Thailand - Economic analysis of government's policies, investment climate and political risk.

THE

McKEEVER INSTITUTE

OF

ECONOMIC POLICY

ANALYSIS

THAILAND: Economic Policy Analysis

This site presents an analysis of the Thai government's economic policies compared to a list of 34 economic policies as prepared by the McKeever Institute of Economic Policy Analysis (MIEPA) as written by native Thai student Sarunyu Thamvorapol studying in San Francisco in the Spring of 2004. To read the analysis scroll through this site. To learn more about the background policies, click here
 
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    Several foreign born students living in California have completed a study of their home country governments' economic policies as compared to the MIEPA list of policies as outlined above. The study as written by Sarunyu Thamvorapol on Thailand is shown below. The ratings herein are based on the following rating scale:

    RATING SCALE

    5.0 Perfect Facilitation of Wealth Creation
    4.0 Midway between Perfect and Neutral
    3.0 Neutral Effect on Wealth Creation
    2.0 Midway between Neutral and Obstructionist
    1.0 Perfectly Obstructionist to Wealth Creation
    [Rating scale copyright Mike P. McKeever, 1996. Used herein with permission]

    To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

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    THAILAND:

    Comparison of Thailand's economic policies to MIEPA criteria as prepared by native student Sarunyu Thamvorapol of Thailand studying in the US in the Spring of 2004.
     

    
    RATING SUMMARY
    
    POLICY NUMBER      RAW SCORE   ADJUSTED SCORE     POSSIBLE  PERCENTAGE
    
            1               4.0           12.0             15.0        80 %
    
            2               4.0           12.0             15.0        80
    
            3               3.0            9.0             15.0        60
    
            4               4.0           12.0             15.0        80
    
            5               3.0            9.0             15.0        60
    
            6               3.0            9.0             15.0        60
    
            7               3.5           10.5             15.0        70
    
            8               4.5           13.5             15.0        90
    
            9               5.0           15.0             15.0       100
    
            10              5.0           15.0             15.0       100
    
            11              4.0           12.0             15.0        80
    
            12              2.0            6.0             15.0        40
    
            13              4.0            8.0             10.0        80
    
            14              5.0           10.0             10.0       100
    
            15              3.5            7.0             10.0        70
    
            16              3.0            6.0             10.0        60
    
            17              2.0            4.0             10.0        40
    
            18              3.0            6.0             10.0        60
    
            19              2.0            4.0             10.0        40
    
            20              3.0            6.0             10.0        60
    
            21              3.5            7.0             10.0        70
    
            22              3.5            7.0             10.0        70
    
            23              3.0            6.0             10.0        60
    
            24              3.0            6.0             10.0        60
    
            25              2.0            4.0             10.0        40
    
            26              4.0            8.0             10.0        80
    
            27              4.0            8.0             10.0        80
    
            28              3.0            6.0             10.0        60
    
            29              2.5            2.5              5.0        50
    
            30              1.5            1.5              5.0        30
    
            31              4.0            4.0              5.0        80
    
            32              3.5            3.5              5.0        70
    
            33              4.0            4.0              5.0        80
    
            34              3.0            3.0              5.0        60           
    
       TOTAL              115.0          256.5            375.0        68.4%
                          =====          ======           =====        =====
    
    
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    INDIVIDUAL POLICIES

    1. Freedom from Internal Control: 4.0

    Thais are free to do what they want because in Thailand government give authority and freedom to do what they want to citizens.

    Source: personal experience.

    2. Freedom of Speech: 4.0

    The law provides for freedom of religion, and the Government generally respects this right in practice; however, it does not register new religious groups that have not been accepted into one of the existing religious governing bodies on doctrinal or other grounds.

    Source: http://www.state.gov/g/drl/rls/irf/2003/24323.htm

    3. Effective Fair Police Force: 3.0

    Police officers in Thailand still donít have enough powers to protect citizens because there are some people who are more powerful than police so it is difficult to arrest them when they do something wrong. However, normally police are responsible for citizen.

