Economic Development in Thailand in detailed point of view
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In this report, it is expected to examine the economic and business strategies used by Thailand in the past years in detail and clearly. As well as, here, it is expected to suggest the business strategies used by Thailand for Sri Lankan application.
Transcript of Economic Development in Thailand in detailed point of view
- 1 | P a g e By: D.M. Sanath Dasanayaka (firstname.lastname@example.org) University of Sabaragamuwa, Sri Lanka
- 2 | P a g e Abstract In this detailed report, it is expected to discuss on the economic and business strategies used by Thailand for gaining a high economic growth rate and uplift the economic activities in past years such as import substitution, diversification of economy, ensuring the confidence of the economy in private sector and investors, Participation of the private sector in export production, developing strategies for alternative power sources, restructuring economic sectors, privatization, targeted industries and policy formulation and more other. As well as, the Sri Lankan application of above strategies is also discussed.
- 3 | P a g e Content Topics Page No 1. Thailand in the economic perspective 04 2. Development and Advancement strategies of Thailand 05-10 3. Appropriate strategies in the Sri Lankan context 11-12 4. References
- 4 | P a g e 1. Thailand in the economic perspective Thailand, the kingdom of Thailand in the official name, formerly known as Siam is in the center of the Indonesian peninsula in Southeast Asia. It is bordered to Burma and Laos by the north, to the Andaman Sea by the west and to Gulf of Thailand and Malaysia by the south. The country is a constitutional monarchy headed by king. Thailand is the worlds 51st largest country in terms of total area. It is similar to France in its scale which is approximately 513,000 square km. The population is about 64 million people. Baht is the currency using in Thailand. The capital and the largest city is Bangkok, Thailands political, commercial and cultural hub. Thailand is an emerging economy as well as considered as a newly industrialized country. It enjoyed the worlds highest growth rate from 1985 to 1996- averaging 12.4% annually. Thailand exports goods and services valued at around $105 billion annually. Major exports are Thai rice, textiles, footwear, fishery products, jewelry, rubber, cars, computers and electrical items. The country is ranked as the no.1 exporter of rice, valuing more than 6.5 million tons of milled rice annually. Rice is recognized as the most important crop in the country as well as about 55 percent of usable land is utilized for rice production. Electrical items, components, computer parts and cars are identified as substantial industries in the country also tourism contributes economy about 6% of the total amount. The economy of Thailand is heavily export-dependent; becoming the 2nd largest economy in Southeast Asia, after Indonesia and it is the 4th richest nation according to GDP per capita, after Singapore, Brunei and Malaysia. Forty-nine percent of Thailands total labor force is employed in agriculture. In 1980, it was around 70 percent. Agriculture has been turned into a more industrialized and competitive sector from labor intensive and traditional one. However, the relative contribution of agriculture to GDP has declined as the relative contribution of exports of goods and services has increased. Basically, the unemployment rate was 0.4 percent when the month of December in 2011. Selected economic indicators of Thailand (%) 2013 2014* GDP growth 4.9 5.0 Inflation rate 3.2 3.1 Current account balance( share of GDP) 0.8 0.1 Table: 01 source: Asian Development Bank * Estimates
- 5 | P a g e 2. Development and Advancement strategies of Thailand In the 1960s, Thai economy was a mainly agricultural economy heavily Dependent on production crops, such as rice, cassava, maize, rubber, sugar cane and seafood production. During the 1980s-1990s, the economy began to boom and it was apparent as a diverse, modern and industrialized economy. Below factors have contributed to the growth, development advancement of the countrys main economic sectors, such as agriculture and fishing, manufacturing and industry and service, particularly tourism. That means the country has implemented a balance framework of policies in the major three sectors. Moreover, these policies were formulated based on requirements of business firms in any scale as small, medium and large. Import substitution This is considered as a rational approach to industrialization. Before industrialization, country had a stable agriculture sector, but after Thailand was altering its strategies, which centered on food processing and manufacturing for export purpose utilizing its wide-spread natural resources and low cost labor. This resulted to a rapid acceleration in manufacturing sector and marked a huge increase in exports. Here, at the first phase, the country exported only simple agriculture-based products, but when the time passed, Thailand realized the value of changing export strategies into technology-based manufacture. As well as this strategy gradually operated towards the development and advancement of Thai economy. Diversification of economy This strategy has also contributed heavily on the economic development of the country. Basically, industrial sector began with simple agriculture-based manufacturing and sharply progressed into more sophisticated industries through the utilization of available resources, such as ample of natural resources and low cost labor. Diversification was also assisted by Foreign Direct Investments made in a wide range of products, like electronics, chemical, property and processed food. In the 1980s, Foreign Direct Investments valued at US$8 billion. Also US$ 2.5 was from Japan and the rest from China, Korea and America. The most important factor that attracts FDIs is lower manufacturing cost in Thailand. 50% of the countrys total industrial production is manufactured in foreign investments and 20% of the total industrial workforce
- 6 | P a g e is employed in projects backed by FDIs. This diversification strategy facilitated the country to acquire a high economic growth rate and the advancement in the state. Ensuring the confidence of the economy in private sector and investors The administration of Prime Minister Prem Tinsulangonda, which existed from 1980 to 1988 developed policies and programs that inspired the confidence of the private sector in both of the government and economy. These favorable policies created a greater willingness to invest in the growing manufacturing industry and support further expansion of export activities. Furthermore, it is clear that favorable policies played the ground role in the inflow of FDIs into the country. Mainly, Thailand attracted many investors from the USA making huge investments in a diverse set of projects. This carried out a significant way towards the economic development and advancement of Thailand. Participation of the private sector in export production In 1981, a significant policy was implemented which provided facilities the creation of the Joint Public-Private Consultative Committee on Economic Problems. This encouraged businesspersons to influence the public policy making through their participation in the mentioned committee. As well as it shifted the participation of the private sector up in the development of state enterprises. Private sector invested a huge sum of money in the industrial sector and the governments task was to direct the economy in the proper way. Thailand has proved that opinions of experienced businesspersons could generate a lot of benefits in the public policy making towards the development and advancement of the economy. Mainly, the government has formed a business friendly environment through flexible laws on labor utilization and it has encouraged the private sector to participate in the economic activities in an active manner. Developing strategies for alternative power sources During the oil crisis of the period from 1970 to 1979, the country had to face severe hardships which impacted the growth and development directly. After the discovery of the countrys first natural gas field in the Gulf of Thailand in 1981, the countrys dependence on imported oil decreased. As well as, Thailand developed and implemented strategies for seeking alternative energy sources, namely, hydropower, liquefied natural gas, coal and wind power. Furthermore, Thailand is now studying the use of nuclear power. The most important benefit in nuclear power is low cost of power generation. So, these alternative power sources impacted to decrease the cost of production and shifted production levels up. On one hand,
- 7 | P a g e export income became higher due to increased exports and on the other hand, import expenditure reduced since decreased import of oil. From the most basic level, Thai government implemented plans to gain the contribution of the private sector and foreign investors in these alternative power generation projects in order to operate them according to global accepted standards. Through attracting the private sector and foreign investors, the government benefited with the most advanced technology and a huge sum of funds to make projects a reality. Absolutely, these alternative power generation projects have been a major factor in determining the development and advancement of Thailand. Restructuring economic sectors In 1999, the International Monetary Fund (IMF) provided Thai government a loan package of US$17.2 billion for reforming financial sector of the country. Along with reforms in the financial sector, the government implemented a restructuring process in industry and agriculture sectors to increase its productivity. Government policies and regulations were rehabilitated to uplift their accountability and