The Thai Economy

The Thai Economy

As we pass an industrial zone on the outskirts of Bangkok, lets talk about Thailand’s economy.

A quick romp through Thailand’s economic history suggests that it has always been intimately tied with politics, and further exposed to international politics and economy.

In old Siam, amidst the jungle, coastal ports welcomed merchants from the maritime traders of Arabia, India, and China. In the 14th Century, Ayutthaya, a city a little ways to the north, became a hub of trade with China, making the central Ayutthaya kingdom prosperous and powerful. Trade with China has been a source of economic power ever since, but the 19th century saw the signing of treaties with European countries and the United States that guaranteed privileges for its traders too.

Domestically, serfdom held the economy back until Chulalongkorn abolished the practice in the beginning of the 20th century, and he began linking the country with better trade infrastructure, including the rail line you are now on. Significant investment in education in the 1930s laid the basis of the development of industrial and service sectors throughout the 20th century.

The rest of the 20th century saw the economy become increasingly globalised and intertwined with geopolitics. For siding with the Japanese during the second world war, Thailand was forced to hand over 1.5 million tonnes of rice to Allied countries, which placed a heavy burden on Thailand’s post-war recovery.

However, from the 1960s to the end of the century, Thailand enjoyed relatively strong economic growth despite becoming the frontline for the West’s fight againt communism in Southeast Asia. The manipulation, and particularly devaluation, of the Thai Baht throughout this period led to a boom in exports, which saw Thailand’s market-based economy race up the economic ladder. But it came crashing down in 1997 when foreign speculation put more pressure on the Baht than the Bank of Thailand could handle, triggering the Asian Financial Crisis and the collapse of not only the Thai economy, but the entire regional economy.

Ever since, Thailand’s politics has limped along in a cycle of coups and democratic transitions, which has scared off tourists and investors alike, leaving the economy stagnant and rudderless. The latest Military Junta has declared Thailand 4.0, with an emphasis on investment into innovative and higher-tech businesses. The industrial park we’ve just travelled past is an important compenent of that. It hosts some of the largest food processing companies in Thailand and the world, as well as heavy industry further to the East, and is part of an innovation ecosystem that includes a various universities and government laboratories.

Today, Thailand is the second largest economy in Southeast Asia after Indonesia, and could be characterised as an industrialised and export driven service economy. Although a lot of the economic activity you’re about to see derives from agriculture – and rice cultivation in particular – only about one twelth of its economic output is agricultural. Its much more about automobiles, electronics, synthetic materials, and financial services. Two thirds of its economic output derived from exporting, and although Thailand is one of the world’s biggest exporters of rice, this only makes for 2% of exports.

In 1988, roughly two thirds of Thai people lived below the poverty line. Today, that figure is closer to one in eight. So despite the hiccups, and although there is a long way to go, those statistics show Thailand as one of the great development success stories in the modern era.

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