South Korea. Japanese capital therefore focused more on
countries such as Thailand, Indonesia, Malaysia, and Sri
Lanka.
The importance of Thailand’s political stability
during this period must also be emphasized. Prime
Minister Prem Tinsulanonda was in power from March
1980 until July 1988. This was the longest parliamentary
premiership in Thai history, which gave an air of
continuity, robustness and stability rare in Thai politics.
Overall, during this period both the economic and
political situations changed radically. Thailand became
regarded as politically and economically stable and an
investment “hot spot.” Thailand was able to take
advantage of a clustering of favorable global, regional,
and national circumstances (Dixon 1999, 126-128).
Prime Minister Prem stepped down in July 1988 and
Chatichai Chunhavan became Prime Minister from then
until February 1991 when he was sacked in a coup
organized by General Suchinda Kraprayun.
With respect to economic planning, the
government abandoned policies to plan and control the
direction of economic growth. In 1988, the NESDB was
relieved of its role as supervisor of all major government
projects. The stated intention of the Sixth Plan was to
transform the role of the public sector into that of a
planner, supporter and facilitator of private sector
participation. The government would withdraw from
activities which could be carried out better and more
effectively by the private sector. In many respects, the
government reacted to the boom by retreating toward a
laissez-faire approach (Pasuk and Baker 2002, 161-162).
The Seventh Plan (1992-1996) was aimed at
fostering economic sustainability and sustainable
development; its broad objectives were balanced
economic growth; improved income distribution, human
resource development, and quality of life; and the
environment. During the early 1990s signs began to
emerge that, behind Thailand’s remarkable growth, a
series of long-term problems were emerging, such as
rising costs of production, lack of skilled labor,
overloaded infrastructure, congestion and pollution, the
opening of such low-cost locations as Vietnam and
China which would undermine Thailand’s comparative
advantage in labor-intensive manufacturing, inhibiting
the transition to more skill- and capital-intensive
activities (Dixon 1999, xi). The GDP growth rate, which
remained between 8 and 9 percent between 1992 and
1995, dropped to 5.9 percent in 1996. In 1996 there was
a sharp slowing of the rate of export growth, although
the impact of this on economic growth was masked by
rapid expansion of the property and financial sectors.
During this period, one of the major factors
affecting the Thai economy was the financial
liberalization over the years 1990 to 1993, and this was
linked to the second phase of the boom in the first half
of the 1990s.13 The liberalization coincided with a
critical period in the capital markets of the developed
world – both Europe and Japan suffered from low