This profile analyzes the political, economic, social, technological, legal, and environmental (PESTLE) structure of Tha...
COUNTRY ANALYSIS REPORT
Thailand In-depth PESTLE insights Publication Date: December 2011
OVERVIEW Catalyst This profile analyzes the political, economic, social, technological, legal, and environmental (PESTLE) structure of Thailand. Each of the PESTLE factors is explored in terms of four parameters: current strengths, current challenges, future prospects, and future risks.
Summary Key findings Thailand has followed prudent policies, but high levels of corruption derail developmental initiatives Over the years, the Thai government has encouraged higher levels of public investment in order to foster rapid economic growth. In June 2010, former Prime Minister Abhisit Vejjajiva planned to launch the Reconciliation Plan to protect the nation's main institutions, redress inequalities and injustice, enable constructive communications between the political parties, and put into motion a political process that is democratic, efficient, and transparent. The current coalition government headed by Prime Minister Yingluck Shinawatra aims to enhance the competitiveness of Thailand by broadening market access for businesses as part of its economic policy, promoting trade and investment, engaging in free trade agreements and co-operation frameworks to expand international economic linkages, providing solutions to the menace of drugs, preventing and fighting corruption, raising the standard of living of the Thai people through wage increases and tax relief, and developing the health insurance system. These prudent policies are expected to help the country’s development. However, alleged high levels of corruption could counter the government’s strong policies. The purportedly widespread corruption in the country’s political and bureaucratic machinery hinders prospective investment. Transparency International's Corruption Perceptions Index for 2010 ranked Thailand 78th out of 178 countries. In the World Bank’s 2010 Worldwide Governance Indicators, the country was ranked in the 46.9 percentile for control of corruption. The series of corruption scandals facing the country covers procurement scams involving hospital equipment and school supplies,
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Overview
construction tenders, and political appointments, which could derail developmental works undertaken by Thailand. Political parties squabbling over corruption charges could also lead to political instability.
Thailand has a healthy banking system; however, the increasing fiscal deficit is worrying Thailand is a major international financial center, with an integrated banking system network. The banking sector plays a significant role in the economy, with estimated financial sector assets at 200% of GDP. Loans expanded by 13.4% in the first quarter of 2011 compared to the same period in 2010. Gross non-performing loans of the system declined to THB300bn ($9.81bn) in the first quarter of 2011, compared to THB371bn ($11.4bn) in the same period in 2010. Net profit during the quarter increased to THB32.1bn ($1.04bn), compared to THB27bn ($830m) in the first quarter of 2010. The Thai Asset Management Company, which was founded in 2001 to acquire and dispose of distressed and non-performing assets from state and private sector financial institutions after the financial crisis, was dissolved in September 2011 after absorb ing debts totaling THB774bn ($25.3bn) during the last decade. However, the government’s increasing fiscal deficit is a cause for concern. The government has set the national budget for 2011–12 at THB2.3tn ($77.2bn), an increase from THB2.1tn ($63.5bn) in 2010–11. In November 2011, the prime minister submitted a draft budget bill for 2012 that called for expenditure of THB2.38tn ($77.2bn). If implemented, the populist policies promised by the current government during its election campaign could cost THB2tn ($65.4bn) over five years. The budget deficit in 2010 was $8.1bn, or 2.7% of GDP. It is expected that the budget deficit will rise to around THB400bn ($13.4bn) in 2011–12, or 3.9% of GDP. The increasing fiscal deficit will make it difficult for the government to enjoy strong public finances for both social welfare and economic development programs.
Although Thailand has a strong social security system, increasing income and developmental disparity is a cause for concern Thailand included social protection in its 11th National Economic and Social Development Plan. Prime Minister Yingluck Shinawatra aims to provide solutions to the menace of drugs, prevent and fight corruption, raise the standard of living of the Thai people through wage increases and tax relief, and develop the health insurance system. The government raised the daily minimum wage of more than 20,000 public sector workers to THB300 ($10) in October 2011, while the Central Wage Committee intends to raise the private sector minimum wage by around 40% from April 2012. The government has embarked upon a strategic plan to make Thailand a welfare society by 2016. According to the deputy permanent secretary for social development and human society Napa Setthakorn, the second strategic plan scheduled for 2012–16 will extend the country’s social security system to cover all groups of people, including those in the non-formal sector. The government will also seek to develop the quality of and raise funds for social security services. However, there is income and development disparity in the country. While Bangkok and its suburbs are prospering, the barren northeast remains poor. The rapid economic growth in and around Bangkok has further marginalized the country’s less developed regions. In addition, the country faces significant income inequality; for example, the average wage levels of employees participating in the private and public sectors in the northeast are around three times lower than those in Bangkok and twice as low as those in the central region. Per capita government expenditure in the northeast – particularly on health and agriculture – is also comparatively lower than other regions and below the central region by almost half. The government needs to tackle the regional disparity in income and development, as it could lead to an increase in crime and anti-national activities in the country.
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Overview
Research and development expenditure in the country is growing, but weak intellectual property rights protection is an issue The government has planned a holistic set of measures for promoting research and development (R&D) in the country. In 2009, the Higher Education Commission launched the National Research Universities Project to build capacity and strengthen human resources in R&D and innovation. The government allocated THB100–500m ($2.9–14.5m) in annual funding support to each university for three years as part of the project. The country’s annual expenditure on R&D is expected to reach THB100bn ($2.4bn), or 1% of GDP, by the end of the 11th National Economic and Social Development Plan in 2016. The government offers many financial incentives to increase private investment in R&D. Although the country’s R&D agenda is still not under a single body, the government is working to develop collaboration among the various agencies and ministries under its first 10 year science, technology, and innovation plan. These developments coupled with an increase in investment would augment Thailand’s position as an R&D leader. However, the country has a very weak track record in terms of intellectual property rights (IPR) protection. The country is recognized as one where IPR protection and enforcement are key issues. In 2010, the Office of the US Trade Representative retained Thailand on its Priority Watch List due to the high level of copyright piracy in the country, which placed it among the poor performers. According to the International Intellectual Property Alliance, losses due to software piracy were estimated at $344m in 2010. The international community has regularly urged the country to improve its performance in IPR enforcement.
The country has a strong business environment, but lacks robust labor laws The business environment in Thailand has improved considerably over the years According to the World Bank's Doing Business 2012 report, which measures the ease of doing business within a country, Thailand was ranked 17th out of 183 economies. The report said the country has made starting a business easier by introducing a one-stop shop. According to the 2011 Index of Economic Freedom, Thailand was ranked 62nd out of 179 countries and 10th out of 41 Asian countries. Thailand scores highly in fiscal freedom, government spending, monetary freedom and labor freedom when compared to the world average. It fared much better than its overall rank on the enforcement of contracts, ease of securing credit for business and closing a business. Starting a business takes an average of 32 days in the country, compared to the world average of 34 days, while obtaining a business license takes less than the world average of 209 days. These factors are important indicators of a positive business climate. However, the country is in dire need of labor market reform in order to become competitive. Workers are not protected by law from employer reprisals for union activities prior to the registration of the union, and employers can use loopholes in the Labour Relations Act to fire union leaders prior to government certification of unions. Under the current labor policies, migrant workers are exposed to abusive and discriminatory practices in the workplace. The government has proposed a private insurance scheme for migrant workers instead of access to the Workmen’s Compensation Fund (WCF). Unlike the WCF, there is no legal binding on the employer to provide private insurance coverage to migrant workers. This policy is expected to have a negative impact on the estimated 2 million migrants in the country. The government has to ensure that labor laws provide equal rights and protection for all workers.
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Overview
Although Thailand has strong environmental policies, it is also responsible for high levels of pollution Thailand has a strong environmental policy framework in place to address its environmental and energy concerns. The government has initiated several policies and measures with a focus towards ensuring a cleaner environment. The country has implemented a 20 year plan for the Enhancement and Conservation of National Environment Quality (1997–2016). In October 2010, the Thai cabinet agreed to impose a new tax on polluting industries as part of its efforts to conserve the environment. However, rapid industrialization has outpaced environmental management, resulting in increased pollution levels in Thailand. A significant proportion of the country’s forest cover has been lost, while around 50% of its rivers and lakes suffer from poor water quality. The rampant use of land and water without proper planning has led to climate change that threatens to impact the low lying central region in a big way; the recent spate of devastating floods are a case in point. Airborne particulate pollution levels have worsened in the northern province of Chiang Rai, with levels of carbon monoxide, sulfur dioxide, nitrogen dioxide, and lead that are above internationally recognized levels. CO2 emissions increased from around 187 million metric tonnes in 2002 to around 268 million metric tonnes in 2010. It is expected that the increasing pollution levels will cause the environment to deteriorate further in the coming years, and could harm the health of both the Thai people and the economy.
PESTLE highlights Political landscape The improvement in bilateral relations with Cambodia has diminished the risk of conflict. Prime Minister Yingluck Shinawatra visited Cambodia in September 2011, and both countries have agreed to jointly develop maritime areas in the Gulf of Thailand. According to the World Bank’s 2010 Worldwide Governance Indicators, the country performed poorly in every single parameter, recording low percentile ranks in terms of voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption.
Economic landscape Thailand's diversified manufacturing sector is a significant contributor to the country's growth. In 2010, the industrial sector contributed 44.7% of GDP, with output increasing from THB2.3tn ($53.1bn) in 2002 to THB4.3tn ($119.5bn) in 2010. The Thai Chamber of Commerce has estimated that the recent floods have cost the economy $33bn and 1 million jobs due to loss of assets and lower output. The industry ministry has claimed that the country’s high technology exports could slide by as much as 40% in 2012.
Social landscape Thailand had a literacy rate of 95.7% for the total population in 2010. The government spent around 4.3% of GDP on education during 2006–09. The high literacy rate signifies the presence of a large educated workforce.
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Overview
With thousands of homes surrounded by water since July 2011, the nation's medical experts are warning of an outbreak of disease, with the population facing the threat of cholera, gastrointestinal diseases, and typhoid.
Technology landscape The number of patents granted to Thailand by the US Patent and Trademark Office increased from 25 in 2005 to 60 in 2010, which shows remarkable progress in terms of the country's innovation scenario. Thailand faces a shortage of skilled workers, which could limit the country’s technological innovation and productivity. Its gross enrolment ratio in tertiary education is only 45%, which needs to be improved in order to increase the skilled workforce.
Legal landscape Thailand has announced major tax reforms to encourage investment and support the market through increased domestic consumption. Tax reforms are expected to increase tax revenues, as well as helping increase business investment in the country. Thailand’s Foreign Business Act strictly limits the level of foreign investment, especially in the services sector. The World Bank’s Investing Across Borders 2010 report stated that Thailand’s restrictions on foreign equity ownership were the most stringent among 87 countries.
Environmental landscape In October 2010, the Thai cabinet agreed to impose a new tax on polluting industries as part of its effort to conserve the environment. The tax rates are expected to be set based on the type of pollution, including water, air, and industrial waste. According to environmentalists in the country, a record 27 environmental activists have been killed in the past 16 years for fighting to save land from illegal developmental projects and campaigning against the sand mafia and illegal timber logging.
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Overview
Key fundamentals Table 1:
Thailand – key fundamentals
GDP, constant 2000 prices ($bn) GDP growth rate (%)
2009
2010
2011f
2012f
2013f
2014f
2015f
170.9
184.2
191.0
199.5
208.8
218.4
228.4
-2.3
7.8
3.7
4.5
4.6
4.6
4.6
2,562.2
2,739.9
2,820.3
2,926.3
3,035.5
3,166.5
3,305.9
Inflation (%)
-0.8
3.3
4.0
4.1
4.2
4.3
3.7
Exports, total as a percentage of GDP
72.8
76.1
79.0
74.6
70.1
65.8
62.0
Imports, total as a percentage of GDP
68.5
75.6
73.5
70.0
66.5
63.1
60.1
Mid-year population, total (millions)
66.7
67.2
67.7
68.2
68.8
69.0
69.1
1.5
1.0
0.9
0.9
0.8
0.8
0.8
170.9
184.2
191.0
199.5
208.8
218.4
228.4
GDP, constant 2000 prices, per capita ($)
Unemployment rate (%) Mobile penetration (per 100 people)
Source: Datamonitor
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DAT AM ONIT OR
Published 12/2011 Page 6
Table of Contents
TABLE OF CONTENTS Overview
1
Catalyst
1
Summary
1
Key Facts and Geographic Location
12
Key facts
12
Geographic location
13
PESTLE Analysis
14
Summary
14
Political analysis
15
Economic analysis
18
Social analysis
22
Technological analysis
25
Legal analysis
28
Environmental analysis
31
Political Landscape
34
Summary
34
Evolution
34
Structure and policies
36
Performance
41
Outlook
42
Economic Landscape
43
Summary
43
Evolution
43
Structure and policies
45
Performance
47
Outlook
60
Social Landscape
61
Summary
61
Evolution
61
Structure and policies
61
Performance
64
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Table of Contents Outlook Technological Landscape
66 67
Summary
67
Evolution
67
Structure and policies
67
Performance
68
Outlook
71
Legal Landscape
72
Summary
72
Evolution
72
Structure and policies
72
Performance
75
Outlook
75
Environmental Landscape
76
Summary
76
Evolution
76
Structure and policies
76
Performance
77
Outlook
79
Appendix
80
Ask the analyst
80
Datamonitor consulting
80
Disclaimer
80
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Table of Contents
TABLE OF FIGURES Figure 1:
Map of Thailand
13
Figure 2:
Thailand – key political events timeline
36
Figure 3:
Thailand – key political figures
37
Figure 4:
Composition of the House of Representatives, 2011
39
Figure 5:
Thailand – historical GDP growth, 1991–2010
44
Figure 6:
Market capitalization of the SET, 2003–10
46
Figure 7:
GDP and GDP growth rate in Thailand, 2004–14
48
Figure 8:
GDP composition by sectors, 2010
49
Figure 9:
Agricultural output of Thailand, 2005–10
50
Figure 10:
Industrial output of Thailand, 2005–10
51
Figure 11:
Services output of Thailand, 2005–10
52
Figure 12:
Current account balance of Thailand, 2005–10
53
Figure 13:
Balance of trade in Thailand, 2006–10
54
Figure 14:
External trade of Thailand, 2006–10
55
Figure 15:
Total foreign investment in Thailand, 2005–10
56
Figure 16:
Consumer price index and consumer price index-based inflation in Thailand, 2004–14 57
Figure 17:
Employment in Thailand, 2004–14
59
Figure 18:
Unemployment in Thailand, 2004–14
60
Figure 19:
Thailand – composition by religion
63
Figure 20:
Expenditure on healthcare in Thailand, 2001–10
65
Figure 21:
Government expenditure on education in Thailand, 2002–13
66
Figure 21:
Growth of fixed and mobile phones in Thailand, 2002–12
69
Figure 22:
Internet users in Thailand, 2002–09
70
Figure 23:
Carbon dioxide emissions in Thailand, 2003–10
78
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Table of Contents
Figure 24:
Carbon fuel usage in Thailand, 2003–10
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Table of Contents
TABLE OF TABLES Table 1:
Thailand – key fundamentals
Table 2:
Thailand – key facts
12
Table 3:
Analysis of Thailand’s political landscape
15
Table 4:
Analysis of Thailand’s economy
18
Table 5:
Analysis of Thailand’s social system
22
Table 6:
Analysis of Thailand’s technology landscape
25
Table 7:
Analysis of Thailand’s legal landscape
28
Table 8:
Analysis of Thailand’s environmental landscape
31
Table 9:
Mid-year population by age, 2010
62
Table 10:
Patents received from the USPTO, 2003–10
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6
68
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Key Facts and Geographic Location
KEY FACTS AND GEOGRAPHIC LOCATION Key facts Table 2:
Thailand – key facts
Country and capital Full name
Kingdom of Thailand
Capital city
Bangkok
Government Government type
Constitutional monarchy
Head of state
King Bhumibol Adulyadej
Head of government
Yingluck Shinawatra
Population
67.2 million
Currency
Baht (THB)
GDP per capita
$8,700
Internet domain
.th
Demographic details Life expectancy
73.6 years (total population) 71.24 years (male) 76.08 years (female)
Ethnic composition (2001 data)
Thai (75%), Chinese (14%), various ethnic groups (11%)
Major religions (2000 census)
Buddhism (94.6%), Islam (4.6%), Christianity (0.7%), other religions (0.1%)
Country area
513,120 sq km
Languages
Thai, English, ethnic and regional dialects
Exports
Textiles, footwear, fishery products, rice, rubber, jewelry, automobiles, computers and electrical appliances
Imports
Capital goods, intermediate goods, raw materials, consumer goods, fuels
Source: Central Intelligence Agency (CIA), The World Factbook
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Key Facts and Geographic Location Geographic location Thailand is situated in the center of Mainland Southeast Asia, and is surrounded by the Andaman Sea to the west, Myanmar to the west and northwest, Laos to the east and northeast, Cambodia to the east, and Malaysia and the Gulf of Thailand to the south. Figure 1:
Map of Thailand
DAT AM ONIT OR
Source: CIA, The World Factbook
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PESTLE Analysis
PESTLE ANALYSIS Summary The coalition government headed by Prime Minister Yingluck Shinawatra aims to enhance the competitiveness of Thailand by broadening market access for businesses and promoting trade and investment. Meanwhile, bilateral relations with Cambodia are improving. However, the country faces widespread corruption in its political and bureaucratic machinery. Prime Minister Yingluck Shinawatra’s amnesty plan for politicians – which may enable her elder brother and former Prime Minister Thaksin Shinawatra to return to the country – could lead to further political turmoil. The government has also announced plans to spend THB600–800bn ($19.6–26.2bn) on rebuilding the country, which could help counter the negative impact of the recent floods. However, the increasing fiscal deficit will make it difficult for the government to enjoy strong public finances for both social welfare and economic development programs. Thailand included social protection in the 11th National Economic and Social Development Plan. Prime Minister Yingluck Shinawatra aims to provide solutions to the menace of drugs, prevent and fight corruption, raise the standard of living of the Thai people through wage increases and tax relief, and develop the health insurance system. However, the country suffers from income and development disparity. In addition, the nation's medical experts are warning of an outbreak of disease due to the receding floodwaters. The number of patents granted to Thailand by the US Patent and Trademark Office (USPTO) increased from 25 in 2005 to 60 in 2010, which shows remarkable progress in terms of the country's innovation scenario. It also indicates that the country has consistently encouraged innovation, and that the research and development (R&D) scenario is improving. However, weak intellectual property rights (IPR) enforcement is an issue, and Thailand also faces a shortage of engineers and skilled technical personnel. Thailand has an independent judicial system, which is responsible for the maintenance of the country’s law and order. According to the World Bank's Doing Business 2012 report, which measures the ease of doing business within a country, Thailand ranked 17th out of 183 economies. Thailand has announced major tax reforms to encourage investment and support the market through increased domestic consumption. However, the country suffers from weak labor laws, which do not ensure equal rights and protection for all workers. Furthermore, the government’s investment regulations are not fully market-friendly. Thailand has a strong environmental policy framework in place to address its environmental and energy concerns. In October 2010 the Thai cabinet agreed to impose a new tax on polluting industries as part of its efforts to conserve the environment. However, economic development, urbanization, and industrial expansion have severely impacted the country’s ecosystems. Air pollution is also very high, and CO2 emissions increased from around 187 million metric tonnes in 2002 to around 268 million metric tonnes in 2010.
