halted the development of Thais economy. Investment and output was
contracting, poverty trend was high, collapsing exchange rate policies especially initiating the
floating exchange rate in 1997. Furthermore, Govt. has to accept the IMF bailout package as
confidence of investors was shattered, financial institutions were shaken with its serious
consequences were borne by the millions of citizens. The economic shock reduce the gains
from the economic growth occurred in the previous year to great extent. The per capita income
was 14% lower than it had been in earlier 2 years, in 1996.
After all the mess up by crisis, Thailands economy is recovering cautiously. The growth rate is
not accordingly to the long-term economic plan until 2003 which was quickly reviving growth
performance. Unfortunately, foreign direct investment and domestic investment is still low
since 1998 but in 2006 the real economic output was 19% higher than 1996 pre-crisis level and
almost 10 times its level 55 years earlier. The recession of 2008 has hit the world economies
badly. Thailand was affected too with its growth in negative pace.

Origins of Economic Growth


Thailand seems to have adapted the Neo-Liberal Policies especially Adam Smiths Laissez-faire
was based on the three Principles:

Freedom: individuals have right to produce and exchange production, labor and capital
as they see it.
Competition: individual have right to compete in the production and exchange of goods
and services.
Justice: actions of individuals must be just and honest, according to the rules of society.

As Adam Smith states that when there is an open market there is aggregate demand on rise
and it was witnessed in Thailand only hindrance was from the supply-side. Many of the sources
for investment were incurred from major private savings and then Central Bank of Thailands
increasing the interest rate gained many foreign investors confidence to bring their investments
and earn profit, that helped investment and establishing of Industries. As the Data shows how
much the manufacturing industry has contributed to the economy with employing much
unskilled labor, transforming them to semi-skilled ones. Specializing in the specific fields
especially in the area of Manufacturing gave Thailand a boost to employment and industrialists
advantage of cheap labor resulting in good quality products for citizens and for exports at
competitive prices.
Thailands acceptance of Liberal policies, one can easily analyze the economic growth and
adaptation of David Ricardos theory on international trade and comparative advantage.
Thailands Physical capital stock is one of the reasons for its progress accounting for 70% of
output, importing capital machinery; new technology to compete with the world it established
its Industries base with leading example of stability management. Specializing in Electronics,
Auto mobile parts, rubber and plastic products and jewelry products cost less in production that
has lead to specialization of taskforce to export these goods at good price, thats why they have
great market share in South Asian region. Thailands focus on its architecture, fashion and
design development has motivated foreigners to exploit and encourage investing and touring
which is constantly contributing to the growth (2011 data). The last recorded total economic
growth for Thailand is 5.1% with improvement from recession.
Short-term capital inflows were of great help can be considered in Foreign Direct investment
(FDI) with Bank of Thailand but again it only accounted for 5% and private savings with govt.
injections of funds were main source. However, as the growth incurred, FDI accounted for 61%
of long-term foreign capital due to loans from IMF and South Asian Development funds. The
great deal of mobile foreign-owned capital exceeded the Bank of Thailands reserves in 1997-99
that caused bail-out from IMF because Thailand was unable to defend withdrawal of funds by
the owners which gravely affected there Fixed Exchange rate. Then, after crisis it adapted
floating rate let the market decide, in 2000-2011 it continued to depreciate at slower rate but it
appreciated in 2009.

