Publication Code: Y89C
by David Dapice and Frank Flatters
Whether looked at from the perspective of the last five years or the past two decades, Thailand has experienced extremely favorable economic performance. For over twenty years real GDP growth has averaged between six and seven percent per year. This compares with industrial country growth of less than three and one-half percent over the same period. Most indicators of social and human development show similar progress. Literacy rates are high, population growth is under control, and other social indicators are improving. While growth has been spurred by a rapid structural transformation towards industrial and service activities, Thai agriculture has continued to make significant contributions to economic development. Most macroeconomic indicators have been highly favorable. Inflation rates have so far been low; export growth has been very rapid; and, except for a brief period in the early 1980s, foreign debt burdens have been modest. Nevertheless, there are some problems. The last decade has witnessed some worrisome increases in income inequality; and secondary school enrollment ratios (about 30 percent) have been low relative to other countries and to local labor market demands. Environmental issues, in urban and rural areas, are in need of some urgent attention. Regional inequality and urban congestion caused by Bangkok's disproportionate economic weight are also causes for concern. But, on the whole, many nations would be only too happy to trade their problems for Thailand's.
While the past two decades have been highly successful, the progress that has been made in the most recent half decade, beginning roughly in 1983, has been truly phenomenal. Growth in total income and in manufactured exports has been extraordinary. From 1983 to 1989, the value of manufactured exports has more than quadrupled, while real annual GDP growth ahs recently averaged over eight percent. In a period of reduced growth in the world's industrial market economies, Thailand's growth has been accelerating. The ratio of exports to GDP is now about thirty percent, and manufactured products now account for over two thirds of exports.
In light of this experience, it is appropriate for TDRI to focus in its year-end conference on an evaluation of these past trends and, more importantly the future prospects for Thailand in the world economy. In light of these recent success, what is the appropriate strategy for the next two decades? Is the current course sustainable over the short and medium-term future? What are the major domestic and international obstacles to a continuation of the current development pattern? Is the Thai economy becoming too unbalanced, too dependent on exports, or too exposed to international events that are beyond its control? Does the experience of the Asian NICs, especially Korea and/or Taiwan, provide a feasible or desirable model for Thailand to emulate?
Most of the papers prepared for this conference focus on particular sectors and/or aspects of the Thai economy in order to provide some detailed answers to questions about Thailand's future prospects in the world economy. This paper is complementary to the others. We have been asked to review major features of Thailand's international economic environment. Our goal is to provide an overview of some general themes and issues that Thailand will face as it enters the last decade of the twentieth century and prepares for the twenty-first. While this makes the scope of this paper far greater than that of the others, it also provides us the luxury of being at times (if not always) more superficial. At this stage we can only hope that we end with the right degree of complementarity between our own and the other conference papers.
We divide our presentation into two major parts. In the first we examine general patterns related to the role of Thailand in the world economy. We discuss likely scenarios for various relevant features of the international economy over the next decade or two, and the implications of these events for the development of the Thai economy. The first step in doing this will be to examine recent Thai economic performance and the role of external influences in shaping it. The second major part of the paper provides some perspective on a number of particular dangers and opportunities that may possibly arise in the context of the world economy over the next decade or two. Questions are raised about the likely impact of more or less extreme developments in international commodity prices, developed country protectionism, changes in manufacturing technologies, and patterns of international capital flows. We conclude with some observations about their policy implications.
December 1989