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PESTLE Analysis
Political analysis Overview Thailand has been encouraging higher levels of public investment in fostering rapid economic growth. The coalition government headed by Prime Minister Yingluck Shinawatra aims to enhance the competitiveness of Thailand by broadening market access for businesses and promoting trade and investment through improved laws, regulations, and investment promotion activities. The country currently enjoys strong relations with its neighbors and other key world players, and bilateral relations with Cambodia are improving. However, the country faces widespread corruption in its political and bureaucratic machinery, which is a big hurdle to investment. Thailand also fares poorly in terms of governance indicators. Added to the increasing violence and insurgency in the south is the threat of politic al instability. Yingluck Shinawatra is working on an amnesty for politicians that could enable former Prime Minister Thaksin Shinawatra's return to the country. The hasty and suspicious manner in which the pardon decree has been introduced has raised doubts about the government’s intentions. Thaksin’s return could lead the country into further political turmoil, as the opposition Democrat Party and the anti-Thaksin defense establishment could come together to topple the government.
Table 3:
Analysis of Thailand’s political landscape
Current strengths
Current challenges
▪ Prudent macroeconomic policies
▪ Political corruption ▪ Poor governance indicators
Future prospects
Future risks
▪ Improving relations with Cambodia
▪ Increasing insurgency in the south ▪ Political instability
Source: Datamonitor
DAT AM ONIT OR
Current strengths Prudent macroeconomic policies Over the years, the Thai government has encouraged higher levels of public investment in order to foster rapid economic growth. In June 2010, former Prime Minister Abhisit Vejjajiva planned to launch the Reconciliation Plan to protect the nation's main institutions, redress inequalities and injustice, enable constructive communications between the political parties, and put into motion a political process that is democratic, efficient, and transparent. The coalition government headed by Prime Minister Yingluck Shinawatra aims to enhance the competitiveness of Thailand by broadening market access for businesses as part of its economic policy. The government plans to promote trade and investment through improved laws, regulations, and investment promotion activities. Additionally, it plans to engage in free trade agreements and co-operation frameworks in order to expand international economic linkages in trade and investment. The government
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PESTLE Analysis
aims to provide solutions to the menace of drugs, prevent and fight corruption, raise the standard of living of the Thai people through wage increases and tax relief, and develop the health insurance system. The prudent policies of the government are expected to help the country’s social and economic development.
Current challenges Political corruption Thailand is plagued with high levels of corruption; indeed, allegedly widespread corruption in the country’s political and bureaucratic machinery has been a serious problem for many years, and at the institutional level has traditionally hindered prospective investment. Transparency International's 2010 Corruption Perceptions Index, which measures perceived levels of public sector corruption, ranked Thailand 78th out of 178 countries. In the World Bank’s 2010 Worldwide Governance Indicators, the country was ranked in the 46.9 percentile for control of corruption. The country has faced a series of scandals. In August 2008, the Supreme Court's Criminal Division for Holders of Political Positions accepted the case of alleged corruption against 44 people involved in the THB1.4bn ($42m) rubber saplings procurement scam during Thaksin Shinawatra’s administration. During 2009, out of all government agencies the Customs Department ranked highest in terms of the number of complaints filed regarding corruption. Former Prime Minister Abhisit Vejjajiva’s administration faced its own corruption scandals in 2009–10. The government’s $42bn stimulus package to tackle recession was riddled with procurement scams and corrupt deals due to patronage politics, which led to the resignation of two ministers. Irregularities were found in the procurement of hospital equipment and school supplies and the award of construction tenders. The leader of the Bhumjaithai Party Chavarat Chanvirakul was accused of auctioning provincial governor posts to the highest bidders, as well as indulging in real estate deals. The Thai military, the budget of which has doubled since the 2006 coup, is also alleged to be a fertile ground for corruption and inflated costs. Political parties squabbling over corruption charges could lead to political instability.
Poor governance indicators Thailand performs poorly on most of the World Bank's Worldwide Governance Indicators. In 2010, in terms of voice and accountability the country was given a percentile rank of 30.3, much lower than its 2000 rank of 63.9. In terms of political stability it ranked in the 12.7 percentile, a low score that reflects the frequent military coups and government changes. In the government effectiveness parameter, it was ranked in the 58.4 percentile, reflecting the lower level of independence of public agencies from political pressures, as well as the poor quality of policy formulation and implementation. The country was ranked in the 56.5 percentile in terms of regulatory quality; not only does it suffer from restrictive regulations on business, labor, and rights to property, but its inefficient bureaucracy imposes various unofficial restrictions, which further hampers investment. In rule of law and control of corruption, the country was ranked in the 49.8 and the 46.9 percentiles respectively. In each indicator, the country ranked below both Malaysia and Singapore. The country must improve its governance indicators in order to meet the standards set by other nations.
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PESTLE Analysis
Future prospects Improving relations with Cambodia The victory of the Puea Thai Party in the July elections is expected to help improve economic ties with Cambodia, especially in the western provinces of the nation, where ethnic-Thai Cambodians hold sway. In a move that further helped improve relations between the two, Prime Minister Yingluck Shinawatra visited Cambodia in September 2011, and claimed that the visit marked the beginning of a new chapter for the Thailand-Cambodia relationship. Both countries have agreed to jointly develop maritime areas in the Gulf of Thailand. In mid-July 2011, the International Court of Justice in The Hague called on both nations to pull back soldiers from a new demilitarized zone between the two countries. The improvement in bilateral relations has diminished the risk of conflict.
Future risks Increasing insurgency in the south Insurgency in Southern Thailand is on the increase. Separatists in the jungle-covered provinces of Southern Thailand, which borders Malaysia, have killed more than 4,000 people since the conflict began in 2004. These separatists have been responsible for an increasing number of car bombs, with attacks of this nature rising from three in 2010 to six between January and August 2011. There are an estimated 40,000 Thai soldiers fighting insurgency in Southern Thailand. Prior to the July elections, Yingluck Shinawatra promised the region greater autonomy by clubbing the three southern provinces of Yala, Pattani, and Naratiwat into a special administrative zone with a single elected governor. However, there is opposition from the interior ministry and the Thai Army to the autonomy proposal. Prime Minister Yingluck Shinawatra has also nominated a retired general, who was responsible for shelling Southern Thailand's holiest mosque in 2004, for a top national security job. This suggests that the government could stand to take a harder line against the insurgents. While the government dithers over a stable policy for Southern Thailand, the insurgency is only increasing and claiming more lives.
Political instability Thailand’s political system once again faces instability. Street demonstrations that were allegedly inspired and instigated by former Prime Minister Thaksin Shinawatra managed to bring the opposition Pheu Thai Party (led by Thaksin’s sister Yingluck Shinawatra) to victory in the July 2011 elections. The government of Yingluck Shinawatra is reportedly working on amending the Defence Administration Act to enable the government to wield greater influence over the defense establishment. The prime minister is also said to be working out an amnesty for politicians that could enable Thaksin’s return to the country. While approving new eligibility conditions to the amnesty decree, the cabinet deleted certain clauses enforced in 2010 that excluded those convicted for drug trafficking and corruption from being granted amnesty. The hasty and suspicious manner in which the pardon decree was introduced has raised doubts about the government’s intentions. The opposition is demanding that Thaksin should not be granted pardon, having shown contempt for the Thai justice system by refusing to serve his jail term. His return would be extremely unwelcome in certain quarters; for example, the anti-Thaksin defense establishment is supportive of the opposition Democrat Party, which could see its political fortunes improve if the military were to exercise another coup to topple the ruling government. All of these factors could lead to political instability.
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PESTLE Analysis
Economic analysis Overview Thailand is a major international financial center, and has an integrated banking system network. The country’s economy has benefited significantly from prudent fiscal and monetary policies. The diversified manufacturing sector is a significant contributor to growth, and the industrial sector contributed 44.7% of Thailand’s total GDP in 2010. The government has announced plans to spend THB600–800bn ($19.6–26.2bn) on rebuilding the country, which could help counter the negative impact of the recent floods. The country's growing capital market is contributing significantly towards the development of the economy, acting as a source of funds for all business sectors and providing an alternative destination for domestic and international investment. However, the increasing fiscal deficit will make it difficult for the government to enjoy strong public finances for both social welfare and economic development programs. It is expected that the budget deficit will rise to around THB400bn ($13.4bn) in 2011–12, or 3.9% of GDP. Added to this, high levels of inflation and debt will not help the country tackle its weak public finances anytime soon. The floods that have ravaged the country since July 2011 have had a major impact, with the Thai Chamber of Commerce estimating that they have cost the economy $33bn and 1 million jobs; meanwhile, high technology exports may slide by as much as 40% in 2012.
Table 4:
Analysis of Thailand’s economy
Current strengths
Current challenges
▪ Well-developed banking system
▪ High inflation and debt
▪ Strong manufacturing sector
▪ Increasing fiscal deficit
Future prospects
Future risks
▪ Flood reconstruction expenditure
▪ Decline in loan growth
▪ Decreasing level of inflation
▪ Flood impact on industry
Source: Datamonitor
DAT AM ONIT OR
Current strengths Well-developed banking system Thailand is a major international financial center, with an integrated banking system network. The banking sector plays a significant role in the economy, with estimated financial sector assets at 200% of GDP. The banking system of Thailand has historically been strong and stable. In 2010, the country had 15 foreign commercial banks, 18 Thai commercial banks , and six specialized financial institutions, with a cumulative total of 7,978 branches. The country's 1,281 post office branches also provide financial services. In 2010, commercial banks added 170 branches, specialized financial institutions added 149 branches, and post offices added 27 branches. In 2010, the number of Internet banking transactions increased by 23.1% to 60.8 million, compared to 49.4 million in 2009, while the total value of transactions increased by 38.6% to
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THB7.9tn ($247.3bn), up from THB5.7tn ($164.7bn) in 2009. Loans expanded by 13.4% in the first quarter of 2011 compared to the same period in 2010. Gross non-performing loans of the system declined to THB300bn ($9.81bn) in the first quarter of 2011, compared to THB371bn ($11.4bn) in the same period in 2010. Net profit during the quarter increased to THB32.1bn ($1.04bn), compared to THB27bn ($830m) in the first quarter of 2010. The Thai Asset Management Company (TAMC), which was founded in 2001 to acquire and dispose of distressed and non-performing assets from state and private sector financial institutions after the financial crisis, was dissolved in September 2011 after absorbing debts totaling THB774bn ($25.3bn) during the last decade. TAMC returned a profit of THB10bn ($327m) before its closure. As of May 31, 2011 TAMC had cumulative debt collection of THB177.5bn ($5.8bn) and cumulative non-performing asset sales of THB92.4bn ($3bn) to ease the pressure on the banking system.
Strong manufacturing sector Thailand's diversified manufacturing sector is a significant contributor to growth. Industries producing computers, electronics, furniture, canned food, toys, plastic products, gems, and jewelry have all experienced strong growth. The country’s exports have been driven by high technology products such as integrated circuits, hard disc drives, electrical appliances, vehicles, and vehicle spares. In 2010, the industrial sector contributed 44.7% of Thailand’s total GDP. Industrial output increased from THB2.3tn ($53.1bn) in 2002 to THB4.3tn ($119.5bn) in 2010, at an average annual growth rate of 8.2%.
Current challenges High inflation and debt Thailand has traditionally witnessed high inflation. The country’s inflation increased from 0.7% in 2002 to 4.7% in 2006 and touched 5.5% in 2008. The rising inflation recorded during early 2008 was due to a significant increase in energy and food prices. Although there was deflation of 0.8% in 2009, the economic revival in 2010 pushed inflation up to 3.3%. High commodity prices are expected to push inflation in the country upwards in 2011. With floods devastating the country, the prices of essentials are expected to rise, thus increasing inflation further. According to Datamonitor estimates, inflation will increase to 4% in 2011. Added to this, the country’s gross external debt increased from $75.3bn in 2009 to $100.6bn in 2010, representing an increase of around 34% according to Bank of Thailand statistics. Gross external debt as a percentage of GDP increased from 28.8% in 2009 to 35.2% in 2010. The high inflation and debt in the country will not help Thailand tackle its weak public finances anytime in the near future.
Increasing fiscal deficit The government has set the national budget for 2011–12 at THB2.3tn ($77.2bn) – an increase from the THB2.1tn ($63.5bn) set for 2010–11 – and has placed emphasis on reducing social disparity, a problem that has long persisted in Thai society. In November 2011, the prime minister submitted a draft budget bill for 2012 that called for expenditure of THB2.38tn ($77.2bn), including substantial investment on flood recovery and rehabilitation. If implemented, the populist policies promised by the current government during its election campaign could cost THB2tn ($65.4bn) over five years. The budget deficit in 2010 was $8.1bn, or 2.7% of GDP. It is expected that the budget deficit will rise to around THB400bn ($13.4bn) in 2011–12, or 3.9% of GDP. The increasing fiscal deficit will make it difficult for the government to enjoy strong public finances for both social welfare and economic development programs.
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Future prospects Flood reconstruction expenditure The government has announced plans to spend THB600–800bn ($19.6–26.2bn) on rebuilding the country, with a focus on water management. The government will invest more than THB100bn ($2.4bn) on getting industrial estates back in action. In November 2011, the cabinet approved a 10% reduction in current year expenditure, amounting to THB80bn ($2.6bn), in order to help with reconstruction expenditure in the coming year. It has also approved an increase in the 2012 budget deficit to THB400bn ($13.4bn), up from THB350bn ($11.4bn), as part of its flood reconstruction expenditure. Additionally, the cabinet approved a THB325bn ($10.6bn) package to provide soft loan to firms, small vendors, and individuals, while also considering tax breaks for affected companies. The government has relaxed tariffs and regulations on imports to bring in essential food, water, and consumer products, which are in high demand. These initiatives are expected to help counter the negative impacts of the floods on the country’s economy.
Growing capital market The capital market of Thailand has contributed significantly towards the development of the economy by being a source of funds for all business sectors and providing an alternative destination for domestic and international investment. The market capitalization of the Stock Exchange of Thailand (SET) grew from $103bn in 2008 to $177bn in 2009 and around $278bn in 2010. The total number of listed companies on the SET increased from 535 in 2009 to 541 in 2010. The value of the mutual fund and asset management markets in Thailand declined in 2008 by 3.1% to THB2.16tn ($65bn), compared to THB2.23tn ($68.7bn) in 2007. However, the market rebounded to record net asset values of $72.2bn in 2009 and $91bn in 2010. The net asset value of mutual funds increased from THB1.01tn ($30.4bn) in 2008 to $50.5bn in 2009 and $62.6bn in 2010. At the end of May 2011, the net value of the asset management industry stood at $87.7bn, with massive growth in the mutual sector, which recorded a net value of $58.5bn. The growing capital market is expected to bring in additional financial resources into the market and aid economic growth.
Future risks Decline in loan growth Many of the country’s top banks have reported that loan growth will slow down up to the second quarter of 2012 due to the devastating impact of the floods on industrial provinces. Many of the largest banks, including Bangkok Bank (the country's biggest lender), Kasikornbank, and Siam Commercial Bank, have stated that lending has declined in the fourth quarter, which is generally the peak quarter for lending. In October 2011, the central bank cut its growth forecast for 2011 from 4.1% to 2.6%, mainly due to the floods. The growth in bank lending is also influenced by economic growth, and the lower GDP growth forecast in 2011–12 is expected to impact bank lending growth.
Flood impact on industry Many manufacturing companies in Thailand, dependent on imports of components and parts from Japan, have been impacted by the earthquake and tsunami in Japan in March 2011. Companies, particularly those operating in the electronics and automotive sectors, have been unable to receive shipments of Japanese components. Added to this, the devastating floods that have ravaged the country since July 2011 have impacted upon Thai industry in a big way. The
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floods have shut down seven industrial estates north of Bangkok, affecting nearly 10,000 factories and around 660,000 jobs, seriously affecting the electronics and automotive sectors. The shutting down of transport infrastructure due to the floods has proven to be an impediment to the manufacturing sector, as such moves have seriously disrupted the supply chain. The floods have also had a negative effect on the tourism sector. According to the tourism ministry the number of tourists arriving in the country is expected to decline by up to 1 million against the government target of 19 million in 2011. The Thai Chamber of Commerce has estimated the floods have cost the economy $33bn and 1 million jobs due to loss of assets and lower output. The industry ministry has stated that the country’s high technology exports could slide by as much as 40% in 2012.
