Thailand Profile

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Downtown Bangkok

Introduction

Thailand emerged as mainland Southeast Asia’s strongest economy in the latter half of the 20th century, yet deep political, social, and spatial divisions continue to provide challenges to Thailand’s economic development and stability.  In 2012 the per capita income of Thailand’s 66.79 million citizens sits among the highest in Southeast Asia.    Along with the international hub and capital of Bangkok, Thailand is known for its rich agricultural production as well as its developed high-tech industrial centers as well as a bounty of natural diversity from the northern hill regions of Chiang Mai to the pristine white sand beaches in the coastal south.

 But do not be fooled by the popular tourism slogan “Land of a Millions Smiles” – Thailand’s oft-crippled constitutional monarchy has experienced 18 coups since the 1930s and the country still struggles to forge a balance between a long lasting monarchy that can at times wield profound political influence and a democratic system that serves the Thai people.  Thailand’s administrations have been consistently savvy at maintaining constructive relations with competitive powers like the US and China, and as one of the founding member of ASEAN, Thailand consistently plays an influential and substantive role in regional relations

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Link to Economic Data

Link to Environment and Resource Use Data

 

The Modern Thai Economy

From 1985 to 1996, Thailand had the fastest growing economy in the world. GDP growth averaged over 9% per year, and inflation stayed in a reasonable range between 3.4–5.7%. However, a confluence of factors including excessive capital inflows and unhealthy lending practices by Thai financial institutions led to the Asian Financial Crisis in 1997, in which the Thai Baht lost over half of its value. The Thai government was forced to float the Baht[7] due to insufficient foreign reserves, and the IMF provided the country with a rescue package.

GDP 2012 breakdown

Thailand comparative gdp growth

The financial crisis also demonstrated Thailand’s growing dependence on economic and foreign policy in China. During the crisis, China contributed to Thailand’s international financial rescue package, made assurances that the Chinese Yuan would not be devalued, and promised to absorb more Thai exports. These gestures proved to Thailand China’s rise as an economic and financial power and foreshadowed closer economic ties between the two countries in the following decade.

Thailand trade balance Thailand regional trade profile

After the financial crisis, the devalued Baht provided for a quick recovery driven by industrial and agricultural exports and tourism. These factors fueled a steady average growth rate of around 5% from 2002-2007. Following the global financial crisis in 2008, exports weakened considerably. Thailand was hit with another setback in 2011 when floods devastated industrial areas in and around Bangkok. The economy has since recovered, and in 2012 GDP grew 6.5%.

THB exchange rate thailand inflation

Thailand is currently trying to encourage domestic consumption and spending to maintain growth and offset weakened exports in 2012. One of Thailand’s most pressing domestic problems is income equality. In 2011, Thailand was the second most unequal country in the world, with a Gini Coefficient of 53.6. Improving income equality would boost domestic consumption, thereby reducing exposure to external economic shocks and improving growth prospects.

thailand gdp compositionthailand gdp by sector

Thai Politics in the 21st Century     

A Thai businessman from Chiang Mai named Thaksin Shinawatra was elected prime minister in 2001. Thaksin, backed by the populist Thai Rak Thai (TRT) party that he founded in 1998, was the first Prime Minister to complete a full term. He introduced a range of popular social policies and presided over a booming economy and a corresponding decrease in the poverty rate. Accused of corruption and conflicts of interest in his business ventures, Thaksin was ousted by a military coup in 2006. In 2008, while abroad, the Thailand Supreme Court found Thaksin guilty of corruption charges. He has stayed abroad ever since. Despite these challenges, Thaksin has remained a strong political force in Thailand. His political allies held a majority in Parliament following elections in 2007, and Thaksin’s younger sister and political ally, Yingluck Shinawatra, has acted as prime minister since her election in 2011.

During political turmoil in 2006, 2008, and 2010, a party of nationalists and royalists, called the People’s Alliance for Democracy (PAD) or Yellow Shirts, and another group of Thaksin supporters, called the Red Shirts, were both responsible for multiple violent protests. Most recently in 2010, Red Shirts started a massive protest against the PAD-led government. The protest turned into the most violent political demonstration since 1992 and resulted in 92 deaths.  2013 is equally frought with political unrest in Thailand as anti-Yingluck protesters mount consistent efforts to oust the Yingluck government by shutting down key government ministries, attempting to occupy Bangkok, and forcing Yingluck to call for parliamentary elections.

