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Level of Globalization in Thailand Research Paper

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Introduction

Thailand is an Asian country with an area of 513,115 sq km which is almost equivalent to the size of France. It has a population of 65.28 million people with a labor force of 36.43 million people. The country was never colonized.

Thailand Economic Growth

Thailand’s economic growth has been steady with a respectable 6.6% growth rate. However, this growth has not been achieved year in year out and it has also not been similar in all sectors of the economy. 1980 to 1990 is the time when Thailand experienced the highest growth rate which averaged 9.1percent per annum. These growth rates were necessitated by the growth in the manufacturing sector.

The coefficient of variation of rates of growth also decreased to only 0.27. This period was the most stable in terms of the country’s economic performance. However, the period from 1997 to 2000 was a very difficult period for the economy of Thailand with the economy only growing by -0.9 percent. This was accompanied by a bulging standard deviation of 7.1 percent. Hence the country turned from its course of a prosperous country to a difficult course of economic hardships. The GDP drop in this period corresponded with reduced uses of capital stock and reduced uses of labor input. In terms of demand, the shrinking of the investment demand was the downward force that led to the recession in 1997-2000. The economic recovery process is still very shaky and the situation in the country in 2001 was deemed to be worse than in 2000. This is because the economic growth rate has stagnated with the unemployment rate increasing rapidly (Alesina, 2007)

Banks in the country are still reluctant to lend lest they fail to get back repayments because of the borrowers’ balance sheets which are undercapitalized and also due to unfavorable macroeconomic outlook. The 7 percent per annum economic growth rate in the country over the four decades has raised the well-being of the people in the country. The income poverty levels sharply declined substantially to 11.2% (headcount ratio) in the period 1990-1996 which was the lowest from 57% which was experienced in 1960-1970. This trend has however increased to 14.2% in the year 2000-2007. In summary form this trend has taken the following shape 1962-1963 the poverty incidence was 57%,1968-1969 the poverty incidence was 39%,1975-1976 the poverty incidence was 31%,1981 the poverty incidence was 23%,1986 the poverty incidence was 29.5% and from 1988 to 2007 the poverty incidence decreased from 32.6 percent to 14.2 percent. (Alesina, 2007)

The country’s overall growth rate has been a result of increases in input use and increases in total factor productivity, (TFP). The main engines of growth are agriculture, industry, manufacturing, and services, and factors of production such as capital, labor, and land. From 1981 to 1985 the total factor production was 9.7 while from 1986 to 1995 the total factor production amounted to 17.3.1986 to 1990 the total factor production was 31.3 and from 1991 to date, the total factor productivity has been at the lowest level of 0.4.

Thailand has for a long time been the top agricultural exporter. This has been necessitated by the continued research and development in the agricultural sector. The research was started as early as 1950 which resulted in the first approved maize variety, Suwan-1. Diseases such as downy mildew have also been contained by the effectiveness of the chemicals that have been researched and approved. The most advanced development is the transgenic plant which is the resistant papaya developed by the agricultural department and Cornell University.

The country’s infrastructure and institutions are unevenly spread in the country with most of the well-furnished infrastructure and institutions concentrated in Bangkok. Telecoms, water, electricity and transport facilities are mainly are more developed in the capital than in the countryside. The country’s institutions are divided into telecommunications, financial and postal services (Benabou, 2003).

The economy of the country has gone through ups and downs, that is, periods of economic boom and periods of recessions, for example, from 1950 to 1973 the country laid foundations for stable and high economic growth. From 1974 to 1985 the country experienced a period of macroeconomic uncertainty difficulty and hardships adjustments with recession characterizing the economic growth. In the period starting 1986 to 1996, the country experienced extraordinary growth in its economy and the lives of the people improved greatly. This was a period of economic boom.1997 to 2000 the country underwent an economic recession with the economic growth rate decreasing sharply. From 2001 to date the country has started accelerating in economic performance though not as it was in 1986 to 1996. Trade is both free and tariff imposed. (Alesina, 2007)

The country is in several trade blocks such as the APEC which is composed of 25 member states. It is also in the G20 trade block which is composed of 20 member countries. It has entered into several regional trade arrangements with the member countries in the APEC group and has also several multilateral trade arrangements with countries outside the region. For example, the trade arrangement between Thailand and Kenya has enabled the country to import elephants from Africa. The country has a total labor force of 36.43 million out of a population of 65.28 million people. The unemployment rate according to the latest statistics has been on the rise to 6.4% while the real wage has only declined by one percent. The labor force participation rate has also increased considerably from 6.5 percent in the year 1999 to 8 percent in 2006.

The Thailand currency suffered terribly during the economic crisis of 1997 to 2000 when it depreciated against the major currencies such as the United States dollar. However, in recent years the currency has gained considerably with the latest statistics on exchange rates showing that the currency is exchanging at 31.43 against the United States dollar from 68.45 during the time the economy went through the crisis. In the region, the currency is stronger with the Baht changing at 0.306037 against the Japanese yen. IMF was at the forefront in aiding Thailand out of the bankruptcy which was brought about by the economic crisis in 1997 to 2000. By 1999 the package from the IMF had increased to 14 billion dollars which was a crucial part of bringing Thailand back to its economic track.

The world bank

The world bank also played a great role in the process of privatization of various institutions which had gone down or were underperforming. It also financed these privatized institutions to put them back on the recovery road. The central bank of Thailand has also played a crucial role in stipulating sound monetary policies which maintain and regulate the financial stability of the county as well as managing the consequences once the financial market becomes unstable.

This entails the formulation of clear financial regulations, management of efficient payment systems, and effective financial institutions supervision. Some of the tools the bank uses to bring stability are the use of the discount window, stipulation of appropriate interest rate policies, and acting as the lender of the last resort. The monetary policies include the inflation regulations policies which regulate the amount of money in the economy. The bank has also adopted sound monetary policies aimed at containing consumption rates as well as saving rates in the economy.

References

Alesina, A.Distributive Politics and Economic growth, New York: Macmillan Company, 2007.

Benabou, R. Inequality and Growth, Bernanke: Rotemberg Press, 2003.

Christensen, S. Siamwalla, A. Institutional and Political analysis of Thailand, Bernanke: Rotemberg Press, 2006.

Deininger, K. New Data Set Measuring Income Inequality, World Bank Economic Review , Vol. 10, no.3, pp. 565-59.

Ingram, J., Economic Change in Thailand Oxford: Oxford University Press, 2005.

Globalization, Thailand, Web.

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