Academic journal article Journal of Southeast Asian Economies

Post-Crisis Export Performance in Thailand

Academic journal article Journal of Southeast Asian Economies

Post-Crisis Export Performance in Thailand

Article excerpt

I. Introduction

The economic boom in Thailand prior to the financial crisis in 1997 was underpinned by rapid growth in exports, accompanied by a dramatic shift in the commodity composition of exports away from traditional agricultural products and towards manufactured exports. There are serious concerns in Thai policy circles that the export performance so far has failed to regain pre-crisis dynamism. In particular, concerns have been expressed about the intensity of world market competition following China's entry into the World Trade Organization (WTO) and the implications for export competitiveness of tightening domestic labour market conditions as part of the recovery process. The purpose of this paper is to inform this debate by examining post-crisis export performance in Thailand against the backdrop of pre-crisis experience and ongoing changes in patterns of international production. In addition to examining trends and patterns of export performance, particular attention will be placed on Thailand's relative performance in major markets compared to China and the impact of crisis-propelled changes in the incentive structure on export performance.

The organization of the paper is as follows. Section II provides an overview of overall export trends, and changes in export composition and revealed comparative advantage, with emphasis on the experience during the post-crisis era. Section III looks at the possible implications of China's emergence as a major force in world trade for Thailand's export performance. Section IV examines changes in the incentive structure following the onset of the crisis and their implications for export performance. The key findings are summarized in the final section.

II. Trends and Patterns of Export Growth

The pre-crisis economic boom (1986-95) in Thailand was a classic example of export-led growth. During this period, the dollar value of total merchandise exports grew at an average annual rate of over 23.3 per cent compared with 13.4 per cent during the preceding decade. Thailand's share in total world trade increased from 0.3 per cent in early 1970s to over 1.1 per cent by the mid-1990s. Exports as a ratio of GDP rose from 30 per cent to over 70 per cent, and exports accounted for over a half of the increment in real GDP, between these time points (Table 1).

This impressive growth record began to falter from about the third quarter of 1995, resulting in a 3.6 per cent contraction in the dollar value of exports in 1996. This unprecedented export downfall contributed to triggering the crisis in 1997 by damaging investor confidence in the capacity to maintain its fixed exchange rate and provoking a large capital outflows (Warr 2000).

For over a year following the onset of the crisis, export patterns remained rather volatile, with year-to-year growth remaining in the negative territory in most months (Figure 1). This was followed by a sharp recovery, lifting year-on-year growth to the pre-crisis average (around 20 per cent) in the first half of 2000. This nascent recovery shortly fell victim to the world economic recession, pushing growth rates again into the negative territory in the second half of 2001. The recent export recovery started in the second quarter of 2002 and has gathered momentum in recent months.

[FIGURE 1 OMITTED]

II.1 Overall Patterns and Trends

Until the late 1970s, Thailand was predominantly a primary commodity exporting country. In the late 1970s, export composition began to change rapidly, reflecting the expansion of processed food exports and traditional light manufactured goods, in particular garments and footwear (Table 2). From then, further diversification of the export mix has taken place, as Thailand became an increasingly attractive location for assembly activities within the broader category of machinery and transport equipment (SITC 7). During 1986-95, manufactured exports grew at an annual rate of 31. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.