Anti-government protesters gather at Bangkok's democracy monument in December 2013

Anti-government protesters gather at Bangkok’s democracy monument in December 2013

During her campaign in 2011, Yingluck Shinawatra promoted the introduction of a rice subsidy that would benefit many of the 40% of Thai people who work in agriculture. Once she was elected, the government started buying rice directly from farmers at twice the market rate to increase rice farmers’ incomes. At the time, Thailand was the number one rice exporter in the world, so proponents argued the policy would be immune from competition in the international market. Optimists saw the subsidy as a good way to stimulate domestic consumption as Thailand reduces its economic dependence on exports.

In practice, however, other rice-producing countries such as India and Vietnam have undercut Thailand’s now-expensive rice. During the first year of the subsidy, Thai rice exports dropped by a third and cost the government $12.5 billion, nearly 4% of GDP. The cost of the program is forecasted to increase in 2013. The debt accumulated by the program, and Yingluck Shinawatra’s recent attempt to solve the issue by reducing the price paid to rice farmers, has caused significant damage to her reputation. The debacle has also damaged Thaksin Shinawatra’s reputation because he is considered to be a close advisor to Yingluck and the original author of the scheme.

Prevailing issues

Other prevailing issues in Thailand include forced labor and human and narcotics trafficking. The nation has two million illegal immigrants that frequently experience inhumane treatment at work. The problem is most evident in the shrimp industry, where workers are sometimes forced to stay on boats for years at a time and workers report witnessing boat captains murdering crewmen too sick or weak to work. According to the U.S. State Department, nearly 60% of shrimp workers experience conditions of forced labor. Part of the reason why Thailand has so many illegal immigrants is that the country’s neighbors are all low-income countries separated by an extremely porous border with Thailand. While there are clear laws against human and narcotics trafficking in Thailand, Thai ministers pay too little attention to these problems, and corrupt policemen and immigration officials prevent the law from being properly enforced.

The State Department’s annual human trafficking report for 2013 rated Thailand in the second-to-worst tier alongside Afghanistan, Iraq, Chad, and Niger. Thai banking regulations are ineffective against less formal financial operations, so proceeds of corruption, prostitution, and human trafficking can be laundered through the country’s financial system. Corruption, insufficient regulation, and ineffective law enforcement continue to hold Thailand back from moving past these smuggling and human rights issues.

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 Historical Overview

            Ancestors of the modern Thai people lived south of the Yangtze River in parts what are now the Chinese provinces of Yunnan and Guangxi. Over the course of multiple centuries, the Tai[1] migrated south into modern Southeast Asia. In 1238, Tai chieftains overthrew the Khmer in present-day Thailand and established the kingdom of Sukhothai. The Thai traditionally regard the kingdom of Sukhothai as the period when the institutions and culture of Thai civilization first developed.

During the reign of the first Sukhothai ruler, Ramkhamhaeng, the Thai established diplomatic relations with China and acknowledged the Chinese emperor as nominal overlord of the Sukhothai kingdom. Many Chinese artisans also migrated to the Sukhothai kingdom during his reign, a migration that continued in following centuries.

In 1378, following the death of Ramkhamhaeng and subsequent political weakening of the kingdom, the Sukhothai were forced to submit to the Thai kingdom of Ayutthaya. The kingdom was established by a Chinese merchant from a wealthy family who married into other politically powerful Tai and Mon families.

Map-Thailand

The Ayutthaya kingdom was formative to the development of the Thai economy and opening to international trade due to a confluence of domestic and international factors. After the Black Death resulted in a tragic loss in population in the 14th century, China and Europe experienced a strong resurgence of population growth in the 15th century. The remarkably stable Ming Dynasty in China, established in 1368, also reformed imperial policy towards foreign trade. These developments resulted in a huge expansion in demand for Southeast Asian goods from China and Europe. These circumstances allowed the Ayutthaya kingdom to move beyond the inland valley economy and financial dependence on vassal states by leveraging the commercial networks of resident Chinese to cultivate a more cosmopolitan outlook.

From the 13th through 15th centuries, rice farmers in the floodplain of the Chao Phraya[2] started growing a new variety of rice imported from Bengal. The larger rice yield of the new grain produced a surplus for sale abroad, primarily to China. Since Ayutthaya was located at the southern end of the floodplain and provided access to international markets, the city became a hub of economic activity. Rice production continued to account for most of Siam’s[3] economic output and employ most of the country’s labor through the 20th century. Despite the fact that Chinese state trading ceased abruptly in 1433, the use of tribute missions to Beijing allowed Ayutthaya to maintain trade connections with the Chinese during the period. The Ayutthaya sent a total of 78 missions to China between 1371 and 1503.

