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Country Profile 2006

Thailand This Country Profile is a reference work, analysing the country�s history, politics, infrastructure and economy. It is revised and updated annually. The Economist Intelligence Unit�s Country Reports analyse current trends and provide a two-year forecast.

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ISSN 1356-4161

Symbols for tables �n/a� means not available; �� means not applicable

Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK.

BANGKOKBANGKOK

Ubon RatchataniUbon Ratchatani

NakhonNakhonRatchasimaRatchasima

Chon BuriChon BuriRatcha BuriRatcha Buri

Yai Yai

Khon KaenKhon Kaen

Chieng MaiChieng Mai

gaga

PetchaburiPetchaburi

Kanchana BuriKanchana Buri

Nakhon PathomNakhon Pathom

LopburiLopburi

AyutthayaAyutthaya

KrabiKrabi

BANGKOK

Ubon Ratchatani

NakhonRatchasima

Songkhla

Chon BuriRatcha Buri

Ban Hat Yai

Khon Kaen

Chiang Mai

Nakhon SawanNakhon SawanNakhon Sawan

Yala

Phuket

Khuraburi

Ranong

Phangnga

Ban Kantang

Trang Phatthalung

Surat Thani

Chumphon

IsthmusIsthmusof Kraof Kra

Isthmusof Kra

Ko Samui

Ko Phangan

Ko Chang

Ko KutPrachuap Khiri Khan

Hua Hin

SurinSurinSurin

PhetchabunPhetchabun KalasinKalasinPhetchabun

LamphunLamphun

LampangLampangPhraePhrae

NanNan

Chiang RaiChiang Rai

Lamphun

LampangPhrae

PhitsanulokPhitsanulok

Roi EtRoi Et

Phitsanulok

UttaraditUttaraditUttaradit

Nong Khai

Nakhon PhanomNakhon PhanomNakhon Phanom

MukdahanMukdahanMukdahan

Sakon Nakon

Udon Thani

Roi Et

Kalasin

TakTakTak

Mae Sot

Nan

Phayao

Siri KitRes.

PhumiphonRes.

SrinakarinRes.

Nam ChonRes.

ao Laemao LaemRes. Res.

Khao LaemRes.

Ubol Ratana Res. Lam Pao Res.

Chiang Rai

SaraburiSaraburiSaraburi

ChanthaburiChanthaburi

TratTrat

Chanthaburi

Samut PrakanSamut Prakan

NonthaburiNonthaburi

Samut PrakanSamutSakhon

Trat

SisaketSisaketSisaket

AranyaprathetAranyaprathetAranyaprathet

PetchaburiPattaya

Rayong

Kanchana Buri

Nakhon Pathom

Suphan BuriSuphan BuriSuphan Buri

Nonthaburi

Lopburi

Ayutthaya

Krabi

Nakhon Si Thammarat

Narathiwat

PaPaPattani

THAILAND

MYANMARLAOS

CAMBODIA

VIETNAM

MALAYSIA

VIETNAM

GULF OF THAILAND

ANDAMAN SEA

Mun R.

PingR.

YamR

.

Meko

n g R.

Mekong R.Chi R.

0 km 50 100 150 200

0 miles 50 100

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Main road

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Capital

Major town

Other town

Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006

Comparative economic indicators, 2005

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Sources: Economist Intelligence Unit estimates; national sources.

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Thailand 1

© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006

Contents

Thailand

2 Basic data

3 Politics 3 Political background 4 Recent political developments 7 Constitution, institutions and administration 8 Political forces 11 International relations and defence

14 Resources and infrastructure 14 Population 15 Education 16 Health 17 Natural resources and the environment 18 Transport, communications and the Internet 20 Energy provision

21 The economy 21 Economic structure 22 Economic policy 25 Economic performance 28 Regional trends

28 Economic sectors 28 Agriculture 30 Mining and semi-processing 31 Manufacturing 33 Construction 34 Financial services 36 Other services

37 The external sector 37 Trade in goods 39 Invisibles and the current account 40 Capital flows and foreign debt 41 Foreign reserves and the exchange rate

42 Regional overview 42 Membership of organisations

45 Appendices 45 Sources of information 46 Reference tables 46 Population 46 Labour force 46 Central government finances 47 Central government expenditure by function

2 Thailand


47 Interest rates 47 Money supply 48 Gross domestic product 48 Nominal gross domestic product by expenditure 49 Real gross domestic product by expenditure 49 Gross domestic product by sector 49 Prices and earnings 50 Crop production 50 Minerals production 50 Manufacturing production 50 Construction statistics 51 Banking statistics 51 Stockmarket indicators 51 Main composition of trade 52 Main trading partners 52 Balance of payments, IMF series 53 External debt, World Bank series 53 Foreign reserves 53 Exchange rates

Thailand 3


Thailand

Basic data

514,000 sq km, of which 38% cultivated and 20% forest

65.1m (2005)

Population in million (local administration departments!December 2000)

Bangkok (Metropolitan; capital) 5.68 Chiang Mai 1.59 Nakhon Ratchasima 2.54 Nakorn Srithammarat 1.52 Ubon Ratchathani 1.77 Udon Thani 1.52

12 other Thai provinces have populations in excess of 1m

Subtropical

Hottest month, April, 35-40°C; coldest month, December, 20-31°C; driest months, January-March, no rain; wettest month in central and northern regions is September, with 305 mm average rainfall, and in the south is December, with 400 mm average rainfall

Thai

The metric system is officially used. For local dealings, traditional units are used:

1 pikul=60 kg 1 wah=2 metres 1 rai=1,600 sq metres 1 tang=20 litres 1 tical or baht (jeweller�s measure)=15.24 grams

1 baht (Bt)=100 satang. Average exchange rates in 2005: Bt40.22:US$1; Bt73.1:£1; average exchange rates on May 30th 2006: Bt38.2:US$1; Bt71.8:£1

Seven hours ahead of GMT

October 1st-September 30th

January 1st (New Year�s Day); February 13th (Makhabuja!regulated by Buddhist calendar); April 6th (Chakri Day); April 13th-15th (Songkran Festival); May 1st (Labour Day); May 5th (Coronation Day); May 12th (Visakhabuja); July 11th (beginning of Buddhist Lent); August 14th (Mother�s Day!the queen�s birthday); October 23rd (Chulalongkorn Day); December 5th (Father�s Day!the king�s birthday); December 11th (Constitution Day); December 31st (New Year�s Eve)

Total area

Population

Main provinces

Climate

Weather in Bangkok (altitude 2 metres)

Language

Weights and measures

Currency

Time

Fiscal year

Public holidays 2006

4 Thailand


Politics

Thailand is a parliamentary democracy with a constitutional monarchy. The revered king, Bhumibol Adulyadej, has ensured a degree of political continuity, although there have been 17 military coups (the last in 1991) since the absolute monarchy was abolished in 1932. The Thai Rak Thai (TRT) party, led by a former telecommunications tycoon, Thaksin Shinawatra, came to power in 2001 and led a coalition government to an unprecedented full term in office. The TRT then became the first party to lead a single-party government in 2005, but mass public demonstrations against Thaksin�s government in early 2006 forced Thaksin to dissolve parliament.

Political background

The first unified Thai kingdom emerged in the 13th century at Sukhothai in the northern part of the Chao Phraya river basin. Subsequently the Thai state (called Siam until 1939) shifted down to the city of Ayutthaya, from which its hegemony extended southwards to Malaya and east into the Khmer empire. The capital was moved to its present site in Bangkok when the Burmese sacked Ayutthaya in 1767. Political conflict between the established monarchical order and new groups in society led to the establishment in 1932 of a constitutional monarchy, which still exists. Thailand is the only country in South-east Asia not to have been colonised by a European power.

From the establishment of the constitutional monarchy until 1973, the country was ruled by a succession of military governments. Only in 1973 was the last of the military strongmen removed in a student-led uprising. Subsequent civilian governments, weakened by rivalry, were usually short-lived and almost invariably ended in military takeovers, mostly bloodless. Throughout this turbulent period the civilian bureaucracy and the king lent an element of stability to the system. During the second world war the Thai government initially formed an alliance with Japan, but switched its allegiance to the Western powers mid-way through the war. It has subsequently remained a close ally of the West.

After 1973 socioeconomic pressures that built up during the course of rapid economic growth changed this general pattern, and military involvement in government was limited to power-sharing with civilians. However, factionalism and corruption persisted, and eventually led to another military coup by the National Peacekeeping Council (NPC) in February 1991. Fresh elections were held in March 1992, and were narrowly won by a coalition of parties that had backed the NPC. When this coalition could not agree on a candidate for prime minister, the NPC installed the retiring army chief, General Suchinda Kraprayoon. Public opposition to the appointment of an unelected military man ran deep, and thousands turned out in urban centres to protest. In May Suchinda�s allies in the army and the police resorted to violence in an attempt to suppress the protests in the capital, Bangkok, resulting in many deaths. As a result of the king�s intervention, Suchinda was forced to step down and a fresh

A unified kingdom

Military governments rule from 1932 to 1973

The last military coup took place in 1991

Thailand 5


election was held in September 1992, resulting in the formation of a coalition government of �pro-democracy� parties under the Democrat Party (DP) leader, Chuan Leekpai.

The Chuan administration that came to power in late 1992 was severely weakened by policy indecision and constant faction-fighting between the five coalition partners. Corruption charges over a land reform programme forced Chuan to dissolve the House of Representatives (the lower house) in May 1995. The DP lost the subsequent election to the Chart Thai (CT) party under Banharn Silapa-archa. However, Banharn was forced to call an election in September 1996 when the six-party coalition split on the eve of a censure debate. The New Aspiration Party (NAP), led by a former general, Chavalit Yongchaiyudh, narrowly defeated Chuan�s Democrats in the November 1996 election. Chavalit assembled another six-party coalition, but he was subsequently blamed for failing to prevent the collapse of the baht in July 1997 and for appearing indecisive in the face of the ensuing economic crisis. In November 1997 Chavalit was forced to step down.

Chuan became prime minister for the second time in December 1997, replacing Chavalit and the NAP, with a shaky line-up of six parties in coalition and 12 defectors from a seventh party, Prachakorn Thai (PT). The ruling coalition increased its 20-seat majority in October 1998 by including Chart Pattana (CP), which controlled 51 seats in the lower house. Despite persistent infighting among the coalition partners, there was progress on political and legislative reform, but by 2000 the public was becoming weary of the slow recovery from the economic crisis and impatient with the government, which was seen as relatively uncorrupt but lacking in dynamism.

Recent political developments

Thaksin and his TRT party won a historic victory in January 2001 in the first general election under the new electoral laws. The TRT, formed less than two years earlier, mounted an aggressive populist campaign that captured the public�s mood and won 248 seats in the 500-seat House of Representatives. In forming the TRT, Thaksin brought together many members of parliament (MPs) who were disillusioned with their original parties, but who had cultivated political strongholds in their constituencies. This election also offered the Thai public a policy agenda, rather than simply �personalities�, for the first time.

Thaksin surpassed the achievements of all of his predecessors by completing a full four-year term in office. Despite this increased political stability, Thaksin�s first term in office was controversial. His first six months as prime minister were overshadowed by the possibility that he would be removed from his post: he faced charges of having made a false asset statement in 1997, while previously a government minister. In August 2001 the Constitutional Court acquitted him, but with only eight out of 15 judges voting in his favour. Despite this initial uncertainty, the Thaksin administration progressively consolidated its hold on power, with covert efforts made to weaken the institutions empowered under the 1997 constitution to provide a robust checks-and-balances mechanism.

The TRT sees out a full term during 2001-05

Unstable coalitions become the norm in the 1990s

6 Thailand


Non-governmental organisations (NGOs) criticised the Thaksin administration for its poor record on human rights, with Thaksin�s �war on drugs� in 2003 resulting in the deaths of more than 2,000 people. The Thaksin administration was also subject to criticism for its mishandling of the upsurge in violence in the Muslim-dominated southernmost provinces, which have experienced sporadic unrest for decades. Thaksin�s mainly hardline approach to the insurgency were blamed for fanning the flames, and the security forces" heavy-handed tactics were strongly criticised by a number of foreign governments and human rights groups.

In a generally free and fair election in February 2005, the TRT recorded another resounding victory, winning 377 seats in the House of Representatives. Although the election outcome was widely expected, the margin of victory was in doubt. In the end the TRT fell short of its ambitious target of 400 seats, a result that would have prevented the parliamentary opposition from censuring government ministers, but its margin of victory was more than sufficient to enable it to form a single-party government, the first in modern Thailand. The TRT maintained its dominance in all regions except the south, which has long been a DP stronghold.

However, within a year Thailand�s political scene had undergone a major upheaval. On February 24th 2006 Thaksin dissolved parliament and called a snap election in the hope of receiving a fresh mandate to govern after months of demonstrations in the capital, Bangkok, demanding his ouster. Pressure on Thaksin to step down had been building rapidly since late 2005, when Sondhi Limthongkul, a media tycoon, began regular anti-Thaksin demonstrations in Bangkok. Sondhi�s anti-Thaksin movement expanded in late January soon after the controversial decision by Thaksin�s family members to sell their controlling stake in Shin, the telecommunications company founded by Thaksin. The sale of the stake to Temasek Holdings of Singapore (an investment company owned by Singaporean government) drew widespread criticism, mostly because the Shinawatra family managed to avoid paying capital gains tax on the Bt73.3bn (US$1.9bn) deal. Thaksin�s opponents also claimed the sale illustrated a conflict of interest in the extreme, with Thaksin putting his family�s interests above those of the nation, and a clear abuse of power.

Although his party, the TRT, secured the majority of votes in the April 2nd poll, the leading opposition political parties, the DP, CT and Mahachon, all boycotted the election, claiming that Thaksin�s decision to call a snap election was designed to serve his own interests. The opposition�s boycott essentially turned the April 2nd election into a referendum on whether Thaksin and the TRT should remain in office. The protest vote in Bangkok was sufficient enough to show that the capital�s middle class had had enough of Thaksin and the TRT, but the party remained immensely popular in the north, north-east and central regions, and the support of the rural electorate ensured that the TRT still won around 60% of the popular vote. Despite his party�s victory, two days after the controversial general election Thaksin stated that he would not lead the government in the next parliament, a �sacrifice� made ostensibly for the sake of national unity.

The TRT wins in 2005, but calls another election in 2006

The results of the snap poll are annulled

Thailand 7


Owing to the opposition�s boycott, it was inevitable that the election would fail to deliver a full complement of 500 members of the lower house. In the end, TRT candidates standing uncontested in 38 constituencies failed to garner the support of at least 20% of the electorate as required by the constitution to win the seat. After the first round of by-elections on April 23rd, 14 seats remained unfilled, and a second round, which was set for April 30th, was suspended. It therefore proved impossible for the lower house to meet in full within 30 days of the election as stipulated in the constitution.

Averting a constitutional crisis, the election results were eventually annulled. In a widely anticipated decision, on May 8th the Constitutional Court ruled in favour of nullifying the results of the controversial election. The verdict, which had the support of eight out of 14 judges, was based on a minor technicality!the positioning of voting booths that did not protect voter confidentiality!and on the court�s interpretation that the election date was unfairly set too soon after the dissolution of parliament. Although the court had a solid basis for its ruling, the subtext of the ruling was simply that the results of the election could not stand. The king had effectively said so a week or so earlier when addressing judges from the Administrative Court and the Supreme Court.

Following the ruling, the political scene was in a state of great uncertainty without a fully functioning parliament. After taking a �holiday�, Thaksin returned to assume the responsibilities of caretaker prime minister in late May, but it was unclear whether or not he would stand for prime minister in the next election, which, after much debate, was set to go ahead on October 15th 2006.

Important recent events

January-February 2001

In the general election the Thai Rak Thai (TRT) party scores an overwhelming victory over the incumbent Democrat Party (DP). Thaksin Shinawatra, the leader of the TRT, becomes prime minister at the head of a three-party coalition.

