50 Years of the NATION 50 Years of the Thai economy

Coincidentally I began my professional career as an economist in 1971/72 when I was about to finish my Ph.D. in Economics at the Johns Hopkins University, and then to return to Thammasat University in early 1973. So I have had almost 50 years to work on the Thai economy, almost the same as the NATION has worked on Thailand, in Thailand.

In 50 years, what had changed in Thailand as seen by the NATION, and as seen by myself? Let me share my views.

For me, what had changed so much was the size and shape of the Thai economy. But for Thai politics, hardly anything had changed.

Since 1971/72 Thailand has had many forms of government, some by selection, some by election, but mostly by the hybrid form of selection plus election. The changing forms of government came with political instability, sometime turmoil. I have counted the years with political troubles, and it came to about half of the 50 years!

Yet, the Thailand’s GDP has grown tremendously, although with debatable quality of growth.

In 1971-1972, GDP of Thailand was about ฿60,000 million; in 2020-21it is about ฿16,000,000 million. That growth was more than 250 times in 50 years! Yes, the number is in nominal terms. But with relatively low inflation and minor change in exchange rate, from about THB20 to $1 then to about THB30 to $1 now, the change of the Thai economy was remarkable.

Thailand now has the capital market considered to be in the first world-class measured by the cost of capital and stability of the exchange rate. Thai industry and service sectors are classified to be in between the second and first world categories.

And yet, our politics and social governance are considered to be still in the third world!

How has Thailand attained economic achievement with so little political development?

Looking back, and using Netflix format, there were political timings that allowed opportunities for changes, and Seasons and Episodes of changes took place.

The Thanom / Prapas regime in 1971-72 was a carry over from the Sarit Regime in 1957 to 1963 when the first generation of infrastructure was started to be built, financed mostly by the World Bank and the Japanese OECF, using the governance of these organizations to manage the projects. That was Season 1, with many episodes about building dam and electricity, water supply, and roads/highways.

Season 2 was in 1976 when the Kukrit government restored ties with China, which led to economic opportunities with China for many years since China adopted the Chinese form of market economy from 1978. Unfortunately, this Season 2 had very few episodes. The political turmoil took place soon after, with the climax’s taking place on October 6, 1976.

Season3 began in a small way under Kriangsak government in 1978 when Thailand discovered a very respectable size of deposits of high-quality natural gas in the Gulf of Thailand. That was the beginning of the development of the energy sector in Thailand, with the establishment of PTT to develop the oil and gas sector, together with EGAT for the electricity sector. Thailand now has a very strong energy sector by international standards.

This Season 3 had so many episodes of economic changes, because the Kriangsak government was transformed to become the Prem government in 1980, which then lasted for 8 years.

It was under the Prem regime that Thailand adopted the policy of industrialization by export promotion,

highlighting foreign investment. The Eastern Seaboard Development was the flagship project for this policy.

Another important policy was the systematic promotion of the tourism sector, which has become one of the most important sectors in Thailand today.

The sectoral development policy was carried out together with an equilibrium adjusting macroeconomic policy in terms of the suitable rates of foreign exchange and interest, and the price levels.

In the meantime a comprehensive system of economic governance was put in place, some of which are still functioning today.

It was at this time that the private sector, supported by the Prem government gained a major role in the Thai economy.

Season 4 began under the Chatchai government during 1989-1991, when the policy of privatization and concessions for operating public utilities was started. This policy took many shapes and forms under different governments, namely Anand (1991/92), Chuan1 (1992/95), Banharn (1995/96), Chavalit (1996/97), and Chaun2 (1997/2001). The major policy results are several projects operated by the private sector including telecom, motorways, mass rapid transit, electricity, and water supply.

During these times, reform of the capital market took place in 1992, resulting in the rapid growth of the financial sector which collapsed in 1997/98, and then recovered in 2000/01 with much better governance.

Also in this period, the era of business conglomerates began and have been flourishing in Thailand, which became a political force. One such force resulted in the government of PM Thaksin which came to power in 2001.

Season 5 was all about political economy, rather than the economy by itself. It began with the Thaksin government in 2001. The government was successful in building up strong economic forces to strengthen its political power, so successful that it threatened the traditional balance of political power in Thailand.

Episode1 of Season5 under Thaksinbegan with the modernization of the Thai economy relying on the rapid changes in digital technology and with mega-projects for the third generation of infrastructure.

Then the coup returned, starting with the mob in late 2005, with the coup in September 2006. Since then, Thailand has been under political uncertainties in most years, interrupting the implementation of several mega projects and economic policy reform.

Fast forward to Season 6, which began in May 2017 with another coup. There are many Episodes because the coup makers who first said they would not stay long, have then decided to stay very long. The Prayut / Pravit regime started to govern Thailand first with a government by selection, and now a hybrid one.

Many mega infrastructure projects which began many years earlier have been completed, and some are still ongoing. But economic reform in the area of rules and regulations to make economic undertakings transparent, with clarity and integrity has not progressed much. And the digital economy needs much work to create the ecosystem that allows it to really help Thailand move into the new economy.

So, looking to the future, what do we see, what do I see?

I must say that I do not expect much in terms of political changes. We may have a new constitution, as we have had so many so far. Whatever a legal constitution is, the governance of Thailand is still according to “the constitution” based on culture and tradition, as it has been since 1960.

With respect to the economy we will have a new Season, Season 7, starting from 2020/21, still under the Prayut / Pravit regime.

Episode 1 in this season is all about the COVID-19 economy, the economy as a result of the pandemic management

by the government. It will then be followed by Episode 2, the recovery or rebound, again depending upon how the economy is managed.

The fact is that the pandemic does not damage physical assets of the economy, i.e., buildings, plants & equipments, and land. The damage is on financial and human assets. So the recovery and rebound formula should be to help businesses solve their financial problems, and to facilitate the people to return to the workplace.

If the formula applied is right, then I expect the Thai economy to move forward, with digital technology being the new engine of growth. Thailand as a country has a lot of private savings that can be used to finance these changes.

The political uncertainties, which will remain in the foreseeable future, may slow down but are unlikely to prevent the changes.