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.