Thailand - Research Paper Example

Economic development in Thailand Thailand’s economic development has strongly been market-oriented and has an open trade for investment with the rest of the world. Thailand has been having an outstanding performance in the economic development since late 1950s. Poverty level in the country has declined by a big margin. Nevertheless, economic inequality has dramatically increased (Mason 278). The economic progress in the country is evident in the continuous improvement of the non-economic indicators that translate to the well-being, like, life expectancy, infant and maternal mortality rate, and literacy levels. However, the country has not recorded good progress in the education system. It requires reforms in several areas like in the political and corporate governance in order to have a smooth run in economic progress. Introduction Thailand has been among a group of East and Southeast Asia that have formed the center of research because of their outstanding economic performance. She forms part of discussions and is a determinant of economic growth. Just like the other economic pacesetters of Asia, Thailand has employed the common development strategies and their immediate outcomes have not been much different (Brewer and McEwan 123). The country has prospered under the globalizing strategy. It lies in the middle-income developing countries in several aspects like; the country was never colonized. This is a unique experience in the states of South East Asia. The country has also been courageous to embark in trade and investment integration with the rest of the world. These interactions in conjunction with macroeconomic policies have steered Thailand towards economic stability. Long-term developments In 1945 at the end of the Second World War Thailand was among the poorest countries in Asia. Its economy remained stagnant for about a century since it had greatly suffered from the war damage. Many economic analysts rated the country as poor. However, in the mid of 1990s, roughly a half a century later, the country replaced all these negative assessments by dramatic economic progresses, following the foot steps of Korea, Taiwan, and Hong Kong. Thailand within a short span achieved a rapid economic growth, macroeconomic stability, and a steadily declining poverty rate. These made the country acquire consideration as a champion of sustained development (Chaloemtiarana 79). Thailand’s long-term economic developments have had a unique character of high levels of investment and deep trade with world countries. Thailand has maintained an economic stability for a long time, since it has never recorded a negative growth for the last four decades. Thailand’s economic growth is worth emulation starting with its central bank, which got awards for having the most competent and stable management. The crisis that occurred in 1997 to 1998 reversed the country’s fine economic progress and poverty incidences began rising. The exchange rate collapsed and the financial system was largely bankrupt. The economic damage due to this crisis was substantial. It eroded some of the gains that Thailand had made (Mason 312). Since the start of the crisis, Thailand’s economic recovery was moderate and her real GDP was slightly below the log-term trend rate. However, the main question as at now is; where did this rapid economic growth source from. The growth framework has focus on the determinants of aggregate supply as relevant on the specific periods. The Thailand’s impressive growth lies on the primary growth of capital stock. The domestic and foreign investment grew rapidly, but the growth rate for the foreign investment was more rapid. This foreign investment has played an important role in introducing new technology and development of export market. The quantitative importance of foreign investment in Thailand’s capital stock accumulation is prone to exaggeration. The main factors that have contributed to the Thailand’s economic boom are foreign direct investment and government investment in the local market. Another important contributor to the Thailand’s aggregate growth is the physical stock market (Brewer and McEwen 247). The stock market investment is from Thai domestic private saving. This notion of Thailand’s accumulation of physical capital stock got financial support from foreign direct investment and foreign aid, which accounted for five percent of the total investment. The compositions of Thailand’s major sectors of growth have improved performance since 1968. Industries, especially the export-oriented and manufacturing have overwhelmed the agricultural sector, which led in the country for years. These observations are typical for a rapidly growing economy where the output per person increases as the industry share expands. The common misinterpretation is that as the agricultural sector is stationary while the industry is dynamic. This is because the total agricultural output is relatively lower than the industrial out put. These differences are in terms of growth rate and productivity (Liu and Premus 12). In Thailand, though the level of productivity of factor agriculture, is lower, it is much higher than most of the world countries. Thailand has been expanding its agricultural output to be parallel with the rest of the economy. The agricultural contribution to the economic growth is inclusive of impressive rates of the total growth. Economic growth has been very helpful in Thailand in benefiting the poor. Thailand has exhibited some forms of poverty incidences in its economical