Thailand During the 1930s and 1960s and Term Paper
- Length: 7 pages
- Subject: Economics
- Type: Term Paper
- Paper: #6905465
Excerpt from Term Paper :
Thailand during the 1930s and 1960s and compares its current day exchange policies. It has 9 sources in MLA format.
The Thai economy, one of the fastest growing in the world through 1995, where trade is elevating and education is stabilizing. Despite of the measures taken up by the government of current Thai Prime Minister Chuan Leekpai to secure the economy and raise it, GDP suffered contractions of 1.8% and 10% in 1997 and 1998 respectively. Since the value of baht (Thai currency) depreciated the Thai government took up the assistance of the IMF (International Monetary Fund) in August 1997 and assembled a package worth $17.2 billion to provide balance of payments relief and begin re-establishing the Thai economy and resume the trade and financial sector. The objective was to manage the external sector in response to changing world trading systems with the assistance of policies like technology and intellectual property right policies taxation policy investment policy; and various cooperative arrangements with trading partners
Before the Second World War, Thailand had enjoyed economic stability, but not much growth. During the early 1920s Thailand has been in great debt problems and so the lenders got all the capital out, and finances ceased to expand. Now the responsibility of growth resided on the locals, who unfortunately depended on foreign capital since the government did not have sufficient resources and finances.
Ever since this incident the government started to seriously grasp this circumstance and took elaborate measures to stabilize the exchange of business and trade policies. With IMF's support the government ran fiscal deficits of 3% of GDP in FY 1998 and 6% of GDP in FY 1999.
DEVELOPMENT OF POLICIES
The Thai government's development policy has been such that Trade and exchange rate policy in the 1930s and the 1960s has left its deepest impact over the economy of the country. Whatever strength it earns now or later in the coming years is due to the steps taken during those years.
Here we see how the country took its move ahead in order to gain efficacy and productivity in those years.
In 1935, when fiscal autonomy was returned to Thailand various policies were introduced in order to gain domination over the business sector and elevate the bhat. Some of which arrive under the heading of are Exchange Rate Policy
Debt Management Policies
Export Subsidies Policies
Labor Rights Policies
Complimentary economic policies, competent foundation, and availability supplies of low cost and well-informed labor also have been important in attracting foreign capitalist's to invest in Thailand. Failure to maintain these favorable conditions would lead to a slackening effect in this economic conversion.
Between the years 1957-1967, Army chief Sarit Thanarat takes power in a coup. He suppresses opposition but implements sound economic policies. Thailand tries to industrialize its agrarian economy through import-substitution policies after 1960. Foreign aid and investment is welcomed. After Sarit's death his deputy Thanom Kittikachorn maintains goals of stability, development, and anti-communism while allowing some democratization.
In view of the fact that the overestimated exchange rates, inefficient industries, high capital intensities, low employment, and condensation of imports in goods all lead to inferior performance than export-oriented nations over a wide variety of international conditions.
Meanwhile, during the years, 1960-1971, a National Economic and Social Development Board announces the first five-year Plan, which pushes industrialization through import substitution beginning in 1960. Army officer's head many of the 104 state firms at first, but civilians gain more authority and the private sector is increasingly emphasized. Foreign investment is welcomed, and U.S. army expenditures help fuel growth.
From 1984 to 1997 the exchange rate averaged 25 baht to the dollar during that period, where the dollar represented the largest share of all. The Thai government accepted IMF Article VIII obligations and began universality and open trade in the exchange control regime in 1990 [Hamilton, 1989].
In order to stabilize the economy IMF brought up various policies which proved to be very deceptive. Different policies were introduced to attract foreign capitalists. Commercial banks received permission to process larger foreign exchange transactions and money transfers were increased. In addition to this the Thai banks offered foreign currency accounts to the citizenry [Phongpaichit and Baker, 1995].
