Thailand's Brief Boom Goes Mushy
Even at its peak, the higher economic growth only increased the country's disparity of wealth
JUST two years ago, the sheer speed of Thailand's economy made it appear destined to become Asia's next "little dragon," trailing behind South Korea, Taiwan, Hong Kong, and Singapore.Skip to next paragraph
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But a hail of bullets on the streets of Bangkok in May, triggered by anti-military protests, has dimmed the hopes of Thailand becoming an economic dragon any time soon.
The sudden downturn has lessons for Asia's other rice-growing nations, such as the Philippines or Vietnam, which were once poised to follow Thailand's rush toward the status of a newly industrialized country (NIC).
Thailand's quest for NIC-status was rooted in an economic boom that began in 1987, following a big change in the yen/dollar exchange rate. Growth rates hit 10 percent, tourism took off, and one Japanese factory opened almost every day. Manufacturing exports were rising 30 to 40 percent.
Thai officials had dreams of turning Bangkok into a financial center for Southeast Asia, a replacement for Hong Kong after 1997.
But the rapid growth was too much for many parts of Thailand, from too narrow streets in Bangkok to a weak education system to a tradition-bound leadership.
"Our economy was not used to rising so fast," says Chalongphob Sussangkarn, head of macro-economic programs at the Thailand Development Research Institute (TDRI).
"The constraints quickly become evident. The bureaucrats were working in 19th-century style, causing bottlenecks in building new roads, ports, and communications. And we had a serious shortage of skilled labor," says Thailand's leading economic forecaster.
But most crucially, Dr. Chalongphob adds, "it's now clear that our economic growth out-paced our political maturity.
"The politicians and military were still operating on rules and assumptions of 10 or 15 years ago, while the political demands of a new middle class were growing at a rapid rate."
That middle-class, based almost totally in Bangkok and known for their mobile phones and designer jeans, are still small in number but big in economic clout. Even though Bangkok has one-fifth of the population, it generates about half of Thailand's wealth and taxes.
"The armed forces and the politicians underestimated the rising demands of this new middle-class for responsible and moral leaders," Chalongphob says. "A whole new set of demands for more democracy was ignored by the establishment. People in Bangkok were fed up with the abuse of power and the manipulation of state television."
Six months before the May protests which were led by the middle-class, Chalongphob decided for the first time to link his economic forecasts to political uncertainty, a sign that the world considers stability an important precondition to investment in Thailand.
But even his worst scenario was not as bad as what happened after scenes were shown around the world of Thai soldiers shooting dozens of unarmed demonstrators from May 18 to 20. Those video shots have scared off many tourists and investors.
Now, instead of an estimated 7.3 percent growth rate in gross domestic product (GDP) for this year, TDRI forecasts a rate of about 6.8 percent or less, depending on what happens between the military and politicians after fresh elections in a few months. In the interim, a caretaker government under former diplomat and businessman Anand Panyarachun will try to halt the economic decline.