Thai lessons

Published On: October 20, 2016 12:35 AM NPT By: Bhagirath Yogi


Export oriented policies adopted by Thailand, both in agriculture and manufacturing, played a big role in transforming its economy 
With the passing away of Thai monarch Bhumibol Adulyadej on 12th October, an era has ended. While many commentators have been focusing on his political legacy, this article will look into his role in transforming an agrarian economy into an export-oriented industrial one. It would also be relevant to ask why Nepal missed out on doing so as well.

When King Bhumibol ascended to the throne 70 years ago, Thailand was a different world.  A Buddhist kingdom, Siam, as the country was known back then, was predominantly an agrarian country. Even after 20 years into his rule, Thailand remained an agrarian country.

According to the World Bank, Thailand became an Upper Middle Income country in 2011. Coming to 2015, Thailand’s Gross Domestic Product per capita stood at over US 5,700. “Thailand’s economy grew at an average annual rate of 7.5 percent in the boom years of 1986 to 1996 and 5 percent following the Asian crisis during 1999-2005, creating millions of jobs that helped pull millions of people out of poverty,” the Bank said adding, “Poverty in Thailand is primarily a rural phenomenon. As of 2013, over 80 percent of the country’s 7.3 million poor live in rural areas.” 

In its report, Thailand: Industrialisation and Economic Catch-up, the Asian Development Bank (ADB) noted that Thai GDP grew by an average of 9.5 percent a year between 1987 and 1996 on the back of political stability, a business-friendly regulatory environment, a large domestic market, open access to foreign investment, and greater participation in regional value chains. But challenges remain. According to the Manila-based Bank, Thailand boasts a few world-class industries and services such as automobiles or high-end hospitality, but the bulk of its workforce remains in low-productivity activities in trading and services. “The agriculture sector still employs almost 40 percent of workers. Growth and structural transformation have also largely concentrated in and around Bangkok,” the report said.

Despite such challenges, progress made by Thailand over the last three decades is noteworthy. In the early 1980s, industry sector contributed 30 percent to the GDP. By 2014, it had risen to 42 percent of GDP. The share of agriculture in the country’s GDP has declined sharply over this period now accounting for 12 percent only. Thailand has also made impressive gains in poverty reduction over the last three decades. According to the World Bank, over 65 percent of the population lived below the poverty line in 1965. But in over three decades (by 2012), the share of population living below the national poverty line declined to around 13 percent.

Though Thailand’s growth slowed considerably in the aftermath of the Asian financial crisis (1997-98) and again after the global financial crisis that started in 2007, the country now has strong fundamentals including good infrastructure to ensure an equitable and sustainable growth. 

Thailand’s telecommunications sector has developed considerably over the past two decades. It has the region’s largest railroad network covering more than 4,400 km. Around 2.8 million small and medium-size enterprises (SMEs) contributed to around 36 percent of the GDP in 2011. The Suvarnabhumi airport in Bangkok is described as one of the best in the world. Tourism and fisheries are other sectors that employ millions of people, bringing in much needed foreign currencies. The late king was one of the active promoters of the tourism sector, which contributes over 10 percent to the national GDP. Nearly 30 million tourists visited Thailand last year.

The Nepali contrast 
Nepal, on its part, has witnessed poor economic growth at par or even below the population growth since the sixties.  During 1966-80, Nepali economy grew by a mere 2.3 percent (mainly due to poor performance of the agriculture sector). During 1981-90, the economy grew by little more than 5 percent, as the growth of agriculture sector also rose to more than 4 percent. During 1991-2000, the overall economic growth also averaged at around 5 percent, while the agriculture growth stagnated at around 2.5 percent.

In their book Explaining Growth in South Asia (Oxford University Press, 2006), economists Suman K Sharma, et al, write that a sustained high growth rate of the (Nepali) economy is unthinkable without a strong turnaround in agriculture, a big surge in exports, large foreign direct investment and effective government policy interventions. 

While remittance sent home by millions of Nepalis working abroad (especially in the Middle East) is sustaining the country’s economy, Nepal could emulate from the Thai experience by modernising the country’s agriculture sector, tapping hydropower and tourism, investing in education and infrastructure and developing labour skills, among others.

According to former vice chancellor of National Planning Commission (NPC), Dr Shanker Sharma, export oriented policies adopted by Thailand, both in agriculture and manufacturing, played a crucial role in transforming the country’s economy. “Nepal too should go into high value crop production eyeing the huge next-door markets to the south and north,” said Sharma, adding, “We should also try to produce components and processing for big companies that have made India their manufacturing base.” For this, uninterrupted power supply would be a prerequisite.

While the role of late Bhumibol—a constitutional monarch—in modernising his country may be examined in the days to come, Thai development experience needs to be studied closely to understand how a largely rural economy was transformed into an industrial force in just three decades. With abundant water resources and youth population, Nepal—a Least Developed Country (LDC)—too has immense potential to be tapped. But in order to graduate from the LDC status, Nepal will need a clear vision matched by sustained investment. A Himalayan challenge, indeed!

The author is a BBC journalist based in London. Views expressed are his own

@bhagirathyogi


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