UEM Thailand Analysis

Group 3, Section 1
Arvind J, Akash, Nishanth A, Lakshay,
Giridharan, Babji, Krishna, Sriram

Economic History(1950-1973)
Agriculture was the main engine for growth during this period.
Chinese communities adopted alliances with military men that led to
creation of business-bureaucrat relationship
Multiple exchange rate system was used to generate revenue for
government and subsidize rice export.
The budget bureau, fiscal policy and new economic development board
laid foundations for high priorities development projects and
infrastructure development.
Military founded monopolies were reduced and Industrial investment
protection Act was formed to promote investment in the country.
Economic mismanagement in the country led to a GDP growth rate of
3.1%.


Economic History(1973-1986)
Political upheaval in the country was rising government budget deficit and
serious debt problems within the country in early 1980s.
Thailands competitiveness was severely affected after the collapse of
Bretton wood system, where US currency was appreciated against other
major currents as a result of which Thai Bhat was also appreciated.
Thailand also went through a structural change from Agriculture to
Industrial.
It shifted its industrial policy from import substitution to export
promotion.
During this period, Thailand faced several financial problems in which 20
finance companies and 1 commercial bank were closed and 25 finance
companies and 2 commercial banks were refinanced.
Economic History(1986-1996)
Time period during which Thailand had its highest growth rate of 9.1%.
Plaza accord had effectively realigned major currencies that led to depreciation of dollar
and as a result Thai Bhat that increased Thailands export competitiveness.
Sharp decrease in the petroleum products was another reason that contributed to the
high growth rate of Thailand.
FDI was flooded in the country due to re-location of business in countries like Japan,
Taiwan, Hong Kong after the exchange rate realignment.
The manufactured production also grew in response growing export and investment
demands that led to the transition from agrarian economy.
Fiscal discipline remained intact during this period because of three reasons a) hardship
in early 1980s b) government efforts to put the budget deficit into surplus c)
foundation of budgetary process.
Private companies were given concessions for building basic infrastructure that led to
development of telecommunication and expressways.
80% of the contribution of growth came from capital accumulation.
Speculation started to take place in real estate and stock market when SIT index rose 12
fold from 1985-1993.



Economic History(1997-2000)
Asian financial crises started in Thailand with the collapse of
Thai Bhat. Thai government floated its currency from fixed to
floating.
Some of the main causes of this crises were-a)Weaknesses in
domestic macro-economic fundamentals b)Weakness in the
Financial System c)Speculative inflow capital flows
d)Floatation of Baht e) Unstable political and social
institutions.
Growth has almost stagnated and unemployment rate reached
to 4.5%
Banks were reluctant to lend any money due to poor
macroeconomic factors and under capitalized Balance Sheet.



Doing Business in Thailand
Foreign investment is restricted only in key sectors like publishing,
defence.Majority of foreign exchange transactions can be conducted by
authorized banks without government control.
Series of political crises stalled the economic growth and hampered the
ease of doing business and the investor sentiment has become negative
One of the biggest drawbacks to Thailand is its bureaucracy. Access to
financing is difficult. Insufficient capacity to innovate is hindering the
nation to move up in the value chain.
The supply of skilled technical labour is low and the standards of spoken
English is very low making it difficult for the foreign companies
Energy costs in Thailand are relatively high, and the country is lagging
behind others in Asia in putting in the latest telecommunications
technology.



Global Competitiveness
Thailand is the world's top exporter of rice, exporting more than 6.5 million tons
annually
There is a large supply of operator-level labor at a relatively low price. It is also
easier and less expensive to hire expatriate managers in Thailand than it is in most
emerging markets of Asia.
Thailand is far ahead of other ASEAN countries in attracting foreign direct
investment into the automotive sector and supporting industries. It also has a
good reputation for attracting foreign investment in other export-oriented
manufacturing industries, from consumer electronics to sporting goods to
processed foods
The country is lagging behind others in Asia in putting in the latest
telecommunications technology
Thailand has a particularly strong medical industry that is turning into a major
foreign exchange earner for the country and a generator of medical tourism
Drug trafficking and presence of illegal workers



Way forward
Consistent Logistics performance over the years


Efficiency of customs clearance process has to be improved.
Intermodal freight transportation system and logistics development
policy have created a conducive environment for the development.
Bangkok is trying to maintain growth by encouraging domestic
consumption and public investment
Developing higher skills is imperative not only for higher incomes
and living standards for Thais, but also for Thailand to grow
sustainably and inclusively. Large disparity between Bangkok and
other regions.