VI - Trade Policy Options for Thailand

Summary

Introduction

There has been much speculation that Thailand's economic structure and performance appear to be entering a transitional period. After a lapse of two years in 1982 and 1983, the Thai economy has recovered and performed well with a steady growth of 5-6 per cent per annum. The growth rate may pale in comparison with that of South Korea or Taiwan where double-digit growth rates are the norm, but within ASEAN, this growth rate is relatively high.

While Thailand's economic performance is noteworthy, its economic structure is not without problems. Production structure has in general tilted towards manufactured activities, but the industrial base remains weak. Light manufactured goods are produced in an increasing number, but local content has not improved. All this points to active production of finished products at the final stage. There appears to be a need to develop activities in the intermediate stage to broaden the base. The incentive system (expressed in terms of effective exchange rate) has improved in many ways. Policies on fiscal and monetary matters have been rationalized, and an appropriate exchange rate policy has been pursued. An export promotion regime has been adopted by the government, consistent with the export-led growth strategy of the country's development plans.

The strong export performance of Thailand in the last few years has benefited the economy in general, but there are still many who will question the wisdom of export orientation and who think that exports will soon reach a saturation point when all LDCs join the export bandwagon. However, as Bhagwati (1986) has pointed out, even if all LDCs are committed to exports, their overall share in the global trade is so insignificant that it is highly unlikely to have saturation of export markets.

The trading environment has turned sour with increasing incidents of tariff and non-tariff problems.