December 2003

Thaksin declares victory in the anti-drug campaign he launched in February 2003, but King Bhumibol Adulyadej is particularly critical of the high death toll.

January 2004

Violence erupts in the Muslim-dominated southernmost provinces, and martial law is imposed.

January 2005

During the weeks following the tsunami disaster on December 26th 2004, Thaksin reiterates that the country does not need international financial aid. His leadership in the immediate aftermath of the tsunami receives widespread praise.

February 2005

The TRT records a resounding victory in the general election and forms a single-party government.

8 Thailand


March 2005

The DP�s general assembly unanimously votes for Abhisit Vejjajiva as the party�s new leader. Thaksin appoints a respected former prime minister, Anand Panyarachun, to head a National Reconciliation Commission (NRC), which has been given the task of curbing the violence in the south.

August 2005

Thaksin reshuffles his cabinet, most notably taking the transport portfolio away from Suriya Jungrungreangkit in an effort to placate the public following the highly publicised censure of Suriya over graft allegations.

September 2005 Sondhi Limthongkul, a media tycoon, embarks on a campaign to oust Thaksin from office, hosting his TV show live in public after it was taken off the air, and attracting audiences in their tens of thousands.

January 2006 Thaksin�s family sells its controlling stake in Shin Corp to Temasek of Singapore. The US$1.9bn sale proves highly controversial!it was free from capital gains tax and questions were raised about the details of tax-free share transfers.

February-March 2006

Anti-Thaksin demonstrations take place in the capital, Bangkok. Thaksin dissolves parliament and calls a snap election. The opposition parties decide to boycott the poll.

April 2006

The TRT secures the majority of votes in the snap poll, but not all seats in the House of Representatives (lower house) are filled. The election results are later annulled.

Constitution, institutions and administration

A new constitution, Thailand�s 16th since 1932, was approved in September 1997. Its principal aims were to stamp out government corruption and to ensure a corruption-free and transparent electoral process. Under the new constitution, MPs must resign their parliamentary seats to take up cabinet posts, ministers are made to declare their assets before and after taking office, and the prime minister must be an elected MP. Candidates must stand for election to the 200-member Senate (the upper house) instead of being appointed.

The constitution stipulates 500 members of the lower house, of whom 400 are directly elected in single-seat constituencies nationwide and the remaining 100 (called party-list MPs) are apportioned to each political party in direct relation to the proportion of votes they receive. Any party receiving less than 5% of the popular vote loses its right to any party-list MPs. The aim is to ensure that MPs directly elected in constituencies concentrate on constituency and legislative work. Only MPs on the party list may be selected to join the cabinet.

The new constitution created 11 constitutionally independent bodies in a bid to try to limit the scope for graft in politics and to create a democratic system of checks and balances. One of these bodies, the Election Commission (EC), was

A new constitution is enacted

Independent institutions lose credibility

Thailand 9


established to monitor elections to both the upper and lower houses. Although the 2001 election was still subject to fraud and vote-buying, the EC played an active role in attempting to reduce such activities, marking considerable pro-gress in Thailand�s move towards more transparent democratic processes. How-ever, the EC came under intense criticism for its handling of the April 2006 snap election, most notably for its alleged favouritism towards the ruling TRT.

The EC�s reputation has not been the only one to suffer. The fact that Thaksin was acquitted by the Constitutional Court raised questions about its impartial-ity, particularly as it was acting on a recommendation to prosecute from the National Counter Corruption Commission (NCCC). Thaksin, unsurprisingly, has been heavily critical of the anti-graft agencies, and has attempted to undermine their credibility. Since taking office in 2001, Thaksin has compromised the impartiality of the agencies by appointing a number of his supporters to them. The NCCC�s reputation, however, was severely damaged in May 2005, not because of a lack of independence but because all NCCC members were forced to resign after being found guilty of wilful self-serving.

The Constitutional Court regained some of its credibility when ruling in favour of nullifying the results of the controversial April 2006 election. The judiciary is independent of the legislative and executive branches of government, and Supreme Court judges are appointed by the king. The legal system is based on a civil law system, with elements of common law.

The 1997 constitution reduced the size of the cabinet from 48 members to 36 in a bid to increase efficiency. However, the Thaksin government�s bureaucratic reform bills, enacted on October 3rd 2002, involved the creation of five new ministries (making a total of 20) and 35 new departments. The new ministries cover natural resources and the environment, tourism and sport, information and communications technology, culture, and social development and human security. The public debt office and the state enterprise department now come under the Ministry of Finance. The reforms appear to run contrary to the decentralisation initiative outlined in the 1997 constitution and are instead increasing the power of the state sector. They were rushed through the legislature, raising questions about adequate preparation and research, and about the government�s numerical strength, which allows it to push through controversial legislation without full debate.

Political forces Last five election results (winning parties)

July 1995 Chart Thai-led coalition Nov 1996 New Aspiration Party-led coalition

Jan 2001 Thai Rak Thai-led coalition Feb 2005 Thai Rak Thai Apr 2006a Thai Rak Thai

a Election results later nullified.

Source: Economist Intelligence Unit.

Bureaucratic reform is enacted

10 Thailand


During its first term in office, the TRT�s parliamentary strength was bolstered by mergers with a number of other parties. In June 2001 the small Seritham Party merged with the TRT, giving the latter an additional 14 seats. In 2002 the National Aspiration Party, which had won 35 seats in the 2001 election, merged with the TRT, and later, in 2004, the CP also dissolved and merged with the TRT, bringing in 31 MPs. Following the 2005 election, the TRT controlled 377 seats in the lower house, enabling it to govern alone rather than merely being the dominant force in a government coalition as during the previous parlia-mentary term. However, the party has suffered factional infighting over the past few years, and there have been some notable splits, particularly in the wake of the political instability in early 2006. Members of the most vocal renegade faction, Wan Nam Yen, led by Sanoh Thienthong, resigned from the party in February 2006, shortly after two of the faction�s members, Uraiwan Thienthong and Sora-at Klinprathum, resigned from their cabinet posts.

The DP is the largest party in opposition, and has traditionally been a force to contend with when out of office. However, it has failed to compete with the TRT. Throughout 2002 the DP was absorbed with its own leadership contest as the party leader, Chuan Leekpai, announced his retirement in April 2003. Banyat Bantadan, a veteran politician with a strong support base in the south of the country, was elected as the new leader shortly afterwards. However, he proved unable to match the charisma and dynamism of Thaksin, and after leading his party to a dismal performance in the 2005 election, Banyat tendered his resignation as leader. In March 2005 the party�s general assembly unanimously voted for Abhisit Vejjajiva as the party�s new head. Soon after receiving the party�s backing in March, Abhisit pledged to overhaul the DP, to enable it to shed its dour image and present itself as a more potent force to counter the TRT.

Although the party�s decision to boycott the April 2006 snap election proved effective in limiting the legitimacy of the poll, by not standing head-to-head with the TRT in the election, the party opened itself to criticism that it had failed to adhere to democratic principles and was simply avoiding another potential dismal election performance.

Bhumibol Adulyadej, the revered king, is the ninth monarch of the 215-year-old Chakri dynasty. With the help of Queen Sirikit, he has spent much of the last half-century restoring the monarchy from its low ebb in the wake of the 1932 revolution. However, the king, who was born in 1927, has been undergoing treatment for heart and other health problems since the late 1980s, and his designated heir, Crown Prince Maha Vajiralongkorn, is considerably less popular than his father.

The king has become more outspoken on political matters in recent years, and in particular since the Thaksin administration took power. In his annual birthday speeches, the king has shown subtle signs of displeasure at Thaksin�s arrogance and growing abuse of power. However, during the political turmoil in the first few months of 2006, with mass anti-Thaksin demonstrations in Bangkok, the king refused to intervene, despite the calls by the demonstrators for him to appoint a government to replace Thaksin and the TRT. The king

The king is greatly revered, and is a stabilising force

The dominant TRT lacks cohesion

The DP has lacked effectiveness

Thailand 11


eventually helped to bring some calm to the proceedings by spurring the courts into action to avert a constitutional crisis. The king avoided any direct intervention, but questioned the legitimacy of the April 2006 poll, saying that a one-party election was not democratic and that parliament would not be able to function without a full quorum. The public�s immense respect for the king makes the monarchy one of the few remaining institutions that garners the full respect of all people and all political parties.

Main political figures

Thaksin Shinawatra

The current caretaker prime minister and founder of the Thai Rak Thai (TRT) party, Thaksin made a personal fortune from government telecommunications concessions and won respect for his business acumen. Thaksin led the TRT to an impressive win in the 2001 election and became the first prime minister to see out a full term in office and be re-elected. However, his time in office has been controversial, as he faced allegations of conflict of interest and abuse of power. His populist polices, however, have endeared him to the rural poor in the north and north-east, but there is widespread antipathy to his government in the capital, Bangkok, and the south.

Abhisit Vejjajiva

After narrowly losing the Democrat Party (DP) leadership election to Banyat Bantadan in April 2003, Abhisit finally took control of the party in March 2005 following Banyat�s resignation. He differs from the old school of Thai politicians in that he is Oxford-educated, young, and professes a fondness for rock groups. He describes himself as a professional politician, and believes that information technology is a key force for political reform (in the sense that the more people know, the less politicians can hide from them).

Korn Chatikavanij

Deputy secretary-general of the DP. A first-time member of parliament (MP), Korn hails from the world of high finance, having run JP Morgan Chase (Thailand), the local arm of the US-based investment bank, which included a successful securities company that he founded and developed into an unrivalled success. An expert on finance and economics and an Oxford class-mate of Abhisit, he connected with voters in his constituency in Bangkok in a way that belied his patrician background, overcoming a high-profile opponent running for the TRT. Korn�s political fortunes sky-rocketed when Abhisit recognised his ability and skill by appointing him to a deputy secretary-general post in the DP.

Sondhi Limthongkul

Thaksin�s foremost critic, and one who has managed to do the most damage to his reputation since late 2005. Sondhi is a media tycoon who was once a close ally of Thaksin�s. However, after a spate of defamation suits was filed against him by Thaksin and his Muang Thai Rai Sapda (Thailand Weekly) TV programme taken off air, Sondhi embarked on a campaign to oust Thaksin from office in late 2005. He began by hosting his TV show live in public, generally focusing on allegations of Thaksin�s abuse of power and the government�s attempts to suppress media freedom. He is a leading voice in the People�s Alliance for Democracy (PAD), which was formed in February 2006 and led mass anti-Thaksin demonstrations in Bangkok.

12 Thailand


International relations and defence

Since the end of the second world war Thailand has been a staunch ally of the West, holding annual joint military exercises with the US and Australia. In the 1970s Thailand was in the front line of the ideological struggle in South-east Asia. After left-wing governments took power in all three countries in Indochina (Vietnam, Laos and Cambodia) in 1975, Thailand became a base of support for Khmer factions opposed to the Vietnamese occupation of Cambodia. During the first US war against Iraq in 1991, Thailand allowed US forces the use of the U-Tapao air base.

In 2003, at the start of the US-led invasion of Iraq, the Thai government remained conspicuously quiet, but eventually announced its neutrality. This was in contrast to its regional neighbours, Singapore and the Philippines, which gave their full backing to the US. However, later in 2003 Thailand sent more than 440 troops to Iraq to fulfil a largely humanitarian role in the conflict. The US later designated Thailand a non-NATO ally, meaning that Thailand will now benefit from greater access to US weaponry in addition to enhanced security co-operation.

The focus of foreign policy (other than overriding commercial interests) now appears to be the strengthening of regional links. This is not limited only to Thailand�s immediate neighbours in the Association of South-East Asian Nations (ASEAN), but to deepening ties with India and China and the wider Asian region. It is within this framework that Thaksin now seems to be striving to become a regional figurehead. He has based his statesmanship on a clutch of assertive policy initiatives, led by the Asia Co-operation Dialogue (ACD) and the Ayeyawady-Chao Pharaya-Mekong Economic Co-operation Strategy (ACMECS). The ACD, a Thaksin initiative, grew from 18 to 25 members in just three years in the early 2000s alongside a host of programmes to promote intra-Asian co-operation. Launched in November 2003, the ACMECS provided an assistance package of Bt10bn (US$247m) to Myanmar, Laos and Cambodia (and to Vietnam from May 2004) for economic development.

Ties with Cambodia have been strained since the 1991 peace settlement at the end of the Indochina war, with the Cambodian government accusing Thai security forces of backing an abortive coup in 1994 and!until its collapse in 1998-99!supporting the Khmer Rouge through logging deals. However, in recent years bilateral relations have warmed, and Thai businesses now have considerable investment and assets in Cambodia. This new rapport was shaken in January 2003, when violent anti-Thai riots led to the burning of the Thai embassy in the Cambodian capital, Phnom Penh, and considerable damage to Thai business concerns. The riots were reportedly sparked by unsubstantiated reports that a Thai actress had said that Cambodia�s national symbol, Angkor Wat, should be returned to Thailand. The Thais responded angrily to the riots, and diplomatic relations were downgraded. However, relations have since returned to normal.

A new foreign policy focusing on regional ties emerges

Tensions with Cambodia reappear

Thailand�s alignment with the West remains intact

Thailand 13


Thailand and neighbouring Myanmar have a long history of strained relations. When he came to office, Thaksin promised to improve relations between the two countries, switching the focus to mutually advantageous commercial deals. After a brief honeymoon period, tensions escalated in May 2002 when the Burmese authorities accused the Thai army of aiding the Shan rebels (who are waging a guerrilla war against the Burmese army), and the border was closed for around five months. The Thaksin administration then attempted to strengthen relations, in part to protect Thailand�s commercial interests in Myanmar, and also to gain the military government�s support in clamping down on crossborder drug smuggling. After failing to make any progress with his own �Bangkok Process� initiative, Thaksin became supportive of the plans of the State Peace and Development Council (Myanmar�s ruling military junta) to implement its own reforms at a self-determined pace. However, the junta�s failure to make any meaningful progress with reforms and its refusal to release the pro-democracy leader, Aung San Suu Kyi, from house arrest, has made it difficult for the Thaksin administration to offer its full support to the junta, particularly as other ASEAN nations are taking a tougher approach in their dealings with the junta. The US, which has imposed trade sanctions on Myanmar, has often criticised Thailand�s conciliatory stance towards the junta.

The influence of the armed forces in Thai political affairs has decreased dramatically since their unpopular seizure of power in 1992. The new constitution has made them more accountable, and the cabinet must now approve all internal service budgets. However, a plan to make all three services come under the command of a civilian leader was scrapped after strong opposition from senior officers. Officially, the three services still report to the supreme commander, but in practice the army chief has influence over all services because of the numerical dominance of the army.

Military forces, 2005 Personnel (no.) 506,600 Active 306,600 Reserves 200,000

Source: International Institute for Strategic Studies, The Military Balance, 2005/06.

Security risk in Thailand

Armed conflict

Historically there has been little serious risk of armed conflict in Thailand, but since the beginning of 2004 there has been mounting civil unrest in the southernmost provinces of Thailand, home to the minority Muslim population. The death toll has risen to more than 1,000, comprising militants, members of the security force, in addition to government officials, teachers and Buddhist monks. The most deadly incident occurred in April 2004, when 34 people were killed in a local mosque in Pattani following a shoot-out between security forces and militants. Attacks on government and police property and personnel occurred frequently even before the start of the recent violence, but such attacks now occur regularly. In April 2005 bombs were detonated in the airport at Hat Yai, Songkhla province, and at the city�s

Thaksin offers support for the Burmese junta

Modernisation of the military begins in 1992

14 Thailand


branch of Carrefour, a French supermarket chain, raising concerns that the violence was likely to spread: these were the first bomb blasts to have occurred outside Yala, Pattani and Narathiwat. The latest targets, an airport and a foreign-owned business, also lend credence to fears that the insurgents are now intent on attacking economic targets in addition to government and military ones. Moreover, the greater sophistication demonstrated in the recent attacks may indicate increased support from forces outside the conflict zone itself, and perhaps from regional Islamist groups, such as Jemaah Islamiah.