However, there was a certain twist in policy after the bhat levitated in 1997. The Government restricted the control on foreign exchange, requiring proper paper work and documented proof in order to maintain the capitalist's position in the country. The Foreign ownership of finance and securities companies in Thailand had been limited to 25%, even though that these limits were raised in the consequence of the financial crisis. As seen in May 1998, foreign capitalists held majority profits in Thai securities houses despite of the minimum investment requirements. Along with foreign investments, government laid stress on the telecommunication industry, which held monopoly in the country [Bureau of Economic and Business Affairs U.S. Department of State, March 2000].
EXPORTS / IMPORTS
The Thai Government maintains various beneficial programs that export manufactured products or prepared agricultural products and which may develop export endowment.
The Thai government bank currently offers an 11 (plus 1.5) percent rate on export credits, around one point lesser than the prime rate offered by the large commercial banks.
The Labor Relations Act of 1975 gives workers in the private sector most internationally recognized labor rights, including the freedom to associate. The Thai Constitution forbids strained or obligatory labor except in cases of war, national emergency or martial law [Phongpaichit and Baker, 1995].
Human resources was useful basically for the major agricultural trade in Thailand. From the post-war years up to the late 1950s, the major agricultural business was facilitated by rice mills, sawmills, sugar mills, ice factories, textile and gunny bag factories, tobacco leaf curing plants and cottage or household industries, such as fabric weaving and basketry, to supply local needs. All these industries grew up as a result of free market forces and with limited government assistance. The Thai poultry industry and the swine industry enjoy substantial comparative advantage. Thai agriculture is therefore expected to be generating a foreign trade surplus, despite the expected fall in prices.
Even though the first Industrial Promotion Act was promulgated in 1954, it was only implemented in 1960 with the establishment of the Board of Investment and Modern industrialization started in the early 1960s. However, to interest the foreign entrepreneur the government in 1962 promoted investment in specific activities, mainly through tariff protection, tax holidays and reduction of taxes on imported raw materials and machinery. And that is why a new law was introduced in 1972 in agreement with the government's shift in policy from an import-substitution to an export-oriented economy [Phongpaichit and Baker, 1995].
One important aspect of industrial development in Thailand has been the private sector's rapid response to shifting market demands. This is reflected in the changing structure of manufactured imports and exports since the early 1960s. Thailand has shifted its export product composition rapidly with another area of revenue that the Thai government was sharp enough to generate was to revolutionize their tourism activity, with 16% of export earnings. This is the same type of flexibility visible in Taiwan, Bangkok, China and many other Asian Countries. Now The U.S.S.R. And Eastern Europe account for about 0.5% of Thai exports [Lane, 1999].
For small businesses and economies with manageable exchange rates, which includes Thailand, inflation- termination is a policy strategy that domestic banks believe will help achieve price stability.
The Thai trade industry grew at an average rate of 10% per year since 1960. In 1993 production accounted for more than 24% of the national income and employed 10% of the entire labor force simultaneously accounted for 64% of exports, making it the countries largest exchange-gaining sector.
In addition to the agriculture trade in the country, industrial activity was concentrated on food processing. Notable products being beverages, tobacco, garments and chemical compounds. In the early 1960s, Thai exports consisted relatively completely of fundamental commodities. A decade later the manufacturing sector had developed to the extent that domestically manufactured products were competing on world markets. From that day on export-oriented industries began to gain prominence in this part of the world.
From 1960 to 1969, the fastest growing was the petroleum products that the industry produced, averaging 103.1% per year.
In due course, industrial activity in Thailand today has become more symmetrically scattered among many groups of industries and is more heterogeneous than in the 1960s. The last five years have seen especially rapid growth in manufactured exports.
Manufacturing of other goods such as food products, animal feed, chemical products, pharmaceuticals, iron and steel products, and electrical components also grew in reply to domestic and foreign demands in the country.
At present the Thai pecuniary fiscal policy plans has been such that relies on capable system liquidity and by keeping low interest rates in order to promote debt restructuring and new lending. Along with this foreign exchange flows has an average effect on exchange rate…