The opening of international trade in the 14th and 15th centuries brought about contact with the west and changes in Thai society. The first Europeans to visit the country most likely came on a Portuguese diplomatic mission to Thailand in 1511. Eventually, the Ayutthaya kingdom developed commercial ties with the Portuguese, Dutch and English trading companies, the French, as well as the Japanese. Despite the growing presence of other foreign powers in Southeast Asian trade, the Chinese were still the largest group of foreign traders in most port cities, including Ayutthaya, throughout the 17th century.

The Thai court was careful to prevent any one of the European powers from gaining excessive influence. Nonetheless, in 1664 the Dutch tried to force the Thai court into a treaty that granted Dutch traders extraterritorial powers and more favorable trade conditions. After initially seeking help from the French, the incident ultimately resulted in Thai society closing off from the west until the 19th century.

19th century Siam was marked by influence from western imperial powers. Pressure from western powers for free trade, together with increasing competition in trade with China, gradually forced the kings to relinquish their trade monopolies during the reigns of Rama I and Rama II (1782-1824). To maintain tax revenues, the kings abandoned tribute systems of revenue collection and adopted a more efficient farm taxing system. The power of the economy and the Thai state grew, and so did its regional influence. Siam pressed claims to the provinces of Battambang and Siemreap in Cambodia and other states in northern Malaysia until those claims were later challenged by Western powers.

Siam was the only Southeast Asian state to retain its independence throughout the colonial period. This was primarily a result of its geographic location and willingness to cooperate with Western imperial policies. After the Anglo-Siam Burney Treaty was signed in 1826, British merchants still complained about taxes and monopolies, so the British pushed for another treaty in the 1850s. While Rama III was opposed to the idea, his successor King Mongkut (Rama IV) recognized that Siam must have full relations with Western countries and make sacrifices to avoid the kind of humiliation Burma and China had suffered in wars with Britain. Consequently, Mongkut signed the Bowring Treaty with Britain in 1855, and similar treaties were negotiated with other Western countries in following years.

King Mongkut is portrayed in the popular American stage play, the King and I, which by the way is banned in Thailand.

King Mongkut is portrayed in the popular American stage play, the King and I, which by the way is banned in Thailand.

These treaties increased diplomatic interaction and boosted international trade by implementing a clear system of export and import duties, but they also included Thai concessions to Western countries, including the extension of extraterritorial rights and a limit in the Siam government’s authority to tax foreign enterprises. Despite the perceived inequity of the treaties at the time, the elimination of these economic barriers led to a huge expansion in the Siam economy and trade with the west. These liberal policies continued under Mongkut’s European-educated son and successor, Chulalongkorn (Rama V). At the end of the 19th century, Britain and France posed a serious threat to Siam’s independence. British power was firmly established in Burma to the west of Siam and Malaysia to the south.

The French occupied Cochinchina (southern Vietnam presently) and pressured the Cambodian king to accept a French protectorate, where Siam and Vietnam had long struggled for control. While there was a threat to Siam’s independence, the Thai also understood the British-French rivalry and Siam’s role as a buffer region between the two powers. Siam’s stronger relationship with Britain, which was the most prominent of the western powers present in region, also limited what other western powers could demand of Siam. Nevertheless, fighting broke out between Thai and French forces in Laos in 1893, and French gunboat diplomacy[4] in Bangkok forced Siam to cede all claims to Laos. In 1907, the French again forced Chulalongkorn to cede claims to the Cambodian provinces of Battamband and Siemreap.

20th Century Thailand

Two years later in 1909, Siam ceded the four northern Malay territories it claimed under the Burney Treaty back to Britain in return for railway funding. This series of events reduced Siam territory to a fraction of its size one hundred years earlier. While Siam was able to retain its independence, extraterritorial rights granted to citizens of western countries, which were not rescinded until 1937-1939, and the government’s loss of control over duties and tariffs both undermined Thailand’s sense of sovereignty and respect in the international community.

The Great Depression caused a sharp drop in the price of rice, which brought about severe economic problems in Siam. The economic downturn also prompted cutbacks in government spending. This fueled discontent among the political elite, most of who were educated in the west and already frustrated with the monarchy’s lack of reform. In 1932, a group of civil servants and army officers, called the “Promoters,” engineered a bloodless coup with the support of the army. The Promoters established a constitutional monarchy and parliamentary system. While Rama VII was stripped of his political power, in deference to the significance of the monarchy to Thai history and culture, the prestige of the monarchy was not undermined.