Unrest/demonstrations

There are periodic demonstrations, and prior to the anti-Thaksin protests in early 2006, the focus of the unrest tended to be related to the government�s management of the economy, rather than politics. However, demonstrations are mostly peaceful. Indeed, despite the number of protestors reaching around 100,000 in early 2006, and the high level of animosity displayed towards the prime minister, Thaksin Shinawatra, the demonstrations were peaceful. Labour unrest has historically been limited, but the planned privatisation of the state electricity utility, Egat, has triggered mass demonstrations by labour unions in recent years. Certain industries, such as power and the national airline, are widely perceived as important national assets, and their sale to foreign strategic partners could cause a public outcry.

Violent crime

Street and petty crime exists at a relatively high level, and travellers outside the capital, Bangkok, in particular, need to take precautions. Violence is unlikely to be used against foreigners unless they become involved with the local business mafia. However, in recent years there have been a number of widely reported murders of foreign tourists.

Organised crime

There is also a high level of organised crime, but it is primarily a domestic phenomenon. Crime rings, many of them involved in the drug industry, use violence against rival gangs. However, foreign companies are unlikely to come into contact with such groups. During 2001 there were two bombings at branches of a UK supermarket chain, Tesco, in Bangkok, raising the possibility that foreign retail interests were being targeted. It has now been proved that the attacks were under-taken by members of a security firm hired by Tesco.

Kidnapping and extortion

Kidnapping is not a threat to foreign businesspeople. Extortion is rampant. The security forces, particularly the police and customs departments, can be expected to demand additional remuneration for services.

Thailand 15


Resources and infrastructure

Population

Population growth has been slowing in recent decades (according to national sources), falling to an average of around 0.9% per year in 2001-05, from around 1.8% in the early 1980s and 3% per year in the 1960s. Thailand"s population stood at an estimated 65.1m in 2005. According to the UN Development Programme (UNDP), in 2003 around 24.5% of the population was below 15 years of age, compared with 40% of the population below 13 years of age in 1980, while 5.4% of the population was above 65 years of age. In 2003 life expectancy stood at 70 years, up from 61 years in 1970-75. There has also been improvement in the infant mortality rate, which stood at 23 per 1,000 births in 2003 compared with 74 in 1970, primarily as a result of improved health provision.

The labour force has been growing at a relatively fast pace, averaging 1.7% per year in 2001-05, and urbanisation is growing rapidly. The proportion of urban residents increased to 32% in 2003, according to the UNDP, up from 24% in 1975, and it is expected to continue to rise. Most of the urban population is concentrated in Bangkok and its extended Metropolitan Area, which has an estimated population of 12m. The west and far north are the most sparsely populated areas of the country.

Population by age and region: data from 2000 census (m) Age Total Urban Rural0-4 4,387.1 1,145.8 3,241.35-9 5,030.9 1,295.5 3,735.410-14 5,203.5 1,377.9 3,825.615-19 5,341.3 1,640.1 3,701.220-24 4,931.6 1,804.1 3,127.625-29 5,248.5 1,868.9 3,379.630-34 5,448.7 1,814.6 3,634.235-39 5,386.9 1,742.2 3,644.740-44 4,849.7 1,606.1 3,243.645-49 3,876.7 1,254.2 2,622.550-54 2,914.7 916.7 1,998.155-59 2,284.5 672.3 1,612.260-64 1,998.2 593.9 1,404.365-69 1,526.0 437.0 1,089.170-74 1,043.4 312.0 731.475-79 594.9 174.4 420.580-84 323.8 101.9 221.985+ 226.8 76.4 150.3Source: Bank of Thailand.

Although Thailand�s population is one of the most homogeneous in South-east Asia, there are pronounced ethnic variations. In the northern border areas, an estimated one-third of the population speaks Lao rather than Thai, and other dialects are spoken that would not be understood in the rest of Thailand. In some parts of the south a dialect involving a mixture of Thai and Malay is

Population growth is falling

Ethnic variations exist

16 Thailand


spoken. The main unifying force is religion!all but around 5% of the population is Buddhist. The largest minorities are Muslim Malays (an estimated 4% of the population is Muslim, most of whom are ethnic Malays residing in the southernmost provinces) and the 600,000 people belonging to hill tribes in the north.

About 14% of Thais claim Chinese ancestry, but the actual figure could be as high as 30%. In the capital, Bangkok, about 70% of the population is believed to have some Chinese blood. Demographic data lack accurate ethnicity assess-ments, partly owing to assimilation policies followed by governments since the 1940s.

Education

According to the 2000 census, the average number of years of education that had been received by those aged 15 years rose to 7.8 in 2000, up from 5.7 in 1990. Government efforts at improving education have resulted in a 91% enrolment rate in primary schools, as well as a considerable rise in enrolment in secondary schools. Attendance at secondary schools, although still relatively low by regional standards, has risen from 17% in 1970 to 45.5% in 1990 and 65.7% in 2000, according to the census. Furthermore, about 22% of the college-age population is enrolled in a tertiary education institution, comparing well with the rate of only 11% in Indonesia. The adult literacy rate, at 92.6% in 2003, according to the UNDP, is one of the highest in the region.

However, nearly 80% of the current labour force has received only primary education, and, most importantly, the quality of secondary and higher education does not meet the requirements of an expanding economy aiming to remain internationally competitive. The majority of students in tertiary education are enrolled in vocational colleges rather than universities, and curriculum standards are generally poor. Consequently, the skills required for a shift to higher value added and high-technology industries are still in short supply. Less than 20% of graduates choose science or technology degrees, compared with 52% in Malaysia in 2000.

Under the 1997 constitution, free education is guaranteed for children up to 12 years old. In addition, the National Education Act of 1999 stipulated a timeframe of three years for an ambitious reform of the entire system. In 2002 the government finally enacted educational reform, with the launch of an initiative guaranteeing 12 years of free education to all children and plans to increase the autonomy of tertiary-level institutions. However, the scope of the reform was limited, and a number of important issues were not addressed. These include the curriculum (the Thai curriculum tends to require rote-learning for tests rather than teaching to solve problems or think independently), regional differences in the quality of educational provision, access to schooling for the disadvantaged and, most importantly, the financial resources to guarantee 12 years of free basic education. However, lower-income families have complained that, although there may no longer be school fees, parents still have to buy textbooks and school uniforms for their children and have to pay for some forms of tuition and school activities.

Educational standards remain low, despite improvement

Educational reform is behind schedule

Thailand 17


Health

Healthcare is still predominantly provided by the public sector, although private-sector care grew rapidly during the 1990s. The public health network, which accounts for around two-thirds of hospitals, includes a health centre in every tambon (group of villages), a hospital with ten to 90 beds in every district, and one referral hospital with at least 200 beds and specialised care in every province. The mispricing of services over the years has meant that the public health services rely heavily on government subsidies, and many are close to insolvency. This issue of insufficient funds was made worse by the introduction in February 2001 of universal healthcare at only Bt30 (around 75 US cents) per hospital visit. Under the Bt30 healthcare scheme, which covers people without health insurance, the government established a flat-rate subsidy per patient to pay the hospital or doctor, but both private and state hospitals are complaining that this does not reflect the true average cost per patient. The subsidy was initially set at Bt1,308 in 2003/04, but has risen steadily to Bt1,659 (around US$40) in 2006/07. Medical staff are reportedly reluctant to work in rural hospitals because of strains on their finances. There is also anecdotal evidence that participating hospitals are unwilling to dispense drugs costing more than Bt30, thus defeating the purpose of the scheme. Furthermore, there are concerns that in the long term the scheme could prove to be a disservice to the poor, as private hospitals will continue to improve their services, whereas state hospitals under the programme will shoulder an increased burden with limited funding.

There has been a large increase in the number of private hospitals in the past few years. At end-2005 there were about 400 private hospitals, with most concentrated in urban areas. Occupancy rates fell at private hospitals following the introduction of the Bt30 scheme, forcing private hospitals to upgrade their facilities and aggressively seek business from middle- to upper-income Thais and foreigners. Standards of care are high, and hospitals use the latest medical technology. Prices are much lower than in Western countries: equivalent treatment would cost twice as much in Japan, three times more in Singapore, five times more in Europe and eight times more in the US.

Thailand has traditionally focused on preventive public health measures, such as sanitation, clean water supplies and vaccinations, as the most cost-effective means of improving the health of the population. This policy has led to remarkable improvements over the last decades, although life expectancy is still lower than in neighbouring Malaysia. The decline in infectious-disease rates has been much slower than in other South-east Asian nations, with tuberculosis, dengue fever and malaria still prevalent. In addition, chronic and degenerative conditions, such as cancer and heart disease, are on the rise. The government launched a massive public education campaign in the mid-1990s to raise the public�s understanding of the risk of HIV/AIDS, and the rate of infection appears to have stabilised.

Public-sector predominates, but it is short of funding

Preventive public health measures are instituted

18 Thailand


Natural resources and the environment

Zinc, gypsum and lignite are the most important minerals, although there have also been promising finds of gold and copper, and there are smaller deposits of other metals. Proven natural-gas reserves are estimated at about 15.4trn cu ft, and proven oil reserves stand at around 700m barrels, having increased in recent years following a number of significant oil discoveries in the Gulf of Thailand. Other reserves are in a 2,600-sq km section of water with disputed sovereignty. Cambodia and Thailand both claim the area, and there is no prospect of an early resolution to the dispute. Thailand also has around 1.4bn tonnes of recoverable coal reserves.

Thailand�s richest land resource area in terms of agricultural productivity is the Central Plains rice belt. Maize, cassava, cotton and pineapple are cultivated in upland areas, and rubber is produced in the south of the country. The planted area has doubled in the past three decades to more than 20m ha, of which rice paddy accounts for one-half. To date, production has generally been increased by expanding the planted area, rather than through productivity improve-ments involving irrigation and the use of fertiliser. However, urbanisation and salinisation are eating into arable land, and a gradual decline in the cultivated area is expected.

Much of Thailand is prone to flooding during the rainy season, and flash floods are becoming a particular problem. At the other extreme, periods of severe drought are not uncommon during the dry season, particularly in the north-east of the country.

Severe pollution, especially in urban areas, has led to the development of a small but active grass-roots environmental movement. Buddhist monks, who still command near-universal respect among the population, lead many of the most effective organisations. A royal princess, Maha Chakri Sirindhorn, is a prominent and vocal supporter of environmental causes.

A World Bank environmental report published at end-2002 reported that air quality in Thailand had improved significantly in the previous ten years. In particular, air quality in the capital, Bangkok, which had been among the worst in the world, was now rated ahead of Beijing in China, Jakarta in Indonesia, New Delhi in India and Manila in the Philippines. The World Bank report did, however, say that there remained a problem with dust created by diesel engine emissions and open fires. The so-called PM10 particles (tiny dust specks) can enter the respiratory system, causing allergies, lung cancer and heart disease.

Urban congestion and health concerns have brought a belated focus on environmental controls since the early 1990s, and a range of legislation now applies. Environment protection zones have also been designated, and are protected under the environmental laws. These include an industrial hub on the eastern seaboard, and tourist destinations (such as Pattaya and Phuket) and biologically rich forests and cultural heritage sites (including the Bang Krachao area on the bank of the Chao Phraya river).

Minerals and gas abound

Efforts are being made to reduce damaging pollution

Thailand 19


Transport, communications and the Internet

Thailand�s road network has been growing. By 2003 the network had expanded to 63,730 km of road, up from 57,233 km in 1998. Nearly all of these roads are paved and are in fairly good condition. Rural road construction enjoys political support, as most members of parliament (MPs) are from the provinces. However, new urban expressways remain a higher priority, owing to prestige factors and the influence of the powerful automotive lobby. Budgetary constraints and a lack of foreign investor interest have meant that the upgrading of national highways has been slow.

There have been major improvements in mass transport systems in Bangkok over the past five years or so. In December 1999 the first mass transit system, the Bangkok Skytrain, opened three years behind schedule and some US$900m over budget. Passenger numbers were initially far below expectations, but have been picking up. The aim of developing an integrated mass transport system in Bangkok moved a step closer in July 2004, when Thailand�s first underground train system finally commenced full operation. The 18-station underground railway stretches 20 km along one route through the centre of Bangkok.

Further development of the mass transport systems in Bangkok, focusing on the extension of the Skytrain and underground rail networks, is planned. An investment budget of Bt480bn (US$12bn) had been approved in 2004 to expand the network from 44 km to around 290 km within five years. However, political instability in 2006 is likely to delay the implementation of such plans.

Two deep-sea ports on the eastern seaboard at Laem Chabang and Map Ta Phut have reduced pressure on Bangkok�s congested Klong Toey port, which handled 90% of freight until 1998. In 2004 the government awarded a 30-year concession to a consortium led by a Hong Kong-based company, Hutchison Port Holdings, to operate six new berths at the Laem Chabang deep-sea port. The deal marked a major step in the expansion of the port, and forms part of an overall plan to improve the country�s transport network. The Laem Chabang port currently has an annual capacity of 3.8m twenty-foot equivalent units (TEUs), with seven berths. With the additional six berths, capacity will expand by 6m TEUs over the next ten years. The government is keen to promote the use of Laem Chabang port rather than Klong Toey in order to reduce the volume of traffic in and out of Bangkok.

Plans to develop a second international airport have been under consideration since 1960. Bangkok urgently needs to modernise and expand its airport facilities. The current international airport at Don Muang is nearing capacity and needs to be upgraded. Vested interests have been the main cause of the 40-year delay in the development of the second airport at Nong Ngu Hao. The project developer, the state-owned New Bangkok International Airport Co, finally commenced construction of the airport, Suvaranabhumi, at the 32-sq km project site in Bang Phli, Samut Prakan, in early 2002. It is estimated that the project will cost around Bt125bn, and that when completed it will be capable of handling over 40m passengers per year; Don Muang International Airport currently handles around 33.5m passengers per year. Although the prime

Transport infrastructure is improving

The opening of a new airport suffers delays

Port facilities expand

20 Thailand


minister, Thaksin Shinawatra, wanted to open the airport by the deadline of September 2005, this did not prove to be feasible, and the most recent revised deadline was for the airport to open for commercial use in September 2006.

Although Thailand�s telecommunications infrastructure has expanded, the long delay in the formation of the National Telecommunications Commission (NTC), which is tasked with overseeing the industry�s liberalisation, has generally hampered the pace of development. As a result, Thailand has fallen behind its regional peers in the level and quality of telecoms services. The NTC was finally formed in 2004, and it has since proceeded with one of its main tasks of issuing licences for telecoms providers.

Fixed-line telephone connections grew to around 7.8m in 2005 from around 6.5m in 2001 and only 1.4m in the early 1990s, when services were partly privatised. Fixed-line services are still largely dominated by two state-owned enterprises, TOT Corporation and CAT Telecom, but they have been losing ground to the mobile sector in recent years. Mobile-phone use has grown rapidly, with a penetration rate of about 36% in 2005, up from only 3.5% in 1998. After being locked in a price war over the past year or so, the three leading mobile operators!Advanced Information Services (AIS), which is run by Thailand�s Shin Corporation (part-owned by the investment arm of the Singapore government, Temasek); DTAC, which is operated by Total Access Communications, itself part-owned by Norway�s Telenor; and True Move, which is operated by Thailand�s True Corp!have moved to expand their networks. However, these operators still focus heavily on Global System for Mobile Communications (GSM) technology, with the development of more advanced third-generation (3G) services, which offer high-speed Internet access as well as video and data download capacity, having been delayed owing to the slowness in establishing the NTC.

The newest entrant to the mobile-phone sector is a code division multiple access (CDMA)-based mobile service, Hutch, which was formed through a joint venture between CAT Telecom and a Hong Kong-based firm, Hutchison. Despite a growing subscriber base, Hutch�s expansion plans have been hampered by delays in the expansion of the CDMA network caused by the slowness in establishing the NTC.