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Social analysis Overview Thailand has included social protection in its 11th National Economic and Social Development Plan. Prime Minister Yingluck Shinawatra aims to provide solutions to the menace of drugs, prevent and fight corruption, raise the standard of living of the Thai people through wage increases and tax relief, and develop the health insurance system. The country had a literacy rate of 95.7% for the total population in 2010, which signifies the presence of a large educated workforce in the country. However, both income and development disparity are prevalent, and while Bangkok and its suburbs are prospering the barren northeast remains poor. Furthermore, the nation's medical experts are warning of an outbreak of disease due to the receding floodwaters; with thousands of homes surrounded by water since July 2011, this has become a pressing issue. The government’s move to raise the minimum daily wage to a flat rate of THB300 ($10) has attracted opposition from businesses, and its populist measures may result in market distortions that will impact the business friendliness of the country.
Table 5:
Analysis of Thailand’s social system
Current strengths
Current challenges
▪ Strong social policies
▪ Regional disparity
▪ Highly educated population
▪ Outbreak of disease
Future prospects
Future risks
▪ Expansion of traditional Thai medicine
▪ Market distortions due to wage hikes ▪ Rising unemployment
Source: Datamonitor
DAT AM ONIT OR
Current strengths Strong social policies Thailand has included social protection in its 11th National Economic and Social Development Plan. Prime Minister Yingluck Shinawatra aims to provide solutions to the menace of drugs, prevent and fight corruption, raise the standard of living of the Thai people through wage increases and tax relief, and develop the health insurance system. The government raised the daily minimum wage of more than 20,000 public sector workers to THB300 ($10) in October 2011. The Central Wage Committee plans to raise the private sector minimum wage by around 40% from April 2012. The government has embarked upon a strategic plan to make Thailand a welfare society by 2016, and has revived a scheme to pay farmers a guaranteed price of THB15,000 ($491) per tonne of unmilled rice. According to the deputy permanent secretary for social development and human society Napa Setthakorn, the second strategic plan scheduled for 2012–16 will extend the country’s social security system to cover all groups of people, including those in the non-formal sector. The government
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also plans to develop the quality of and raise funds for social security services. These initiatives are expected to strengthen social progress in the country. The strong social system will contribute to the development of the nation.
Highly educated population Thailand had a literacy rate of 95.7% for the total population in 2010. While the male literacy rate was 98.3%, the female literacy rate was slightly lower at 93.1%. Although the adult literacy rate is one of the highest in the region, nearly 80% of the current labor force has received only primary education. According to the 2011 Human Development Report published by the United Nations Development Programme, during 2001–10 the gross enrolment ratio for primary education was 91.1%, for secondary education it was 77%, and for tertiary education it was 45%. The government spent around 4.3% of GDP on education during 2006–09. The high literacy rate signifies the presence of a large educated workforce.
Current challenges Regional disparity Income and development disparity is still prevalent in Thailand. While Bangkok and its suburbs are prospering, the barren northeast remains poor. The rapid economic growth in and around Bangkok has further marginalized the country’s less developed regions. Successive Thai governments have tried to tackle this regional disparity through provincial programs such as the Eastern Seaboard project and other populist policies. However, the disparity persists, and remains a challenge for the country’s social and economic development. In addition, income inequality remains a significant problem; for example, the average wage levels of employees participating in the private and public sectors in the northeast are around three times lower than those in Bangkok and twice as low as those in the central region. Per capita government expenditure in the northeast – particularly on health and agriculture – is also comparatively lower than other regions, and below the central region by almost half. The government needs to tackle regional disparities in income and development, as the current situation could lead to increased crime and anti-national activities in the country.
Outbreak of disease The nation's medical experts are warning of an outbreak of disease due to the receding floodwaters. As of November 2011, half of Bangkok was still covered by the floodwaters. Several areas of Bangkok are in the path of water flows from the north to the Gulf of Thailand, and the city faces a net inflow of 100 million cubic meters of water every day. With thousands of homes surrounded by water since July 2011, the outbreak of disease has become a real issue. Doctors have already warned of the risk (especially to women) of infection from water contaminated by animal urine. The population also faces the threat of cholera, gastrointestinal diseases, and typhoid, while millions of displaced people are faced with unclean food, water, and an unhygienic environment. The situation poses a major challenge that the country must overcome.
Future prospects Expansion of traditional Thai medicine According to World Health Organization, the number of physicians in the country averaged three per 10,000 people during 2000–10, while the number of nurses and midwives per 10,000 people was 15.2. In September 2008 the government announced a plan to invest about $3bn on public health facilities. The country is also accelerating the availability of traditional Thai medical services in hospitals, boosting the use of Thai herbs along with modern medicine. According to the
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permanent secretary for public health Dr Paijit Warachit, traditional Thai medical services are currently available in 4,400 hospitals and health centers, accounting for 42% of all hospitals and health centers in the country. This number is expected to go up once the government begins implementation of its program to expand the availability of traditional Thai medicine.
Future risks Market distortions due to wage hikes The government’s move to raise the minimum daily wage to a flat rate of THB300 ($10) has attracted opposition from businesses. Prior to the government’s announcement, the minimum daily wage varied across the provinces, from a high of THB221 ($7.20) in Phuket to a low of THB159 ($5.20) in the northern province of Phayao. Businesses have complained that a sudden sharp rise in wage bills without a matching increase in productivity is not financially feasible. The government plans to increase the minimum monthly salary for new university graduates from THB10,640 ($348) to THB15,000 ($491). These populist measures are expected to result in market distortions that will impact the business friendliness of the country.
Rising unemployment The March 2011 earthquake and resulting tsunami in Japan, which wiped out entire towns and industrial zones supplying critical electronics and automotive components, has impacted the Thai manufacturing sector, as Japan is the country’s biggest import partner. The floods that have been occurring in Thailand since July 2011 have also had a serious impact on the manufacturing and tourism sectors, and have resulted in the loss of jobs. During 2001–10, employment grew at an average rate of 1.4%; however, according to Datamonitor estimates employment growth is expected to fall to an average of 0.6% during 2011–16. The impact of the floods on industry is expected to push up the country's unemployment rate.
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Technological analysis Overview The number of patents granted to Thailand by the USPTO increased from 25 in 2005 to 60 in 2010, which shows good progress in the country's innovation scenario. It also indicates that Thailand has consistently encouraged innovation, and that the R&D scenario is improving. The country’s annual expenditure on R&D could reach THB100bn ($2.4bn), or 1% of GDP, by the end of the 11th National Economic and Social Development Plan in 2016. The government offers many financial incentives to increase private investment in R&D. The number of Internet users in the country increased from 4.8 million in 2002 to 18.3 million in 2009, and the growing ICT sector opens new opportunities in terms of employment generation and delivery of public services online. However, weak IPR enforcement is an issue, and in 2010 the Office of the US Trade Representative retained Thailand on its Priority Watch List due to high levels of copyright piracy. The country also faces a shortage of engineers and skilled technical personnel, which could limit its technological innovation and productivity. Thailand’s gross enrolment ratio in tertiary education is only 45%, which needs to be improved to tackle its skills shortage.
Table 6:
Analysis of Thailand’s technology landscape
Current strengths
Current challenges
▪ Strong patent growth
▪ Weak IPR enforcement
▪ Growing ICT sector
Future prospects
Future risks
▪ Growing R&D expenditure
▪ Lack of skilled workers and technicians
Source: Datamonitor
DAT AM ONIT OR
Current strengths Strong patent growth The number of patents granted to Thailand by the USPTO increased from 25 in 2005 to 60 in 2010, which shows good progress in the country's innovation scenario. It also indicates that the country has consistently encouraged innovation, and that the R&D scenario is improving. The growth in the number of patents awarded to Thailand reflects the expansion of its R&D environment and the government’s support for companies undertaking R&D activities. These initiatives will help the country gain a technological advantage in the global marketplace.
Growing ICT sector Thailand’s Internet users increased from 4.8 million in 2002 to 18.3 million in 2009. According to the National Statistical Office, computer and Internet usage increased during 2004–09 due to the expansion of the country's ICT infrastructure.
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During this period, computer usage increased from 21.4% to 29.3%, while Internet usage increased from 11.9% to 20.1%. Additionally, there is huge disparity in ICT usage between Bangkok and other areas, with northeastern and southern provinces having the lowest computer and Internet usage ratios. Increasing access to the Internet will encourage companies to invest in e-commerce. According to the National Statistical Office, the proportion of individuals using computers and Internet was the highest in Bangkok at 46% and 38% respectively. The growing ICT sector opens new opportunities in terms of employment generation and the delivery of public services online.
Current challenges Weak IPR enforcement Thailand has a very weak track record in terms of IPR protection, although intellectual property development in Thailand has, over a period of time, evolved from being imitative to innovative. The country is recognized as one where IPR protection and enforcement are key issues. In 2010, the Office of the US Trade Representative retained Thailand on its Priority Watch List due to the high levels of copyright piracy in the country, which placed it among the poor performers. According to the International Intellectual Property Alliance, losses due to software piracy were estimated at $344m in 2010. Other sections of the international community have also regularly urged the country to improve its performance in IPR enforcement. Although the government of Thailand has assured critics of its intention of boosting IPR protection, the country has yet to deliver on its promises.
Future prospects Growing R&D expenditure The government has planned a holistic set of measures for promoting R&D in the country. In 2009, the Higher Education Commission launched the National Research Universities Project to build capacity and strengthen human resources in R&D and innovation. The government allocated THB100–500m ($2.9–14.5m) of annual funding support to each university for three years as part of the project. In March 2010, the government stated that the country’s annual expenditure on R&D could reach THB100bn ($2.4bn), or 1% of GDP, by the end of the 11th National Economic and Social Development Plan in 2016. The National Science and Technology Development Agency's budget in 2010 was $156m. The government offers many financial incentives to increase private investment in R&D. For instance, the Ministry of Finance provides a 200% corporate income tax deduction for R&D spending. Although the country’s R&D agenda is still not under a single body, the government is working to develop collaboration among the various agencies and ministries under its first 10 year science, technology, and innovation plan. These developments coupled with increased investment would help augment Thailand’s position as an R&D leader.
Future risks Lack of skilled workers and technicians Thailand faces an acute shortage of skilled workers. The shortage of engineers and skilled technical personnel could limit the country’s technological innovation and productivity. According to the World Bank’s 2009 Knowledge Economy Index (KEI), an aggregate index that represents the overall preparedness of a country to transform into a knowledge-based economy, Thailand’s KEI ranking fell from 48th in 1995 to 63rd (out of 145 countries) in 2009. Moreover, the electrical and
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electronics industry, one of the biggest industries in terms of both investment and exports (with medium and large companies employing more than 1 million workers each), also faces a shortage of skilled labor. The country’s gross enrolment ratio in tertiary education is only 45%, which needs to be improved in order to increase the number of skilled workers and technicians in the country. A continued shortage of skilled engineers would hamper the competitive position of Thailand.
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Legal analysis Overview Thailand has an independent judicial system, which is responsible for the maintenance of the country’s law and order. The constitution formed a tribunal to pass judgment regarding disputes that arise in court. Meanwhile, Thailand's business environment has improved considerably over the years; according to the World Bank's 2012 Doing Business report, which measures the ease of doing business within a country, Thailand ranked 17th out of 183 economies. The country has announced major tax reforms to encourage investment and support the market through increased domestic consumption. Tax reforms are expected to increase the government’s tax revenues, as well as helping to increase business investment in the country. However, the country suffers from weak labor laws, which do not ensure equal rights and protection for all workers. Under the current labor policies, migrant workers are exposed to abusive and discriminatory practices in the workplace. Furthermore, the government’s investment regulations are not fully market-friendly. The Foreign Business Act strictly limits the level of foreign investment, especially in the services sector. The World Bank’s 2010 Investing Across Borders report stated that Thailand’s restrictions on foreign equity ownership were the most stringent among 87 countries. The country’s planned tax restructuring threatens to burden the automotive sector with higher production costs, and the stringent tax and legal environment could deter foreign investors.
Table 7:
Analysis of Thailand’s legal landscape
Current strengths
Current challenges
▪ Strong judicial system
▪ Weak labor laws
▪ Improvement in legal indicators
▪ investment regulations
Future prospects
Future risks
▪ Tax reforms
▪ Impact of tax reforms on the automotive sector
Source: Datamonitor
DAT AM ONIT OR
Current strengths Strong judicial system Thailand has a strong judicial system, with more than 3,000 educated and qualified judges sitting on courts of first instance (excluding the constitutional court, the administrative court, and military courts), courts of appeal, and the Supreme Court. The appointment of judges in Thailand is decided by the king, and requires initial approval by a judicial commission. The constitution formed a tribunal to pass judgment regarding disputes that arise in court. Based on the level and type of court, different judges with various levels of specialized expertise are hired. The comprehensive judicial system is capable of
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addressing various bottlenecks and structural issues in the system, and gives foundational strength to the investment climate of the country.
Improvement in legal indicators The business environment in Thailand has improved considerably over the years According to the World Bank's Doing Business 2012 report, which measures the ease of doing business within a country, Thailand was ranked 17th out of 183 economies. The report stated that the country has made starting a business easier by introducing a one-stop shop. According to the 2011 Index of Economic Freedom, Thailand was ranked 62nd out of 179 countries and 10th out of 41 Asian countries. Thailand scored highly in terms of fiscal freedom, government spending, monetary freedom, and labor freedom compared to the global averages. It fared much better than its overall rank on the enforcement of contracts and the ease of securing credit for a business and closing a business. Starting a business takes an average of 32 days in the country, compared to the world average of 34 days, while obtaining a business license takes less than the world average of 209 days. These factors are important indicators of a positive business climate.
Current challenges Weak labor laws Thailand is in dire need of labor market reforms in order to become competitive. Workers are not protected by law from employer reprisals for union activities prior to the registration of the union, and employers can use loopholes in the Labour Relations Act to fire union leaders prior to government certification of unions. Furthermore, Thailand is one of only 18 countries that have not ratified International Labor Organization (ILO) Conventions 87 and 98, instruments forged in 1948 and 1949 respectively that protect workers’ rights to set up labor unions and engage in collective bargaining. Despite continuing pressure from labor unions, the government has still not ratified these conventions. Under the current labor policies, migrant workers are exposed to abusive and discriminatory practices in the workplace. In September 2011, the State Enterprise Workers Relations Confederation submitted a petition to the ILO, stating that the government was discriminatory towards migrant workers who did not have access to the Workmen’s Compensation Fund (WCF). The government has proposed a private insurance scheme for migrant workers instead of access to WCF. Unlike WCF, however, there is no legal binding on the employer to provide private insurance coverage to migrant workers, and the government has no legal authority to enforce such a requirement against employers. This policy is likely to have a negative impact on the estimated 2 million migrants in the country. The government must ensure that labor laws ensure equal rights and protection for all workers.
Investment regulations Although Thailand welcomes foreign investment, its Foreign Business Act strictly limits the level of foreign investment, especially in the services sector. The World Bank’s Investing Across Borders 2010 report stated that Thailand’s restrictions on foreign equity ownership were among the most stringent among 87 countries. The government has to follow a stable and uniform policy to attract investments. According to the World Economic Forum’s Global Competitiveness Report 2010– 11, the country was ranked 38th out of 139 countries. The report’s survey results showed that the country’s four main problematic areas when it comes to doing business were government instability, policy instability, inefficient government bureaucracy, and corruption. Investment regulations with anti-business preconditions could have a negative impact on the business climate in Thailand.
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Future prospects Tax reforms Thailand has announced major tax reforms to encourage investment and support the market through increased domestic consumption. The government plans to reduce corporate tax rates, provide tax breaks for first time home and car buyers, and review the country’s tax code including personal income tax, corporate income tax, and consumption taxes. To compensate for the increase in minimum wages, by 2013 the corporate tax will be cut from the current rate of 30% to 20%. The corporate tax reform is also aimed at improving competition among Thai companies and increasing foreign business investments in the country. Furthermore, the government plans to bring changes to personal income tax deductions in order to increase its revenues, and is reviewing the tax incentives provided to companies. Other changes could include taxation of capital gains on equity investments and excise duty on cars. These reforms are expected to increase both the government’s tax revenues and business investment in the country.
Future risks Impact of tax reforms on the automotive sector The country’s planned tax restructuring in the automotive sector has been criticized by major carmakers, as the changes could push up car production costs and hurt the local automotive industry. Indeed, the increase in production costs could ultimately cripple the automotive sector and reduce car exports. The country’s current excise tax r ates for automobiles are based on the engine size compatibility of vehicles with alternative fuels. The government’s new automotive excise tax structure focuses on high fuel efficiency, lower carbon dioxide emissions, and safety. Increased production costs could impact the competitiveness of the automotive sector, thus negatively impacting the country’s exports.
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Environmental analysis Overview Thailand has a strong environmental policy framework in place to address its environmental and energy concerns. The country benefits from rich biodiversity, including a variety of fauna (spanning from large wildlife such as elephants to tiny bats) and flora (including giant forest trees and rare orchids). The government has initiated several policies and measures with a focus towards ensuring a cleaner environment, including the implementation of a 20 year plan for the Enhancement and Conservation of National Environment Quality (1997–2016). In October 2010, the Thai cabinet agreed to impose a new tax on polluting industries as part of its efforts to conserve the environment. However, economic development, urbanization, and industrial expansion have severely impacted the country’s ecosystems. A significant proportion of Thailand's forest cover has been lost, while around 50% of its rivers and lakes have been polluted. Air pollution is also very high, and CO2 emissions increased from around 187 million metric tonnes in 2002 to around 268 million metric tonnes in 2010. In addition, in the past 16 years around 27 environmental activists have reportedly been killed in the country. The increasing level of pollution harms the health of the country's people, its environment, and its economy. With tourism, fisheries, and agriculture contributing significantly to the economy, the protection of ecosystems and the sound management of natural resources are crucial to avoid extreme weather conditions such as the recent spate of devastating floods.