Although the political movement was unified in its pursuit of international respect and economic success, two opposing factions disagreed on how the country should develop. The first promoted radical economic reform plans and was led by Pridi, one of Siam’s premier academics. The second and more successful party was associated with more conservative ideals, sought to strengthen the nation through economic self-sufficiency and nation building, and was led by Phibun, a military officer. As the influence of the army grew, Phibun assumed the position of Prime Minister. Phibun led a nationalist campaign that revived anti-French sentiment and calls for the reclamation of lost territory in Laos and Cambodia. In World War II, the Japanese forced France to cede the territories of Battambang and Siemreap in Cambodia and territory in northern Laos back to Thailand. The Japanese then pressured Thailand into declaring war on Britain and the United States.[5] As the war dragged on, Phibun also recovered the four Malay states that had been ceded to Britain in 1909, but the opinion of the Thai public and the political elite eventually turned on Phibun and the Japanese. In 1944,Phibun was forced from office and replaced by Pridi’s party. As a result of the war outcome and Pridi’s anti-Japanese stance, territories reclaimed during the war were returned.

Pridi’s rule was short lived. In late 1947, a coup reinstalled Phibul’s group to power, who sought closer relations with the United States and promoted a staunchly anti-communist political philosophy. Phibul’s renewed rule only lasted through 1957 and multiple leadership changes took place throughout the next two decades, but friendly relations with the west and particularly the United States persisted. In the 1960s and early 1970s, United States military expenditures in Thailand during the Second Indochina War[6] along with other multilateral aid loans and foreign investment allowed Thailand’s economy to grow at an average annual rate of 8%.

However, Thai economic growth slowed as the Second Indochina War drew to a close and the United States phased out military expenditures in Thailand. Three more bloody coups in 1976, 1977 and 1991 brought new military rulers to power. A violent military crackdown on demonstrations in Bangkok followed the 1991 coup and prompted intervention by the king to restore peace.

Vietnam’s invasion of Democratic Kampuchea in 1979 began a new crisis for Thailand. Democratic Kampuchea served as an important buffer state between Vietnam and Thailand. The Cambodian conflict introduced worries that Vietnam might seek revenge for Thailand’s involvement in the Second Indochina War and also revealed issues with Thailand’s security as the Khmer Rouge moved into border areas between the two countries. During the conflict, the Thai government also formed a de-facto military alliance with the PRC that allowed the Chinese to transfer military resources through Thailand to the Khmer Rouge. Thailand’s alliance with the Japanese during World War II and the United States during the Second Indochina War had weakened Sino-Thai relations, so cooperation during the Cambodia conflict marked a significant step forward for the bilateral relationship between the two countries.

 

Basic country report written by Wills Shott, November 2013

Works Cited

“Central Intelligence Agency.” The World Factbook. N.p., n.d. Web. 03 Nov. 2013.

“Income Equality.” The Economist. N.p., 20 Apr. 2011. Web. 4 Nov. 2013.

“Thai Rice: Less Paddy Power.” The Economist. N.p., 14 June 2012. Web. 4 Nov. 2013.

“Thailand Profile.” BBC News. BBC, 31 July 2013. Web. 03 Nov. 2013.

“Thailand.” Trading Economics. N.p., n.d. Web. 03 Nov. 2013.

“Thailand’s Economy: The Rice Mountain.” The Economist. N.p., 10 Aug. 2013. Web. 4 Nov. 2013.

“Thailand’s Illegal Immigrants: A Deadly Cocktail.” The Economist. N.p., 2 Mar. 2013. Web. 4 Nov. 2013.

“Thailand’s Riots: A Polity Imploding.” The Economist. N.p., 20 May 2010. Web. 4 Nov. 2013.

United States. Department of State. Bureau for International Narcotics and Law Enforcement Affairs. International Narcotics Control Strategy Report. N.p., June 2013. Web. 4 Nov. 2013.

United States. Department of State. Trafficking in Persons Report. N.p., June 2013. Web. 4 Nov. 2013.

United States. Library of Congress. Federal Research Division. By Frederica M. Bunge, Robert Rinehart, Irving Kaplan, Donald P. Whitaker, Rinn-Sup Shinn, and Harold D. Nelson. N.p.: Library of Congress, n.d. Thailand: A Country Study. 1988. Web. 4 Nov. 2013.


[1] Ancestors of the modern Thai people are referred to as the Tai, a group that originated in what is now the Chinese province of Yunnan. The Tai are also ancestors of the Shan ethnic group in present-day Myanmar, the Lao people, and other groups located in present-day Vietnam.

[2] The Chao Phraya is a river that flows through Thailand to Bangkok and then into the Gulf of Thailand. The river plain forms the center of the country.

[3]Thailand was named Siam until 1939.

[4]Gunboat diplomacy is the pursuit of foreign policy objectives using displays of naval power.

[5] The Thai ambassador to the United States refused to deliver the declaration to Congress, so the two countries were never technically at war.

[6]Also referred to as the Vietnam War.

[7] Prior to the 1997 Asian Financial Crisis, the Thai Bhat was pegged to the U.S. Dollar.

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