The Internet penetration level has risen sharply, to around 13.3 users per 100 people in 2005 from 3.8 in 2001, but problems remain in the form of regulatory constraints, high costs, unfamiliarity with computer technology and the limited number of websites in the Thai language. One constraint is cost: leasing Internet lines in Thailand costs six times more than in Hong Kong and over twice as much as in Malaysia and the Philippines. However, the NTC announced in late 2005 that it was planning to liberalise International Internet Gateway (IIG) services. Such a liberalisation process will break the long-standing monopoly held by the state entity, CAT Telecom, which currently provides the sole gateway for international connections, and will enable private Internet service providers (ISPs) to build direct links with overseas networks. According to the NTC chairman, Choochart Promprasit, the move should result in a fall in broadband Internet tariffs. Local ISPs have blamed CAT Telecom�s monopoly in

Internet penetration rises, but broadband is slow to develop

Telecoms development is delayed

Thailand 21


IIG services for high Internet access costs and limited broadband penetration in the country.

The National Broadcasting Commission (NBC) is another new regulatory body that was due to be set up but whose formation has been delayed owing to accusations of corruption and cronyism in the selection of its members. In March 2002 the Administrative Court invalidated a shortlist of 14 commission members, citing favouritism. There is considerable concern about the extensive powers that the NBC will have to allocate television and radio frequencies as well as to set guidelines for the content of radio and television programmes. All terrestrial free-to-air television services are now in the hands of government agencies, the army or families with close connections to government ministers, including the prime minister.

Energy provision

Thailand�s current energy provision is adequate and reliable!in 2005 installed capacity stood at about 25,500 mw, including production from the state-owned electricity generator and distributor, Egat, private suppliers and imported capacity. Energy conservation schemes have proved successful, and domestic energy production is continually increasing, reducing Thailand�s traditional reliance on imports. However, Thailand�s electricity generation, around 70% of which is fuelled by gas, is vulnerable to supply disruptions and price volatility. Demand for gas has been growing strongly in recent years, partly because of high international oil prices, but also because it is preferred on the grounds that it is a cleaner fuel. Thailand started buying gas in significant quantities from Myanmar in 2000, but domestic gas production has been expanding, reaching 836.6bn cu ft in 2005, up from 692.6bn cu ft in 2001.

The government�s failure to part-privatise Egat in 2005 has raised concerns about future power supply. Egat accounted for 15,035 mw or 59% of total production in 2005, but its power plants are typically too old to run at full capacity, and some of them are fuelled by expensive bunker oil. Persistent opposition from conservation, farming and environmental groups to new power stations is also leading to slow progress on developing the power sector. The government is increasingly turning to neighbouring countries with spare capacity to fill gaps in domestic energy provision.

In response to rising global oil prices, the Thaksin administration intensified its efforts to cut the country�s crude oil import bill, partly through measures to promote energy conservation. These include electricity-saving campaigns for large buildings and factories as well as 800 government buildings, and a financing plan for small and medium-sized businesses to renovate or adapt their buildings in order to reduce energy consumption. The government has also been strongly supportive of efforts to encourage motorists to switch to gasohol, which is produced by combining one part of ethanol with nine parts of petrol.

Liberalisation of the media is still suffering delays

Energy provision is adequate, but there are problems

Policies are proposed to reduce energy imports

22 Thailand


The economy

Economic structure Main economic indicators, 2005 (Actual unless otherwise indicated)

Real GDP growth (%) 4.5

Consumer price inflation (av; %) 4.5

Current-account balance (US$ m) -3,719

Exchange rate (av; Bt:US$) 40.2

Population (m) 65.1

External debt (year-end; US$ m) 52,457a

a Economist Intelligence Unit estimate.


The Thai economy, traditionally based on agricultural exports, has transformed dramatically over the past few decades. By the 1970s the active promotion of foreign investment had already created an industrial sector based on import substitution. In the 1980s an export-oriented manufacturing sector, based on labour-intensive products such as textiles and garments, began to develop. After 1990 the fastest growth was in higher-technology goods, such as computer accessories and motor vehicle parts. Agriculture now accounts for less than 10% of GDP, while industry and services each account for a fairly equal share of around 45% of GDP. Industrial activity is highly concentrated in the central region, around the capital, Bangkok. However, the government has been keen to decentralise Thailand�s industrial base through the creation of investment promotion zones throughout the country.

Despite the shift away from agriculture to industry, structural reform to support this change in economic focus has been inadequate. After the economic crisis struck in mid-1997, consensus grew on the need to prioritise structural reform, in areas such as fostering backward linkages in industry to improving the provision of higher education The subsequent recession forced a certain amount of restructuring, but a steady recovery in 1999-2000 dulled reformers� zeal. In 2001 the slowing economy, driven by a downturn in export demand, led the administration to refocus on the need for structural reform, and particularly on the need to invest in education, agriculture, technology and small and medium-sized enterprises. Robust economic growth since 2002 has again dampened the administration�s willingness to push ahead with reforms.

Industry expands as the role of agriculture diminishes

Thailand 23


Comparative economic indicators, 2005 Thailanda Singaporea Indonesia a USb Japanb

GDP (US$ bn) 176.6b 116.8b 281.3 b 12,487.2 4,563.7

GDP per head (US$) 2,696 26,873 1,162 42,129 35,805

GDP per head (US$ at PPP) 8,413 34,041 3,489 42,129 30,460

Consumer price inflation (av; %) 4.5b 0.4b 10.5 b 3.4 -0.3

Current-account balance (US$ bn) -3.7 32.8 2.0 -804.9 165.6

Current-account balance (% of GDP) -2.1 28.1 0.7 -6.4 3.6

Exports of goods fob (US$ bn) 109.3 231.9 83.2 892.6 568.5

Imports of goods fob (US$ bn) -106.0 -195.5 -62.0 -1,674.3 -474.7

External debt (year-end; US$ bn) 52.5 23.8 135.0 � �

Debt-service ratio, paid (%) 8.6 1.5 14.2 � �

a Economist Intelligence Unit estimates. b Actual.


Economic policy

Economic policy over the past five years has been dominated by so-called �Thaksinomics�. On coming to office in 2001, shortly after the country com-pleted an IMF support programme and with the economy still in recovery mode after the 1997 financial crisis, the administration of Thaksin Shinawatra pushed ahead with a populist economic policy agenda. The administration implemented a number of conspicuous policy initiatives: farmers were offered a three-year moratorium on the debt owed to the state-owned Bank for Agriculture and Agricultural Co-operatives (BAAC); a grant of Bt1m (US$25,000) was disbursed to each of the 70,000 or so villages under a revolving Village Fund scheme; a Bt30 (75 US cents) healthcare scheme was implemented; and subsidised loans to small and medium-sized enterprises (SMEs) were offered by the state-owned SME Bank. Although there are no firm data to indicate the precise impact of each policy component on the economy, these policies have been lauded both domestically and internationally for contributing to the impressive rate of economic growth in recent years.

However, the policy agenda has also been heavily criticised for being populist and irresponsible. Opposition groups have produced anecdotal evidence to back up their claims that Thaksin�s policies have led to a build-up of household debt, destroyed the sense of community self-reliance and destabilised the health service. They have also put at risk the sustainability of the sovereign debt burden through the increase in off-budget contingent liabilities associated with lending by state-owned banks.

Despite the expansionary nature of the Thaksin administration�s populist policies, much of the expenditure has been off-budget, and the central govern-ment�s budget position has strengthened in recent years. Indeed, in late 2005 the IMF commended the government for its prudent macroeconomic polices. In fiscal year 2004/05 (October-September) the government recorded a gross operating budget surplus (excluding net acquisitions of non-financial assets) of Bt175.5bn (US$4.4bn), up from Bt84.2n in 2003/04 and Bt124.5bn in 2002/03. In 2001/02 the government recorded a gross operating budget deficit of Bt283.3bn. Underpinning the improvement in the fiscal position has been continued sharp

�Thaksinomics� is a popular alternative to IMF�s austerity

The budget turns to surplus in recent years

24 Thailand


growth in revenue. In 2004/05 total revenue reached Bt1.3trn compared with only Bt834.1bn in 2000/01. However, government expenditure has also been on the increase, reaching around Bt1.1trn in 2004/05, up from Bt750bn in 2000/01.

�Mega-projects� on hold

Thaksin�s policy platform shifted in 2005 to one based on investment in large-scale infrastructure and social development mega-projects. The government had planned to spend a total of Bt1.8trn (US$45bn) over five years to improve mass transit infrastructure, transport and communications, water resources, education and public healthcare. Although the development plans, if fully implemented, would undoubtedly boost economic growth and improve the overall economy, the ambitious programme, however, raised serious concerns about the potential for both the fiscal and external accounts to record unsustainable deficits. Despite the rapid expansion in central budget spending to support this plan (Bt658bn of the total spending was set to come from the central budget), the government was certain that it would be able to maintain a balanced budget, and that public debt will remain under 50% of GDP. When switching to caretaker government mode in February 2006, the Thai Rak Thai-led administration asserted that it had not shelved plans for the mega-projects and that it would continue to prepare for the bidding process. However, owing to the ongoing political instability, it remained unlikely that the programme would proceed as planned.

Monetary policy was traditionally formulated in order to smooth exchange-rate volatility. Under the auspices of the IMF programme the Bank of Thailand (BOT, the central bank) adopted a monetary-targeting regime, under which daily and monthly targets for the monetary base were set, price stability being the main policy objective. Since May 2000, however, the BOT has formally adopted an inflation-targeting regime. The BOT�s Monetary Policy Committee (MPC), which meets every six weeks, pursues monetary policy by adjusting interest rates to the appropriate level to keep inflation within set targets.

By mid-2003, in line with falling international interest rates and local inflation, the 14-day repo rate had dropped to a historical low of 1.25%, a level at which it remained until August 2004. Since then the BOT has been steadily tightening monetary policy by raising the repo rate, and by April 2006 the repo rate had been raised to 4.75%. As the BOT is mandated to keep core inflation within a 0-3.5% range, it has been concerned about rising inflationary pressures in recent years, and it has justified its tight monetary policy position on the basis that it is focused on maintaining economic stability rather than economic growth. Although it has rarely been mentioned in the MPC�s minutes, the BOT has also appeared keen to maintain a 25-basis-point spread below comparable US rates.

The Thaksin administration has failed to push ahead with its privatisation programme, which, in early 2005, the then finance minister, Somkid Jatusripitak, stated was a �key step� in transforming the economy. In the past few years it has managed to oversee the privatisation of only three enterprises: the oil and gas firm, PTT; the airports operator, Airports of Thailand (AoT); and

Monetary policy shifts to inflation-targeting

Little progress is made with privatisation plans

Thailand 25


MCOT (Mass Communications Authority of Thailand). The Thaksin administration�s plans to sell shares in the state-operated electricity utility, Egat (formerly known as the Electricity Generating Authority of Thailand), have suffered numerous setbacks and delays in recent years. The biggest setback came in March 2006, when the Supreme Court ruled that the two executive decrees paving the way for the sale of shares in Egat were illegal. The same court ruled in November 2005 that the initial public offering (IPO) in Egat be suspended; the ruling came the day before the IPO was due to go ahead and was a major embarrassment for the Thaksin administration. The court�s latest decision was based on the opinion that there were serious conflicts of interest in the planned sale of shares in Egat, with politicians linked to the Thaksin administration set to benefit, and that there were not enough public hearings prior to the planned IPO. The court also ruled that Egat should remain a public entity because it operates on public lands that had been expropriated by the government.

The Thaksin administration had planned to oversee the issuance of nearly 1.25bn shares in Egat, enabling the firm to raise up to Bt35bn. It claimed that the sale would help to raise the firm�s operating efficiency and promote good governance, while also boosting the country�s capital markets (the Egat IPO would have been the largest in the country�s history). The court ruling was therefore a severe blow to the Thaksin administration, damaging its policy-making credibility, while also providing Thaksin�s critics with ammunition to back their claims that his time in office has been plagued by conflicts of interest. Anti-privatisation lobbies stated that they would use the ruling against the Egat IPO to justify launching lawsuits against the IPOs in a number of large firms, including the petroleum giant, PTT. The IPO in PTT in late 2001 raised concerns over unfair distribution of shares, with those with close links to the Thaksin government securing relatively large numbers of shares.

Following the ruling against the privatisation of Egat, the government announced that plans for IPOs in the state telecoms firms, TOT Corporation and CAT Telecom, had been suspended indefinitely. In addition to these two firms, a number of other state entities had been slated for privatisation by the Thaksin administration, including the Metropolitan Electricity Authority, the Provincial Electricity Authority, the Metropolitan Waterworks Authority, the Government Pharmaceutical Organisation, the Provincial Waterworks Authority, the Port Authority of Thailand, and the Expressway and Rapid Transit Authority of Thailand.

Thaksin appealed to nationalist sentiment in his inaugural election campaign, criticising the tax and tariff incentives offered to foreign investors and the generally high level of import demand. Concern about the possibility of a return to more inward-looking policies partly accounted for the sharp drop in foreign direct investment in 2001. Thaksin subsequently toned down his nationalist rhetoric, and became increasingly keen to attract foreign investment, and in recent years he has been determined to reach bilateral free-trade agreements (FTAs) with key trading partners. Trade agreements have been reached with Australia (a comprehensive FTA, effective January 2005) and New Zealand (a �closer economic partnership�, effective July 2005), while �early

Thaksin downplays nationalist rhetoric and supports FTAs

26 Thailand


harvest� deals have come into effect with China, India and Bahrain. Negotiations over FTAs have also taken place with Japan and the US. However, these deals have not proved popular, with opponents claiming that the agreements fail to protect Thai interests. There have also been legal challenges against FTAs that have already been signed, most notably those with Australia and New Zealand, with the Senate Foreign Affairs Committee lodging a complaint with the Constitutional Court in January this year based on the government"s failure to debate FTAs in parliament.

The political crisis in early 2006 seriously disrupted the momentum behind the drive to reach trade deals with the US and Japan. The seventh round of FTA negotiations with the US were tentatively scheduled for early 2006, but this proved impossible. Instead, negotiating teams said that talks would resume during the middle of the year, assuming a new government was in place. There still remain a number of issues on which the two sides will struggle to bridge their differences, most notably those related to patent protection for pharmaceuticals and intellectual property rights for biodiversity. The proposed trade deal with Japan, known as an Economic Partnership Agreement, was also hampered by the political crisis. Both sides had planned to sign the deal in early April 2006, but agreed to postpone this until a new government is formed in Thailand.

Economic performance

Gross domestic product (% real change; av)

Annual average 2005 2001-05Private consumption 4.4 5.2Government consumption 12.2 4.4

Gross fixed investment 11.3 8.9Exports of goods & services 4.4 5.6Imports of goods & services 9.3 7.6

GDP 4.5 5.0

Source: National Economic and Social Development Board.

Thailand�s economy has recorded fairly strong rates of GDP growth in recent years. The economy recovered from the recessions in 1997 and 1998, when GDP contracted by 1.4% and 10.5% respectively, with growth averaging 4.5% per year in 1999-2000. However, growth slowed in 2001 in response to weak global demand for exports, before picking up again to 5.3% in 2002 and 7% in 2003. The pace of growth slowed slightly in 2004, to 6.2%, partly reflecting the devastating impact of the outbreak of avian influenza (or bird flu) on the agricultural sector, and dropped to 4.5% in 2005, owing primarily to a contraction in agriculture.

Exports have been the main engine of economic growth for several decades. The depreciation of the baht in 1997 and the first half of 1998 had been expected to trigger a recovery of the export sector, but owing to numerous structural constraints export growth was at first disappointing. However, in

Exports still drive growth, but less so than in the past

Growth has rebounded strongly in recent years

Thailand 27


2000 the export sector expanded by 17.5% year on year. Weak global demand in 2001 led to a renewed slowdown in exports, and the sector contracted by 4.2%. But the downturn proved to be short-lived, as exports of goods and services rebounded strongly in 2002, growing by 12%, and maintained their expansion at an annual average rate of over 8% in 2003-04. However, growth in exports of goods and services slowed in 2005, to 4.4%.

