Assessment Of Economic Progress In Thailand, 1985-95 Essay, Research Paper

ASSESSMENT OF ECONOMIC PROGRESS IN THAILAND, 1985-95

Here is a list of the main measurable indicators of

economic growth and structural

change for Thailand to be observed by World Bank staff

members who are visiting there.

To ensure a successful tour of business meeting

between the World Bank

representatives and the Thai government and their business

executives, I feel that a

thorough understanding of the Southeast Asia’s (although

the main focus will be Thailand’s)

economic growth is necessary. Economic growth is simply a

long-term increase in real

output per capita and measuring it often involves an

unbiased and theoretical assessment of

national performance. The following are the key signs of

economic growth:

1) Agricultural Modernization and Agricultural

Diversification

2) Industrial Transformation

3) Growth of Service Industry

4) Improvement in Quality of Life (including

social, environmental, and economic

variables)

5) Growth of Trade and Foreign Investment

6) Improvement in Technology and Infrastructure

Note that in comparison to other Southeast Asian

countries (except Singapore),

Thailand has a relatively better performance in agriculture

and service industries during

the mid and late 80s. For example, the cultivation,

processing, and export of agricultural

products, especially rice, was traditionally the mainstay

of the Thai economy. Although

Thailand has long been among the most prosperous of the

Asian nations, its dependence on

a single crop made it extremely vulnerable to fluctuations

in the world price of rice and to

variations in the harvest. The government has diminished

this vulnerability by instituting a

number of development programs aimed at diversifying the

economy and by promoting

scientific methods of farming, particularly controlled

flooding of the rice fields, so that the

rice harvest might remain stable even in years of few

rainfalls. In the early 1990s,

Thailand annually produced approximately 18.5 million

metric tons of rice, up from about

11.3 million metric tons per year in the 1960s (Dutt,

1992). Another example of its notable

success was the increase in tourism during the late 1980s

that boosted the economy of

Thailand’s service industry.

There are many ways to explain the economic

development of Thailand and other

Southeast Asian countries. Three things come to mind that

is associated with the rise of

their economic success in the 1980s to mid 1990s. The

first is the increase of foreign

direct investment (FDI). In the mid 1980s, there was an

average $676 million dollars in

FDI and by 1995, FDI flowing into Thailand’s economy had an

average $2,300 million

dollars. Second, the stock market grew in size between

1980 and 1996; Thailand’s market

grew from a mere $1.2 billion dollars to a staggering $99.8

billion dollars (before the

crash in 1997). Third, the people’s incomes in many

Southeast Asian countries rose

dramatically between 1980s and early 1990s. In Thailand,

the gross domestic product per

person rose from $444 in 1980 to $6,900 in 1996. Beginning

in the early 1980s, huge

amounts of investments began pouring into Asian countries,

lured by high returns, stable

governments and currencies pegged to the dollar. The

foreign money paid for factories and

skyscrapers, and a booming export economy created a newly

comfortable middle class that

in turn stimulated more consumption.

Other explanations of economic development in

Thailand include:

1) Removal of Regional Economic Disparities

2) Diversification of the Economy

3) Industrialization

4) General Economic Development are conceived as

the goals of the country

Now I will look at the individual sector of

Thailand’s economy and try to show the

reasons for each sector’s success in its economic

development.

Agriculture accounts for 16% of Thailand’s gross

national product. As mentioned

above, rice is the principal crop and the leading export in

Thailand. The second most

important crop in value is rubber, which is produced mainly

on plantations on the Malay

Peninsula. In the early 1990s approximately 1.4 million

metric tons of rubber were

produced each year. Other important crops included cassava,

sugar-cane, maize,

pineapples, coconuts, and kenaf. Fishing was also

important, but commercial logging was

banned in 1989. Thus, the agricultural diversification in

Thailand is a recent achievement

that is specific to its economic development.

Another important sector in Thailand’s development

is manufacturing. Manufacturing

accounts for about 24% of the country’s gross national

product. Thailand’s increasingly

diversified manufacturing sector is a central component of

the nation’s economic

expansion, growing by 9.4% annually during the 1980s and

early 1990s. Food-processing

industries, especially rice milling and sugar refining;

textile and clothing manufacture; and

the electronics industry predominate. Other important

manufactured goods included cement,

motor vehicles, cigarettes, and various chemicals and

petroleum products. Manufacturing

employs about 8% of the labour force. In the early 1990s,

Thai exports were valued at

about $28.4 billion annually, and imports were valued at

about $37.6 billion (Dutt, 1992).

Principal exports were agricultural and manufactured goods,

such as electronics, clothing

and footwear, and rubber. Thailand’s primary trading

partners were Japan, the United

States, Singapore, Germany, Hong Kong, and South Korea.

Assessment of Costs and Benefits of Economic Growth:

BENEFITS

1) Increase people’s incomes

2) Expansion of cities or the rise in

urbanization:

(a) Creating employment opportunities, many

rural peasants (locally or from

abroad) migrate from rural areas to cities

where there are better

opportunities to earn more money.

(b) Access to education

(c) Access to health care and other welfare

needs

3) Poverty-alleviation. People have more

money to spend on food and still

have change for other basic needs, such as

toilet paper, tooth brushes, etc.

4) Gains from trade, investment, technical

and other mutual assistance, access

to global economy

5) Improvement in transportation and

infrastructure, better roads and highways,

access to public transit, building of

public facilities; hospitals, schools, police

stations, etc.

6) National stability

COSTS

1) Over population, especially in major

cities where crowding is a problem

2) Pollution associated with households and

industries, including toxic

discharges, such as pesticides and

automobile fluid; air pollutants, such as

smoke stacks from lumber mills;

3) Threat of species contamination or

extinction from pollution

4) Inadequate resources:

(a) for self-sufficiency

(b) for industrialization

(c) for exports

5) Sociological dualism, ethnic tensions,

for example, the oppression against

ethnic Chinese in Indonesia for their

“wealth”

6) Technological dualism, too much

development in industrial sectors and not

enough for agriculture, education, etc.,

may induce corruption in government

7) Vicious cycles:

(a) poverty trap

(b) cheap labour trap

8) Overvalued currency, governments try to

stay competitive in the world

market regardless of everything else

9) Excessive bureaucracy

10) Foreign debt trap

Concluding remarks:

At first glance, the benefits and costs of economic

growth is on a pretty even scale.

For example, the problem of “poverty trap” associated with

the cost of growth can be offset

by government assistance programs like the welfare system,

which is established by the

benefit of growth. However, there is an unfair advantage

for developing countries to

involve too much in economic growth. For one thing, these

countries are very vulnerable

to world price fluctuations and their economy (since most

are only a tiny fraction of the

world’s economy) heavily depended upon foreign

speculators. Therefore, the fragile

economy of the developing countries can collapse easily

under the slightest of economic

slow-down. Unfortunately, if an economic crisis took place

in these countries, the cost of

fixing the crisis would be too high to imagine.