    Source: personal experience

    4. Private Property: 4.0

    Thailand government has always protected the right of Thais to own property. In Thailand people have to prove that they own the property before they can do anything with it. A person who owns a property must have a title deed to show that the property is owned by him/her legally.

    Source: personal experience

    5. Commercial banks: 3.0

    The Bank of Thailand had revised the notification regarding the usage of the Internet network for undertaking of commercial banking business by issuing a new notification dated November 9, 2000 and has cancelled the previous notification dated on December 30, 1999. The objective is to expand the scope of the usage of the Internet network for undertaking of commercial banking business in order to support both commercial bank and electronic commerce transactions which play an important role in future economic development of the country

    Source: http://www.boi.go.th/japanese/tid/data/BOT_pressreleases12643e.htm

    6. Communication system: 3.0

    The communication in the capital city of Thailand is quite good. There are many modes of communication in Bangkok. For example, cell phones, faxes, telephone and etc. However, those communication isnít widespread in countryside.

    Source: personal experience

    7. Transportation: 3.5

    The transportation of Thailand carries many modes of transportation. Such as, airport, train, railway, highway, waterway, buses. However, those transportation isnít widespread in countryside.

    Source: personal experience

    8. Education: 4.5

    Thailandís education requires students to at least graduate a high school or grade 12. Most of Thai students always keep studying until they at least graduate a university.There are multiple universities offered to students. And Thai education is also considered to be one the best in Asia.

    Source: personal experience

    9. Social mobility: 5.0

    In Thai society, Thai always accept and respect people with high education. People who have special abilities can get good jobs, so Thai people can succeed their needs without any connection, on the other hand, we can say that there usually is no need for people to know someone with a high position in a society in order to get a good job.

    Source: personal experience

    10. Freedom from outside control: 5.0

    Thailand is free from other countries because Thailand has never been defeated by other countries. Thailand isnít a colony of any country. So Thais are subject to the laws of the country only.

    Source: personal experience

    11. Foreign currency transaction: 4.0

    Thais usually donít transact to foreigners by using foreign currency. But there are some people like to accept US dollars from foreigners. However, if you really want to transact to Thais, you should convert your money to Thai currency first because there are still tons of people who donít like taking other foreign currency.

    Source: personal experience

    12. Border control: 2.0

    I believe that the Thai government has given so much attention on illegal goods because there are many people who make illegal products. For instance, there is tons of illegal software, CDs, waiting for you to buy. Therefore, I think that the government should try to increase the punishment for people who make illegal copies.

    Source: personal experience

    13. Currency: 4.0

    The main Thai unit of currency is called baht. 1 baht is equal to 100 Salung or Satang. Thai currency is approved by the government of Thailand. 1 US dollar is equal to 40 bahts.

    Source: personal experience

    14. Cultural, Language Homogeneity: 5.0

    Thais always respect the history of Thailand. They never surrender the culture. Thais are friendly to foreigners. They always welcome all the visitors. The official language of Thailand is Thai, Thai is spoken everywhere, 99% of language used in Thailand is Thai.

    Source: personal experience

    15. Political effectiveness: 3.5

    Recently, Thai government has solved a lot of problems about economics and politicwhich improves the business climate in the country. Therefore, Thai government has made a lot of successes in the past 3 years.

    Source: personal experience & also based on http://www.boi.go.th/japanese/tid/data/prd_pr_02dec02.html

    16. Institutional stability: 3.0

    After enjoying a real compound annual growth rate of 9.6 percent between 1986 and 1996, Thailand suffered a sharp economic downturn in 1997. This was a combination of currency and financial crises as a result of the unsuccessful defense of the currency and the weak banking system. Nevertheless, in recent months financial conditions have started to improve. Market confidence has strengthened and has extended beyond the exchange rate to declining inflation and interest rates, a bull rally in the stock market, and a leveling off in indicators of production and demand.

    Source: http://www.boi.go.th/japanese/tid/data/BTsp1.htm

    17. Honest Government: 2.0

    Corruption is still a serious problem in Thailand, many of the governors corrupt. The poor are still poor because there is less progress in Thailand. While the poor are still poor but people who corrupt become rich.

    Source: personal experience.