The high foreign content of exports means that imports generally move in line with trends in the export sector; imports of goods and services expanded by 13.7% in 2002, followed by a rise of 8.5% in 2003. In 2004 and 2005, however, import growth was particularly strong, with imports of goods and services expanding by 13.5% and 9.3% respectively, largely owing to a resurgence of investment demand.

In recent years, domestic demand has also helped to bolster overall economic growth rates. Rising consumer confidence and higher incomes have under-pinned strong private consumption growth, which averaged 5.4% in 2001-04 before slowing to 4.4% in 2005. Both farm and non-farm incomes have im-proved in line with higher commodity prices and the impact of the government�s expansionary policies, such as the moratorium on farmers� debt repayments and the Village Fund scheme. Largely as a result of low interest rates and rising confidence in the business sector, overall investment spending has been strong, rising by 11.3% in 2005, following growth of 13.8% in 2004 and 12.1% in 2003.

Inflation, as measured by the consumer price index (CPI), has accelerated in recent years, rising to 4.5% in 2005 from 1.6% in 2001. Low capacity utilisation and relatively high unemployment meant that the principal sources of inflation in 2000-01 were external, consisting of bouts of baht weakness and volatile international oil prices. The pick-up in GDP growth since 2002 has contributed to upward pressure on consumer prices, but in the past few years the main factor contributing to the acceleration in inflation has been rising food and fuel prices. Prices of food and beverages increased by only around 0.5% per year in 2001-02, before rising by an average of 4.4% per year in 2003-05. The rising trend in global crude oil prices has meant that fuel prices have surged, particularly since the government stopped subsidising retail fuel prices in October 2004 (for petroleum) and July 2005 (for diesel). Energy prices jumped by 9% in 2004 and 17.7% in 2005. Core inflation, which excludes volatile food and fuel prices, has also edged up in recent years, rising to 1.6% in 2005 from an average of only 0.3% in 2002-04.

Inflation (% change, year on year)

Annual average 2005 2001-05Consumer prices 4.5 2.2Producer prices 9.1 4.8


Consumer price inflation picks up

28 Thailand


The solid rates of economic growth in recent years have contributed to an improvement in employment. The rate of unemployment has fallen gradually since the 1997 economic crisis. In 2005 the unemployment rate averaged 1.7%, down from 4.4% in 1998. Although employment in agriculture has continued to fall in recent years, this trend has been offset by a rising number of workers in most other sectors, particularly manufacturing, construction and in the hotel and restaurant business. The size of the registered labour force reached 36.2m in 2005, out of a total population of 65.1m. However, official data are believed to underestimate the number of unemployed.

Regional trends

Strong growth rates since 1970 have led to a steady rise in the level of real income per head, even though population growth was rapid until the 1980s. However, there are alarming disparities in national wealth distribution, which were amplified by the economic downturn of 1997-98. According to a report published by the National Economic and Social Development Board (NESDB) in 2001, in that year 15.9% of the population lived below the poverty line, represented by a monthly income of Bt886 (about US$20). The north-east of Thailand accounted for 30% of those below the poverty line, and the southern states accounted for a further 15%. The central area, including the capital, Bangkok, accounted for only 0.2%. The NESDB also reported that the level of poverty had risen from only 11.4% of the population in 1996, providing stark evidence of the damaging social impact of the 1997-98 regional financial crisis.

Governments have promoted economic decentralisation as a way of reducing regional inequalities. Since 1993 about 65% of investment receiving government incentives has gone outside Bangkok, but most reached only as far as the Eastern Seaboard Industrial Zone, about an hour�s travel from the capital. The Board of Investment (BOI) responded in 1997 by setting up the country�s first special economic zones in 13 of the poorest provinces, but the timing was poor and there has been little response. The Thaksin administration has focused more strongly on developing the agricultural sector than on trying to industrial-ise rural areas.

Economic sectors

Agriculture

Once the backbone of the economy, the agricultural sector (including forestry and fisheries) is declining in terms of its importance to the overall economy!in 2005 it accounted for less than 10% of GDP (at current prices)!with growth rates usually lagging behind overall economic growth. The number of people employed in agriculture is generally declining, and accounted for around 39% of total employment in 2005, compared with 52% in 1995. However, the agricultural sector is still closely linked with employment and income prospects, which in turn determine domestic demand.

Wealth is unevenly distributed

Agriculture now accounts for less than 10% of GDP

The unemployment rate is falling

Thailand 29


Rice, the dominant agricultural export crop, is irrigated in the Central Plains and in the basins of northern Thailand, but is rain-fed elsewhere. The annual rice harvest (paddy production) stood at above 29m tonnes in 2003-05, up from around 26m tonnes in both 2001 and 2002. Thailand remains the world�s largest exporter of rice. Although exports dropped to only 7.5m tonnes in 2005, down from a record high of nearly 10m tonnes in 2004, this level was still above the annual average of 7.1m tonnes recorded in 2000-03. Thailand is hoping that China�s accession to the World Trade Organisation (WTO) and the decline in China�s domestic rice production will lead to a rise in global demand for Thai rice. The government is also aiming to achieve greater control over rice prices. In December 2002 officials from the five largest Asian rice-exporting countries!China, India, Pakistan, Thailand and Vietnam!met in Bangkok to discuss how to build an information exchange system in rice trade. The five countries agreed that Thailand would serve as the focal point for the com-pilation and distribution of information on the rice trade to the participating countries. The information would then be used to set rice prices, with a view to maintaining stability in the market and protecting the interests of farmers.

The bird flu crisis eases

Thailand was the world"s third-largest chicken exporter in 2003, before suffering a collapse in sales following an outbreak of avian influenza (bird flu) in January 2004. Since then, over 60m poultry birds have been culled or have died of bird flu (Thailand typically produced about 1bn chickens per year). Exports of fresh and frozen duck and chicken plummeted to US$45m in 2004 and only US$15.5m in 2005 compared with nearly US$600m in 2003. Thailand"s poultry farmers, however, have restocked and switched to exporting cooked chicken. Japan and the EU still have bans in place on raw poultry meat from Thailand, and in October 2005 the EU extended its ban for another 12 months. However, reported outbreaks of the virus have been less common over the past year. The government has pledged financial support for containment and prevention efforts, which focus on changing poultry-farming methods, primarily by encouraging a switch to closed-system farming. The rapid outbreaks of bird flu in 2004 have largely been blamed on small-scale open-system farms, which are more likely to be susceptible to the spread of the virus by migratory birds. The government has so far ruled out the use of vaccines to protect poultry from bird flu, owing to the likely ban by many countries on imports of poultry from Thailand that would follow, but it may allow a study of the use of vaccines to proceed. It has ruled out poultry vaccination, but insists that it is adopting tough measures to eradicate the disease.

Thailand�s 150,000 fishermen have 50,000 vessels, including about 17,000 deep-sea trawlers. Most are now big commercial operations with refrigeration and canning facilities for shrimp, lobster, squid, cuttlefish and tuna. Since 1999 unfavourable tariff changes by the EU and the US have led to sluggish growth in exports. The industry has also suffered from periods of high oil prices, which significantly increase production costs, and from rising competition (particularly in the US market) from China, Vietnam, Indonesia and the newly liberalised Indian export industry. The longer-term outlook for the Thai fishing sector is uncertain, owing to the depletion of stocks and low levels of investment. In

Thailand remains the world�s largest rice exporter

The fishing industry is under threat

30 Thailand


particular, the depletion of marine resources in the Gulf of Thailand and the closure of Burmese waters to Thai fisherman in 1999 has forced them to look for new fishing grounds. Indonesian waters are now the most popular, and this is causing friction between the two countries.

The fisheries industry was hit hard by the devastating December 2004 tsunami. According to a survey by the Fisheries Department, a total of 4,529 fishing boats were destroyed, including 1,127 large vessels. Shrimp farmers were also badly hit. According to the Thai Shrimp Association, the tsunami caused more than Bt1bn of damage to hatchery farming and facilities, and more than Bt1bn (US$248m) of damage to post-larval shrimp production.

Thailand is the world�s largest frozen-shrimp exporter, and the US is the largest market for Thai shrimps, typically accounting for around 50% of the total. However, the export volume of fresh and frozen shrimp dropped by more than 30% in 2002, with the value of exports falling to US$800m, from US$1.5bn in 2000 and US$1.2bn in 2001. The contraction was a result of a banned antibiotic having been found in shipments to the EU in February 2002 and of the subsequent restrictions imposed on imports from Thailand. The EU started to check every shipment of Thai shrimps, whereas previously testing was carried out on a random basis. In February 2003 the EU reverted to random testing after citing its satisfaction with the Thai government�s efforts to raise standards. The export volume of fresh and frozen shrimp rebounded as a result, rising by 20% year on year in 2003. Export volume has continued to rise, reaching more than 160,000 tonnes in 2005, up from around 99,000 tonnes in 2002.

However, the Thai shrimp industry has since faced a new challenge, that of anti-dumping duties on its exports to the US. In January 2005 the US International Trade Commission (ITC) upheld a preliminary decision reached in February 2004 to impose the duties on imports from Thailand and five other countries (namely Brazil, China, Ecuador, India and Vietnam) following an anti-dumping suit filed by the US Southern Shrimp Alliance, a group representing shrimp farmers and processors in eight southern US states. The ITC imposed a rate of 6.03% on Thai shrimp (down slightly from the preliminary rate of 6.39%). This is lower than the maximum rates applied to China (112.8%), Vietnam (25.8%), Brazil (10.4%) and India (9.5%). However, the Thai shrimp industry received a boost in 2006, when the EU restored import-duty privileges under its generalised system of preferences (GSP).

Mining and semi-processing

Although the mining sector�s share of GDP has fallen steadily in recent years to about 2.2% (including natural gas and crude oil output), the sector has enjoyed steady growth in recent years, and mineral export revenue has expanded. In 2005 the mining sector grew by 9.1%, following growth of 4.7% in 2004 and 6.8% in 2003, while export revenue jumped by 60% in 2005. After four successive years of expansion, natural-gas production reached 836.6bn cu ft in 2005, up from 692.6bn cu ft in 2001. Crude oil production has also risen with the development of new fields in the Gulf of Thailand, doubling from 22m barrels in 2001 to 41.3m barrels in 2005. The performance of other minerals has

Shrimp exporters suffer EU tests and US tariffs

Mineral output is anaemic, apart from oil and gas

Thailand 31


been mixed. Gypsum production rebounded strongly in 2004, reaching 8m tonnes, up from only 1.9m tonnes in 2003, but output slipped back to 6.9m tonnes in 2005. Iron ore output expanded sharply in 2002, rising to 570,000 tonnes, before dropping to less than 10,000 tonnes in 2003 and 135,600 tonnes in 2004. However, production picked up to around 220,000 tonnes in 2005. Output of tin concentrate continues to fall, dropping to only 163 tonnes in 2005, down from 2,383 tonnes in 2001.

Thailand has begun to realise its considerable potential for gold mining. In early 2003 a new gold mine was opened in the north-eastern province of Loei by a local company, Thungka. The mine is expected to yield 5 tonnes of gold in total, worth an estimated Bt1.5bn (US$0.1bn) over five years. Copper deposits estimated at 900m tonnes have been found in Chachoengsao and Loei provinces. Limited deposits of tungsten, antimony and lead also exist.

Exports of precious stones and jewellery have risen strongly in recent years, reaching US$3.2bn in 2005, up from US$1.8bn in 2001. Exports go principally to Japan, Israel, Belgium and the US. Thai competitiveness has been enhanced by the exemption of raw materials from import duty and revisions to the rate of value-added tax (VAT) levied on gold. The principal stones used in Thai jewellery are sapphires, rubies, zircon, garnet, beryl, quartz and jadeite.

Manufacturing

Manufacturing accounts for around 35% of current-price GDP, and specialises in export-oriented industries such as vehicles, electronics, electrical goods and textiles. The sector suffered a sharp contraction in the wake of 1997-98 regional financial crisis, but rebounded quickly in 1999. After posting only steady growth in 2000-01, manufacturing output has since expanded strongly. In 2002-05 the value of manufacturing output rose by an annual average of nearly 11%, in line with strong domestic demand and general buoyancy in major export markets. The capacity utilisation rate has also improved, picking up to 72.6% in 2005, from around 64% in 2002-03.

Manufacturing sector, 2005 (% change, year on year; volume terms)

Manufacturing production 9.2 Commercial vehicles 34.8 Integrated circuits 45.5 Petroleum products -0.4

Source: Bank of Thailand.

The Thai government has achieved marked success in its efforts to expand Thailand�s automotive industry and transform it into the �Detroit of the East�, with vehicle makers keen to use the country as a platform for export to other members of the Association of South-East Asian Nations (ASEAN). Partly in response to a host of investment initiatives, a number of leading global automotive firms, including Japan�s largest vehicle maker, Toyota Motor, and Ford Motor of the US, have announced or implemented plans to relocate production bases to Thailand or to expand their facilities there. The number of

The automotive industry expands rapidly

Manufacturing has recorded strong growth in recent years

Exports of precious stones and jewellery continue to grow

32 Thailand


vehicles produced in Thailand has risen rapidly in recent years, surpassing 1.1m units in 2005, a record level and nearly double the number produced in 2002. Of the total, around 440,000 vehicles were exported, worth Bt203bn (US$9bn). In March 2006 the deputy permanent secretary at the Ministry of Industry, Sumornman Garayasiri, stated that Thailand was set to overtake the US as the leading manufacturer of one-tonne pick-up trucks, a status that rewards the government�s efforts to promote Thailand as a regional automotive hub. In 2005 Thailand produced around 440,000 one-tonne pickup trucks, up from 229,000 in 2002.

Domestic demand for vehicles has been strong in recent years, in line with rising consumer confidence, loose fiscal and monetary conditions and the release of pent-up demand. Nearly 60% of domestic sales consist of pick-up trucks.

The electronics and electrical appliances sectors have recorded strong growth in the recent years. Output of electronic products increased by an annual average of 37% in 2003-05. Manufacturers of integrated circuits and hard disk drives (HDDs) have posted particularly impressive gains. In 2005 total output of integrated circuits reached 11.4bn pieces, up from only 4.4bn in 2001, while 120.6m HDDs were produced, more than double the number produced in 2003. The expansion in HDD output is a reflection of the expansion in operations of leading global HDD producers in Thailand. The country has become an increasingly attractive destination for HDD producers, owing to a range of promotional investment incentives offered by the Board of Investment, which has stated that HDD production is a priority sector.

Thailand has also been attracting greater investment by manufacturers of electrical appliances. Part of the attraction of investing in Thailand is that foreign firms can potentially benefit from low tariff privileges under the Association of South-East Asian Nations (ASEAN) Free Trade Area, in addition to bilateral free-trade agreements that Thailand has signed with major trading partners. Despite growing investment levels, growth in output of electrical appliances slowed to only 1.8% in 2005, down from an annual average of 8.5% in 2002-04. However, output of refrigerators and airconditioners continued to grow strongly.

The textile and garment sector has recorded fairly strong output growth in recent years, but exports have been suffering as a result of intensifying competition from low-wage suppliers, such as China and Vietnam. Thailand has been attempting to move up the value chain by promoting Bangkok as a regional fashion hub. The Thai Garment Manufacturers� Association (TGMA) is also determined to help small and medium-sized enterprises (SMEs), which account for around 70% of garment factories numerically, to improve their competitiveness. In early 2005 the TGMA unveiled its �Fast Fashion� programme, which comprises strategies to develop modern management skills, expand overseas markets and link the industry from upstream weavers to downstream garment-makers. The need to enhance competitiveness intensified in 2005, as at end-2004 the World Trade Organisation (WTO)�s Agreement on Textiles and Clothing brought to an end the system of export quotas that had

The electronics and electrical goods sectors return to growth

Textile and garment exports are weak

Thailand 33


operated since 1974. Although China has since faced further restrictions on its exports to the US and the EU, the country�s exports of textiles have expanded sharply, ensuring that Thailand�s exporters, with relatively high cost bases and capacity constraints, will suffer.

