In October 2011, Thailand faced the worst flood in 50 years. Poor water management and unusually high amount of rainfall from several monsoon storms cause severe floods in many provinces in Thailand, both in rural and urban areas. Over 20,000 square kilometers were declared as flood disaster areas. Several mitigation measures were introduced by the Thai government during and after the disaster to help flood victims and to mitigate future severe natural disasters. These post-disaster policies include providing aids to flood victims, building and improving physical infrastructures, and establishing special governmental agencies in response to natural disaster management. The 2011 Thailand Flood affected millions of population as well as the economy. The economic damage and loss from the flood was estimated to be US$ 5 billion, or approximately 1.5% of Thai GDP (World Bank, 2011). Not only an agricultural sector, which is highly vulnerable to climate, but also manufacturing industries were hit hard by this flood. One of the hardest hit industries by the flood is an automobile industry, which was already damaged by the East Japan Quake in March 2011. Many factories of automobile makers located in the flooded areas were forced to temporarily shut down. Some factories were under water for weeks and were forced to close for several months after this flood. However, only a year later, in 2012 the automobile industry quickly recovered from these disasters. The exceptionally high growth in both production and sales sectors in Thailand in 2012 pushed the car production to the new record. Another positive factor creating high domestic demand for automobiles was the government’s tax rebates for first-time car buyers. This tax rebate policy was launched in order to help the automotive industry recover in the wake of 2011 devastating flood, to boost the economy, as well as to increase a number of jobs and a number of car ownership. The automotive industry is a driving force for the Thai economy. It accounts for ten percent of GDP of the country, employs more than 500,000 direct skilled-labor jobs, and creates spillover effects to many other industries in the economy. In addition to the automakers, more than one million people are expected to benefit from this policy. However, some economists predict that defaults on car loans will increase since many buyers may not be able to maintain their car ownership. One of the debt-collection service providers also forecasts that about the quarter of the total loans will become bad debts. Besides the economic impact of this policy, increasing number of cars has worsened the already severe
2
traffic congestion problems in the Bangkok Metropolitan Region since approximately half of the total applicants for the rebates reside in this region. The government believes that this first-car buyer tax rebate program will contribute to the growth of the automotive industry and the economy of the country. However, many people suggest that the policy is mainly to popularize the government by aiming to benefit the low- income households. In this study, the benefit-cost analysis of this controversial tax rebate scheme will be examined. The economic impact of this policy will be analyzed using Computable General Equilibrium (CGE) modeling to investigate the economy-wide and distributional impacts on income distribution of this tax rebate program as well as using spatial analysis to examine socioeconomic impacts of disasters in Thailand. This study is one of the first few attempts to evaluate and to find a key to success of post-disaster policies in Thailand.