growth (Mason 341). The poverty incidences have been concentrated in the rural areas more so on the northeastern regions of the country. However, absolute poverty has declined dramatically over the last four decades although inequality has increased. Large families in the country have a higher probability of becoming poor then the smaller families. In addition, another common trend in the country has been that the families headed by persons with low education levels will probably be poor. Poverty elimination in Thailand focuses on house incomes data, collected by the National Statistical Offices on household survey data. The long-term decline in the poverty incidence is due to the sustained economic growth condition. The long-term improvements in the education have been an important pillar in the reduction rate of poverty and the subsequent economic growth (Chaloemtiarana 108). The economic growth booms of Thailand are associated with rapid reductions in the level of absolute poverty incidences. For instance, the moderate economic growth of Thailand of 1962 met steadily declining poverty incidences. However, no relationship found between inequalities, as a phenomenon, with the subsequent economic growth. Growth seems not to have a significant effect on the continued inequality but other factors do. Non-economic actors Economic transformations of Thailand have also been due to environmental and other non-economic factors. Environmental pollution in Thailand is a common phenomenon and agricultural expansion has been partly accountable for the deforestation effect (Mason 358). Economic changes have also coincided with the massive social changes of which some were not beneficial. For example, the decline of village institutions and the traditional values are widely lamented together with drug trafficking form part of the negative effects of the negative effects. Women trafficking and child prostitution are also a common phenomenon in Thailand. In addition, the rising wages for the Thailand workers have resulted into illegal migrants migrate into the country. Population growth has been an important pillar to the economic growth rate of Thailand. Currently the economic growth rate of Thailand has been 3.5 per cent per annum. Low population growth leads to a fast economic development (Liu and Premus 43). The population growth rate of Thailand had been very high until the government advocated for family planning methods in 1960s. Four decades later the economic growth of Thailand had dropped to 0.8 per cent. This enabled the country to improve its education and health facilities. Thailand’s population is rapidly urbanizing and thus it requires immediate adjustment in the way the government avails its services and the improvement of infrastructural facilities. Economic development has led to led to startling improvements in the health indicators like infant and maternal mortality. The country has experienced a dramatic decline in the mortality rates for the infants. The economic progress of Thailand has contributed to improved health condition for the Thai population. The continuous growth in the literacy level of people of Thailand is the direct translation of the economic progress of the country. The data collected at the beginning of 1960 to determine the literacy level of the country found that, nationally 71 percent of the population was literate with males forming 80 per cent and females formed 61 percent (Brewer and McEwen 304 ). In 2000, the same research was conducted and it established that 95 of the citizens were literate, with males forming 96 percent and females forming 94 per cent. It is clear that the overall basic literacy has improved significantly. The increased literacy levels have a direct translation of economic progress of Thailand. Generally, the government of Thailand has laid strategies to improve economic state of the country as well as the living standard of the citizens. First, the government started a development plan in 1961that aimed at primacy of private enterprises and a policy of fostering and assisting it. The plan also aimed at improving the living standards of people through agriculture, industry, and production power (Mason 421). The government laid a second development plan that emphasized on agricultural development, education and industrial development. The government also aimed at rural development through improving infrastructure system and rural electrification in its third plan. It also aimed at improving and the financial and commercial sector. The government also committed itself to reduction state-owned enterprises. The first three development plans aimed at improving the living standards of the persons in Thailand. They were also oriented at improving roads, irrigation schemes, and making land reforms for the Bangkok region. Despite their intended purposes, these development plans also translated into an increase in the income for the rural dwellers and urban residents. This made very many immigrants migrate to the town looking for jobs. The government of Thailand set another development plan that aimed at decentralization of industry and economic growth from the capital regions to the provinces. The plan aimed also at encouraging import-substitution of agricultural industries. This was in order to begin promotion of export-oriented industries. The government made these industries to benefit from nation’s low wage rates. Plans were also laid to aid in the establishment of the industrial estates under the industrial Estate authority of Thailand (Oxford Business