The opening since 1996 of two refineries by international oil giants Royal Dutch/Shell (Netherlands/UK) and Caltex (US), and the expansion of a third plant by another US firm, ExxonMobil, have made Thailand a net exporter of petroleum products. However, the 1997-98 recession and subsequent govern-ment intervention hit the industry hard. By end-2000 the Thai government owed the country�s six oil refineries a total of Bt2bn (US$50m) for selling liquefied petroleum gas (LPG) to the public at 40% of cost. This merely added to the financial problems of the refiners, which were already facing high costs, high levels of US dollar debt and weak domestic demand. Capacity utilisation dropped from over 90% in 1997 to around 75% in 2001, but has picked up since, reaching around 85% in both 2004 and 2005. Annual growth in output of petroleum products accelerated from 1.8% in 2002 to 8.3% in 2004, but the sector recorded a slight contraction in output in 2005. According to a UK-based energy company, BP, Thailand had a combined oil-refining capacity of 876,000 barrels/day in 2004.

Production in the steel industry has expanded fairly rapidly in recent years, and output from hot- and cold-rolled steel plants has been particularly strong. The sector has generally benefited from strong performances by sectors dependent on steel inputs, in particular the vehicle and automotive parts industries. Recovery in the property and construction sectors also raised demand, and output of iron and steel products jumped by nearly 30% in 2002. Output growth slowed to an average of around 8% in 2003-04, before the sector�s output contracted in 2005, by 3.4% year on year.

Local steel manufacturers have raised concerns about the future development of the industry. Under a free-trade agreement with Japan, which was agreed �in principle� in August 2005 but has yet to be signed, tariffs on Japanese steel imports are set to fall, immediately for steel products that are unavailable or in short supply, and gradually over eight to ten years for other steel products, such as hot-rolled steel. Local firms had called on the government not to yield to Japanese demands for lower tariffs for fear of a sharp rise in imports. Some local steel firms are also concerned over moves by foreign competitors to take a share of the local market.

Construction

After being hit particularly hard by the 1997-98 crisis (by late 1998 about 60% of the 13,000 registered construction firms were either insolvent or had ceased operating), the construction sector has generally recovered, with some signs of a renewed bubble. The sector contracted for three consecutive years in 1999-2001 (on a national accounts basis), but expanded by 5.2% in 2002, 3.3% in 2003 and an impressive 13.2% in 2004. Growth slowed to around 3% in 2005. Historically, Thai firms were relatively small, and even before 1997 Thai-owned

Petroleum refineries have considerable spare capacity

The construction sector has recovered

The steel industry has strengthened

34 Thailand


enterprises were suffering from an influx of bigger and more efficient European, Asian and Australian competitors. Since the crisis, a number of larger developers and contractors have restructured their debts, and there has been considerable consolidation in the industry. Several of the leading listed developers have taken foreign partners.

The housing market has been driving the expansion in construction, with buoyant consumer confidence in recent years and low interest rates supporting demand. There has been a particularly rapid expansion in luxury real-estate developments in Bangkok and its suburbs. After offering a range of incentives in 2002, in 2003 the government and the Bank of Thailand (BOT, the central bank) took steps to prevent a recurrence of the 1997 property market bubble. In an effort to stem speculation, the BOT announced in November 2003 that mortgage loans would be limited to 70% of the purchase price for properties worth more than Bt10m (US$250,000). No restrictions have been placed on properties worth less than Bt10m.

Financial services

Thailand�s financial institutions were at the centre of its 1997 economic crisis, and a total of 56 finance firms were subsequently closed. In response to the 1997-98 crisis, the authorities set up a number of new institutions to restructure the financial sector and restore confidence. To prevent bank runs and systemic risk, the Financial Institutions Development Fund (FIDF) was established to guarantee the deposits and liabilities of financial institutions. The government also created the Financial Sector Restructuring Authority (FRA), to auction off the assets of financial companies that had closed down, and the Thai Asset Management Corporation (TAMC), to manage the non-performing loans (NPLs) of the banking sector and ultimately to act as a centralised debt-restructuring mechanism. The TAMC accumulated around Bt780bn (US$19bn) in bad loans transferred from state-owned commercial banks.

The main institutions with responsibility for policymaking and supervision of the financial system are the Ministry of Finance and the BOT. The central bank supervises banks, finance firms and housing loan officials, and plays a leading role in instituting market reforms. Both institutions have been pushing through a joint reform agenda, under the Financial Sector Reform Master Plan, which was announced in early 2004 and centres on a process of consolidation. Under the reform plan, Thai banks have had to apply for licences to operate as either full-service commercial banks or restricted banks. Licences have also been granted to non-bank financial institutions, enabling them to operate as credit companies without the right to accept public deposits. For financial institutions that are unable to obtain licences as commercial or restricted banks, licences are being granted enabling them to operate as credit companies without the right to accept public deposits. Foreign-owned financial institutions will be permitted to operate as full-service banks, thereby enjoying the same scope of business as Thai commercial banks but without the right to open branches. Alternatively, foreign-owned financial institutions are allowed to operate as subsidiaries, enabling them to enjoy the same scope of business as Thai commercial banks and to open between three and five branches.

Good progress is made with restructuring plan

Thailand 35


Solid progress has been made under the reform programme, with seven new banks coming into operation in 2005-06, including Kiatnakin Bank, Tisco Bank and ACL Bank, all of which changed to become full-service commercial banks, upgrading from finance firms. However, these banks are set to continue to focus on niche products. Four other finance firms have received licences to operate as retail banks, including GE Money Retail Bank, a subsidiary of GE Money Thailand. The retail bank formally commenced operations in January 2006 and plans to offer deposit and lending services, including mortgages.

In addition to the restructuring of local banks and finance firms, the process of consolidation continues. In November 2005 United Overseas Bank (UOB) of Singapore formally announced the creation of its subsidiary, UOB (Thai), which was formed through the integration of UOB Radanasin and the Bank of Asia.

At present, there are three state-owned commercial banks!Krung Thai Bank (KTB), BankThai and Siam City Bank (SCB)!and a number of state-owned specialised banks, the largest of which are the Government Savings Bank, the Bank for Agriculture and Agricultural Co-operatives, and the SME Bank. In May 2006, in addition to the state-owned commercial banks, there were 15 Thai commercial banks and 17 foreign banks with single branch offices.

The banking system remains plagued by NPLs, and this has generally hampered the efficient functioning of the sector. In an attempt to improve the quality of management in Thailand�s banking system, in 2004 the BOT introduced tighter provisioning rules for commercial banks� NPLs. Although a number of banks have managed to restructure some bad loans and have reduced the level of NPLs in their portfolios, the second-largest commercial bank, KTB, suffered a sharp upturn in NPLs in mid-2004, the result of the reclassification of its doubtful loans following a BOT review. Now that BOT auditors are making qualitative as well as quantitative assessments of loans, the KTB had to include doubtful loans to 14 business projects in its NPL assessment. Other banks have also had to revise up their assessment of NPLs following the BOT directive. However, the overall trend in reducing NPLs has been maintained. At end-2005 total outstanding NPLs held by Thai commercial banks stood at Bt470bn, equivalent to around 8.3% of total outstanding loans, down from Bt570bn (10.9% of total outstanding loans) at end-2004.

Although commercial bank lending remains weak, the credit-card sector has expanded rapidly. There were nearly 10.2m credit cards in circulation in March 2006, up from 8.6m at end-2004 and only 2.6m at end-2001. Total outstanding credit-card debt reached Bt144bn in March 2006, up from Bt41bn at end-2001. Reflecting concerns about the rapid build-up in credit-card debt, in November 2002 the BOT restored the Bt15,000 (US$350) minimum monthly salary require-ment for credit-card holders, a regulation that it had abolished earlier in the year. The central bank also established an interest rate ceiling on overdue debt, allowing credit-card issuers to charge a maximum annual interest rate of 18% after taking other fees into account.

The credit-card sector expands, raising concerns

Non-performing loans remain a problem

36 Thailand


The Stock Exchange of Thailand (SET), the country�s main equity market, lost much of its appeal after the peak trading period in the mid-1990s, owing to a lack of quality listings and limited liquidity. This was compounded by the 1997 financial crisis, and in 1998-2000 the number of listed stocks dropped by 30%. The SET made a modest comeback in 2001-02, however, buoyed in large part by the successful initial public offerings of shares of state-owned enterprises, and in 2003 the SET was the world�s best-performing bourse, its composite index rising to 772.2 at end-2003, a year-on-year increase of 116.6%. Although the government was pleased to present the impressive upward trend as a reflection of improving economic fundamentals, the rapid rise created concern in some quarters, and particularly on the part of the market regulator, the Securities and Exchange Commission. However, the fairly sluggish performance of the SET throughout 2004!the composite index had fallen to 668 points by the end of the year!reduced such concerns. In 2005 the SET picked up steadily, and the index closed at the end of the year at around 714 points. Market capitalisation reached Bt5.1trn (US$126bn) at end-2005 with 468 listed companies, up from Bt4.5trn at end-2004 and Bt1.6trn at end-2001.

Other services

The tourism industry has suffered a number of major setbacks in recent years, most notably the regional outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003 and the December 2004 tsunami. However, the overall trend in the industry has been positive. Tourist arrivals rose by 5.8% year on year to just over 10m in 2001, despite the global economic downturn and the September 11th terrorist attacks in the US, bringing in Bt295bn (US$6.6bn) in revenue, with Thailand benefiting then from its reputation as a safe and stable society and from its efforts to step up security for visitors. In 2002 the number of foreign tourist arrivals jumped by more than 7% to 10.8m. According to the Tourism Authority of Thailand (TAT), revenue generated from foreign tourists in 2002 reached more than Bt320bn, up by 8.5% year on year. However, in 2003 arrivals fell to only 9.7m as the outbreak of SARS deterred regional travel. The industry rebounded quickly in 2004, with arrivals jumping to 12m, but the devastating tsunami that hit the southern part of the country on December 26th 2004 was followed by a severe drop in tourist arrivals.

According to data from Phuket International Airport, the number of passenger arrivals at that airport in January 2005 plunged to only 181,511, from nearly 510,000 in January 2004. However, according to the TAT, during the whole of 2005 the number of international arrivals dropped by only around 2% year on year to 11.4m, a fairly impressive number considering the sharp downturn in the first few months of the year. Rebuilding of hotels and resorts in the affected areas has also taken place at a fairly impressive rate.

Tourism growth is hampered by SARS and the tsunami

The stockmarket rebounds in 2003, and then stabilises

Thailand 37


The tourism industry counts the economic cost of the tsunami

There have been varying estimates of the cost of damage to buildings and infrastructure in the six southern provinces affected by the December 2004 tsunami disaster!Phuket, Krabi, Ranong, Phang Nga, Satun and Trang. The Tourism Authority of Thailand (TAT) initially estimated the cost of damage to hotels in the two worst-affected areas, Khao Lak in Phang Nga, and Phi Phi island in Krabi, at Bt12bn (US$300m) and Bt2.8bn respectively. Khao Lak, which had developed rapidly over the previous few years, with major international hotel chains opening large luxury hotels, suffered the greatest devastation in terms of the number of people killed and the extent of damage to hotels: few of the hotels in Khao Lak, which had a total of around 6,000 rooms, were left standing. The situation on Phi Phi, which had around 4,000 hotel rooms, was the same, with few hotels left standing. In Phuket, which has around 32,000 hotel rooms, the damage was less severe. Initial surveys of hotels around the island indicated that less than 20% had suffered serious damage, and reportedly a week after the tsunami only 15% of hotels remained closed. According to TAT, the damage on Phuket was estimated at Bt16bn, excluding that to public utilities and roads and to the power grid.

The external sector

Trade in goods

Foreign trade, 2005 (US$ m; fob-cif)

Exports 110,111 Machinery & mechanical appliances 16,198 Electrical apparatus for circuits 12,531 Electrical appliances 8,917

Imports 118,191 Fuel & lubricants 20,828 Minerals & metal products 16,499 Electronic parts 13,044Trade balance -8,080

Source: Bank of Thailand, Key Economic Indicators.

The value of merchandise exports (on a customs basis) has expanded sharply over the past few years, reaching US$110.1bn in 2005, up from US$96.2bn in 2004 and only US$64.9bn in 2001. Structural factors, including diversification into new and higher value added product areas, have played a major role in export growth, as has the expansion in export markets. Manufactured goods accounted for around 88% of all exports in 2005, up slightly from 85% in 2001. Exports of computer components, electronic consumer goods and vehicles, which are produced at relatively low cost in Thailand, have all grown sharply in recent years and are leading export sectors, eclipsing textiles and shoes, which dominated the export sector until the mid-1990s.

Exports of machinery and mechanical appliances (primarily computers and parts) increased to US$16.2bn in 2005 from US$9.4bn in 2001, while exports of electrical apparatus for electrical circuits jumped to US$12.5bn in 2005 from US$7.9bn in 2001. Exports of electrical appliances were valued at US$8.9bn in

Exports continue to expand rapidly

38 Thailand


2005, up from US$5bn in 2001, but it was the automotive sector that recorded the fastest growth, with export revenue rising to US$8.2bn in 2005, up nearly threefold compared with revenue in 2001.

Traditional exports regained some ground as a result of the post-1997 currency depreciation and lower labour costs, but Thailand is also rapidly losing competitiveness in these areas to lower-cost producers, such as India, China and Vietnam. Although exports of textile products have risen steadily in recent years, reaching US$5.5bn in 2005, growth has been weak over the past decade (textile export revenue stood at US$5.7bn in 1995).

The agricultural sector has benefited from strong global prices for major export commodities in recent years. The value of agricultural exports dipped slightly in 2005 to US$7.9bn from nearly US$8.1bn in 2004, but remained high compared with previous years. Rising prices in the past couple of years have helped rubber to reclaim its position as the main agricultural export earner, ahead of rice. In 2005 earnings from rubber exports reached US$3.7bn, compared with only US$1.3bn in 2001; revenue from rice exports totalled US$2.3bn in 2005, up from US$1.6bn in 2001.

Thailand�s dependence on imports of intermediate and capital goods has increased rapidly, owing to the shift from an agricultural to an industrial base. The total import bill (on a customs basis) reached US$118.2bn in 2005, up from only around US$61.9bn in 2001. Imports of intermediate products and raw materials account for the largest share of total imports, around 42-45% in recent years. In 2005 such imports stood at US$49.4bn up from US$26.9bn in 2001, while capital goods imports expanded from US$18.8bn to US$32bn during the same period. Consumer-goods imports have also grown rapidly in recent years in line with strong private-sector demand. In 2005 imports of consumer goods reached US$8.4bn, up from US$5.3bn in 2001, with consumer durables, such as electrical appliances, accounting for around 5% of total imports. The rapid expansion of the automotive industry has contributed to sharp growth in imports of vehicles and parts; these totalled US$3.9bn in 2005, compared with around US$2bn in 2001. However, one of the main driving forces behind the expansion in the import bill in 2005 was the surge in global crude oil prices, which pushed up Thailand�s imports of crude oil to US$16.9bn in 2005 compared with only US$5.8bn in 2001.

