Thailand: Economic Overview

Article excerpt

The economic history of Thailand is entering a new chapter under the leadership of Prime Minister Chavalit Yongchaiyudh, elected in November 1996.

After Thailand was cited by the World Bank as having the world's fastest-growing economy between 1985 and 1994, with an average GDP of 8.2% during that decade, Thailand's economy began to slow in 1995. Holding the line against a further downturn will require a fundamental refocusing of government and business to regain prior growth levels.

The government has maintained a high current account deficit and high import tariffs, while exports have declined. Much of the industry has overinvested in capacity, being overconfident about the future, and utilization rates are estimated at a low 70% level.

Among measures being considered by the government are a devaluation of the baht, which could threaten both existing and future foreign investment levels. FOREIGN INVESTMENT CLIMATE

Thailand has been slow to privatize state assets.The government now controls about 65 state enterprises, including utilities, communications, transportation, and other infrastructure companies. State companies employ 250,000 people and, together with some 1 million civil servants, the state accounts for over a quarter of all salaried employment and 6% of the national work force.

Nonetheless,Thailand has moved ahead quickly with build-operate-transfer concessions,with nearly $30 billion in projects either proposed or under development.

Electric power generation has been a high priority recently, and deals worth several billion dollars were signed during late 1996.The former administration of Thailand estimated that the country would spend more than $60 billion over the rest of this decade on infrastructure, of which $30 billion would be spent on expanded electrical generating capacity

In addition to electric power plants, other major projects being implemented are two new oil refineries and petrochemical facilities; a sec ond Bangkok internationalairport; six million new phone lines, mass transit systems for Bangkok and regional center new rail and highway development and expansions; new ports development and expansions; development of new central government administrative city; and solid waste and waste water treatment centers for Bangkok and provincial cities.

BANKING SYSTEM

At the end of 1995 bank assets totaled $202 billion. There are 29 commercial banks in Thailand, 15 domestic branch offices and 14 foreign branch offices. Foreign branches are limited to one office. There are three American banks with full branches: Citibank, Chase Manhattan, and Bank of America, There are also 43 representative offices of foreign banks in Thailand, including 14 American banks.

Thai banks currently account for about 93% of banking assets, with foreign banks controlling the remaining 7%, and American banks accounting for 1.8% of total assets.

Foreign banks perform many of the same activities as Thai-owned banks, but they do not receive national treatment, being prohibited from opening branches.To permit more foreign banks to operate in the economy, the government several years ago established the Bangkok International Banking Facility for offshore operations.

DOMESTIC MARKET

With a population of 60 million,Thailand still is perceived as one of the fastestgrowing markets in the world. …