Group 57). Another development plan that covered the reduction of rural poverty and social tensions was established. The government also intended expansion of employment opportunities in the poorer regions through the same fifth development plan. This fifth development plan came into being in 1981 a time when, already four other plans had been implemented and successfully attained their intended goal (Liu and Premus 87). The sole fact from these plans is that the economy of Thailand originated form good administration procedures and focus of the governing tyranny. Reformation of Thailand The war for the economic development Thailand was around 1980s and 1990s. At this period, Thailand provided an important instance of rapid economic growth. The Gross Domestic Product of the country grew by 6.5 per cent per annum for more than a decade and a half. The main question however is how actually the country came to attain this. The economic growth in Thailand got facilitation from two factors. Technological improvement is one of the driving forces for the rapid economic growth of Thailand. The link between the macroeconomic evidence and the labor market implicate high yields and is an alternative way of testing for economic growth (Chowdhury 507). The test for economic growth models through the microeconomic foundation that is available in the micro-level data. The economy of Thailand has been relatively capital intensive. The growth of capital stock in the country has consistently exceeded that of the output, though by a relatively modest margin. The capital out put ration is still relative to the industrial economies. The country’s economic growth has been accompanied by sizeable changes in the structure of the economy. The industrial annual GDP has risen from 21 percent to 44 per cent within a span of thirty years (Mason 438). Contrary, the agricultural sector dropped form 23 per cent to 10 per cent. This has been the case because the country is slowly moving from agricultural sector to industrial sector. Employment opportunities in the country have increased steadily in Thailand. This is due to the growth of the industrial sector, which absorbs very many people into jobs. Whenever these people get job they are rewarded salaries, which directly improve their living standards. Improved living standards of people indicate a growth in the economy of the country. Human development has made remarkable progress (Chaloemtiarana 157). The success of Thailand is due to its government combining the various factors of economic success like the astute policymaking, strong democratic governance, and industrious population. The country has encouraged public investment in social services and advantageous historic and geopolitical circumstances that are boosters of economic growth. However, these economic growth steps made by Thailand are not equally distributed. The benefits of the economic development in Thailand have accrued to those who have close link to the international economy and those that have business-oriented minds. Those who have remained in the domestic economy like the small-scale farmers continue to swirl in streams of poverty. The cities of Thailand have grown very fast than the countryside accommodating more than a half of the whole population. Thailand has been focusing on national development as well as developmental plan for provision of quality services to the persons (Liu and Premus 114). The government of Thailand has been in attempt to avail clean water to the families in the country. Currently the citizens are enjoying the services of piped water Thailand population has increased gradually from 58 million in 1993 to 64 million with the number of females being slightly higher than male population. The proportion of the total population has gradually led to expansion of the countries economy. Thailand expects that by 2030 the dire population will be about seventy seven million (Brewer and McEwen 389). Due to the socio-economic developments and improvements in the public health, the demographic structure is changing. The country is expecting an aging society in the near future. The technological developments in the country have accelerated the rate of economic development by enhancing national productivity in order to respond to the emerging needs of the society. Population distribution and economic development is the same thing particularly within the industrial area. The areas that have industries have high concentration of people. This situation is further accelerated by urban population growth and the expansion of cities. The expectations are that by the end of the next half a century, Thailand’s urban population will constitute more than half of the population. Urban expansion in Thailand has been occurring in the problematic urban communities necessitating careful and systematic planning that will ensure sound urban development. These developments will occur in the entire dimension, that is, in infrastructure, resource development, environment, and socio-economic development (Oxford Business Group 91). The crisis The 1997 crisis caused serious problems to the Thai economy. The current account deficit was the main reason behind the weakened economy. The non-productive expenses and the speculative investments fueled the crisis. The country however employed various measures like revision of the long-term financial plans an rehabilitation of financial institutions. These measures gradually improved the country’s economy (Mason 531). They revived the external trade, ensured net flow of