During the boom years of the 1990s, higher purchasing power and closer invest-ment ties made regional Asian countries Thailand�s fastest-growing trading partners. The Association of South-East Asian Nations (ASEAN) emerged as the largest buyer of Thai goods in 1995-96. The regional recession in 1997-98 arrested this trend, however, and the US and the EU became the major growth markets for Thai exports. In recent years, stronger regional economic growth and policies to enhance regional integration have meant that ASEAN countries have absorbed larger shares of Thai exports, reaching 21.8% of the total in 2005. Although the US remained the largest single export market in 2005, it absorbed only 15.4% of total exports, compared with more than 20% in 2001. Japan is Thailand�s second-largest market in terms of individual countries, accounting for 13.7% of total exports in 2005. China is emerging as an increasingly

Capital and intermediate goods push up imports

Japan remains Thailand�s leading trade partner

Thailand 39


important export market, accounting for 8.3% of total exports in 2005, up from only 4.4% in 2001. Japan remains Thailand�s biggest trading partner, largely because of its role as the leading import supplier, accounting for nearly one-quarter of Thailand�s merchandise imports.

Main trading partners, 2005 Exports to: % of total Imports from: % of totalASEAN 21.8 Japan 22.0

US 15.4 ASEAN 18.3Japan 13.7 EU25 9.1

EU25 13.6 China 9.4China 8.3 US 7.3Singapore 6.8 Malaysia 6.9

Source: Bank of Thailand, Key Economic Indicators.

Invisibles and the current account

Thailand�s current account plunged into deficit in 2005, after recording a healthy surplus in every year since the 1997 financial crisis. This outcome primarily reflected the deterioration in the merchandise trade account, largely because of a sharp rise in the import bill. According to the IMF, the current-account deficit stood at US$3.7bn in 2005, compared with a surplus of US$6.9bn in 2004 and US$8bn in 2003.

The services balance showed a deficit of US$7bn in 2005, according to data from the IMF. Despite the problems faced by the tourism industry in the wake of the December 2004 tsunami, overall travel-related services receipts stood at US$10.1bn in 2005, a record high, up slightly from 2004. This contributed to overall services receipts of US$20.6bn, up from only US$13bn in 2001. The drop in the services surplus in 2005 reflected the expansion in services payments, mainly transport services, for which payments rose to US$3.4bn in 2005, up from US$2.4bn in 2004 and only US$1.4bn in 2001.

The income-account deficit reached US$3bn in 2005, the highest level since 1998. Although income receipts have remained fairly stable, averaging around US$3.3bn in 2001-05, income payments have been rising in recent years, with payments on equity investments reaching a record high of US$4.8bn in 2005, up from only US$1.8bn in 2001. This trend has offset the decline in foreign debt service in recent years.

Current transfers boomed in 2005, with inflows standing at US$3.4bn, up from US$2.5bn in 2004 and an average of only around US$1.1bn in 2001-03. The expansion in net transfers primarily reflects financial aid flows for post-tsunami relief.

Slower economic growth in other countries has eaten into overseas workers� remittances. The exact contribution of remittances to the economy remains uncertain, as many workers remit their earnings through unofficial channels. However, the Ministry of Finance estimates that flows amount to at least US$2bn per year. In recent years, remitted earnings have been offset by increasing payments to foreign skilled workers and professionals by Thai

The current account falls back into deficit in 2005

The level of workers� remittances is uncertain

40 Thailand


companies trying to ease their own labour shortages as they take their production up the technology ladder.

Capital flows and foreign debt

Primarily as a result of the high level of external debt repayments, Thailand recorded annual deficits on its capital and financial accounts every year following the 1997 financial crisis up to 2004. However, as repayment obligations eased in 2005, and combined with a sharp increase in net portfolio investment inflows, the capital and financial accounts switched into surplus. Net portfolio investment inflows jumped to US$4bn in 2005, the highest level since before the 1997 crisis. Net inflows into equity securities reached a record high of US$5.2bn, while net inflows into debt securities returned stood at around US$314m, after returning to positive territory in 2004. Foreign direct investment (FDI) improved in 2005, with net inflows reaching US$3.3bn, the highest level since 2001. FDI inflows dropped sharply in 2002, partly reflecting concerns that the new administration under Thaksin Shinawatra would be more nationalist and inclined to protect domestic interests. However, this drop in FDI was also part of a more general move by foreign investors to invest in China rather than South-east Asia.

According to data from the Bank of Thailand (BOT, the central bank), total foreign debt has continued to fall, to US$50.9bn at end-2005, down from US$79.7bn at end-2000 and a peak of US$109.3bn at end-1997. The government and the banking sector have consistently managed to reduce their holding of external debt in recent years, but this has been partly offset by rising private-sector debt, particularly on a short-term basis. By end-2005 the private sector�s short-term external debt position had reached US$13.6bn, the highest level since the 1997 financial crisis. However, there is a difference in the composition of this short-term debt. In 1997 around 70% of the private sector�s short-term external debt comprised loans, whereas in 2005 trade credits made up 60%, with loans accounting for only 40%. (General government short-term external debt was completely cleared by the third quarter of 2005.) Another measure of the difference between the current external financial position and that prevailing before the 1997 crisis is that at the end of 2005 the ratio of Thailand�s international reserves to short-term debt stood at 312%, whereas in 1997 it was only 70%.

Repayments to the IMF and a number of central banks, which lent US$14.3bn to Thailand between 1997 and 2000, began in the fourth quarter of 2000. By July 2003 the government had successfully managed to complete repayment.

Net capital inflows return to surplus in 2005

Total external debt continues to fall

Thailand 41


Foreign reserves and the exchange rate

Thailand has managed to rebuild its foreign-exchange reserves over the past five years or so, after the government�s unsuccessful defence of the baht in foreign-exchange markets in 1997 exhausted up to one-third of all reserves in that year. By end-2005 reserves had risen to a record high of US$52bn, up from around US$32bn in 2001. Reserves have been driven upwards by the robust current-account surpluses recorded annually up to 2004, despite the early repayment of the external debt incurred in 1997-2000. In 2006 the reserves position continued to improve as financial inflows, in the form of both foreign direct and portfolio investment, offset the current-account deficit.

The authorities operate a free-floating exchange rate, with the currency peg being abandoned on July 2nd 1997. However, the BOT has intervened on occasions in recent years to prevent excessive fluctuation in the currency. Between 2001 and 2004 the baht strengthened markedly against the US dollar, primarily owing to the general weakness of the dollar. In 2004 the baht averaged Bt40.2:US$1, compared with Bt44.4:US$1 in 2001. Although the annual average value of the baht against the US dollar was practically unchanged in 2005 compared with 2004, the baht ended the year on a low of around Bt41:US$1. However, it appreciated sharply in early 2006 in line with strong capital inflows. The baht also began strengthening against other major trading currencies in early 2006, but prior to this it had been on a weakening trend. Against the Japanese yen, the baht depreciated in 2003-04 before rebounding somewhat in 2005 to average around Bt36.6:¥100, compared with Bt34.3:¥100 in 2002. Against the euro, the baht had depreciated more sharply, falling to Bt50:#1 in 2005 compared with Bt40.6:#1 in 2002.

Reserves continue to expand

The baht remains fairly strong

42 Thailand


Regional overview

Membership of organisations

The Association of South-East Asian Nations (ASEAN) was established in 1967. The five original members were Indonesia, Malaysia, the Philippines, Singapore and Thailand. Brunei joined in 1984, as did Vietnam in 1995, Laos and Myanmar in 1997 and, most recently, Cambodia in 1999.

ASEAN summit meetings, which bring together the heads of government of member states, must now be held every three years. The most recent took place in Malaysia in December 2005. Informal summits of heads of governments are also held. In addition, the foreign and economic affairs ministers of member countries meet annually. Joint meetings of foreign and economic affairs ministers are held before each ASEAN summit. There is also a standing committee (consisting of the members" accredited ambassadors to the host country), which usually meets every two months. There is a permanent secretariat, based in the Indonesian capital, Jakarta, and a number of committees.

The organisation started with some grand objectives, but has failed to deliver in most areas, with the exception of tariff reform. Early hopes that ASEAN could engineer a regional economic development strategy!with particular countries concentrating on particular industries!were soon dashed. In 1977 the Basic Agreement on the Establishment of ASEAN Preferential Tariffs was concluded, but a decade later only about 5% of trade between the association"s members was covered by this system. (Members had been permitted to exclude "sensitive" sectors, a let-out clause that a subsequent agreement in 1987 curtailed only slightly.)

Plans for a proper ASEAN Free-Trade Area (AFTA) were unveiled in 1992, with the aim of achieving it by 2008. A common effective preferential tariff (CEPT) scheme was applied in 1993, providing for the gradual reduction of tariffs on intra-ASEAN trade in certain goods over a number of years. Again, however, member states could exclude sensitive items, limiting progress. A new AFTA programme, covering a wider range of products, was launched in 1994. During the mid-1990s the timescale for implementing the programme was steadily tightened, with the aim of reducing tariffs on most goods to below 5% by 2000. A limited AFTA, between the original six members of ASEAN and involving a reduction of tariffs on intra-ASEAN trade to between zero and 5%, came into operation on January 1st 2002. (Countries joining recently have been allowed more time.) The momentum for change has been maintained in recent years. An ASEAN finance ministers" meeting in September 2004 agreed to abolish tariffs in 11 industrial sectors by 2012.

Before the recent acceleration in tariff reform, ASEAN"s slow progress towards AFTA had encouraged some of its members, notably Singapore, to opt instead for bilateral trade pacts. But ASEAN"s hopes of further multilateral deals have not been extinguished. In December 2004 ASEAN and China signed a major trade deal, which aims to eliminate most tariffs on trade between ASEAN and

Association of South-East Asian Nations (ASEAN)

Thailand 43


China by 2010 (2015 for the less developed members of ASEAN). Tariffs will not go completely: countries will be able to designate a number of sectors as sensitive, and the greatest liberalisation is therefore likely to occur in areas where Chinese and ASEAN trade is complementary.

The 1997-98 regional financial crisis exposed ASEAN"s failings in other areas in a brutal fashion. The organisation was unable to stop the regional currency devaluations or alleviate the subsequent economic hardship. A Statement on Bold Measures, issued at end-1998, was exactly the opposite of what the title implied. Unfolding events in Indonesia then moved the focus on to the organisation"s security plans. ASEAN members" commitment to the principle of non-interference in the internal affairs of other member countries complicated the response to the crisis in East Timor in 1999. (Some members did eventually participate in the multinational force that intervened in East Timor, but not under ASEAN auspices.)

The non-interference principle has also enabled the ruling military junta in Myanmar to escape strong criticism from the governments of other ASEAN countries. However, in July 2005 Myanmar gave in to international and regional pressure and agreed to forgo its turn to chair the association, thus sparing ASEAN embarrassment in its relations with the US and the EU. In another sign that the policy of non-interference in domestic issues is becoming more flexible, in August 2005 the Indonesian government asked ASEAN countries to provide representatives to help monitor progress on the restoration of peace in the province of Aceh, in northern Sumatra. Further, in December 2005 it was announced that ASEAN was to send an envoy to meet not only Myanmar"s ruling generals but also the opposition leader, Aung San Suu Kyi, whose National League for Democracy won elections in 1990 but was denied power by the junta. In the event the envoy, Syed Hamid of Malaysia, was not allowed to see Aung San Suu Kyi, and it appears that ASEAN"s patience with Myanmar"s glacial progress on political reform is running out. Myanmar is increasingly being seen as a serious impediment to ASEAN"s attempts to raise its profile and increase its credibility.

APEC started life as a forum for informal discussion between six members of the Association of South-East Asian Nations (ASEAN), Brunei, Indonesia, Malaysia, the Philippines, Thailand and Singapore, and their six dialogue partners in the Pacific, Australia, Canada, Japan, New Zealand, South Korea and the US. In 1991 China, Hong Kong and Taiwan became members, followed by Mexico and Papua New Guinea in 1993, and Chile in 1994. Peru, Russia and Vietnam joined in 1998. APEC describes itself as �the primary vehicle for promoting open trade and practical economic co-operation� in the region, with the goal of advancing �Asia-Pacific economic dynamism and sense of community�.

APEC has had a permanent secretariat since 1992, and also runs four permanent committees!on budget and managerial issues, on trade and investment, on economic trends generally, and on economic and technical co-operation. In addition, there are 11 working groups!on agricultural technical co-operation, energy, fisheries, human resources, industrial science and

Asia-Pacific Economic Co-operation (APEC) forum

44 Thailand


technology, marine resource co-operation, small and medium-sized enterprises, telecommunications, tourism, trade promotion and transport. There is also an APEC business advisory council (ABAC), which includes up to three senior private-sector representatives from each member country. APEC as a whole has its headquarters in Singapore, while ABAC is based in the Philippines. APEC�s main business is done at annual meetings of member states� ministers of foreign affairs and economic affairs, which are followed by informal gatherings of members� heads of state. Every other ministerial meeting is held in a South-east Asian country. The chairmanship of APEC rotates on a yearly basis.

During the 1990s APEC�s star first waxed brighter and then started to wane. The high point was probably reached in 1994, when members agreed a timetable for the liberalisation of trade across the region: the ambitious aim was to eliminate all trade barriers by 2020, and then to extend reciprocal concessions to non-members. Since then APEC has appeared to lose momentum and effectiveness. APEC�s response to the Asian regional financial crisis in 1997-98 lacked substance, and subsequent meetings provided other distractions from the trade liberalisation theme: the East Timor crisis in 1999, information technology in 2000 and security issues in 2001. Discussion returned to trade relations in 2002 and 2003, and it was agreed in a very general way to proceed towards greater trade and investment liberalisation. These commitments were reiterated at the November 2004 meeting, held in the Chilean capital, Santiago. The most recent APEC meeting, held in Busan, South Korea, in November 2005, was marred by demonstrations by South Korean workers and farmers against liberalisation of global trade, particularly that in agricultural goods. The meeting itself was also characterised by growing tensions on trade issues. The conclusion to be drawn from recent meetings is that APEC is now more an informal talking shop than a serious regional reformer.

Thailand 45


Appendices

Sources of information

Asian Development Bank

Bangkok Post (daily)

Bangkok Post, �Economic Review�

Bank of Thailand, Annual Economic Report, Bangkok

Bank of Thailand, Economic and Financial Statistics (monthly), Bangkok

Bank of Thailand, Time Series Database, (online)

IMF, Direction of Trade Statistics

IMF, International Financial Statistics

International Institute for Strategic Studies, The Military Balance

The Nation (daily), Bangkok

US Energy Information Administration

World Bank, Global Development Finance

Chris Dixon, The Thai Economy, Routledge, London, 1999

Rohan Gunaratna, Arabinda Acharya and Sabrina Chua, Conflict and Terrorism in Southern Thailand, Marshall Cavendish, Singapore, 2005

Duncan McCargo (ed), Reforming Thai Politics, Nordic Institute of Asian Studies, Copenhagen, 2002

Pasuk Phongpaichit and Chris Baker, Thaksin: The Business of Politics in Thailand, Silkworm Books, Bangkok, 2003

Board of Investment: www.boi.gor.th

Bank of Thailand: www.bot.or.th

National Economic and Social Development Board: www.nesdb.go.th

National Statistical Office: www.nso.go.th

Royal Thai Government: www.thaigov.go.th

Stock Exchange of Thailand: www.set.or.th

Tourism Authority of Thailand: www.tat.or.th

Select bibliography and websites

National and international statistical sources

46 Thailand


Reference tables Population (m unless otherwise indicated)

2001 2002 2003 2004 2005

Total (m) 62.94 63.46 64.01 65.08 65.11

% change, year on year 0.9 0.8 0.9 1.7 0.0

Population by age

Under 15 years 15.88 15.78 15.69 15.75 15.29

% of total population 25.2 24.9 24.5 24.2 23.5

Over 15 years 47.06 47.68 48.32 49.33 49.82

Source: Bank of Thailand, Economic and Financial Statistics.

Labour force (m unless otherwise indicated)

2001 2002 2003 2004 2005a

Employed 32.17 33.00 33.82 34.85 35.34

Agriculture 13.59 13.74 13.55 13.55 13.62

Non-agriculture 18.59 19.26 20.26 21.30 21.73

Unemployed 1.10 0.77 0.70 0.71 0.62

Seasonal inactive labour force 0.65 0.48 0.30 0.27 0.23

Total labour force 33.92 34.25 34.85 35.82 36.20

Unemployment rateb 3.2 2.2 2.0 2.0 1.7

a Preliminary. b % of labour force.