Table 8:
Analysis of Thailand’s environmental landscape
Current strengths
Current challenges
▪ Strong environmental policy framework
▪ High pollution levels
▪ Rich biodiversity
▪ Opposition to environmental activism
Future prospects
Future risks
▪ Government measures for a clean environment
▪ Natural disasters
▪ Green tax
▪ Heavy reliance on coal for power generation
Source: Datamonitor
DAT AM ONIT OR
Current strengths Strong environmental policy framework Thailand has a strong environment policy and legislative framework. The country has well-established environmental institutions, and the government focuses on implementing environmental policies so as to address its environmental and energy concerns at both the national and provincial levels. The Ministry of Science, Technology, and Environment is responsible for the protection of the environment. Several departments and regional offices also exist, which administer environmental and conservation policies. These offices include the Office of Environmental Policy and Planning, the
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Pollution Control Department, and the Department of Environmental Quality Promotion. These measures are indicative of the efforts made by the relevant authorities to conserve the environment of Thailand.
Rich biodiversity Thailand is acclaimed for its rich natural resource base, and its biodiversity has significant economic value. The country has forestlands that stretch over 2,000km from north to south, and has varied climatic conditions and a coastline with clear and muddy waters lapping productive mudflats. The country is also famed for its diverse wildlife and plant life. As a party to the Convention on Biological Diversity, Thailand has executed several measures to safeguard biodiversity, and has implemented initiatives to raise awareness on the conservation of biodiversity. The abundant biodiversity of Thailand and its commitment towards integrating conservation into economic planning greatly enriches the country's natural heritage.
Current challenges High pollution levels Rapid industrialization has outpaced environmental management, resulting in increased pollution levels in Thailand. Economic development, urbanization, and industrial expansion have had a severe impact on the country’s ecosystems. A significant proportion of the country’s forest cover has been lost, while around 50% of rivers and lakes suffer from poor water quality. The rampant use of land and water without proper planning has led to climate change that threatens to impact the low-lying central region in a big way. The country has also been faced with high pollution levels over the years due to motor vehicle emissions in Bangkok, Hat Yai, and Chiang Mai. The release of smoke caused by incomplete combustion from poor quality engines is a major contributor to air pollution. Furthermore, airborne particulate pollution levels have worsened in the northern province of Chiang Rai, with levels of carbon monoxide, sulfur dioxide, nitrogen dioxide, and lead that are above internationally recognized levels. CO2 emissions increased from around 187 million metric tonnes in 2002 to around 268 million metric tonnes in 2010. It is expected that the increasing pollution levels will cause the environment to deteriorate further in the near future, and could harm the health of both the Thai people and the economy.
Opposition to environmental activism In July 2011, environmental activist Thongnak Sawekchinda was killed in the Samut Sakhon province outside Bangkok for his activism against the transportation of coal used by a range of industries in the province. Seven men were reportedly paid a total of $10,000 for the contract killing. The activist’s friends allege that the crime was committed by powerful people with connections to local businesses and politics. According to the nation's environmentalists, a record 27 environmental activists have been killed in the past 16 years, and not one of the individuals behind these murders has been held to account. This alleged impunity for criminals is a cause for concern, as recent victims have included activists trying to save land from developmental projects, campaign against sand transportation, and protest against illegal timber logging.
Future prospects Government measures for a clean environment The government has initiated several policies and measures with a focus towards ensuring a cleaner environment. The country implemented a 20 year policy and prospective plan for the Enhancement and Conservation of National Environment Quality (1997–2016). The policy is aimed at recognizing the responsibilities that local government authorities
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and non-governmental organizations have towards improving and safeguarding the quality of water by increasing awareness. The plan also aims to reduce water pollution caused by industrial and agricultural activities, by encouraging greater investment in the private sector. These measures are expected to enhance the country's environmental quality in the long term.
Green tax In October 2010, the Thai cabinet agreed to impose a new tax on polluting industries as part of its efforts to conserve the environment. The tax rates are expected to be set based on the type of pollution, including water, air, and industrial waste. As part of the green tax initiative, the government plans to impose a 15% tax on airline tickets from 2012. In the automotive sector, the government will introduce green tax rates based on CO2 emissions, fuel efficiency, and safety, rather than engine size. This is expected to generate additional tax revenues for the government, which it can plough back into environmental and wildlife conservation programs.
Future risks Natural disasters Thailand has suffered from a number of natural disasters over the years. The 2004 tsunami seriously affected the nation's tourism, fisheries, and agriculture sectors. The high rainfall and massive flooding that Thailand has been experiencing since July 2011 is a case in point, impacting almost 85% of the country, killing more than 500 people, displacing more than 8 million, destroying 700,000 homes, and swamping thousands of factories. The devastating floods have had an adverse effect on economy. In a country where tourism, fisheries, and agriculture contribute significantly to the economy, the protection of ecosystems and the sound management of natural resources are crucial to avoiding extreme weather conditions .
Heavy reliance on coal for power generation Thailand is heavily reliant on coal for power generation, and plans to further increase its reliance in the future. At present, of the 22,684MW of power generated per year in Thailand, 15% is generated though coal. Furthermore, the government plans to increase its reliance on coal over the next 15 years. Due to inefficient power generation planning and the lack of a diversified supply of power, carbon emission levels have risen to three times higher than the 1990 level. Increased coal usage is expected to leader to even higher CO2 emissions.
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POLITICAL LANDSCAPE Summary Thailand’s political system has traditionally suffered from widespread instability, as highlighted by the frequent collapse of civilian administrations and recurrent military incursions into political life. The 1997–98 financial crises ushered in a renewed period of political instability. However, the elections in 2001 brought a new political force – Thais Love Thais (Thai Rak Thai [TRT]) – to power. The TRT campaigned on a populist platform, promising financial assistance for beleaguered farmers and improvements to the healthcare system in response to the financial cris is. However, the 2001 and 2005 elections were tarnished by persistent allegations of vote-rigging and bribery, which led to the party being banned in 2007. The military took over in September 2006 in a bloodless coup, and former army chief General Surayud Chulanont was installed as prime minister. In the December 2007 general elections, the People's Power Party (Phak Palang Prachachon [PPP]), a reincarnation of the TRT party, won the majority vote. However, persistent street protests led by the People's Alliance for Democracy (PAD) contributed to the resignation of two pro-Thaksin prime ministers in 2008. On December 15, 2008, the parliament elected Abhisit Vejjajiva as prime minister of the country. However, pro-Thaksin protests continued through to May 2011, leading to the announcement of general elections. In July 2011, Yingluck Shinawatra, the sister of former Prime Minister Thaksin Shinawatra, led the opposition Pheu Thai Party (PTP) to victory, and was elected prime minister. The government is reportedly working on plans to amend the Defence Administration Act to allow it to influence military appointments. Prime Minister Yingluck Shinawatra is also looking into ways to allow her brother to return to the country from his self-imposed exile, by fighting for amnesty for politicians; however, Thaksin’s return could lead the country into further political turmoil.
Evolution Since 1782, the Chakri dynasty has ruled the country. The country was then known as Siam, and was ruled by King Rama I. King Chulalongkorn reigned between 1868 and 1910. He employed Western advisers to modernize administration and commerce and develop a railway network. In 1917, Siam became an ally of Great Britain in World War I. In 1932, a bloodless coup against absolute monarch King Prajadhipok led to the introduction of a constitutional monarchy with a parliamentary government. In 1939, Siam's name was changed to Thailand. In 1942, Thailand declared war on Great Britain and the US. After the end of World War II in 1945, Thailand was forced to return the territories it had seized from Laos, Cambodia, and Malaya. In 1947, pro-Japanese leader Phibun Songkhram led a military coup against the government. The military remained in control until 1973. Student riots in Bangkok in 1973 led to the fall of the military government and the holding of free elections. However, the resultant government lacked stability, which led to military rule once again in 1976. A new constitution was promulgated in 1978, and General Prem Tinsulanonda assumed power in 1980. He gave up his military rank in 1983 and led a civilian government. He was re-elected in 1986. General Chatichai Choonhaven replaced Prem after the elections in 1988, before the country’s 17th military coup in 1991 led to the appointment of Anand Panyarachun as prime minister. After the elections held in 1992 Anand was replaced by General Suchinda Kraprayoon, but the latter was forced to resign due to public demonstrations against him, and Anand was reinstalled as prime minister. This arrangement was also short-lived, as the elections in September 1992 saw Democrat Party (Phak Prachathipat) candidate Chuan Leekpai assume power. The Leekpai government collapsed in 1995, and Banharn Silpa-archa of the Thai Nation Party was elected prime minister. In 1996, Banharn's government resigned due to allegations of corruption. This led to an election that was won by Chavalit
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Political Landscape
Yongchaiyudh of the New Aspiration Party. In 1997, the devaluation of the Thai currency, the baht, heralded the start of a period of financial and economic turmoil following a decade of strong growth. The led to bankruptcies and unemployment across the country. Chuan Leekpai was re-elected prime minister that same year. However, 2001 saw significant realignments. Charismatic populist Thaksin Shinawatra stormed to an impressive election victory. His newly formed TRT party narrowly missed out on an overall parliamentary majority, forming a center-right coalition in conjunction with several smaller conservative parties. The TRT party won a stunning election victory early in 2005 on the back of the prime minister’s popularity, cementing Thaksin's reputation as an important new force in the region’s politics. However, it had not all been plain sailing for the businessman-turned-politician. Even before he was sworn in as leader in 2001, concerns were raised as to whether he had properly disposed of all his assets as demanded by Thailand’s tough anti-corruption laws. The courts later cleared the prime minister of wrongdoing, although some commentators claim that popular pressure, reflected in Thaksin’s 80% approval rating on taking office, weighed unduly on the judiciary’s decision-making process. As his tenure progressed, the prime minister’s popularity fell as a number of his flagship projects ran into trouble, and the electorate’s soaring optimism began to wane. In the 2005 parliamentary polls, the TRT won 75% of the seats in parliament, amid allegations of bribery and vote-rigging. Despite being a newcomer to the political scene, Thaksin’s TRT was soon embroiled in scandal, with around half of the disqualified winners in the 62 disputed constituencies being TRT candidates. Thaksin Shinawatra’s worsening relations with the military elite and the king took a toll on his position, and in a rather sudden turn of events he was deposed in September 2006, in a bloodless military coup carried out while he was attending the United Nations General Assembly in New York. After the coup, the Council of National Security was established as the chief executive body, and former army chief General Surayud Chulanont was appointed prime minister. In May 2007, the TRT party was banned, and in August 2007 a military-drafted constitution was approved by voters in a referendum. In the December 2007 general elections, the PPP, a reincarnation of the TRT party, won a majority vote. In February 2008 Samak Sundaravej was sworn in as prime minister; however, street protests erupted across the country, calling for his resignation. He was soon replaced by Somchai Wongsawat, but the opposition PAD rallied more protestors in a bid to topple the government. In December 2008, Prime Minister Wongsawat was removed from his position after a Constitutional Court disbanded the PPP for electoral fraud, barring the party for five years. On December 15, 2008, parliament elected Abhisit Vejjajiva as prime minister of Thailand. During March and April 2009, supporters of former Prime Minister Thaksin Shinawatra held mass protests against the government's economic policies. The continued unrest led to the cancellation of a scheduled Association of Southeast Asian Nations (ASEAN) summit after anti-government protesters stormed the venue in the resort of Pattaya. As a result, Abhisit Vejjajiva declared a state of emergency and troops were brought in to Bangkok to end the protests. Despite this, the protests continued through 2009, with several clashes between protesters and law enforcement agencies. In December 2009, over 20,000 Thaksin supporters rallied in Bangkok and demanded fresh elections. The protests continued between March and May 2010, demanding Abhisit's resignation and early elections, eventually prompting the government to announce that parliament would be dissolved in May 2011, so that new elections could be held. In the July 2011 general elections, Yingluck Shinawatra, sister of former Prime Minister Thaksin Shinawatra, led the opposition PTP to a major victory, winning 265 seats in the House of Representatives. She was subsequently sworn in as Thailand’s first female prime minister.
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Political Landscape
Figure 2:
Thailand – key political events timeline
Pre –1945 Pre-1945
1945–90 1946–90
•• InIn1917, 1917,Siam Siambecame became the theally allyof ofGreat GreatBritain Britain ininWorld War I. World War I.
•• InIn1946, 1946, King King Ananda Ananda was was assassinated. assassinated.
•• InIn1932, 1932,Peoples PeoplesParty Party organized organizedaarevolution revolution which whichcompelled compelledKing King Prajadhipok Prajadhipokto to abandon abandonabsolute absolute monarchy monarchyf for or constitutional constitutional monarchy. monarchy.
•• During 1965–75 During1965 1965–75, –75, Thailand Thailand permitted permitted the US to use the US to useits its base baseduring duringthe the Vietnam War. Vietnam War.
•• InIn1939, 1939,the thecountry country changed changedits itsname namef from rom Siam Siamto toThailand. Thailand. •• InIn1941, 1941,Japan Japanand and Thailand Thailand entered entered into intoaa ten ten-year tenyear yearagreement agreement under which Thailand under which Thailand agreed agreedto toassist assist Japan’s Japan militarily, militarily, Japan’s militarily, politically and politically and economically economicallyagainst against Britain Britainand and the theUS. US.
•• InIn1971, 1971,the thearmed armed fforces orcesof ofThailand Thailand perf carried out aa performed ormed bloodless when bloodlesscoup coupand when they suspended the the theysuspended suspended the cabinet and declared cabinet and declared martial law. martial law. •• InIn1976, 1976,the thecoalition coalition government governmentwas was conquered overthrown by conqueredby byaaa military militarycoup. coup.
•• InIn1978, 1978, Thanin Thanin Kraivichien Kraivichien’s Kraivichien’s’s government governmentwas was conquered overthrown by conqueredby byaaa military coup military coupinin Bangkok, with Bangkok,and withaaa "Revolutionary "Revolutionary Council" Council"of ofmore morethan than 20 iled 20high highprof profile iled of who control. offficers icerstook whotook took control. control.
1990–2001 1991–2001
2001–06 2002–06
2005 onwards 2007 Onwards
•• InIn1991, 1991, Major MajorGeneral General Chatichai Chatichai Choonhavens Choonhaven’s Choonhavens leadership leadershipcollapsed collapsed with af terthe thearmed armed orces with the armed ffforces orces seizing seized power. seizingpower. power.Anand Panyarachun was named •• In the primeGeneral minister. In1992, 1992, General Suchinda Suchinda Kraprayoon, Kraprayoon, • In 1992, General hitherto supreme hitherto supreme Suchinda Kraprayoon, commander commanderof of the the hitherto supreme armed armedfforces, orces,was was commander ofthe theprime appointed appointedas as the prime armed f orces, was minister. minister. appointed as the prime •• In minister. However, In1996, 1996, Chavalit Chavalit he Yongchaiyudh of was f orced to resign. Yongchaiyudh ofthe theHe New Aspiration was replaced byparty Chuan New Aspiration party won Leekpai. wonthe theelections elections
•• InIn2002, army of 2002,the theThai armyarmy of fThailand ired shells f fired into Burma Thailand ired during the battle ammunition into Burma ammunition into Burma between Burmese during battle duringthe the battle army andBurmese ethnic Shan between between Burmese rebels, triggering a army ethnic armyand and ethnicShan Shan diplomatic row. rebels rebels
•• Due Dueto topost-election post-election turmoil, turmoil,Mr. Mr.Thaksin Thaksin was stepped f orced down, to but was f orced tostep step resumed his post inhe down, but however down, but however he May 2006.his resumed resumed hispost postinin May 2006. May 2006. • In 2007, corruption were f iled InIn2007, •• charges 2007,corruption corruption against Thaksin charges were f filed chargesMr. were iled and his wif e. against againstMr. Mr.Thaksin Thaksin and his wif e. and wif e. street • Af terhis massive parliament •• protests, Af street After termassive massive street elected Abhisit Vejjajiva protests, parliament protests, parliament as prime minister on elected Abhsit elected AbhsitVejjajiva Vejjajiva December 15, 2008. as on asprime primeminister minister on December 2008. December15, 15, 2008. • Pro-Thaksin protesters •• began Unrest f from Unrestdemonstrations rompro pro-Thaksin protesters against government Thaksinthe protesters lead to cancelation of f lead rom 2009 up to May to cancelation of ASEAN summit ininApril 2011, when elections ASEAN summit April 2009. The unrest were announced. 2009. The unrest continued f for orthe therest rest • Incontinued the July 2011 of ofthe theyear. year. Elections, the Pheu Thai
•• InIn2001, Chavalit 1996, 2001, leader leader of of the the Thai Thaksin Yongchaiyudh the Thai Rak Rak Thai, Thai,of Thaksin Shinawatra , won the New Aspiration Party Shinawatra , won the general won the elections. elections. general elections. • In 2001, leader of the Thai Rak Thai Party Thaksin Shinawatra won the general elections and f ormed a coalition government.
Source: Datamonitor
•• InInthe 2005 2005 elections, elections, Mr. 2005 elections, Mr. Thaksin Shinawatra was Thaksinwas wasre re-elected -elected by re-elected greater majority, by a greater by greater majority, and majority, won the securing election more and won the election by than 350 of the 500 byaacomprehensive comprehensive victory than parliamentary seats. victoryof ofmore more than 350 350seats seatsout outof of500 500 • In 2005, with the parliamentary parliamentaryseats. seats. continuing violent •• unrest InIn2005, the 2005, in with the withsouth, the Mr. continuing violent Thaksin continuing resorted violentto unrest the counter unrestinin suspected thesouth, south,Mr. Mr. Thaksin sorted Muslim Thaksinmilitants sortedto to in the counter suspected region using a military counter suspected Muslim militants Muslim militantsininthe the of f ensive. region. region. • In February 2006, Mr. •• InInFebruary 2006, February 2006, Mr. Mr. Thaksin suspended the Thaksin suspended the Thaksin Assembly suspended National in the National inin NationalAssembly Assembly response to a growing reply replyto toan anfincreasingly increasingly campaign or his deaf deafening eningcampaign campaign resignation. f for him to step or him to stepdown. down.
•• Party During March –May – won under the During March –May 2010, of leadership of Yingluck 2010,thousands thousands of pro-Thaksin protesters Shinawatra, who was pro-Thaksin protesters wore elected ast t--shirts prime worered red -shirtsand and blocked minister. blockedcentral central Bangkok in protest f for Bangkok in protest or Colombia also restored resignation resignationof ofPM. PM.
diplomatic ties with Venezuela.
