Thailand today is the most economically diversified and successful of the Asean countries. Singapore and Malaysia are not as diversified.
In terms of output per head and industrialization, Thailand is ahead of Indonesia, the Philippines, Vietnam and all other member countries.
Thailand’s recent economic history. During the 1960s, Thailand’s economy was still essentially agricultural with few industries. Industrialization began in earnest by the 1970s. In that growth, FDIs played a major role.
As Thailand began to industrialize by the 1970s, their economic policies were generally “inclusive” before that term gained popular usage in the development literature. The window toward foreign capital was one of welcome.
Foreign direct investments (FDIs) were encouraged in a wide range of economic sectors. Wholly-owned FDIs were allowed to come even as joint ventures were promoted. Foreign capital was treated like domestic investment in many economic sectors. Tariff protection was extended to industry, but also allowed imports of competing products. FDIs could sell their produce to the domestic market even as they were encouraged to export.
Foreign capital was even allowed in the retail trade. Foreign retailers became active conduits and catalysts for building domestic products for foreign markets.
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During its growth period, Thailand relied on a market-based baht exchange rate policy. Thus, the exchange rate induced export development.
A feature of economic policy was a flexible labor market. Wages were not artificially raised, but allowed firms to raise wages as productivity improved.
These aspects of economic policy were significant in attracting more FDIs and domestic investments, and they created employment opportunities for many low income workers. These boosted income growth and reduced poverty.
The politics of Thailand has been very volatile, with drastic changes in governments dominated by the military. However, the state has remained stable through the symbolic stability of the monarchy, a respected institution.
Through the political upheavals induced by military control of the parliament, economic policy has remained consistent, essentially stable and administered through the government institutions by the civilian bureaucracy.
Recent experiments in civilian elective democracy during the 1990s and 2000s have ended again in military rule (today).
Comparing FDI inflows: Thailand vs Philippines. FDIs have come to Thailand in much bigger volume when compared to the Philippines.
As in recent “Crossroads” essays on the subject in which I discussed Indonesia and Vietnam, FDI data compiled by UNCTAD (United Nations Conference on Trade and Development) are used. Data definitions are consistent and they enable comparison of “apples-to-apples” in US dollars.
Thailand was one of the main beneficiaries of manufacturing FDIs that transferred to the ASEAN countries during the 1980s and 1990s. During that period, Thailand’s annual growth consistently hovered between eight-to 10 percent.
It was also at the same time when the Philipines underwent economic and political crisis for a prolonged period. Though the 1997 Asian crisis had its origin in Thailand, the magnitude of the impact of the Philippine crisis of an earlier decade were more devastating to us.
The result was that the damage from the 1997 Asian financial crisis was clipped by timely international assistance. It put Thailand’s recovery footing sooner.
FDI inflows. In 2005 to 2007, FDI inflows to Thailand amounted to $9.6 billion compared to the $2.4 billion to the Philippines. From 2010 to 2013, FDI inflows to Thailand were: $9.14 billion (in 2010); $3.71 billion (2011, year of Bangkok floods and political turmoil); $20.7 billion (2012); and $12.9 billion (2013).
Benigno S. Aquino has been Philippine president since 2010. In that time, FDI inflows were: $1.1 billion (2010); $2.0 billion (2011); $3.2 billion (2012); and $3.7-billion (2013).
Comparing the four year period of 2010 to 2013, Thailand received FDI inflows totalling $36.4 billion while the Philippines got $12.7 billion. This was a huge difference in total inflows, with Thailand receiving almost three times in FDI inflows.
FDI outflows. We have to know more. Outflows are the reverse of inflows. Outflows mean the departure of capital from the host country. Such could be FDIs leaving the country for other countries. Or else, it is the host country finding investments in other countries.
For Thailand, outflows in 2005-2007 were $1.5 billion. Then, they were: $4.5 billion (2010); $6.6 billion (2011); $12.9 billion (2012); and $6.6 billion (2013).
For the Philippines, outflows in 2005-2007 were $2.41 billion. During 2010 to 2013, FDI outflows were: $2.7 billion (2010); $2.35 billion (2011); $4.17 billion (2012); and $3.64 billion (2013).
These are large numbers. To comprehend their meaning, we need to compare the inflows