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