Economics, Commerce and Trade Management: An International Journal (ECTIJ)
Competitive Advantage of Thailand Report
1. THE COMPETITIVE ADVANTAGE OF THAILAND
Thailand GCI BCI
Eashwar 27 January 2015
For More MBA Academic Project Reprts Refer Here : http://www.freembaprojectreports.blogspot.com
Distance makes the heart grow fonder, and familiarity breeds contempt. According to this my soul mate should be in Thailand.
- Jason Zebehazy
Said adage for the west stands renounced at this date, Kingdom of Thailand is altogether a revised economy and has rendered itself to the
global marketplace. Call it the next door country.
Introduction
The incorporated Kingdom of Thailand (frequently addressed as Thailand) was established in the mid-14th century. Known as Siam until 1939,
Thailand is the only Southeast Asian country never to have been taken over by a European power. In 1932 the constitutional monarchy was
formed. In alliance with Japan during World War II, Thailand became a US treaty ally following the conflict.1
Thailand was customarily a relatively poor, developing, agrarian economy, but since the World War II, as a market-driven economy, it has
developed sizeable business and services base and a better marketplace for the world.
Meticulous studies viz. ‗The Human Development Report‘2, ‗The Global Competitiveness Report 2009-2010‘3 suitably reveal the current
position of Thailand of ranking 87 under MEDIUM HUMAN DEVELOPMENT group & ranking 36 under overall ranking respective for the
reports.
Since the mid-1970s, industrialization has augmented and investment has directed towards export-oriented behavior and the services
industries. Between 1984 and 1994, Thailand had the most rapid economic expansion out of any country in the world. Social institutions, social
capital, and costs failed to keep pace, leaving the country vulnerable to corruption, cronyism, money politics, systemic frailty, and an
unorganized civil society. Thailand has received criticism over its inability to cope with recent demands on its infrastructure. Improvements are
marked by indecision, delays, political conflicts, contract irregularities, corruption, and cost overruns. The financial crisis sparked by the flotation
of the Thai Baht (The currency of Thailand) in July 1997 quickly spilled over to the real economy, where it exacerbated severe structural
deficiencies.
The Kingdom has made important progress in social and economic development, even though it has suffered several years of financial and
economic crisis in the late 1990s and has been impacted by political uncertainty over the past years. The long term trend has been strong for
the country. In the decade that ended in 1995, the Thai economy was one of the world‘s fastest-growing at an average rate of 8-9 percent a
year. After recovering from the ―Asian Crisis‖ of 1997-1998, the Thai economy took off again. From 2002-2006, Thailand‘s growth averaged at
5.6 percent.
Thai Government has been very successful in reducing poverty past three decades and extending coverage of social services. By 2006, the
number of poor people in Thailand dropped to 6.1 million compared to 18.4 million in 1990. Superior income and greater way in to medical
infrastructures have also led to lowered death rates i.e. mortality and morbidity rations. More than 97 percent of the population, both in the
urban and rural areas, now have access to clean water and sanitation. In addition, Thailand is recognized internationally for its progressive and
effective response against HIV/AIDS, which has helped the government cut down HIV infections dramatically since the mid-1990s.
Bangkok the Thai capital has turn out to be the center of progress eventually the most affluent part of the country. Economic activities in
Bangkok and the metropolitan area account for almost 60 percent of the national gross domestic product, though it has fewer than 20 percent
of the nation‘s population. Bangkok‘s basic infrastructure is impressive compared with neighboring countries. The city is competing closely with
Singapore to become a regional hub for air travel within Southeast Asia1.
Recently, however, Thailand‘s economic growth has been slowing down because of weak private consumption and investment demand,
following the September 2006 coup and subsequent political uncertainty. The political instability of Thailand has become a major concern for
the investors.
2. THE COMPETITIVE ADVANTAGE OF THAILAND
Thailand GCI BCI
Eashwar 27 January 2015
For More MBA Academic Project Reprts Refer Here : http://www.freembaprojectreports.blogspot.com
Thailand: modern economic history
Despite European pressure, Thailand is the only Southeast Asian nation that has never been colonized. Two main reasons for this were that
Thailand had a long succession of very able rulers in the 19th century, and that it was able to exploit the rivalry and tension between the French
and the British. As a result, the country remained a buffer state between parts of Southeast Asia that were colonized by the two colonial
powers. Despite this, Western influence led to many reforms in the 19th century and major concessions, most notably being the loss of a large
territory on the east side of the Mekong to the French and the step-by-step absorption by Britain of the Shan (Thai Yai) States (now in
Burma)[citation needed] and the Malay Peninsula. The losses initially included Penang and Tumasik and eventually culminated in the loss of
four predominantly ethnic-Malay southern provinces, which later became Malaysia's four northern states, under the Anglo-Siamese Treaty of
1909.
Until 1932, Thailand was under the absolute monarchy when in all commercial transactions were in the hands of the king, royal family
members, and nobles of high ranks who had absolute controlled over the country . Because of Chinese merchants‘ skills and experiences in
trading, the Crowns promoted Chinese immigration. During 1820 – 1870, the Chinese were given a number of privileges, patronized with
trading licenses, tax farms, and investment loans and provided political support4. Under the patronage of the noblemen, these Chinese
merchants became successful in doing their own businesses, in particular the rice trading which was the most important business accounting
for about 70% of all exports in the 1910s5. In 1930s, the rice trade was dominated by the ―Big Five‖ families, Bulakul, Bulasuk, Iamsuri,
Lamsam, and Wang Lee who have been among the top business groups until the present. After the 1932 Revolution when the absolute
monarchy was overthrown, civil service officers and armed forces played important roles in shaping Thai economy.