finances, balanced the payment of the state workers, and improved the country’s GDP. During the revival of the economy of Thailand, another problem came up. These problems came about due the political instability in the country. The recovery rate thus slowed down because of the negative effects of exchange rates and the political conflicts. The confidence of the consumers and the producers also went down leading to further aggravation of the country’s economy. This economic slow down was more severe than the agricultural drop in exports and imports. Thai government assumed aggressive fiscal policies to boost the economy of the country. The country gave cash for consumption to the low incoming families. Besides this, the government drew up various emergency measures to stimulate the economy of the country. These measures also contributed to the convention in both negative and positive means. The government formulated policies that that would address both the climate change and the economic development. This was in accordance to the prevailing economic conditions and the existing market system (Chowdhury 431). From the past thirty-five years, it is evident that Thailand has had a good economy with just simple guidance from seven national economic and social development plans. Thus from three decades of guided developments plans, the national welfare is deemed satisfactory though the benefits are not distributed equitably. Majority of the people did not receive a fair share form the benefits of the economic progress. Economic development is a tool for human development to acquire peace and happiness (Liu and Premus 187). Unfortunately, the economic and financial crises caused the government to place an immediate focus on the prevailing crises rather than first pursue development as intended. The Thai government had to adjust its plans in order to respond to the prevailing economic crisis that had been due because of political problems and global economic recession. The government developed social capital intended for a sustainable development. Since then the government has provided a framework for sustainable development. The experience of Thailand over the past half a century confirms the importance of a sustained economic growth to the citizens and the government at large especially to the poor countries. The sustained economic growth is necessary for the achievement of basic social objectives and improvement of education and public health (Mason 564). Thailand has now completely recovered form the crisis although it expects several setbacks like drought, influenza, and political violence. Conclusion Thailand’s economic experience tells it all about the value of an open economic system in promoting the long-term economic growth. This is evident in the two neighboring countries of Thailand that is, Burma, and Myanmar. Burma did not engage in trade because she was deeply suspicious of the outside world. The internal markets were suppressed and control oriented solutions had to be sought. The differences in living standards of people in Burma were stark. Therefore, majority of the Burmese people ended up leading poor lives. However, this is a gone case for a country like Thailand, which agreed to engage in deep trade. Moreover, not all aspects of Thailand development strategy were successful. Inequality has increased substantially in the current dates but at the same time, absolute poverty has declined. The ultimate causes of this inequality are however yet to be known (Brewer and McEwen 412). Education policy in Thailand remains to be the most serious problem. The current system of primary and secondary education remains archaic. The standards of rural education, particularly, is very low and of poor quality. This dooms the people who live in the rural areas forcing them to migrate to towns to look for better services. The country also faces a long-term neglect of the environmental degradation. This is evident in the pollution rates of water and air, deforestation, and the denudation of mangrove forests as well as the wasteful management of water resources. Works cited Brewer Dominic and McEwan Patrick. Economics of Education. Amsterdam: Elsevier, 2010. Print. Liou kuotsai. Managing Economic Development in Asia. Westport: Greenwood Publishing Group, 2002. Print. Liu Lewis and Premus Robert. Global Economic Growth. Westport: Greenwood Publishing Group, 2000. Print. Mason Andrew. Population Change and Economic Development in East Asia. California: Stanford University Press, 2001. print. Shabbir Tayyeb and Klein Lawrence. Recent Financial Crises. Cheltenham: Edward Elgar Publishing, 2006. print. Sjohlom Fredrick and Tongron Jose. Institutional Change in Southeast Asia. New York: Routledge, 2007. Print. Institute of Southeast Asian Studies, Australian National University. National Thai Studies Centre. Thailand's Economic Recovery. Buona Vista: Institute of Southeast Asian Studies, 2006. Wattanawisitporn Ratchanee. Foreign Direct Investment in Thailand. : Gottingen: Cuvillier Verlag, 2005. Print. Chaloemtiarana Thak. Thailand: The Politics of Despotic Paternalism. New York: SEAP Publications, 2007. Print. Chowdhury Anis. Handbook on the Northeast and Southeast Asian Economies. London: Edward Elgar Publishing, 2007. Print. Maddison Angus. Economic Progress and Policy in Developing Countries. Taylor & Francis, 2006. Print. Nafziger Wayne. Economic Development. New York: Cambridge University Press, 2006. Print. Oxford Business Group. The Report: Thailand. London : Oxford Business Group, 2009. print. Read More