DAT AM ONIT OR
Structure and policies Key political figures The key political figures in Thailand are: Head of state King Bhumibol Adulyadej Prime Minister Yingluck Shinawatra.
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Political Landscape
Figure 3:
Thailand – key political figures
King Bhumibol Adulyadej received his Bacheliers lettres diploma f rom the Gymnase Classique Cantonal of Lausanne. He became the king of Thailand af ter the death of his elder brother, King Ananda Mahidol, in June 1946. King Bhumibol has played a crucial role in the country’s transition to a democratic system in 1992. He is currently the world’s longest serving head of state. During his reign, he has overseen 15 military coups, 16 constitutions, and 27 changes of prime ministers.
Yingluck Shinawatra is Thailand’s 28th prime minister, and the f irst woman to ever to hold the off ice. She holds a bachelor's degree f rom Chiang Mai University and master's degree f rom Kentucky State University, both in public administration. She was involved with the businesses of her brother, former Prime Minister Thaksin Shinawatra, until she was elected as the leader of the Pheu Thai Party (PTP) in May 2011. She led the PTP to a landslide victory in the July 2011 general elections, winning 265 seats in the House of Representatives. She was appointed as head of the ruling coalition government in August 2011.
Source: Datamonitor
DAT AM ONIT OR
Structure of government Structure of legislature Thailand is a constitutional monarchy with a parliamentary system and a bicameral legislature of government. The present head of state, King Bhumipol Adulyadej, or Rama IX, has ruled since 1946. The government is drawn from the Saphaputhan Ratsadon (the National Assembly), which has an upper and a lower chamber. The lower chamber (the House of Representatives) has 500 members, 100 of whom are elected by proportional representation and the remainder in multiseat constituencies. The upper chamber or the Senate has 200 members, all non-partisans, elected in single seat constituencies.
Executive branch of government Executive authority is vested in the government headed by the prime minister. The prime minister is chosen from the members of the House of Representatives and elected by members of parliament. King Bhumibol Adulyadej has been the legal ruler and head of state since 1946. The Privy Council is an 18 member legal system that counsels the king on issues related to legislation and other government affairs. The members of the Privy Council are chosen by the king. Moreover, executive legislative authority is exercised through a cabinet headed by the prime minister appointed by the king, and the 19 members of the council of ministers who head major ministries.
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Judicial branch of government Thailand has a three tier court system. The Supreme Court of Justice is the highest court, followed by the courts of appeal and the courts of the first instance. The courts of the first instance consist of 16 regional administrative courts and a central administrative court. A new constitutional tribunal, composed of justices from the Supreme Court of Justice and the Supreme Administrative Court, was established on October 1, 2006 to replace the functions of the constitutional court. Judges of the Supreme Court of Justice and the Supreme Administrative Court are subject to Senate approval.
Key political parties Active political parties in Thailand include Phak Prachathipat, the PTP, the Bhumjaithai Party (BJT), the Chartthaipattana Party, the Chart Pattana Puea Pandin Party, the Matubhum Party, the Rak Santi Party, and Phak Rak Prathet Thai. The largest opposition party and the oldest party in Thailand is Phak Prachathipat. The party was first formed in 1945, and was initially comprised of former Seri Thai members who were involved in the resistance movement against Japan during World War II. The party contended against several parties associated with Pridi and the Progress P arty of brothers Seni and Kukrit Pramoj (the Progress Party, including the Pramoj brothers, later merged with Phak Prachathipat). It is a conservative pro-monarchy party supported by the military and the middle class, primarily in the south and Bangkok. The party has not won a general election since 1992. It came to power in 1997 and 2008 only after the courts dissolved the then ruling governments over corruption charges. Former Prime Minister Abhisit Vejjajiva is the party's current leader. The party won 159 seats in the July 2011 general elections. The PTP is the latest incarnation of the TRT, which was once headed by the ousted former Prime Minister Thaksin Shinawatra, who won the 2001 and 2005 general elections. The PTP is allegedly controlled by Thaksin, who is on selfimposed exile in Dubai. The PTP is led by Yingluck Shinawatra, sister of Thaksin, who won a landslide victory in the July 2011 general elections. The PTP won 265 seats in the House of Representatives and elected Yingluck Shinawatra as the country’s first female prime minister. The PTP follows Thaksin’s populist policies, and its support base is largely located in the north and northeast. The BJT is led by Newin Chidchob, who was once Thaksin's right hand man. The party has been implicated in various corruption scandals involving former Prime Minister Abhisit Vejjajiva. Many of its members are former Thaksin allies. The party won 34 seats in the July 2011 general elections.
Composition of government The last federal elections were held in July 2011, when the new PTP won 265 seats while Phak Prachathipat won 159 seats. In third spot was the BJT with 34 seats, followed by the Chartthaipattana Party with 19 seats. The Chart Pattana Puea Pandin and the Phalang Chon Party parties won seven seats each, while five other parties shared the remaining nine seats. The coalition government comprises six parties: the PTP (265 seats), the Chaithaipattana Party (19), the Chart Pattana Puea Pandin Party (7), the Phalang Chon Party (7), the Mahachon Party (1), and the New Democracy Party (1).
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Figure 4:
Composition of the House of Representatives, 2011
Chartthai pattaana 4%
Others 4%
Bhumjaithai 7%
Democrats 32%
Source: Datamonitor
Pheu Thai Party 53%
DAT AM ONIT OR
Key policies Economic policies Throughout 2008, the government implemented several economic policies and measures. These include higher levels of public investment, which are aimed at increasing domestic demand and stimulating private investment and consumption. Furthermore, in 2008 the government deducted tax for small- and medium-sized organizations listed on the stock exchange and on property transactions and removed the 30% unremunerated reserve for capital inflows to increase private investment. In addition, during 2007 the main drivers that provided support to the country's economy were rapid growth in exports and increased public expenditure. In June 2010, the then Prime Minister Abhisit Vejjajiva stressed that opinions from all government offices and business organizations would be taken for the Reconciliation Plan to protect the nation's main institutions, redress inequalities and injustice, enable constructive communications between the political parties, and put into motion a political process that is democratic, efficient, and transparent. As part of its economic policy, the coalition government headed by Prime Minister Yingluck Shinawatra aims to enhance the competitiveness of Thailand by broadening market access for businesses. It plans to invest in developing transportation and public utilities infrastructure, and to promote trade and investment through improved laws, regulations, and investment promotion activities. Additionally, it plans to engage in free trade agreements and co-operation frameworks to expand international economic linkages in trade and investment.
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Social The 1997 constitution guarantees citizens the right to unite and form associations, farmer groups, non-governmental organizations, co-operatives, or unions. Thai people are allowed to undertake these ventures to "conserve or restore their customs, local knowledge, arts, or good culture of their community and of the nation and participate in the management, maintenance, preservation, and exploitation of natural resources and the environment." The new National Social Policy Committee, which was established in 1998, is empowered to oversee all issues of social policy, and has a subcommittee on non-governmental organizations. In June 2010, the government initiated reforms to deal with the country's social structure changing into that of an aging society. The reforms have included building sustainable welfare for the elderly; using the work experience of the aged to maximize their social benefits; creating income guarantees that are sustainable; enabling efficient treatment and care for the aged by the family institution; and encouraging local administration to take part in the care of the aged people. Prime Minister Yingluck Shinawatra aims to provide solutions to the menace of drugs, prevent and fight corruption, raise the standard of living of the Thai people through wage increases and tax relief, and develop the health insurance system.
Foreign Thailand enjoys relatively strong relations with its neighbors and other key world players. Relations with the US are historically strong; the US forces used bases in Thailand during the Vietnam War, and Thai troops fought alongside the US army and its South Vietnamese allies. Thai trade with the US is significant, particularly in the areas of ICT equipment and components. Thai relations with other East Asian countries are generally positive. Thailand is a member of the ASEAN, and is also a member of the Asia-Pacific Economic Cooperation forum. Relations with Myanmar have been strained in recent years by a series of disputes, generally related to Thai military activity against separatist rebels close to (and occasionally on the wrong side of) the border between the two. In the first year of its tenure, the government aimed to promote Thailand's relations with other countries. Its long-term plan includes cooperation with ASEAN countries, promote its role in international organizations, technical co-operation with other developing countries, and co-operation with Islamic countries and organizations.
Defense In October 2007, the Thai cabinet approved a budget of THB34.4bn ($1.1bn) for the Royal Thai Air Force to purchase 12 JAS-39 Gripen multi-role fighters from Sweden to replace its aging fleet. Government expenditure on defense was around $4.1bn in 2008, or 1.5% of GDP. The government also aims to upgrade and modernize its military hardware and procure new equipment, according to the 2006–14 defense forces modernization plan. The country’s defense budget was $4.5bn in 2009 and $5.1bn in 2010. Six JAS-39 Gripen fighters were delivered in February 2011, with the remaining six expected to be delivered in 2013. For the Thai defense establishment, conflict with Cambodia is a real present danger. In September 2011, the countries clashed on the border, leading to many casualties on both sides. Myanmar is another threat for Thailand due to the inflow of illegal weapons, drugs, illegal immigrants, ethnic insurgencies, and human trafficking. However, the country faces its greatest threat from its domestic crisis and insurgency in the south. The southern provinces have been fighting over the ethno-nationalist Malay Muslim separatist identity since 2004, in clashes that have resulted in violent insurgency and thousands of casualties.
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Since the bloodless coup of 2006 that ousted Thaksin Shinawatra, the military has become active in Thai politics. Under its current defense policy the country plans to enhance its intelligence system, enhance the potential of military science and technology, develop its e-defense, end domestic insurgency in the south, and enhance security co-operation with the international community. Under the 2011 fiscal budget, the country plans to modernize its armed forces via better assault rifles, machine guns, artillery equipment, missiles, tanks, and attack helicopters. In its new defense white paper for 2012– 16, the defense establishment is expected to focus on political violence, sovereignty, and territorial integrity, as well as protection of the monarchy.
Performance Governance indicators The World Bank report on levels of governance uses factors such as voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption as indicators for 213 countries and territories over 1996–2010. The study was conducted by Daniel Kaufmann of Brookings Institution, Massimo Mastruzzi of the World Bank Institute, and Aart Kraay of the World Bank Development Economics Research Group. For any country, a percentile rank of zero corresponds to the lowest possible score, and a percentile rank of 100 corresponds to the highest possible score. Thailand ranked in the 30.3 percentile in terms of voice and accountability in 2010, a significant drop from its 2000 score of 63.9. The country was behind Singapore, which recorded a percentile rank of 37.4 in this parameter. Thailand ranked in the 12.7 percentile on the political stability and absence of violence indicator in 2010, much lower than Malaysia and Singapore, which had percentile ranks of 51.9 and 89.6 respectively. This indicator measures perceptions of the likelihood of government destabilization by unconstitutional or violent means, including domestic violence and terrorism. Thailand ranked in the 58.4 percentile on the government effectiveness indicator in 2010. Thailand ranked lower than both Malaysia and Singapore, which recorded scores of 82.3 and 100. Government effectiveness measures the quality of public services; the quality of civil services and their degree of independence from political pressures; the quality of policy formulation and implementation; and the credibility of the government's commitment to such policies. Thailand ranked in the 56.5 percentile in terms of regulatory quality in 2010. Regulatory quality measures the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development. In comparison, Malaysia and Singapore had percentile ranks of 71.3 and 98.6 respectively. Thailand ranked in the 49.8 percentile on the rule of law indicator in 2010. In comparison, Malaysia and Singapore scored 65.4 and 93.4 respectively. Rule of law measures the extent to which agents have confidence in and abide by the rules of society, and examines the quality of contract enforcement, the police, and the courts, as well as the likelihood of crime and violence. Thailand ranked in the 46.9 percentile in terms of control of corruption in 2010. Thailand’s score is considerably lower than Malaysia's and Singapore's percentile ranks of 61.2 and 98.6 respectively. Control of corruption measures the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as the appropriation of the state by elite and private interests.
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Political Landscape Outlook Thailand’s political system has traditionally suffered from endemic instability, witnessed by the frequent collapse of civilian administrations and recurrent military incursions into political life. The July 2011 general elections threw many surprises. Street demonstrations that were allegedly inspired and instigated by former Prime Minister Thaksin Shinawatra managed to bring the opposition Pheu Thai Party (led by Thaksin’s sister Yingluck Shinawatra) to victory in the July 2011 elections. The government of Yingluck Shinawatra is reportedly working on amending the Defence Administration Act to enable the government to have greater influence over the defense establishment. The prime minister is also said to be working out an amnesty for politicians that could enable Thaksin’s return to the country. The cabinet has approved new eligibility conditions to the draft pardon decree, which includes convicts aged more than 60 years, punishment of less than a three year jail term, and no history of prior offences. The cabinet deleted certain clauses enforced in 2010 that excluded those convicted for drug trafficking and corruption from being granted amnesty. However, the hasty and suspicious manner in which the pardon decree was introduced raises doubts about the government’s intentions. The opposition is demanding that Thaksin should not be granted pardon, having shown contempt for the Thai justice system by refusing to serve his jail term. Meanwhile, the opposition Phak Prachathipat, which is supported by the military, could see its fortunes improve if the military were to exercise another coup to topple the ruling government. In its new defense white paper for 2012–16, the defense establishment is expected to focus on political violence, sovereignty, and territorial integrity, as well as protection of the monarchy. The defense establishment is anti-Thaksin, and the military has a history of violent crackdowns on pro-Thaksin “red shirt” supporters. Any confrontation between the military and pro-Thaksin supporters – which include members of the ruling government – could result in political turmoil. Despite the political uncertainties, the coalition government headed by Prime Minister Yingluck Shinawatra aims to enhance the competitiveness of Thailand by broadening market access for businesses as part of its economic policy. The government plans to promote trade and investment through improved laws, regulations, and investment promotion activities. Additionally, it intends to engage in free trade agreements and co-operation frameworks in order to expand international economic linkages in trade and investment. The government aims to provide solutions to the menace of drugs, prevent and fight corruption, raise the standard of living of the Thai people through wage increases and tax relief, and develop the health insurance system. In the first year of its tenure, the government sought to promote strong relations with other countries. Its long-term plan includes co-operation with ASEAN members, promote its role in international organizations, technical co-operation with other developing countries, and co-operation with Islamic countries and organizations.
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Economic Landscape
ECONOMIC LANDSCAPE Summary The Thai economy successfully bounced back from the 1997–98 crises and the difficult aftermath, recording an annual growth rate of around 7.1% in 2003, driven by a 6% growth in private consumption spending and an 18% growth in business investment. The country's economic performance averaged 5.2% during 2004–07, while in 2008 the growth rate declined to 2.5% due to the global financial crisis. Although the government introduced non-budgetary stimulus packages worth $43bn in 2009, the economy contracted by around 2.3%; however, it rebounded with growth of 7.8% in 2010, driven by strong exports. Thailand's external balances improved significantly in 2010 according to the Bank of Thailand. The current account balance was at a surplus of $13.7bn, or 7.9% of GDP. Total external trade crossed $450bn in the same year. Rising inflation has emerged as one of the greatest concerns for the central bank, as it could damage economic gains and negatively affect the prospects of the Thai economy. The budget deficit in 2010 was $8.1bn, or 2.7% of GDP. The country’s gross external debt rose from $75.3bn in 2009 to $100.6bn in 2010, representing an increase of around 34%. Prime Minister Yingluck Shinawatra's coalition government has embarked upon a strong economic policy that aims to promote trade and investment through improved laws, regulations, and investment promotion activities. The government plans to invest in developing transportation and public utilities infrastructure and engage in free trade agreements and cooperation frameworks.
Evolution 1923–99 In the 1980s, Thailand was the archetypal East Asian Tiger economy. Feted by the global business community, the Tiger economies combined social cohesion with economic dynamism. Thailand enjoyed an extremely rapid rate of economic growth in 1996, based on an expanding presence in ICT exports, strong investment, and record inflows of capital. However, ballooning foreign currency borrowing – often unhedged and based on an assumption of currency stability that proved unfounded – made the economy extremely vulnerable to changes in investor sentiment. By 1996, signs were emerging of an economic slowdown, resulting in overcapacity and lower-than-expected investment returns. With short-term external liabilities equal to almost 100% of available foreign currency reserves, the downturn in investor confidence led to a run on the currency, resulting in devaluation and a self-fulfilling flight of foreign capital. Thailand was hit particularly hard, with output declining by a cumulative 12% during 1997–98. Unemployment and poverty rose sharply, while the financial system almost collapsed under a mountain of bad debt.
1999–2010 The economy had partially recovered after 1999, with real GDP growth bouncing back to 4.4% in 1999 and rising to 4.8% in 2000, before falling back to around 2.2% in 2001 as renewed global economic uncertainty took its toll. The recovery was aided by the extended boom in ICT sector demand and generally healthy global conditions. In 2002, GDP growth rose to 5.3%, assisted by the loosening of the country's fiscal and monetary stance and renewed inward investment as a result of privatization. Domestic consumption demand was a key driving force, leading some to question the sustainability of the renewed upturn. However, the second half of 2002 saw investment and export demand pick up significantly. The stronger external position encouraged a gradual strengthening of the Thai baht over the course of the year, which helped to maintain
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Economic Landscape
inflation well inside the authorities’ target range, allowing for further monetary easing. In 2003, Thailand concluded a free trade agreement with Australia, a trading partner of growing significance, while free trade agreement talks with Japan and the US – Thailand’s principal trade partners – commenced in 2004. As such, the recovery picked up momentum, aided by the global recovery.