    18. Common Laws: 3.0

    I donít think equality really exists in Thailand because In my own experience, I have seen a lot of poor people who arenít treat as well as they should be. Normally, the law is good but there are some officers who break the rule. Therefore, person with lots of money will be treated a lot better than the poor.

    Source: personal experience.

    19. Central banks: 2.0

    According to the Bank of Thailand Act, the Minister of Finance is empowered to oversee the overall affairs of the Bank of Thailand with the general control and direction being entrusted to a Court of Directors which comprises the Governor and Deputy Governors, appointed by His Majesty the King, as Chairman and Vice Chairmen respectively and at least five other members appointed by the Cabinet.

    Source: http://www.boi.go.th/japanese/tid/data/rol_respon-e.htm

    20. Domestic budget management: 3.0

    The country's debt problem must be resolved by the creation of income. Therefore, the Government would support and promote the process of income creation for the people at all levels. Towards this end, the Government would promote the principles of the Sufficiency Economy in accordance with the potential of each community at the grassroots level of the country. The Government would also support villagers to join together in conducting economic activities at the community level, accelerate the development of small- and medium-scale entrepreneurs, promote mutually beneficial and supportive linkages between such entrepreneurs and large-scale enterprises, and provide access to domestic and overseas markets in order to systematically strengthen the income creation process for the people.

    Source: http://www.boi.go.th/japanese/focus/gov_policy26feb01.htm

    21. Government debt: 3.5

    At present, the Thai economy has already passed its lowest point following the 1997 Crisis. During the second quarter of 1998, the economy reached its nadir with economic growth of minus 14 per cent. Economic growth since then has gradually improved and has turned positive, reaching a level of 6.3 percent in the second quarter of 2000. Today, however, economic growth has slowed down and currently stands at 3 per cent. Current predictions indicate that the Thai economy will expand at the rate of between 3 to 4 per cent this year. Economic growth will remain positive but at a slow pace. This is a signal for us to be cautious and to take care in solving the country's problems.

    Source: http://www.boi.go.th/japanese/focus/PM_sp03apr01.htm

    22. Economic statistics: 3.5

    Preliminary data indicated that the Thai economy continued to expand in 2003 Q2, despite external uncertainties, in particular, the Severe Acute Respiratory Syndrome (SARS) problem, which dampened private consumption and investment in April and May. However, the SARS problem that ended swiftly and the accommodative monetary policy were positive factors that contributed to strong investor and consumer confidence. Furthermore, the economic growth of 6.7 per cent in 2003 Q1 will provide further momentum to future economic expansion.

    External stability remained strong. Core inflation was low, averaging 0.2 per cent in the second quarter and first half of 2003. The exchange rate remained stable. The current account recorded a surplus throughout the quarter, despite the deterioration in the services sector due to the SARS problem. Meanwhile, international reserves remained high despite the early debt repayment to the IMF.

    Source: http://www.boi.go.th/japanese/tid/data/july03_inflation_report.htm

    23. Protection of public health and safety: 3.0

    The foundation of the Thai public health system has been laid since the early days in the Thai history. It has been developed from the period when there was no state agency responsible officially for health activities. A departmental level agency was established in 1888, and continuously evolved until the establishment of present Ministry of Public Health in 1942. It can be stated that the Ministry of Public Health is the main national health agency that plays important role in health program development and the improvement of health status of Thai people.

    Source: http://eng.moph.go.th/ContentDetails.asp?intContentID=34&strOrgID=001

    24. High Wages Policies: 3.0

    Nowadays, some of working people in Thailand can afford to find a place to live and most of the people who can afford a place to live are in urban. However, there are still lots of working people who canít afford a place to live and most of them are in rural areas.

    Source: personal experience.

    25. Environmental Protection: 2.0

    The Ministry of Industry, while proud of its achievements to date, is well aware of the toll rapid economic development has taken on the Kingdom's natural environment and quality of life.

    Supporting the greening of Thailand is one of the MOI's top priorities. Besides monitoring individual factory pollution control and assisting firms with environmental problem solving, the MOI plays a central role in highlighting investment opportunities in Thailand's environmental sector.

