International trade has been the great success story and Corner Stone of growth in the Thai economy in the 1980's and 1990's. The growth of foreign trade has been nothing short of amazing. The Chart below shows that from 1980 exports had increased 45% by 1985, 342% by 1990, 955% by 1995 & a staggering 1,952% by 2000. Few countries in the world could claim this kind of dramatic growth in any sector of their economies.
Overall international trade grew from 14% of GDP in 1980 to more than double that figure (29%) in 1995. Most important to note is that despite the currency crisis in mid 1997 both imports and exports have continued to grow. Albeit import levels dropped below exports for the first time in 1997 in response to the rapidly rising foreign currency cost of imports and the Thai government's rising foreign debt obligations.
* Source of all Charts on this page - Department of Business Economics, Bank of Thailand & the EXIM Bank.
As you would expect, with the rapid growth of Thailand's international trade over the past 15 years, the composition of Thailand's exports has changed significantly. In 1985 53% of the value of Thailand's exports were made up of Agricultural & Agricultural industrial products. By the year 2000 only 8% came from Agricultural products and 4% from fishing. Incredibly, 84% of the value of exports was now made up of manufactured goods. This is not to say that primary product exports lost significant value. As you will see from Chat 1 below Rice, Rubber and fishing products have been consistent export earners for Thailand but the value of manufactured exports has increased so dramatically as to completely overshadow these more traditional export product sectors. Frozen Prawns & Chicken Meat export continues to show growth potential.
The big success story for Thailand has been the very rapid growth of manufacturing in the Electronics sector, particularly computers, computer modules and Integrated Circuits. This sector now generates more than 500 Billion Thai Baht (US$ 12 Billion approx) in Export earnings per year and shows every sign of continuing to grow and diversify into other areas such as Radio & TV manufacture.
While very solid growth in exports continues despite the currency crisis of 1997 and the more recent global down turn, Thailand relies on the USA, Japan, Singapore and more recently Hong Kong to take over 55% of its exports. This has been the pattern for the last 15 years and Thailand's major trading partners remain the same. This does imply some vulnerability to the fortunes of a small trading group, but these have certainly not been adverse to date. The effect of more recent events in the USA (World Trade Center Attack on Sept 11th, 2001) is yet to be seen but it is assumed that it will demonstrate a loss of demand.
Just as Exports experienced rapid growth over the past 15 years so have imports into Thailand. The vast majority of these imports have been to provide the raw materials and equipment necessary to fuel the rapidly developing export manufacturing sector.
There has been a conspicuous increase in domestic consumption of imported products such as cars, luxury goods etc but their value as a percentage of the total has remained low in comparison to capital goods. Government investment incentives and a benign political environment have meant that the pattern of foreign investment has been towards value-added industries using imported machinery and materials. Unfortunately, to date this has not lead to the same increases in down stream investment in raw materials processing or capital goods manufacture.
During this period of rapid growth, the value of imports has tended to remain high and to exceed that of exports. In fact it was one of the factors that lead to the currency melt down after the Baht was floated in July 1997 because levels of imports continued to be high despite the global down turn in demand. After July 1997 the cost of foreign currency and foreign debt became so prohibitive the trend reversed and the level of imports dropped below that of exports.
As noted above Thailand does the majority of its trade with just five or six countries. While real efforts have been made in recent years to expand the portfolio of trading partners via government initiatives the situation remains largely unchanged.
One of the most obvious points to note when looking at the Charts 3 & 5 above is the size of the trade imbalances with the USA and Japan. With the USA this could reach 300,000 Million Baht in Thailand's favour in 2001.
By contrast with Japan it could reach 200,000 Million Baht in Japan's favour in 2001! While Japan has been a major investor in Thailand's growing industrial base as well as the financier of most major infrastructure projects (Eastern Sea Board, Second International Airport, Elevated Rail etc.) it does remain the major provider of capital and luxury goods.
Thailand has committed itself to a number of international trade regulation and tariff reduction agreements. It was one of the founding members of the WTO and one its former government Ministers, Dr. Supachai will shortly succeed as WTO President.
Thailand is a member of the ASEAN Free Trade Area (AFTA), APEC and a signatory to GATT. However, don't think that Thailand is free from excise and import duties. It does have a broad ranging tariff regime on imports and exports in some cases. Aircraft parts and Defence equipment does enjoy exemptions in most cases, but you need to check this out thoroughly before planning an investment or export to Thailand, particularly where it involves electronic equipment and spare parts. The best approach is to seek assistance from your customer or commercial representative in this area. |
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