Thailand – historical GDP growth, 1991–2010
Figure 5:
10.0
8.0
Growth rate (%)
6.0
4.0
2.0
0.0 1991
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-2.0
-4.0 Year Source: Datamonitor
DAT AM ONIT OR
With the international economy improving and the monetary and fiscal policy relatively relaxed, economic growth picked up further in 2003 and 2004. The economy posted a 7.1% expansion in 2003, driven by 6% growth in private consumption spending and 18% growth in business investment. The manufacturing sector, particularly the electronics subsector, was boosted by strong global demand, helping to drive growth in exports to around 19% in 2003. The Thai baht subsequently strengthened marginally, helped by soaring foreign direct investment (FDI) inflows, export growth, and improved investor confidence. The economic performance in 2004 was almost as strong as in 2003, with overall growth of over 6.3%. However, the increasingly volatile international environment and a series of natural disasters took their toll on the economy , and real GDP growth fell to 4.6% in 2005. High oil prices resulted in higher costs of living and severe drought in rural regions, a decline in tourism (caused in part by the tsunami) brought down domestic demand, and private consumption declined significantly. In 2006 and 2007, the GDP growth rate recovered to 5.2% and 4.8% respectively, but in 2008 it dropped to 2.5%. In 2009, the government introduced two non-budgetary stimulus packages worth around $43bn to bring the Thai economy to positive growth. However, the economy contracted by around 2.3% in 2009 due to the impact of the
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Economic Landscape
global economic crisis, before rebounding with growth of 7.8% in 2010, driven by strong exports. Datamonitor expects GDP to grow by 3.7% in 2011, driven by exports and domestic demand.
Structure and policies Financial authorities and regulators The Bank of Thailand controls the issuing of the country’s international reserves, the printing and issuing of banknotes, and banking facilities for the financial institutions. It is also responsible for maintaining Thailand's fiscal stability. Moreover, the bank is granted concessions to operate foreign currencies and buy off credits issued by foreign companies and banks. Since 2000, the bank has maintained a policy of replacing the money supply and curbing inflation. The key associations of the Thailand capital market are the Bangkok Stock Exchange (BSE), which is privately owned, and the Securities Exchange of Thailand (SET). The Thai stock market was set up in 1962 through the formation of a private entity which became a limited company, Bangkok Stock Exchange Company Limited, in 1963. However, the BSE failed to succeed due to low turnover and a lack of trading and support from the government. The SET was established in 1974, and commenced trading in 1975. The exchange changed its name to The Stock Exchange of Thailand in 1991. Over the past 33 years, the capital market of Thailand has contributed significantly towards the development of the economy by being a source of funds for all business sectors and providing an alternative destination for domestic and international investment. In 2007, the total businesses raised through the SET and the MAI was THB89.52bn ($2.6bn), and the total turnover of trade on the SET and the MAI was THB4.27tn ($123.5bn). The market capitalization of the SET decreased from $197.1bn in 2007 to $103bn in 2008. However, it rebounded to $177bn in 2009 and around $278bn in 2010. In the same year, the total number of listed companies on the SET increased to 541, up from 535 in 2009.
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Economic Landscape
Figure 6:
Market capitalization of the SET, 2003–10
300.0
250.0
$bn
200.0
150.0
100.0
50.0
0.0 2003
2004
2005
2006
2007
2008
2009
2010
Year
Source: Datamonitor
DAT AM ONIT OR
Asset management The value of the mutual fund and asset management markets in Thailand declined by 3.1% in 2008 to THB2.16tn ($65bn), compared to THB2.23tn ($68.7bn) in 2007. However, the market rebounded to record a net asset value of $72.2bn in 2009 and $91bn in 2010. The net asset value of mutual funds increased from THB1.01tn ($30.4bn) in 2008 to $50.5bn in 2009 and $62.6bn in 2010. At the end of May 2011, the net value of the asset management industry stood at $87.7bn, with massive growth in the mutual sector, which recorded a net value of $58.5bn.
Banking sector The banking system of Thailand has historically been strong and stable. In 2010, the country had 15 foreign commercial banks, 18 Thai commercial banks, and six specialized financial institutions, with a cumulative total of 7,978 branches. The 1,281 post office branches also provide financial services. In 2010, commercial banks added 170 branches, specialized financial institutions added 149 branches, and post offices added 27 branches. In 2010, the number of Internet banking transactions increased by 23.1% to 60.8 million, compared to 49.4 million in 2009, while the total value of transactions increased by 38.6% to THB7.9tn ($247.3bn), up from THB5.7tn ($164.7bn) in 2009. Currently the banking sector in Thailand is dominated by a number of large players, including Bangkok Bank, Krung Thai Bank, Kasikornbank, Thanachart
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Economic Landscape
Bank, and Siam Commercial Bank. Standard Chartered, HSBC, and Citibank are some of the major foreign banks with large branches in the Central Business District.
Key policies The coalition government headed by Prime Minister Yingluck Shinawatra aims to enhance the competitiveness of Thailand by broadening market access for businesses as part of its economic policy. The government plans to promote trade and investment through improved laws, regulations, and investment promotion activities. As part of its economic policy, the coalition government plans to invest in developing transportation and public utilities infrastructure. Additionally, it plans to engage in free trade agreements and co-operation frameworks to expand international economic linkages in trade and investment. The government wants to raise the standard of living of the Thai people through wage increases and tax relief, and also intends to develop the health insurance system.
Performance GDP and growth rate Overview The economy of Thailand recovered partially after the 1997–98 financial crises. GDP declined in both 1997 and 1998, and did not recover to 1996 levels until 2003. Thailand’s real GDP growth during 2004–10 averaged 4.1%, which was below its potential growth of 5.5–6%. Furthermore, with the slowdown in the growth of private investment over the past four years, there exists a significant need for investments and a higher skilled workforce. The economy contracted by 2.3% in 2009, before rebounding with growth of 7.8% in 2010, driven by strong exports. Datamonitor expects GDP to grow by 3.7% in 2011, driven by exports and domestic demand.
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Economic Landscape
Figure 7:
GDP and GDP growth rate in Thailand, 2004–14
250.0
10.0
8.0 200.0 6.0 Growth rate (%)
150.0
$bn
4.0
2.0
100.0
0.0 50.0 -2.0
0.0
-4.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year GDP
Real GDP growth rate
Source: Datamonitor
DAT AM ONIT OR
GDP composition by sector Accounting for 44.7%, the industrial sector generates the largest single proportion of Thailand’s GDP. The services sector follows closely behind, accounting for 42.9%, while the agricultural sector contributes 12.4%.
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Economic Landscape
Figure 8:
GDP composition by sectors, 2010
Agriculture, 12.4%
Services, 42.9%
Industry, 44.7%
Source: Datamonitor
DAT AM ONIT OR
Agriculture In 2010, agriculture accounted for 12.4% of Thailand’s total GDP. Agricultural output increased from THB503.3bn ($12.3bn) in 2002 to THB1,185.8bn ($30.16bn) in 2010, at an average annual growth rate of around 11.4%. The sector depends primarily on farming, forestry, and fishing. Although output from this sector has increased, there has been a decrease in the share of the labor force employed in agriculture, from 63% in 1980 to 42.4% in 2008.
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Economic Landscape
Agricultural output of Thailand, 2005–10
1400.0
25.0
1200.0
20.0
1000.0
15.0
800.0
10.0
600.0
5.0
400.0
0.0
200.0
-5.0
0.0
Growth rate (%)
THBbn
Figure 9:
-10.0 2005
2006
2007
2008
2009
2010
Year Agriculture output
Growth rate
Note: sectoral figures are given in local currency due to foreign exchange fluctuations and their impact on growth figures.
Source: Datamonitor
DAT AM ONIT OR
Industry In 2010, the industrial sector contributed 44.7% of Thailand’s total GDP. Industrial output increased from THB2,263.8bn ($53.1bn) in 2002 to THB4,261.6bn ($119.5bn) in 2010, at an average annual growth rate of 8.2%, compared to 10% during 1980–96. In addition, output per worker declined by one-third following the 1997–98 financial crises. Sectors such as tourism, textiles and garments, agricultural processing, beverages, tobacco, and cement have maintained their importance in terms of total manufacturing activity in Thailand. The industries that stand out, especially with regards to technological content, are the automotive sector and its components, integrated circuits, furniture, and plastics. The share of the labor force in industry was 19.7% in 2008.
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Figure 10:
Industrial output of Thailand, 2005–10
4500.0
20.0
4000.0 15.0 3500.0
THBbn
10.0
2500.0 5.0 2000.0 1500.0
0.0
Growth rate (%)
3000.0
1000.0
-5.0 500.0 0.0
-10.0 2005
2006
2007
2008
2009
2010
Year Industry output
Growth rate
Note: sectoral figures are given in local currency due to foreign exchange fluctuations and their impact on growth figures.
Source: Datamonitor
DAT AM ONIT OR
Services Services output increased from THB2,567.3bn ($60.7bn) in 2002 to THB4,097.4bn ($111.4bn) in 2010, at an average annual growth rate of around 5.9%. The thriving services sector continues to increase employment opportunities for Thailand's population. The country’s main services sectors include airlines, commercial banking, telecommunications, and trucking. With these industries contributing significantly towards total services activity, any improvements in productivity can have substantial benefits for resource allocation and competitiveness in the broader economy. The share of the labor force in services was 37.9% in 2008.
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Economic Landscape
Figure 11:
Services output of Thailand, 2005–10
4500.0
10.0
4000.0 8.0 3500.0
THBbn
6.0
2500.0 4.0 2000.0 1500.0
2.0
Growth rate (%)
3000.0
1000.0
0.0 500.0 0.0
-2.0 2005
2006
2007
2008
2009
2010
Year Services output
Growth rate
Note: sectoral figures are given in local currency due to foreign exchange fluctuations and their impact on growth figures.
Source: Datamonitor
DAT AM ONIT OR
Fiscal situation The government set the national budget for 2011–12 at THB2.3tn ($77.2bn), with an emphasis on reducing social disparity, a problem that has long persisted in Thai society. This is an increase from the THB2.1tn ($63.5bn) budget set for 2010–11. In November 2011, the prime minister submitted a draft budget bill for 2012 that called for expenditure of THB2.38tn ($77.2bn), including substantial investment in flood recovery and rehabilitation. If implemented, the populist policies promised by the current government in its election campaign could cost THB2tn ($65.4bn) over five years. The budget deficit in 2010 was $8.1bn, or 2.7% of GDP. It is expected that the budget deficit will rise to around THB400bn ($13.4bn) in 2011–12, or 3.9% of GDP.
Current account Thailand’s current account balance was at a surplus during 2006–10. The country recorded a current account deficit of $7.6bn in 2005, or 2.5% of GDP. Thailand's external balances improved significantly in 2010, according to the central bank. The current account balance was at a surplus of $13.7bn in 2010, or 7.9% of GDP. The balance of trade remained at around $32bn for both 2009 and 2010. The balance on net services, primary income, and secondary income was negative $18.6bn.
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Economic Landscape
Figure 12:
Current account balance of Thailand, 2005–10
25
12
20
10
15
10 6 5
Percentage
$bn
8
4 0 2005
2006
2007
2008
2009
2010 2
-5
-10
0 Year Current account balance
Source: Datamonitor
Current account balance as % of GDP DAT AM ONIT OR
Exports and imports Thailand's economy has seen robust trade growth. Most of the country's imports consist of capital goods, intermediate goods and raw materials, consumer goods, and fuels. Furthermore, the country’s major export commodities include textiles and footwear, fishery products, rice, rubber, jewelry, automobiles, computers, and electrical appliances. Total trade decreased from around $436bn in 2008 to around $353bn in 2009. However, total external trade rebounded to more than $450bn in 2010. In 2010, the country’s top 10 export partners were China (which accounted for THB678.6bn [$21.2bn]), Japan (THB645.2bn [$20.2bn]), the US (THB638.8bn [$20bn]), Hong Kong (THB413.8bn [$13bn]), Malaysia (THB334.6bn [$10.5bn]), Australia (THB297.1bn [$9.3bn]), Singapore (THB285.2bn [$8.9bn]), Indonesia (THB232.9bn [$7.3bn]), Vietnam (THB184.5bn [$5.8bn]), and the Philippines (THB154.9bn [$4.8bn]). The country also had significant export business with India, Switzerland, the UK, Netherlands, South Korea, Germany, and Taiwan, with a combined value of THB820.1bn ($25.7bn). The country’s top 10 import partners in 2010 were Japan (which accounted for THB1,211.5bn [$37.9bn]), China (THB775.4bn [$24.3bn]), Malaysia (THB343.2bn [$10.7bn]), the US (THB342.1bn [$10.7bn]), United Arab Emirates (THB276bn [$8.6bn]), South Korea (THB258.5bn [$8.1bn]), Taiwan (THB218.2bn [$6.8bn]), Singapore (THB201.9bn
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Economic Landscape
[$6.3bn]), Australia (THB188.7bn [$5.9bn]), and Indonesia (THB181.7bn [$5.7bn]). The country also had significant import business with Saudi Arabia, Switzerland, Germany, and Russia, with a combined value of THB597.6bn ($18.7bn).
Figure 13:
Balance of trade in Thailand, 2006–10
15.0
6
10.0
4
5.0 0.0 2006
2007
2008
2009
2010
0
-5.0
Percentage
$bn
2
-2 -10.0 -4
-15.0 -20.0
-6 Year Balance of trade
Source: Datamonitor
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Balance of trade as % of GDP DAT AM ONIT OR
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Economic Landscape
Figure 14:
External trade of Thailand, 2006–10
500.0 457.1
436.1
450.0 400.0 362.1 350.0
316.0
353.3 225.3
$bn
300.0 250.0 200.0
154.4
171.2
178.1
161.6
227.8
229.3
210.8 182.1
184.0
150.0 100.0 50.0 0.0 2006
2007
2008
2009
2010
Year Exports
Source:
Imports
Total trade
DAT AM ONIT OR
External debt According to Bank of Thailand statistics, Thailand’s gross external debt rose from $75.3bn in 2009 to $100.6bn in 2010, representing an increase of around 34%. However, gross external debt as a percentage of GDP increased from 28.8% in 2009 to 35.2% in 2010.
International investment position Foreign direct and portfolio investments The inflow of FDI into Thailand increased significantly in the 1980s after the Plaza Accord, an agreement signed in 1985 at the Plaza Hotel in New York City by five nations that aimed to depreciate the US dollar by intervening in currency markets. During 1986–89, Thailand attracted approximately $900m per annum of net FDI flows, representing around 7% of private business investment. Due to political unrest in the early 1990s, FDI in Thailand witnessed a slight decline from $1.7bn in 1993 to $1.3bn in 1994. With the subsequent depreciation of the baht, FDI inflows increased to $3.6bn in 1997, fell to $2.8bn in 2000, and rose to $3.7bn in 2001.
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Economic Landscape
During 2004–07, total foreign investments increased from $4bn in 2004 to $11.4bn in 2007. In 2006 the country consolidated its position as the second largest FDI recipient in Southeast Asia. However, in 2008 FDI related to mergers and acquisitions in manufacturing dropped, and total FDI declined to $8.4bn, falling further to $5bn in 2009. According to the Thai Board of Investment, a total of 413 projects were approved in 2009 with a combined investment of THB97.8bn ($2.8bn). However, there was a marked improved in FDI in 2010, when it increased to $5.8bn.
Figure 15:
Total foreign investment in Thailand, 2005–10
11.4
12.0
9.5
10.0
8.4
8.1
$bn
8.0
6.0
5.8
5.0
4.0
2.0
0.0 2005
2006
2007
2008
2009
2010
Year FDI
Source: Datamonitor
DAT AM ONIT OR
Credit rating In December 2010, Standard & Poor’s affirmed a BBB+/A-2 foreign currency rating and an A-/A-1 local currency rating for Thailand, and rated the outlook for the country as stable, citing its low level of government debt and prudent fiscal policies. However, the increasing political instability could bring the economy under pressure in the medium term.
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Economic Landscape
Monetary situation Key monetary indicators Thailand has traditionally witnessed high inflation, although the figure fell in 2009. The country’s inflation increased from 0.7% in 2002 to 4.7% in 2006, and had reached 5.5% by 2008 due to a significant increase in energy and food prices. However, falling commodity prices combined with stringent monetary policies led the country to deflation of 0.8% in 2009. With the economic revival in 2010, inflation went up to 3.3%. The high price of commodities is expected to push inflation in the country upwards in 2011. According to Datamonitor estimates, inflation is expected to reach 4% in 2011.
Consumer price index and consumer price index-based inflation in Thailand, 2004–14
160.0
6.0
140.0
5.0
120.0
4.0
100.0
3.0
80.0
2.0
60.0
1.0
40.0
0.0
20.0
-1.0
0.0
Inflation (%)
Consumer price index
Figure 16:
-2.0 2004 2005 2006 2007 2008 2009 2010 2011
2012 2013 2014
Year Consumer price index
Source: Datamonitor
Inflation DAT AM ONIT OR
Banking sector The banking sector plays a dominant role in the economy, with estimated financial sector assets at 200% of GDP. Nonperforming loans as a percentage of total loans increased slightly from 7.5% in December 2006 to 7.9% in September 2007. The total loans of the banking system have also increased significantly. In 2010, the revenue of commercial banks from payment systems services totaled THB59.9bn ($1.9bn), or 10.5% of total revenue, an increase of 11.8% compared to 2009. According to the Bank of Thailand, the overall banking system is strong, due to domestic economic expansion. In the
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Economic Landscape
first quarter of 2011, the sector experienced strong credit growth, improved asset quality, a decline in non-performing loans, and improved fund mobilization due to deposits and bills of exchange increasing by around 12%. This also led to increased liquidity in the banking system. While loans expanded by 13.4% year-on-year, non-performing loans declined by THB12.1bn ($396m) to THB300bn ($9.81bn). During the quarter, operating profit and net profit increased due to higher net interest income, non-interest income, and declining provisioning expenses. In addition, the Federation of Accounting Professions published a new Thai accounting standard, effective January 1, 2011, in line with the new standards published by the International Accounting Standard and the International Financial Reporting Standard. This led to a decline in capital in the banking system, as banks adopted a new accounting standard entitled Employee benefits for the first time.
