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Assessment Of Economic Progress In Thailand 198595

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 ap

proximately 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.

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