Theory of Capital Accumulation and Balanced growth by Rosenstein Rodan of mass


industrialization has proven good for Thailands economic competitiveness in manufacturing
sector, although this is one good reason for progress but to deal properly with this
backwardness of one country he suggested that barriers to growth can be covered with the
help of State intervention, investment in education of workforce (which did not contributed
much to the Thailands economy in the beginning of boom was less than 5%), planning and
organizing of large scale investment in industrial sector. Forwarding the message of David
Ricardo, Hurschmen and Kuznets stated that developing nations should invest in selected
sectors which have backward and forward linkages helping them to strive and prosper. Thailand
has successfully adapted many of these Strategies for development and economic growth.
The growth in areas of Export-oriented is far ahead compared to agricultural side which is an
indicator of development. However, the situation of Thailand in this area is different.
Agriculture sectors productivity and output is higher but its growth compared to other sector
like Services and Manufacturing is lower. Total factor Productivity (TFP growth) is larger
contribution from agricultural aspect as output is more but nothing compared to other sectors.
Thailands Economic development and growth strategy can also be related to John Maynard
Keynes Dual Role of State and Market. He considered employment to be key growth factor with
massive Govt. spending on infrastructure as witnessed; many Thai workers were unskilled with
large growth in physical stock lead to massive industrialization and need of labor was on rise,
employment made better lives of Thai citizens reducing poverty with unemployment rate at
1.5% (2011). Continuous investment in Infrastructure; Thailand claimed 3rd position in South
Asia after Singapore and Malaysia. The constant upgrades from Thai Govt. have raised the
standards of Thai people enabling easy access to places, telecommunication and transport
access.
Employment in Agricultural sectors is more as compared to other sectors. 49% of the labor is
employed in this sector of economy. Less educated and illiteracy rate is high in rural areas but
again this type of workforce working in other sectors earn more but, less proportion of
unskilled labor is employed after the establishment of industries. The National Statistical office
clearly shows the data agriculture has employed more people than any other sector their
productivity is high but not much effective to contribute to Total GDP because Agriculture has
been facing transition from labor intensive and development methods to more industrialized
and competitive sector. The main agriculture export of Thai Rice was in more production but
not effective as other sectors as earlier stated. Service markets and Shops employ more female
workers then male, same can be seen for Professional fields and elementary occupations where
women provided more to GNP. The great success of Fifth Tiger during 1980-1993, Thai export
average was 15.5% according to World Bank Statistics. The Trade share rose from 45.6% to
65.5% in 1989 to 85.95% in 1996; the most contribution was from the women side. Informal
Sector does not include any contractual policies in work. Almost 50% of the non-agricultural
workers are part of informal economy of Thailand which again proves 2/3 rd are women where
works like petty-trading, crafts and piece rate jobs.
Thaksin, Political party of Thailand which introduced labor laws for protection against the
economic blasphemers and claimed to stimulate the economic grassroots and as well as find

the link to World economy in order to provide sustainable and growth-oriented economy. As
Soon as the Labor Protection Act passed 1998, the act countered the labor laws which were in
great favor of Rich and Wealthy of Thailand than for working poor class.

Poverty incidence reduction and Inequality Rise


Thailands unemployment rate has been impressive throughout the years with as of December
2011 only 0.4%. Absolute poverty has declined but inequality has created a big difference. The
flood hit in 2011 recorded Thailands growth to 0.1%. Poverty incidence is highest in rural areas,
following outer urban than inner urban. Large families are more likely to be poor then smaller
families in rural areas; same can be said for farming families operating on small land then those
operating on large lands and properties. The Education holds a strong aspect as the head of the
family with lower level of education are more likely to be in destitution. Education
concentration has been poorly dealt by the Thai Govt.
For Long-term, sustained economic growth is a necessary for large-scale poverty relief. Long
term improvements in education will result in reduction in more poverty incidence but here the
growth factors the Thailands big boom has concealed inequality and removed poverty
incidence (National Economic and Social Development Board). Basic requirement of Food and
access to clean water is available that is the reason poverty incidence has been falling
constantly but again the inequality is on rise. North-East area of Thailand is much affected by
poverty; 3.8 million are affected compared to rest of the countrys total 2.3 million. South
region comparing to north is highly populated with greater poverty but, these regions includes
many wealthy provinces that makes the poverty incidence less than7.5% and North area
calculates less due to lower population density. Govt. adopted the strategy of reducing mass
poverty by introducing Sufficiency philosophies in 2001 which is being used up till now. This
included Village Fund, People Bank, asset capitalization and health care schemes and started to
concentrate on the small poverty blocks by Poverty mapping. Poverty and Social registration
programs were initiated to register poor for basic needs which have been successful in
providing benefits to the society. The registration also distinguished between the indebted
families, landless, victims of frauds and other deceptions, illegal occupations, destitute school
children and families with housing problems. Focusing on specific allocated regions, whatever
resources were available there is only being used for that regions and districts this does not
dislocates and confuses with the allocation thus has provided good conditions for those
regions. Developing regions by regions has altogether made Thailand a better place for survival.

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