    Several MOI agencies are engaged in environmental services. The Department of Industrial Works monitors effluent and emissions, regulates environmental policy, and reviews the required environmental impact assessment prior to license issuing. The treatment of hazardous waste is primarily the responsibility of the Office of Industrial Environment Management. Currently, there is one hazardous waste treatment facility in Bangkok and one secure landfill site in Ratchaburi.

    Source: http://www.boi.go.th/english/tid/data/MOIintro.htm

    26. Strong army: 4.0

    Thailand has recently entered into the Agreement on Information Exchange and Establishment of Communication Procedures with other regional countries to combat terrorism. With the United States, it also signed the ASEAN-United States of America Joint Declaration for Cooperation to Combat International Terrorism.

    Source: http://www.boi.go.th/japanese/tid/data/prd_pr_02dec02tourismsecurity.html#3

    27. Foreign Trade Impact: 4.0

    Under the present Administration, the global economic slowdown continued to adversely affect Thailand's economy. Both the USA and Japan, which are Thailand's major trade partners, have experienced a slower economic growth. The world economic recession was further aggravated by the events of 11 September 2001. By its structure, Thailandís economy has always been very much export-oriented. Its exports account for 58% of the national Gross Domestic Product. The global slump inevitably made it more difficult for Thailandís economy to recover.

    The recent economic crisis had far-reaching repercussions on the Thai society as a whole. 1.2 million People were unemployed. The number of children who had to leave school because their parents could not pay tuition fees soared. Crime rate and drug-related incidents were on the increase. In 1999 alone, there were 256,925 drug arrests. The environment became further degraded. These problems posed major threats to the prosperity and security of the country.

    Source: http://www.boi.go.th/english

    28. Protection of foreign currency earning enterprises: 3.0

    Thailand recognizes three kinds of intellectual property rights: patents, trademarks, and copyrights.

    The Patent Act protects both inventions and product designs and pharmaceuticals. The Copyright Act protects literary, artistic works, and performance rights, by making it unlawful to reproduce or publish such works without the owner's permission. The Trademark Act governs registration of, and provides protection for, trademarks.

    The Alien Occupation Law requires all foreigners working in Thailand to obtain a Work Permit prior to starting work in the Kingdom, except when they are applying under the Investment Promotion Law, in which case they have 30 days to apply.

    Non-Immigrant visas provide the holder with eligibility to apply for a work permit, and allow the holder to work while the work permit application is being considered.

    Source: http://islandstyleproperties.com/thai-business.html

    29. Management of foreign currency budget: 2.5

    Overseas borrowing is a temporary, but immediate, measure to maintain international reserves during a period in which confidence in the Thai economy is still low and while the industrial and economic structure is being adjusted (over the next 1-2 years) to be able to export competitively in the world market. Accordingly, the Thai government has set targets for international reserves of US$23-24 billion for 1997-1998 and US$30 billion dollars, a figure equal to 4-5 months of imports, for the medium term. These targets, together with other rehabilitation measures, will gradually increase stability in foreign exchange rates and the baht (measure 1.3).

    Source: http://www.boi.go.th/japanese/focus/veraimf.html

    30. Layers of collective action: 1.5

    In a recent critical assessment regarding the conventional approach to development studies Edwards shows that in most cases research in this field has "become part of the problems of underdevelopment rather than being part of the solutions to these problems" [1]. This is related to the fact that advising developing countries had become a "major industry, employing 80.000 expatriates in Africa south of the Sahara. As an alternative to the conventional academic survey and policy (top-down) research Edwards pleads for the introduction or extension of participatory or action research. This kind of research appears the only type that can seriously take into account the knowledge about their own environment and problems that exists among the common people for whom all the studies are allegedly to serve.

    Fortunately, at the margins of the mainstream academic and policy-studies participation- and action-research and - even better - participatory action-research has been carried out over the last few decades in several countries. This was mostly related to such fields as community- and peasant organization, adult education, and similar grassroots oriented development efforts, designed to lead to "empowerment of the poor" [2]. A brief overview of the emergence of action research and participatory action research as its offshoot should be given.