Employment During 2008, the agriculture sector employed around 42.4% of the labor force, followed by the services sector with a share of 37.9%. The industry sector accounted for the remainder of employment. The country continues to be faced by significant income inequality; for example, the average wage levels of employees participating in the private and public sectors in the northeast are around three times lower than those in Bangkok and twice as low as those in the central region. Per capita government expenditure in the northeast – particularly on health and agriculture – is also comparatively lower than other regions, and below the central region by almost half. As a result, the overall enrollment rate of the northeast in comparison with the central, northern, and southern regions is low. The country's unemployment rate declined from 2.6% in 2001 to 1% in 2010, while the number of employed individuals grew from 34 million in 2001 to 38.6 million in 2010. During 2001–10, employment grew at an average rate of 1.4%. According to Datamonitor estimates, employment growth is expected to fall to an average of 0.6% during 2011 –16, largely due to the impact of the floods that have ravaged the country since July 2011, which have had a significant effect on the manufacturing and tourism sectors. The March 2011 earthquake and resulting tsunami in Japan, which wiped out entire towns and industrial zones supplying critical electronics and automotive components, has also impacted the Thai manufacturing sector, as Japan is the country’s biggest import partner.
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Economic Landscape
Figure 17:
Employment in Thailand, 2004–14
2.0
39.0
38.0
37.0
1.0
36.0
Employment growth rate (%)
Number of employed (millions)
40.0
35.0
34.0
0.0 2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Year Total employment
Source: Datamonitor
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Employment growth rate
DAT AM ONIT OR
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Economic Landscape
Figure 18:
Unemployment in Thailand, 2004–14
0.70
2.0
0.50
Rate of unemployment (%)
Number of unemployed (millions)
0.60
0.40
0.30
0.20
0.10
0.00
0.0 2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Year Total unemployment
Source: Datamonitor
Rate of unemployment (%)
DAT AM ONIT OR
Outlook The government has set the national budget for 2011–12 at THB2.3tn ($77.2bn), with an emphasis on reducing social disparity, a problem that has long persisted in Thai society. In November 2011, the prime minister submitted a draft budget bill for 2012 that called for expenditure of THB2.38tn ($77.2bn), including substantial investment in flood recovery and rehabilitation. The budget deficit in the country is expected to rise to around THB400bn ($13.4bn) in 2011 –12. The economic revival in 2010 pushed inflation up to 3.3%, and Datamonitor estimates that inflation will increase to 4% in 2011. Although Standard & Poor’s affirmed a BBB+/A-2 foreign currency rating and an A-/A-1 local currency rating for Thailand and rated the outlook for the country as stable in December 2010, the increasing political instability could bring the economy under pressure. Datamonitor estimates employment growth to fall to an average of 0.6% during 2011–16. This is reflective of the severe impact of floods on the manufacturing and tourism sectors since July 2011. The March 2011 earthquake and resulting tsunami in Japan, which wiped out entire towns and industrial zones supplying critical electronics and automotive components, could also impact the Thai manufacturing sector significantly, as Japan is the country’s biggest import partner. The country needs to tackle the floods as a priority and return its infrastructure to normalcy as soon as possible in order to sustain the strong economic revival experienced in 2010. Datamonitor expects GDP to grow by 3.7% in 2011.
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Social Landscape
SOCIAL LANDSCAPE Summary Thailand has an extensive social security and welfare system that provides coverage to most of its citizens. The country has a large number of social security organizations, which provide a significant variety of benefits and provisions. Some of the most important social welfare schemes that the government provides are unemployment insurance, medical insurance, and insurance for work-related injuries. The government has enacted a wide range of reforms in recent years to improve the standard of public health. The ruling government of Prime Minister Yingluck Shinawatra introduced a daily minimum wage of THB300 ($10) from October 2011, which is expected to improve the earnings of workers in the informal sector. However, unemployment is currently a serious issue that must be tackled.
Evolution The quality of life in Thailand improved due to the drastic drop in the birth rate during the late 1960s. However, during the same period severe poverty persisted, especially in rural areas. During the 1970s, the government initiated several programs with a view towards alleviating poverty, but did not allocate adequate funds for these programs, which left a large proportion of the rural population impoverished. In the 1990s, the quality of life of the people deteriorated due to unregulated development and the AIDS epidemic. The situation worsened when the economic crisis began in 1997, which led to increasing poverty and people returning to rural areas. Rapid economic growth during the mid-20th century led to a substantial improvement in the country's healthcare services. During 1999–2003, a national plan was initiated that focused on improving access to healthcare services for people living in rural areas at a nominal cost. In the same period, education was made compulsory until the age of 16.
Structure and policies Demographic composition Thailand’s population in 2010 was estimated at 67.2 million. In the same year, the birth rate was recorded at 12.95 births per 1,000 population and the fertility rate at 1.66 children per woman. The infant mortality rate was 16.39 per 1,000 live births and the death rate was relatively high at 7.29 per 1,000 people.
Age and gender-wise composition In 2010, the estimated population distribution by age was as follows: 0–14 years (20.26%); 15–64 years (70.76%); and 65 years and older (8.98%).
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Social Landscape
Table 9:
Mid-year population by age, 2010
Mid-year population by age
Female
Male
0–4
2.13
2.24
5–9
2.15
2.25
10–14
2.38
2.49
15–19
2.58
2.69
20–24
2.42
2.50
25–29
2.69
2.75
30–34
2.83
2.92
35–39
2.76
2.71
40–44
2.70
2.53
45–49
2.54
2.32
50–54
2.25
2.10
55–59
1.86
1.72
60–64
1.42
1.31
65–69
1.11
1.00
70–74
0.92
0.79
75–79
0.66
0.53
80+
0.62
0.42
Source: Datamonitor
DAT AM ONIT OR
Urban/rural composition and migration In 2008, Thailand’s net migration rate was approximately 0.86 migrants per 1,000 people, with a large number (approximately 80%) of immigrants coming from Myanmar. In 2010, 65.4% of the population was rural, while 34.6% of the population was urban.
Religious composition In 2000, 94.6% of the people living in Thailand were Buddhist, followed by Muslims (4.6%), Christians (0.7%), and other religions (0.1%).
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Social Landscape
Figure 19:
Thailand – composition by religion
Christians 0.7% Others 0.1% Muslims 4.6%
Buddhists 94.6%
Source: Datamonitor
DAT AM ONIT OR
Education The education system in Thailand is complex, and is provided for by the government through the Ministry of Education. A minimum of nine years of school attendance is mandatory, and basic education of 12 years is provided by the govern ment. Furthermore, 12 years of basic and higher education is required for a formal education. The basic education includes six years of both primary and secondary education, with secondary education subdivided into three years of lower and upper secondary levels. Under the 15 year free education policy launched by the government in 2009, pre-primary education is offered free of charge. The Office of the Basic Education Commission is responsible for policies, plans, and standards of basic education in the country, and as of 2008 supervised 32,262 public schools and 185 educational service areas. The Office of the Vocational Education Commission is responsible for all technical and vocational education and training in the country, and supervises the 404 vocational colleges that have been merged into 28 multi-campus vocational institutes.
Healthcare According to the World Health Organization (WHO), the number of physicians in the country averaged three per 10,000 people during 2000–10, while the number of nurses and midwives was 15.2 per 10,000 people. Human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS) is a grave issue in Thailand. In 2004, the government introduced a
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Social Landscape
well-funded, politically supported response to the epidemic, which reduced the number of infections in the country. However, in 2008 around 600,000 people aged 15 and above were carrying the HIV virus, and a WHO report put HIV prevalence at 1.4% of the adult population. Although the occurrence of HIV/AIDS in Thailand has reduced compared to the 1980s, there exists an increasing need to match prevention efforts with recent changes in the epidemic, since the outbreak of this disease has spread across the population. In September 2008 the government announced a plan to invest around $3bn on public health facilities. The country is also accelerating the availability of traditional Thai medical services in hospitals, boosting the use of Thai herbs along with modern medicine. According to the permanent secretary for public health Dr Paijit Warachit, traditional Thai medical services are currently available in 4,400 hospitals and health centers, accounting for 42% of all hospitals and health centers in the country.
Social welfare Social welfare policies A large number of social security organizations exist in Thailand, offering a wide variety of benefits and provisions. Some of the most important social welfare schemes that the government provides are unemployment insurance, medical insurance, and insurance for work-related injuries. The government also provides benefits to the disabled, dependent children, the unemployed, and the elderly. The social security system provides for private sector employees and medical security, as well as pension systems for public service employees and employees of national enterprises. Furthermore, Thailand aims to ultimately provide free healthcare services for all, free education from kindergarten to university, comprehensive housing programs, land reform to ensure land tenure for small farmers, unemployment benefits, universal pensions, and support for single parents and people with disabilities. The country included social protection in its 11th National Economic and Social Development Plan. The government of Prime Minister Yingluck Shinawatra raised the daily minimum wage of more than 20,000 public sector workers to THB300 ($10) in October 2011, while the Central Wage Committee plans to raise the private sector minimum wage by around 40% from April 2012. The government has embarked upon a strategic plan to make Thailand a welfare society by 2016. According to the deputy permanent secretary for social development and human society Napa Setthakorn, the second strategic plan scheduled for 2012–16 will extend the country’s social security system to cover all groups of people, including those in the non-formal sector. The government also plans to develop the quality of and raise funds for social security services.
Performance Healthcare The total healthcare spending of Thailand has increased considerably over the years. Total health spending accounted for 4.2% of GDP in 2010, compared to 3.4% in 2001. Healthcare expenditure in dollar terms increased from $3.8bn in 2001 to $12.6bn in 2010.
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Social Landscape
Figure 20:
Expenditure on healthcare in Thailand, 2001–10
14.0
5.0 4.5
12.0
4.0 3.5 3.0
8.0
2.5 6.0
2.0
Percentage (%)
$bn
10.0
1.5
4.0
1.0 2.0
0.5
0.0
0.0 2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Year Healthcare expenditure
Healthcare expenditure as % of GDP
Source: Datamonitor
DAT AM ONIT OR
Income distribution Thailand has a highly inequitable society, with disparities in household incomes and high concentrations of poverty. During 2006, the poverty headcount declined from 21% in 2000 to 9.6% in 2006. In terms of the Gini coefficient, which ranges from zero (perfect equality) to 100 (perfect inequality), the country scored 53.6 for 2000–11. Poverty in the country appears to be on the decline, with the population living on $1–2 per day decreasing from 8.2 million in 2000 to 7.4 million in 2010. However, rising food prices could increase the incidence and intensity of poverty. In 2010, the percentage of the population earning above $5,000 was 25%, while those earning below $5,000 was 75%.
Education Thailand had a literacy rate of 95.7% for the total population in 2010. While the male literacy rate was 98.3%, the female literacy rate was lower at 93.1%. Although the adult literacy rate is one of the highest in the region, nearly 80% of the current labor force has received only primary education. According to the 2011 Human Development Report published by the United Nations Development Programme, the gross enrolment ratio for primary education was 91.1% during 2001–10, for secondary education it was 77%, and for tertiary education it was 45%. The government spent around 4.3% of GDP on education during 2006–09.
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Social Landscape
Figure 21:
Government expenditure on education in Thailand, 2002–13
14.00
5.0 4.5
12.00
10.00
3.5 3.0
8.00
2.5 6.00
2.0 1.5
4.00
Expenditure as a % of GDP
Expenditure ($ billion)
4.0
1.0 2.00 0.5 0.00
0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year Education Expenditure
Source: Datamonitor
Expenditure as % of GDP DAT AM ONIT OR
Outlook In terms of providing basic education to all children, Thailand has performed well, having achieved a literacy rate of more than 95.7% for the total population. Furthermore, a large number of social security organizations exist in Thailand, with a significant variety of benefits and provisions. Some of the most important social welfare schemes that the government has implemented deal with the reduction of poverty and augmentation of the rate of income growth. The country is also accelerating the availability of traditional Thai medical services in hospitals. According to the permanent secretary for public health Dr Paijit Warachit, traditional Thai medical services are currently available in 4,400 hospitals and health centers in the country. Thailand also included social protection in the 11th National Economic and Social Development Plan. The government has embarked upon a strategic plan to make Thailand a welfare society by 2016. Under the strategic plan scheduled for 2012–16, the country aims to extend its social security system to cover all groups of people, including those in the non-formal sector. The Central Wage Committee has approved a plan to raise the private sector minimum wage by around 40% from April 2012. The government plans to develop the quality of and raise funds for social security services. Prime Minister Yingluck Shinawatra aims to provide solutions to the menace of drugs, prevent and fight corruption, raise the standard of living of the Thai people through wage increases and tax relief, and develop the health insurance system.
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Technological Landscape
TECHNOLOGICAL LANDSCAPE Summary Thailand has promoted science and technology on an active basis in order to encourage innovation. The country receives research and development (R&D) projects from international companies such as Seagate, Toyota, and Honda, as well as other leading companies such as Siam Cement and PTT. Furthermore, the number of patents granted to Thailand by the US Patent and Trademark Office (USPTO) increased from 25 in 2005 to 60 in 2010, which shows remarkable progress in the country's innovation scenario. However, the country has a very weak track record in terms of intellectual property rights (IPR) protection. Thailand’s poor IPR practices were highlighted in the negative comments submitted to the Office of the US Trade Representative in 2010, and the country was retained on the Priority Watch List.
Evolution The Asian Institute of Technology in Thailand was founded in 1959, and provides advanced degrees in the fields of agricultural engineering, human settlements, and computer applications. The institute also receives equipment for Landsat transmissions, which provides Southeast Asian countries with aerial surveys for agricultural advancement, forest inventories, and city planning. In 1979, the Ministry of Science, Technology, and Environment was formed, and focused on implementing policies related to science and technology, the environment, and energy. In 1991, the National Science and Technology Development Agency (NSTDA) was established with a view towards using technical capabilities to encourage Thailand’s economic development, social development, and growth through the promotion of linkage and collaboration between the public and private sectors. In 1992, the government introduced the National IT Committee, a high level policy organization whose members consist of executives from both the public and private sectors. In 2002 the Ministry of Information and Communication Technology was formed, and in 2006 the Thailand Institute of Nuclear Technology (TINT) was created for national nuclear research and development. Moreover, in the same year the TINT entered into collaboration with the Office of Atoms for Peace, formed in 1961 as the Office of Atomic Energy for Peace, to provide nuclear research and services to the public.
Structure and policies Intellectual property Thailand is recognized as a nation where IPR protection and enforcement are key issues. In 2010, the Office of the US Trade Representative retained Thailand on its Priority Watch List due to the high levels of copyright piracy in the country, which placed it among the poor performers. According to the International Intellectual Property Alliance, losses due to software piracy were estimated at $344m in 2010. The number of patents granted to Thailand by the USPTO increased from 25 in 2005 to 60 in 2010, which shows remarkable progress in the country's innovation scenario. It also indicates that the country has consistently encouraged innovation, and that the R&D scenario is improving.
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Technological Landscape
Table 10:
Patents received from the USPTO, 2003–10
Year
Thailand
Malaysia
Singapore
South Korea
Japan
2003
47
63
460
4,132
37,248
2004
28
93
485
4,671
37,032
2005
25
98
377
4,591
31,834
2006
42
131
469
6,509
39,411
2007
25
173
451
7,264
35,941
2008
40
168
450
8,730
36,679
2009
39
181
493
9,566
38,066
2010
60
224
633
12,508
46,978
Source: Datamonitor
DAT AM ONIT OR
Research and development Since its formation in 1979, the Ministry of Science, Technology, and Environment has considerably strengthened Thailand's R&D system. The ministry administers the Thailand Institute of Scientific and Technological Research, a nonprofit state enterprise, and carries out R&D programs that provide solutions to problems related to industries and rural communities. Its other functions include transferring technology to small- and medium-sized enterprises; rendering scientific and technological services to industries so as to increase productivity; and carrying out R&D activities and providing scientific and technological services to state agencies and private enterprises for economic and social development.
Performance Telecommunications, broadband, and the Internet The telecommunications network of Thailand has experienced several delays and other shortfalls in the provision of telephone services due to a lack of investment. However, in Bangkok and other major cities the quality and availability of telephone service are much better in comparison with rural areas. Access to mobile telephones is also more prevalent than landline phones. Although Thailand's telecommunications infrastructure has expanded, the long delay in the formation of the National Telecommunications Commission (NTC), which is tasked with overseeing the industry's liberalization, has hampered the pace of development. As a result, Thailand has fallen behind its regional peers in terms of the level and quality of telecoms services. The NTC was finally formed in 2004, and has since proceeded with one of its main tasks, that being the issuing of licenses for telecoms providers. Regardless, fixed line growth fell from 8% in 2002 to -2.5% in 2010. In comparison, the mobile telephone subscriber base witnessed high growth over 2002–10, with a rate of around 30.7% recorded for the period. Fixed line services are still largely dominated by two state-owned enterprises, TOT Corporation and CAT Telecom, but the pair have been losing ground to the mobile sector in recent years.
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Technological Landscape
The number of Internet users in the country increased from 4.8 million in 2002 to 18.3 million in 2009. According to the National Statistical Office, the use of computers and the Internet increased during 2004–09 due to the expansion of the country's ICT infrastructure. During this period, computer usage increased from 21.4% to 29.3%, while Internet usage increased from 11.9% to 20.1%. Additionally, there is huge disparity in ICT usage between Bangkok and other areas, with the northeastern and southern provinces having the lowest computer and Internet usage ratios. Increasing access to the Internet will encourage companies to invest in e-commerce. According to the National Statistical Office, the proportion of individuals using computers and Internet was the highest in Bangkok at 46% and 38% respectively.