Central government finances (Bt bn; fiscal years ending Sep)

2001 2002 2003 2004 2005Income Taxation 687.4 763.8 897.6 1,023.5 1,161.1 Personal income tax 97.0 103.1 111.4 128.7 138.4 Corporate income tax 156.6 176.1 221.2 279.2 325.1 Import duties 90.8 95.4 110.0 103.6 104.6 Value-added tax 157.0 156.1 183.4 209.3 279.1 Excise taxes 175.4 205.7 237.1 259.2 257.5Total incl others 834.1 871.7 1,045.6 1,168.7 1,321.0Expenditurea Wages & salaries 299.8 306.8 328.1 354.1 416.0Grants 56.3 171.3 177.9 208.6 263.9Interest payments 63.7 69.0 65.1 84.3 88.4Social assistance 63.1 67.7 70.9 124.4 74.0Total incl othersa 750.4 1,155.0 921.1 1,084.5 1,145.5Budget balancea 83.7 -283.3 124.5 84.2 175.5

a Excluding off-budget transactions.


Thailand 47


Central government expenditure by functiona (Bt m; fiscal years ending Sep)

2001 2002 2003 2004 2005General public services 148,601 484,465 222,915 279,844 322,316Defence 74,752 79,394 75,794 81,037 84,929

Public order & safety 59,201 57,829 62,761 67,843 73,942Economic affairs 201,683 230,325 207,467 242,724 323,231Environmental protection - 1,651 963 10,953 6,844

Housing & community amenities 50,098 54,326 22,233 9,465 27,105Health 66,038 88,370 97,125 102,062 97,289

Recreation, culture & religion 6,906 7,224 7,783 7,377 7,301Education 199,807 226,503 235,264 262,975 265,847Social protection 114,110 81,326 109,218 132,484 102,526

Total 921,195 1,311,411 1,041,522 1,196,762 1,311,329

a Including off-budget expenditure.


Interest rates (%; period averages)

2001 2002 2003 2004 2005

Lending interest rate 7.3 6.9 5.9 5.5 6.9

Deposit interest rate 2.5 2.0 1.3 1.0 3.9

Money-market interest rate 2.0 1.8 1.3 1.2 4.1

Source: IMF, International Financial Statistics.

Money supply (Bt bn unless otherwise indicated; end-period)

2001 2002 2003 2004 2005

Money (M1) incl others 579.4 663.5 766.8 859.0 910.9


Quasi-money 4,664.2 4,715.4 4,875.0 5,089.4 5,528.0

Money (M2) 5,243.7 5,378.9 5,641.8 5,948.4 6,438.9



48 Thailand


Gross domestic product (market prices)

2001 2002 2003 2004 2005

Total (US$ bn) At current prices 115.5 126.9 142.9 161.7 176.6

Total (Bt bn) At current prices 5,133.5 5,450.6 5,929.0 6,503.5 7,103.0

At constant (1988) prices 3,073.6 3,237.0 3,464.7 3,678.5 3,842.5


Per head (Bt) At current prices 81,614 85,837 92,640 99,977 108,442

At constant (1988) prices 48,865 50,977 54,136 56,549 58,665



Nominal gross domestic product by expenditure (Bt bn at current prices; % of total in brackets)

2001 2002 2003 2004 2005

Private consumption 2,941.0 3,120.0 3,388.5 3,687.6 4,043.7

(57.3) (57.2) (57.2) (56.7) (56.9)

Government consumption 581.1 603.9 635.3 721.3 838.8

(11.3) (11.1) (10.7) (11.1) (11.8)

Gross fixed investment 1,181.3 1,243.2 1,423.9 1,686.8 2,057.0

(23.0) (22.8) (24.0) (25.9) (29.0)

Stockbuilding 55.8 54.1 53.6 75.0 188.0

(1.1) (1.0) (0.9) (1.2) (2.6)

Exports of goods & services 3,380.8 3,499.0 3,886.6 4,587.9 5,232.9

(65.9) (64.2) (65.6) (70.5) (73.7)

Imports of goods & services 3,047.6 3,134.3 3,485.3 4,281.9 5,338.6

(59.4) (57.5) (58.8) (65.8) (75.2)

GDP 5,133.5 5,450.6 5,929.0 6,503.5 7,103.0


Thailand 49


Real gross domestic product by expenditure (Bt bn at constant 1988 prices; % change year on year in brackets)

2001 2002 2003 2004 2005

Private consumption 1,690.6 1,782.6 1,896.3 2,008.2 2,097.1

(4.1) (5.4) (6.4) (5.9) (4.4)

Government consumption 284.0 286.1 292.7 306.5 343.8

(2.5) (0.7) (2.3) (4.7) (12.2)

Gross fixed investment 604.2 643.8 721.4 820.6 913.3

(1.1) (6.5) (12.1) (13.8) (11.3)

Stockbuilding 35.8 34.4 49.9 56.8 71.5

(0.3)a (0.0)a (0.5) a (0.2)a (0.4)a

Exports of goods & services 1,865.1 2,088.8 2,235.7 2,451.1 2,558.8

(-4.2) (12.0) (7.0) (9.6) (4.4)

Imports of goods & services 1,415.4 1,609.3 1,745.5 1,980.9 2,166.0

(-5.5) (13.7) (8.5) (13.5) (9.3)

GDP 3,073.6 3,237.0 3,464.7 3,678.5 3,842.5

(2.2) (5.3) (7.0) (6.2) (4.5)

a Change as a percentage of GDP in the previous year.


Gross domestic product by sector (Bt bn; at constant 1988 prices)

2000 2001 2002 2003 2004a

Agriculture 309.9 320.0 322.2 359.0 341.8

Mining & quarrying 64.2 64.6 71.7 76.6 80.2

Manufacturing 1,096.2 1,111.5 1,190.8 1,317.2 1,425.0

Construction 76.3 76.5 80.6 82.9 91.2

Electricity, gas & water supply 97.6 103.9 110.1 115.2 122.5

Transport & communications 289.9 309.6 330.7 343.2 370.0

Wholesale & retail trade 474.8 469.6 479.7 494.4 521.5

Hotels & restaurants 113.4 118.7 124.0 118.9 133.1

Transportation, storage & communications 290.4 310.1 331.2 341.3 367.4

Financial intermediation 84.0 85.8 95.7 111.7 126.4

Real estate, renting & business activities 120.3 122.4 128.4 134.9 144.4

Public administration & defence 95.3 98.8 105.3 108.3 110.0

Other servicesb 185.9 191.8 197.4 204.1 214.9

GDP 3,008.4 3,073.6 3,237.0 3,464.7 3,678.5

a Preliminary. b Includes education, health, and other community, social and personal service activities.


Prices and earnings (% change, year on year)

2001 2002 2003 2004 2005

Consumer prices (av) 1.6 0.5 1.8 2.8 4.5

Average nominal wages 1.0 2.0 2.0 3.3 5.0

Average real wages -0.6 1.5 0.2 0.5 0.4

Unit labour costs -7.1 6.7 6.3 7.1 6.7


50 Thailand


Crop production (�000 tonnes)

2001 2002 2003 2004 2005

Paddy rice 27,105 26,924 29,337 29,299 29,207

Rubber 2,561 2,632 2,861 3,005 2,975

Maize 4,516 4,189 4,081 4,300 3,881

Cassava 18,895 15,485 23,849 19,236 16,271

Sugarcane 50,963 61,732 81,722 69,808 43,666

Palm oil 4,097 4,001 4,903 5,182 5,003

Coconuts 1,396 1,418 1,957 1,848 1,674

Soybean 278 262 237 235 219

Tobacco leaves 64 78 66 63 70


Minerals production 2001 2002 2003 2004 2005Iron ore ('000 tonnes) 0.1 570.1 9.2 135.6 219.9Zinc ore ('000 tonnes) 88.7 151.6 148.3 199.2 283.8Gypsum (m tonnes) 6.5 6.3 1.9 8.0 6.9

Lignite (m tonnes) 19.6 19.5 4.3 19.8 20.9Natural gas (bn cu ft) 692.6 722.2 752.2 788.6 836.6

Condensate (m barrels) 18.9 19.6 22.9 25.0 25.7Crude oil (m barrels) 22.0 27.2 35.5 31.1 41.3


Manufacturing production 2001 2002 2003 2004 2005Passenger cars (�000) 155.9 169.3 251.7 299.0 277.6Commercial vehicles (�000) 303.3 415.6 490.4 628.6 847.7Motorcycles (�000) 1,051.0 1,496.0 1,908.0 2,279.0 2,510.0

Integrated circuits (m) 4,400.0 5,741.0 8,223.0 9,848.0 11,378.0Petroleum products (bn litres) 42.0 42.7 44.6 48.3 48.1

Spinning (�000 tonnes) 677.9 735.5 783.2 845.8 755.2Synthetic fibres (�000 tonnes) 806.4 868.7 830.7 893.9 809.0Overall index (2000=100) 102.7 112.0 127.6 142.4 155.5


Construction statistics 2001 2002 2003 2004 2005Construction area approval (m sq metres) 9.0 13.9 18.6 22.7 19.6 Bangkok 5.1 7.8 10.9 13.1 11.7

Construction materials sold Cement (m tonnes) 19.0 23.0 24.2 27.2 29.0Galvanised iron sheets (�000 tonnes) 434.1 519.9 462.1 436.0 283.6Steel bars (�000 tonnes) 1,475 1,841 1,986 2,321 2,208


Thailand 51


Banking statistics (Bt bn; year-end)

2001 2002 2003 2004 2005Assets of commercial banks 6,616.0 6,900.9 7,237.8 7,638.7 8,226.3 Claims on business & household sector 3,774.7 4,404.7 4,705.3 4,958.4 5,362.9 Claims on government 318.0 398.7 294.4 314.8 306.1 Foreign assets 748.4 633.6 617.8 574.3 661.7Liabilities of commercial banks 6,616.0 6,900.9 7,237.8 7,638.7 8,226.3 Total deposits of businesses & households 4,667.0 4,753.2 4,910.5 5,104.5 5,487.9 Foreign liabilities 461.6 413.2 325.4 394.9 330.5 Capital accounts 644.0 882.8 984.8 1,011.9 1,104.0


Stockmarket indicators 2001 2002 2003 2004 2005Companies quoted (no.) 382 391 408 440 468Total capitalisation at market value (Bt bn) 1,607 1,986 4,790 4,521 5,105SET index (year-end) 303.9 356.5 772.2 668.1 713.7

Sources: Bank of Thailand, Annual Report; Stock Exchange of Thailand, Annual Report.

Main composition of trade (US$ m; fob-cif)

2001 2002 2003 2004 2005

Exports fob Machinery & mechanical

appliances 9,391 9,109 10,593 12,859 16,198

Electrical apparatus for making or breaking circuits 7,943 8,540 10,581 12,266 12,531

Electrical appliances 4,960 5,652 6,427 8,446 8,917

Vehicles, parts & accessories 2,775 3,004 4,119 5,787 8,204

Total exports incl others 64,919 68,108 80,324 96,247 110,111

Imports cif Fuel & lubricants 7,445 7,435 8,937 13,150 20,828

Minerals & metal products 6,552 7,406 9,046 13,140 16,499

Electronic parts 8,471 8,638 9,286 11,007 13,044

Industrial machinery, tools & parts 6,136 6,464 7,930 9,553 11,239

Total imports incl others 61,959 64,644 75,823 94,410 118,191


52 Thailand


Main trading partners (% of total)

2001 2002 2003 2004 2005Exports fob to: US 20.4 19.9 17.0 16.1 15.4Japan 15.3 14.7 14.2 14.0 13.7China 4.4 5.2 7.1 7.4 8.3Singapore 8.1 8.2 7.3 7.3 6.8Imports cif from: Japan 22.4 23.0 24.1 23.7 22.0China 6.0 7.6 8.0 8.7 9.4US 11.6 9.6 9.5 7.7 7.3Malaysia 5.0 5.6 6.0 5.9 6.9


Balance of payments, IMF series (US$ m)

2001 2002 2003 2004 2005

Goods: exports fob 63,083 66,089 78,084 94,979 109,217

Goods: imports fob -54,538 -57,009 -66,909 -84,194 -106,055

Trade balance 8,543 9,080 11,175 10,786 3,162

Services: credit 13,024 15,391 15,799 19,040 20,628

Services: debit -14,611 -16,720 -18,169 -23,077 -27,603

Income: credit 3,834 3,356 3,016 3,120 3,390

Income: debit -5,200 -4,696 -4,808 -5,142 -6,300

Current transfers: credit 990 977 1,325 2,479 3,350

Current transfers: debit -389 -375 -385 -348 -348

Current-account balance 6,191 7,015 7,953 6,857 -3,719

Direct investment in Thailand 3,892 953 1,950 1,412 3,694

Direct investment abroad -344 -105 -488 -126 -246

Inward portfolio investment (incl bonds) -525 -694 851 892 6,977

Outward portfolio investment -361 -913 -940 1,214 -1,524

Other investment assets 577 4,135 -410 -1,985 -997

Other investment liabilities -6,897 -6,262 -8,590 -1,986 -410

Financial balance -3,658 -2,886 -7,627 -579 7,494

Capital account nie credit � � � � �

Capital account nie debit � � � � �

Capital account nie balance 0 0 0 0 0

Net errors & omissions -259 1,409 192 -586 1,643

Overall balance 2,275 5,536 517 5,710 5,417

Financing (� indicates inflow) Movement of reserves -380 -5,874 -3,233 -7,683 -2,234

Use of IMF credit & loans 0 0 0 0 0


Thailand 53


External debt, World Bank series (US$ m unless otherwise indicated; debt stocks as at year-end)

1999 2000 2001 2002 2003

Public medium- & long-term 31,300 29,500 26,200 22,600 17,800

Private medium- & long-term 38,600 32,300 26,100 24,500 23,100

Total medium- & long-term debt 69,900 61,800 52,300 47,100 40,900

Official creditors 21,800 20,800 19,100 16,300 13,200

Bilateral 16,400 15,500 13,600 12,900 10,200

Multilateral 5,430 5,330 5,430 3,450 3,020

Private creditors 48,053 40,947 33,200 30,840 27,728

Short-term debt 23,400 14,900 13,200 11,900 10,900

Interest arrears 0 0 0 0 0

Use of IMF credit 3,430 3,060 1,680 391 0

Total external debt 96,730 79,760 67,180 59,391 51,800

Principal repayments 9,440 9,138 16,989 17,160 13,003

Interest payments 6,789 4,853 3,306 2,546 2,107

Short-term debt 1,010 905 562 419 382

Total debt service 16,229 13,991 20,295 19,706 15,110

Ratios (%) Total external debt/GDP 78.9 65.0 58.1 46.8 36.2

Debt-service ratio, paida 21.4 16.0 25.0 22.9 15.1

Note. Long-term debt is defined as having original maturity of more than one year.

a Debt service (paid) as a percentage of earnings from exports of goods and services.

Source: World Bank, Global Development Finance.

Foreign reserves (US$ m; end-period)

2001 2002 2003 2004 2005

Total reserves incl gold 33,041 38,915 42,148 49,831 52,065

Total international reserves excl gold 32,355 38,046 41,077 48,664 50,691

Gold, national valuation 686 869 1,071 1,167 1,374


Exchange rates (Bt per unit of currency unless otherwise indicated; annual averages)

2001 2002 2003 2004 2005

US$ 44.4 43.0 41.5 40.2 40.2

� 39.8 40.6 47.0 50.0 50.1

S$ 24.8 24.0 23.8 23.8 24.2

¥ 0.366 0.343 0.358 0.372 0.365

Source: IMF International Financial Statistics.

Editors: Gerard Walsh (editor); Robert Ward (consulting editor) Editorial closing date: June 6th 2006 All queries: Tel: (44.20) 7576 8000 E-mail: [email protected]

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