    Source: http://www.fao.org/WAICENT/FAOINFO/SUSTDEV/PPdirect/PPre0030.htm

    31. Pro-business climate: 4.0

    People usually give respect to persons who have a power to open up a business.And they also feel that all businessmen, Thai or foreign alike. Therefore people can be confident that when they invest in Thailand, they will receive fast, fair and transparent treatment.

    Source: http://www.boi.go.th/thai/faq/index.html

    32. Government enterprises: 3.5

    The Master Plan comprises an action plan for the reform or privatization of 59 states enterprises. These enterprises are an integral part of economic activity in key sectors of the economy and can be broadly categorized into the following five major sectors: telecommunications, water, energy, transport, and others (including industrial, social and technology, commercial and services, agriculture, and financial sectors). While some are profitable, increased private sector participation will improve economic efficiencies, reduce the government burden, and improve service quality, coverage and reliability. The total number of state owned enterprise employees currently stands at approximately 320,000, with the top ten largest entities employing over 226,000 individuals.

    The state enterprises were set up with the purpose of either discharging the government's role of providing basic services to the public or creating and promoting new industries where there is a lack of private sector participation. The forty-two enterprises concerned encompass the following sectors: banking, industrial, and commercial and services, agricultural, and social and technology.

    Source: http://www.boi.go.th/english/tid/data/Thaigvtpriv2.htm

    33. International security agreements: 4.0

    President George W. Bush and Prime Minister Thaksin Shinawatra recently reaffirmed the strength and vitality of the alliance between the United States and Thailand, celebrating a mature partnership that spans many fields of endeavor, based on a shared commitment to democracy, open markets with free and fair trade, human rights, and ethnic and religious tolerance. Noting U.S.-Thai cooperation in conflicts from World War II to the war on terrorism, the President and the Prime Minister expressed the conviction that the alliance has been a pillar of stability in the Asia-Pacific region and beyond. The two leaders agreed that the scourges of terrorism, narcotics trafficking, and other transnational threats demonstrate the continued need for a robust alliance into the 21st century. Highlighting their vibrant program of joint military exercises and training, including co-hosting the largest multilateral military exercise in Asia every year, the two leaders emphasized their determination to strengthen and revitalize the alliance, while working with partners throughout the region to combat common threats. The two leaders agreed on the importance of a strong and united ASEAN, and President Bush offered all appropriate assistance to support capacity-building within ASEAN. The two leaders pledged to ontinue cooperation in promoting regional peace and stability through the ASEAN Regional Forum (ARF).

    Source: http://www.usa.or.th/news/press/2001/nrot141.htm

    34. Protection of domestic enterprises: 3.0 Under the Investment Promotion Act the BOI provides guarantees against nationalization; competition from new state enterprises; price controls; state monopolization of the sale of products similar to those produced by promoted projects; against tax exempt imports by government agencies or state enterprises.

    The BOI also guarantees permission to export, permission to own land to carry out promoted activities and permission to take or remit foreign currency abroad. However, the government doesn't fully take advantages of their power. They give only a few penalties to people who don't respect to the laws

    Source: http://www.boi.go.th/thai/faq/index.html

    DISCLAIMER

    All the information and conclusions in each country analysis are solely the responsibility of the individual student and have not been verified, corrected, checked for copyright infringement or evaluated in any way by MIEPA or Mike P. McKeever. You are solely responsible for the results of any use you make of the information and conclusions in these studies. Use them at your own risk as interesting supplemental information only instead of seasoned judgements about the policy factors contained herein. Each student has granted permission for his or her work to be displayed here under his or her own name or wishes to remain anonymous and have either created a pen name or used no name at all; if you wish to contact them for any reason, forward your request to MIEPA and the student will be notified of your interest.

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    CONTENTS OF SITE

    Return to MIEPA's Home Page list of country studies

    Introduction and Policy Recommendations

    Winning Essays: There Are Alternatives Project (TAA)

    Essay: Balanced Trade: Toward the Future of Economics

    Moral Economics

    McKEEVER INSTITUTE of ECONOMIC POLICY ANALYSIS

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