The Key Factors that Contributed to The Growth of Thailand’s Economy Back in The 1980s to Mid-1990s

This paper aims to analyze the key factors that contributed to the growth of Thailand’s economy back in the 1980s to mid-1990s. It identifies the external and internal factors that was a major change to the economy of Thailand. The study focuses solely on those factors that help contributed to Thai economy. Thailand’s economy was one of the fastest growing economy in Southeast Asia. Before the growth, Thailand’s economy was mainly focused on agriculture. In the 1980s, Thailand’s economy transformed itself from an agricultural-based country to a more modernized or industrialized country. During the time, Thailand was governed by a military prime minister, Prem Tinsulanonda. Despite being governed by a military officer, Thai economy still grew year by year. (Southgate, 2017)

Between the 1980s to 1990s, Thailand’s economy sparked an economic growth age, in which was known as the “Boom Years” of Thailand. It was considered to be the rising tiger of Southeast Asia. (“Thailand – Overview of economy”)There are many key factors that involved in the economic growth of Thailand. First, Thailand chose to take a risk of changing its country from an agricultural-based country to a more industrialized country. Thailand’s agricultural processes had helped improve the movement of the change and it became a good structure for building up the industrialize change. In 1960s, Thailand used the agricultural gains to “initiate a shift into industrialization” (“Thailand – Overview of economy”) by attempting on a strategy called “import substitution” (“Thailand – Overview of economy”), which focused on local foods rather than food that got imported from other countries. (Staff, 2008) This strategy led to the increase of domestic product usage and more value to local farms. All the profits they gained from agriculture from this strategy, the government had invested all these profits to developing industrialize machines, in order to catch up the western world. (“Thailand – Overview of economy”) The government had balanced the economic growth and the gap between economic loss and gains. It had also contributed to the improvement of social services as well. The increase of urbanization, the spread of industrial activities and service industries keeps on growing its income are the social and economic trends in Thai economy. (Hays, 2014)

Second, Thailand had diversified their economy. The diversification of Thai’s economy embedded in the nature of Thai people, which they are very flexible in adapting. It is a kind of manufacture that started off from a simple agricultural-based manufacturing and developed itself through the use of resources such as natural resource and labor, into a more complex industry and more importantly, to developed their industrial technology. The process was also hugely supported by the Foreign Direct Investment (FDI). This focused on a variety range of products, electronics, goods and food. The major investors for Thailand are Japan, Korea, China and America. With only these 4 countries alone, they had invested in Thailand for 2.5 billion dollars out of an overall FDI total of 8 billion dollars. (“Thailand – Overview of economy”) In the 1990s, Thailand was ranked fifth in the FDI ranking in Asia. The exchange rate of the Japanese currency, which is the Yen, had affected the dollars and the Thai baht exchange rate. At first, the Thai baht was fixed to the American US dollar, but after the Japanese Yen skyrocketed through the global exchange rate in the Plaza Accord in 1985, it had a very huge impact to the fixation of Baht-Dollars, and furthermore, it sparks off a significant impact on trade deals and investments plans between Japan and Thailand. (Heng, 2003) Thai’s cheap labor and the technological industry had fueled the Thai economy. As a result, Thailand has become the rice leading exporter and Southeast Asia’s biggest factory for producing cars. During 1986-1989, the increase percentage of foreign income rises up to 400 percent. Post-1988, investments from Southeast Asian countries started to come into Thailand and become major investors in Thailand. Thailand quickly realize the potential of creating huge income from various countries in Southeast Asia, it quickly reacted to it by it had set up an international bank in Bangkok called, Bangkok International Banking facility, in order to simplify the route for those foreign investors. (Hays, 2014)

The third factor was its government. During the Boom Year of Thailand, it was under controlled of the military. The military officer and also the prime minister of Thailand at the time was Prem Tinsulanonda. His reign lasted for eight years, from 1980 to 1988. (“Thailand – Overview of economy”) He was known as the “Power Broker of Thailand”. (Southgate, 2017) He had fought against corruption in all of his years working for the government and for the people. He had influenced the armed forces to promote anti-corruption. Since he got elected in the Privy Council, he had given his criticism towards the Thai government, its transparency towards the people and ineffective auditing system. This opened up to new improvements in the society and in the governmental system of Thailand. He had setup a policy of macroeconomy under the command of the “Bank of Thailand, Ministry of Finance, the National Economic and Social Development Board, and the Bureau of the Budget.” (Southgate, 2017)

Prem Tinsulanonda had introduced a project which was called, Eastern Seaboard Development Project, which was the central point of Thailand’s Fifth National Development plan from 1982-1986. Its goal was to focus in Bangkok about the reduction of factory overcrowding, and split those factories into trading and manufacturing centers in the eastern seaboard. The project had accomplished a growth of number of development industries such as the birth of ports around deep seas, automobile and chemical industries had also been improved and the improvement of infrastructures since its creation in 1982. In the years between 1991-1995, the growth kept on going and it added another 8.5 percent to Thai’s economy. (Southgate, 2017) These creations led to the uprising of industrialization in urban areas and also at the rural areas as well. Under the leadership of Prem Tinsulanonda, Thailand had became the one of the fastest growing economy all over Southeast Asia.The fourth factor was power of the private sector in exporting production. In 1981, a policy was created and was put to use in the block of Joint Public-Private Consultative Committee on Economic Problems that made the allowance or freedom to citizen to make an influence over the market. This allows opportunities for businesspersons to contribute to the society. It also gave a space for the development of the state enterprises as well.

The growth rate of Thai economy between 1985-1995 was 8 percent. In 1988, it reached its peak of 13 percent growth rate. (“Thailand – Overview of economy”) Between 1993-1996, private sectors in Thailand began to borrow more and more money from the Thai bank. The percentage of private sectors borrowing GDP leaped from 39 percent to 123 percent. Economic development was mainly pushed by private sectors in which it focused solely on the industrial growth of the country. (Hays, 2014)

In conclusion, these 4 factors had greatly influence Thailand’s economy in 1980s to mid-1990s. The 4 factors are change in methods of developing the country, diversified of its economy, Prem Tinsulanonda’s leadership and private sectors in Thai’s economy. Between these times, it is the highest peak that Thailand’s economy had ever reached. It is still a large impact and cause of Thailand’s economy today. With all these gains, Thai’s economy is still rising year by year since then. Thai people still look back at the time and still talks about it whenever a topic is related to Thai economy. It was a huge leap of faith for the Thai government and also for their citizen as well.