Figure 22:
Growth of fixed and mobile phones in Thailand, 2002–12
120.0 100.0
Growth rate (%)
80.0 60.0 40.0 20.0 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 -20.0
Year Mobile Phone Growth
Fixed Line Growth
Source: Datamonitor
DAT AM ONIT OR
Country Analysis Report: Thailand
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Page 69
Technological Landscape
Figure 23:
Internet users in Thailand, 2002–09
20.0 18.0
Number of users (millions)
16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2002
2003
2004
2005
2006
2007
2008
2009
Year Number of users Source: Datamonitor
DAT AM ONIT OR
Research and development The government has planned a holistic set of measures for promoting R&D in the country. For instance, the Thai Board of Investment has granted full incentives for the promotion of R&D investment instead of labor-intensive projects since 2006. Several businesses are being encouraged to produce more skilled human resources to support investment in R&D so as to create competitive advantages for the country. Furthermore, the government has granted 17 skills, technology, and innovation (STI) projects for manufacturers to improve their workforce in STI. R&D expenditure in Thailand accounted for just 0.25% of GDP, or around THB25bn ($723m), in 2009. In the same year, the Higher Education Commission launched the National Research Universities Project to build capacity and strengthen human resources in R&D and innovation. The government allocated THB100–500m ($2.9–14.5m) annual funding support to each university for three years as part of the project. In March 2010, the government stated that the country’s annual expenditure on R&D could reach THB100bn ($2.4bn), or 1% of GDP, by the end of the 11th National Economic and Social Development Plan in 2016. The NSTDA’s budget in 2010 was $156m. The government offers many financial incentives to increase private investment in R&D. For instance, the Ministry of Finance provides a 200% corporate income tax deduction for R&D spending. Although the country’s R&D agenda is still not under a single body, the government is working to develop collaboration among the various agencies and ministries under its first 10 year science, technology, and innovation plan.
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Technological Landscape Outlook Thailand has witnessed an increase in the number of R&D facilities opened by multinationals. Several businesses are being encouraged to produce skilled human resources to promote investment in R&D, so as to create competitive advantages for the country. Moreover, with considerable support from the government and private entities, the nation has a reasonable number of universities with abundant aid and excellent infrastructure, which have the potential to be transformed into research institutions of an international standard. Increasing R&D spending and investment of over THB100bn ($3bn) a year is expected to come into place before the end of the 11th National Economic and Social Development Plan, which runs from 2012–16. Under the National Research Universities Project to build capacity and strengthen human resources in R&D and innovation, the government allocated THB100–500m ($2.9–14.5m) of annual funding support to each university for three years. Although the country’s R&D agenda is still not under a single body, the government is working to develop collaboration among the various agencies and ministries under its first 10 year science, technology, and innovation plan.
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Legal Landscape
LEGAL LANDSCAPE Summary The business environment in Thailand has improved considerably over the years. According to the World Bank's Doing Business 2012 report, the country was ranked 17th out of 183 economies, following measures that were introduced to make starting a business easier, specifically the creation of a "one-stop shop." According to the 2011 Index of Economic Freedom, Thailand was ranked 62nd out of 179 countries and 10th out of 41 Asian countries, scoring high in fiscal freedom, government spending, monetary freedom, and labor freedom. Moreover, Thailand has an independent judicial system, which is responsible for the maintenance of the country’s law and order. Its comprehensive legal structure and judicial system provides significant scope to address various bottlenecks and structural issues in the system, and gives foundational strength to the investment climate. Criminal law, rather than civil law, mainly governs the nation's business regulations.
Evolution The constitution of Thailand is the highest law in the country. Thailand has experienced 17 charters and constitutions, after the 1932 coup backed change from an absolute to a constitutional monarchy. The legal system of Thailand was complicated before the western regime, which later influenced it to implement a system of jurisprudence based on European models. In the 19th century, the legal system was reformed and implemented on the basis of the French (Napoleonic) model. Formed in 1997, the constitution provided for an independent judiciary and the guarantee of basic civil liberties. Courts of the first instance, juvenile courts, and magistrates' courts exist in Bangkok and in each of the provincial capitals. Several judicial reforms were implemented during the 20th century: for instance, the Supreme Court, with justices appointed by the monarch, was announced as the final court of appeal for civil and criminal cases, and intermediary appeals courts were formed to solve cases from courts of first instance.
Structure and policies Judicial system Structure of the system Thailand’s legal system is based on civil law, the basic laws of which include the Civil and Commercial Code, the Criminal Code, the Civil Procedure Code, and the Criminal Procedure Code. The appointment of judges in Thailand is decided by the king, although they must meet initial approval by a judicial commission. The constitution also formed a tribunal to pass judgments regarding the disputes that arise in court. The court system consists of the courts of the first instance, courts of appeal, and the Supreme Court. In Bangkok, there exist several courts of the first instance, such as the Bangkok civil court, the Bangkok criminal court, and the central labor court. In addition, there also exist nine regional courts of appeal (which deal with provincial courts), a court of appeal in Bangkok (which focuses on the civil and criminal courts), and the Supreme Court. Thailand has no juries, thus lending the judges a significant authority based on the judgment passed. In terms of the level and type of court, different judges with various levels of specialized judicial expertise are hired.
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Legal Landscape
Courts of the first instance Courts of the first instance are the first tier in the court system, being lower courts where trials take place. These courts are classified into three subdivisions: general courts, juvenile and family courts, and specialized courts. The general courts are divided into two groupings, one in Bangkok and the other in the rest of Thailand. The general court in Bangkok consists of civil, criminal, provincial, and municipal courts; meanwhile, the rest of Thailand is classified based on the jurisdiction, with a view to having at least one provincial and municipal court in each province.
Juvenile and family courts The juvenile and family courts solve criminal cases involving children and minors below the age of 20. The courts also administer issues related to family, such as divorce. As per Thai law, children below the age of seven are not punished, and no imprisonment is imposed on children under the age of 14.
Specialized courts Most of the specialized courts are located in Bangkok, with the labor court being the only court to have branches in several other regions. Appeals from these courts can be resolved directly by the Supreme Court, overruling the appellate level.
Courts of appeal There exist 10 different appeals courts: one in Bangkok that solves cases in the civil and criminal courts, and nine regional courts of appeal that solve cases in the provincial courts. In order to hear the appeals of such cases a minimum of three judges are required.
Supreme Court The Supreme Court hears appeals from both the courts of appeal and specialized courts. The Supreme Court has around 60–70 justices, including the president (chief justice) and vice-presidents. It operates 17 divisions, each composed of three justices.
Tax regulations Income tax Thailand has a progressive personal tax system. An individual earning below THB150,000 ($4,905) is exempt from taxation; a rate of 10% is levied on an individual earning THB150,001–500,000 ($4,905–16,350); 20% for those earning THB500,001–1m ($16,350–32,700); 30% for those earning THB1–4m ($32,700–130,800); and 37% for income above THB4m ($130,800). In addition, taxable income includes income incurred from business, or through dividends, interest, royalties, and service fees. Capital gains are also a part of ordinary income, and are thus liable for corporate income tax.
Corporate tax Corporate tax is imposed on companies and partnerships formed under Thai or foreign law. Domestic companies are liable for taxation on worldwide income, and a foreign company is liable for taxation based on the income it earns in Thailand. Tax is generally levied for these companies at around 30% of net profits. However, depending on the type of taxpayer,
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Legal Landscape
corporate tax ranges from 2% to 30%. In October 2011, the Thai cabinet approved a proposal to reduce corporate tax to 23% in 2012 and to 20% in 2013.
VAT VAT is the major indirect tax in Thailand. An individual who supplies goods in Thailand and has an annual turnover of more than THB1.8m (approximately $56,000) is liable for VAT. The customs department collects VAT when the goods are imported. Almost all goods available for sale fall under VAT. The tax also includes goods imported to Thailand. Certain goods that are exempt from VAT are subjected to a specific business tax of 2.5–3%. The standard VAT rate is 7% at present; it is expected to rise to 10% from October 2012.
Establishing operations as a foreign enterprise A foreign company looking to set up operations in Thailand has several options to choose from.
Sole proprietorship firm A sole proprietorship firm is generally started by a single individual, who has the option of conducting business either under their own name or under a trade name. Starting a business of this type is easier, as it can be managed well with limited operating expenses, minimized legal tangles, minimized financial risk, and tax advantages.
Limited company Three types of limited company exist in Thailand: private limited companies, public limited companies, and limited partnership companies. In the case of a private limited company, the Civil and Commercial Code, the Revenue Code, and the Accounts Act govern the procedures as well as the laws in relation to commencing operations. Several procedures form the process of establishing a private limited company in the country. These include reserving a corporate name (which must not be identical to the name of an existing firm); the filing of a memorandum of association with the Business Development Office; covering the name of seven promoters; capital information; and other requirements. A minimum of 15 promoters are required in order to start a public limited company. The Public Company Act governs the procedures required to start the company. In addition, the public have the option of subscribing to shares of such companies, as specified by the Securities Exchange Act.
Limited partnership The liability of at least one of the general partners is unlimited for the joint obligation, with other partners having limited liability. A minimum of two members are required to start a limited partnership, at least one of which should have limited liability. There exists no law regarding the minimum amount of capital required for starting a limited partnership company.
Labor laws Thailand has constitutional provisions, statutes, and regulations that supervise employment, industrial relations, social security, and discrimination. The Labour Protection Act 1998 is a general enactment that governs employment contracts and provides provisions for establishing a minimum wage and labor standards for all employees. The law forbids labor practices such as the refusal of paying wages on time, fining employees, bonded child labor, and excessive and
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Legal Landscape
inappropriate deductions from workers’ wages. In addition, sick leave is salaried for up to 30 working days in a year, and pregnant workers are provided with the option of 90 days of leave, of which 45 are paid. According to the Workers’ Compensation Act 1994 of Thailand, the law requires employers to pay designated medical expenses upon injury or disability up to a total of $1,200. Compensation of 60% of salary is provided for up to 15 years in case of disability, while in case of death compensation of 60% of salary for eight years and funeral expenses of around $500 are provided.
Performance Effectiveness of the legal system According to the World Bank's Doing Business 2012 report, which measures the ease of doing business within a country, Thailand was ranked 17th out of 183 economies. The report stated that the country has made starting a business easier by introducing a one-stop shop. According to the 2011 Index of Economic Freedom, Thailand was ranked 62nd out of 179 countries and 10th out of 41 Asian countries. Thailand scores highly in fiscal freedom, government spending, monetary freedom, and labor freedom when compared to the global averages. It fared much better than its overall rank in terms of the enforcement of contracts and the ease of securing credit for a business and closing a business. However, the implementation of labor laws remains a significant challenge. Starting a business in the country takes an average of 32 days, compared to the global average of 34 days, while obtaining a business license in Thailand takes fewer days than the global average of 209 days. According to the World Economic Forum’s Global Competitiveness Report 2010–11, the country was ranked 38th out of 139 countries. The report’s survey results showed that the country’s four main problematic areas when it comes to doing business are government instability, policy instability, inefficient government bureaucracy, and corruption.
Outlook The Ministry of Finance has taken significant steps to overhaul the taxation system. The Revenue Department of Thailand intends to simplify the tax code to reduce costs and improve efficiency in compliance, as well as closing existing loopholes and ensuring fair treatment for all taxpayers. However, workers are not protected by law from employer reprisals for union activities prior to the registration of the union, and employers can use loopholes in the Labour Relations Act to fire union leaders prior to government certification of unions. Thailand is in dire need of labor market reform in order to become competitive. In October 2011, the Thai cabinet approved a proposal to reduce corporate tax to 23% in 2012 and to 20% in 2013. Furthermore, if the government encounters financing difficulties, the removal of the tax holidays, exemptions , and preferential tariff rates offered to foreign investors would be a relatively easy way of increasing revenue without antagonizing the public. However, this would send the wrong signal to the international investor community, which is already skeptical of the country's initiatives with regards to foreign investment. The country’s Foreign Business Act strictly limits the level of foreign investment, especially in the services sector. The World Bank’s Investing Across Borders 2010 report stated that Thailand’s restrictions on foreign equity ownership were among the most stringent among 87 countries.
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Environmental Landscape
ENVIRONMENTAL LANDSCAPE Summary Thailand is committed to the goal of environmental protection and sustainable development. It has a strong environmental policy and legislative framework, as well as established environmental institutions that focus on implementing policies to address the country's environmental and energy concerns at the national and provincial levels. However, increasing levels of pollution, rising domestic solid and hazardous wastes, and increased levels of industrial wastewater have significantly dented the state of the economy.
Evolution In order to prevent hunting and the encroachment of wildlife habitat, the Wild Animals Preservation and Protection Ac t was introduced in 1960. Several acts were implemented for regulating the usage of land in urban areas, including the City Planning Act of 1975 and the 1960 Act for Cleanliness and Orderliness of the Country. The establishment of the National Environmental Quality Act (NEQA) in 1992 provided the landmark for the development of Thailand's natural environment as well as its ongoing quest for bureaucratic reform. The NEQA formed the National Environmental Board and the Ministry of Science, Technology, and Environment with the aim of controlling reclamation projects and ecological preservation. In 1992, the Energy Conservation Promotion Fund was established in order to offer monetary support to factories and buildings for investment in and operation of energy conservation programs. The Fisheries Act – which was initially formed in 1947 and administers fishing and aquaculture development activities through the protection of fishing habitats and nursing grounds – was again updated in 1994. In 1996, the country formulated the Industrial Estate Authority of Thailand Act, with a view to addressing the issues of industrial waste treatment in industrial areas. In 2002, the Ministry of Natural Resources and Environment was formed, its objectives including protecting the water and mineral resources; preserving marine and coastal resources; and improving environmental quality.
Structure and policies Environmental regulations Overview The government’s medium-term development plan monitors economic growth, social welfare, and environmental sustainability. In Thailand, several well-resourced agencies are responsible for developing and implementing a range of environmental policy instruments. Several ministries and agencies have mandates for environmental programs, including the Ministry of Natural Resources and Environment, the Ministry of Industry, the Ministry of Transport and Communications, the Ministry of Planning, and the Ministry of Agriculture and Cooperatives.
Policies The government has initiated several policies since 1961. It has implemented successive five year National Economic and Social Development Plans that focus on the overall priority and policy framework for the country’s development. The seventh plan (1992–96) affirmed the government’s commitment to encouraging sustainable economic development that safeguards the environment. The eighth plan (1997–2001) aimed to improve natural resources and the environment by
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Environmental Landscape
strengthening environmental management; the primary objectives of this plan were to provide good governance through decentralization, public participation in decision-making, and increasing transparency and accountability. The ninth plan (2002–06) focused on improving management by striking a balance between usage and conservation of natural resources and improving the quality of life of the Thai people. Furthermore, Thailand framed a 20 year policy and prospective plan for Enhancement and Conservation of National Environment Quality (1997–2016). The policy is focused on recognizing the responsibilities of local government authorities and non-governmental organizations towards improving and safeguarding the quality of water by increasing awareness. The plan also aims to reduce water pollution generated from industrial and agricultural activities by encouraging greater investment in the private sector. In October 2010, the Thai cabinet agreed to impose a new tax on polluting industries as part of its efforts to conserve the environment. The tax rates are expected to be set based on type of pollution including water, air, and industrial waste. As part of the green tax initiative, the government plans to introduce a 15% tax on airline tickets from 2012. In the automotive sector, the government will set green tax rates based on CO2 emissions, fuel efficiency, and safety, instead of engine size.
Performance Environmental impact Economic development, urbanization, and industrial expansion have had a severe impact on the country’s ecosystems. A siginificant portion of the country’s forest cover has been lost, while around 50% of rivers and lakes suffer from poor water quality. The rampant use of land and water without proper planning has led to climate change that threatens to impact the low-lying central region in a big way. The country has faced high pollution levels over the years due to motor vehicle emissions in Bangkok, Hat Yai, and Chiang Mai. The release of smoke caused by incomplete combustion from poor quality engines is a major contributor to air pollution. Furthermore, airborne particulate pollution levels have worsened in the northern province of Chiang Rai, with levels of carbon monoxide, sulfur dioxide, nitrogen dioxide, and lead that are above internationally recognized levels. The government is promoting the use of natural gas powered engines, and aims to meet the Euro 4 fuel standard by 2012. In 2009, Thailand was the fourth highest producer of greenhouse gases in the region and 31st in the world, with a per-head emission rate of 5.1 tonnes. Globally, Thailand accounts for around 1% of carbon emissions, which calls for a reduction in emissions at the average level for the world. Carbon dioxide emissions have risen by more than three times compared to 1990 levels, due to low investment in the public transportation sector and inefficient planning concerning power generation. CO2 emissions increased from around 187 million metric tonnes in 2002 to around 268 million metric tonnes in 2010.
Country Analysis Report: Thailand © Datamonitor. This brief is a licensed product and is not to be photocopied
Published 12/2011 Page 77
Environmental Landscape
Figure 24:
Carbon dioxide emissions in Thailand, 2003–10
300.0
12.0 10.0
250.0
200.0 6.0 150.0
4.0
Growth (%)
Million metric tons
8.0
2.0 100.0 0.0 50.0 -2.0 0.0
-4.0 2003
2004
2005
2006 2007 Year Volume
Source: Datamonitor
Country Analysis Report: Thailand © Datamonitor. This brief is a licensed product and is not to be photocopied
2008
2009
2010
Growth rate DAT AM ONIT OR
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Environmental Landscape
Figure 25:
Carbon fuel usage in Thailand, 2003–10
20.0
Barrels of oil equivalent per capita
15.0 10.0 5.0 0.0 2003
2004
2005
2006
2007
2008
2009
2010
-5.0 -10.0 -15.0 Year Carbon fuel usage
Source: Datamonitor
DAT AM ONIT OR
Outlook Thailand is acclaimed for its rich natural resource base, and the biodiversity of the country has significant economic value. Thailand benefits from rich biodiversity, including a variety of fauna (spanning from large wildlife such as elephants to tiny bats) and flora (including giant forest trees and rare orchids). Moreover, the government has initiated several policies and measures with a focus towards ensuring a cleaner environment. However, the country has faced several natural disasters over the years, with the high rainfall and massive flooding since July 2011 being just one case in point. The devastating floods have thrown the economy out of gear, and in a country such as Thailand – where tourism, fisheries, and agriculture contribute significantly to the economy – the protection of ecosystems and the sound management of natural resources are crucial. The government plans to impose a green tax on various polluting industries, mostly industries that pollute the country's air and waterways. This is expected to generate additional tax revenues for the government, which it can plough back into environmental and wildlife conservation programs.
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Appendix
APPENDIX Ask the analyst Datamonitor’s Country Analysis Practice consists of a team of economists, analysts and researchers, all with expertise in their given fields. For any questions or comments about this report you can contact the author directly at
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Country Analysis Report: Thailand © Datamonitor. This brief is a licensed product and is not to be photocopied
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