During 1932 until 1947, the People‘s Party was the new ruler. Political and economic power was transferred from the king and noblemen to
civil service and military officers. The development regime led was regarded as the nationalistic development approach under the slogan
―Thailand is for the Thais. Under this regime, the government aimed to promote Thai nationals into business participation and decrease the role
of Chinese migrants who dominated important industries. In fact, by this time the Big Five Chinese rice trading families had expanded their
business networks to cover various businesses to assist their rice trading. These businesses included rice milling, warehouses, shipping,
banking, insurance, and foreign exchange dealing.
To encounter the Chinese dominance, the government was involved in doing business directly by setting up many state-owned enterprises and
semi-governmental companies. The members of the People‘s Party and their close associates (including the Chinese traders) utilized their
power to set up private companies5. So, it turns out that even though the government‘s policy aimed to eradicate the economic power of the
small and medium Chinese traders, they collaborated with the big Chinese merchants.
In 1947, a group of armed forces led by Field Marshal Plaek Pibulsongkram, Lt. Gen. Pin Chunnahawan, Col. Pao Sriyanond, and Field
Marshal Sarit Thanarajata, took over power from the People‘s Party.
Until the 1973 Revolution, the military had been in charge of controlling and developing Thai economy. The military in power did not renounce
the ―state capitalism‖ policy established by the People‘s Party. There were two important groups in the coup due to the conflict of interests
among them. The first group was the Soi Rajakru led by Pin Chunnahawan and Pao Sriyanond. The second group was the Sisao Deves led by
Sarit Thanarajata. After Sarit Thanarajata seized power from Plaek Pibulsongkram in 1957, the Sisao Deves group solely controlled Thai
economy and were able to exploit private benefits of control6.
Under the military regime, major profitable industries, namely sugar refining, tobacco, paper and plywood, and brewing were monopolized by
the state. Consequently, about 56 state enterprises were set up during 1947-1956 in the key industries. In addition, the government formed a
large number of joint venture companies with the business leading Sino-Thais. In the financial industry, the government had the ownership and
directorship in all the 13 commercial banks7. It is thought, however, that the real objective behind the government‘s involvement in doing
3. THE COMPETITIVE ADVANTAGE OF THAILAND
Thailand GCI BCI
Eashwar 27 January 2015
For More MBA Academic Project Reprts Refer Here : http://www.freembaprojectreports.blogspot.com
business was to generate the funding to finance both personal and political activities of the military figures that were in control6. In general, as
the military government was strong and could intervene in any areas of life during the period 1947-1973, the business environment turned out
to be uncertain. There was a fear that potential business might be taken over by the government or was abolished if it was against the interests
of the important members of the military hierarchy.
In 1961 even after the implementation of the first National Economic Development Plan, Industrial promotion policies were implemented,
beginning with import substitution policies in 1961 and later being replaced by export promotion policies in 1972. The Board of Investment
(BOI) and various other state owned banks were established to promote investment. Since the 1960s, the emerging business groups have
expanded their connections with state apparatus by recruiting former managers and retired high-ranking officers of state-owned companies
(e.g., the Bank of Thailand). The benefits from such recruitment were thought of being used to establish connections with the senior
bureaucrats at that time.
Until 1980s (the first half), the business was dominated by the big five financial business groups. They managed to grow probably because
they owned banks and finance companies and hence were less financial constrained. Also, all the Chinese businessmen who founded the
groups had close ties with the government.
Similar to many emerging economies, the expanding of Thai business empires is also contributable to foreign capital and technology. The huge
inflow of foreign capital and technology since the 1960s with the peak in the 1980s did not only relax the constraints of smaller business groups
that did not own financial institutions but also provided technology of which they lacked.
Financial deregulations and the development of the Stock Exchange of Thailand during the late 1980s, as well as the establishment of the
Bangkok International Banking Facilities (BIBF) in the early 1990s, provided alternative sources of fund that reduced the reliance of domestic
banks for lending. Accordingly, business groups that did not own banks have become less financial constrained and been able to expand
rapidly since then. Until the financial crisis in 1997, while bank-dominated business groups have become less important, business groups in
communications, media, electronics, manufacturing, and real estate have been growing.
The growing mismatch in the currency denomination of banks‘ assets and liabilities was thought as one of the major causes of the banking
crisis in 1996 and 1997. Specifically, banks used deposits and short term unhedged foreign currency loans to lend long term loans in domestic
currency. It was clear in 1996 that many finance companies and one bank, the Bangkok Bank of Commerce (BBC) were in financial trouble due
to their exposure to real estate loans. The failure of the Thai government in dealing with the problems in the financial sector precipitated the
crisis in Thailand as compared to other developing economies viz. India where the Governments support was at its peak in the recessions of
2009.
In August 1997 the IMF was informed in written for the reforms. The IMF program included 2 major components: stabilize the macro economy
and restore financial market stability. The same was performed well and Thailand was able to come up shedding the scabs of the crisis by
2000 by acquiring reforms in financial institutions and corporate restructuring.
The first-ever elections to the Senate were held in 2000, and, in January 2001 one party—the Phak Thai Rak Thai (Thai Loves Thai Party)—
won an absolute majority in the House of Representatives. The Thai Rak Thai was further strengthened in 2002 when it absorbed many
members of the New Aspiration Party. Thaksin set out to stabilize several problematic areas. The year 2005, however, there were mass
4. THE COMPETITIVE ADVANTAGE OF THAILAND
Thailand GCI BCI
Eashwar 27 January 2015
For More MBA Academic Project Reprts Refer Here : http://www.freembaprojectreports.blogspot.com
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