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This is an overview of the Thai economy, her industries, commerce and the background
before and after the Asian 'meltdown'. |
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Additional details and contacts can be found in our [Directory]. |
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The Main Industries |
Like most Asian counties', the Thai economy
initially was purely based on agriculture; however many new industries have been and still
are being introduced during the past few decades.
Agricultural exports are still the backbone of the economy, with Thailand and Vietnam
being Asia's main supplier of rice. |
| Other fields of agribusiness include the commercial
farming of fruits and vegetables in the more temperate North, rubber plantations and
aquaculture, namely shrimps and clams in the South and commercial fishing in the
Southeast, as well as timber and budding dairy operations in the Northwest of the kingdom. |
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While several metals and minerals are being mined, the Southern tin mines
are responsible for generating most of the related revenues.
Manufacturing and Crafts represent another main industry with Thai leather
and garment manufacturers producing large numbers of clothing, shoes and other leather
goods for an ever expanding world market.
In recent years Thailand has also become a site for assembly
lines for electrical appliances, electronic consumer goods, telecommunication devices and,
more recently, semi-conductors. Thailand further boasts a sophisticated industry for
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building and construction supplies as
well as expanding chemical and pharmaceutical production plants.
The last but certainly not the least major foreign currency supplier in
the list is a sophisticated tourism industry, ranging from large numbers of backpacker
facilities to modern 5-star facilities and related services throughout the country.
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Currency and Investments |
The Thai Baht (1 Baht is divided into 100
Satang), not being
subject to any currency restrictions, is traded freely and exchange rates are noted at all
regional and most major International exchanges.
Foreign currencies are readily available and foreign currency accounts can be opened with
most major Thai banks (conditions apply but vary between banks).
The actual movement of foreign banknotes into Thailand is not restricted; however permits
are required to remove the equivalent of any amount exceeding US$ 10,000.00 in cash, from
Thailand.
Similar restrictions apply if visitors carry in excess of TBt 50,000.00 in cash upon
departure. |
| While the Baht was the first of the regional currency to
undergo serious devaluations during the Asian crisis of 97/98 it was also the first one to
recover. Current exchange rates are averaging but 15% below the pre-crisis ratings with
all major world currencies having lost 10-20% against the US Dollar within the same
time-frame. Statistically speaking, the Baht is now only slightly weaker against most Western currencies,
and stronger against some regional currencies than it has been
before the crisis. |
Currently valid exchange rates
can be found [HERE]
courtesy of Bangkok Bank |
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| Apart from investments into interest-bearing foreign and
local currency accounts and other financial tools there are several other ways of
investing locally, such as foreign and local Thai investment funds, project financing,
etc. While foreign ownership of property in Thailand is technically restricted, there
are several exemptions:
- foreigners are not restricted from investing into property funds
(which can even be project / building specific);
- foreigners are normally allowed to lease land and/or buildings
(with lease agreements often stipulating a virtual de facto ownership)
- foreign entities are permitted to own shares in joint venture operations with local
companies; such a joint venture is de jure treated much the same way a Thai company is
treated and can hence not only purchase other companies but also property; while foreign
ownership is in such joint venture operations limited to 49%, the low cost of
incorporation and the virtual absence of 'red tape' as well as the low amount of the
minimum initial capital (TBt 3,000,000, which is less than US$100,000.00) make this
certainly an interesting option; especially if one considers the obvious possibilities a
'double-tier' set-up would offer;
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| Western expatriates' holdings are traditionally focused on tourism,
import/export, handicraft and garment and leather goods manufacturing in Bangkok and the
Southern Islands (ie. Koh Samui, etc.).
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However, more recently a number of consultancies in the areas of information technologies,
the internet, etc. have found their way into the kingdom and compliment the local
'techie' community in their task to take the Thai industry into the next millennium.
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Statistics |
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Background and Outlook |
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For centuries Thailand was the rice basket of South East Asia. Offering not only
relative freedom through remaining independent despite colonisation attempts from France,
it also became a centre of stability and cherished the Arts and Crafts.
After WW2 while her neighbours gradually gained their respective independence, Thailand
slowly, carefully implemented innovations and technological advancements in order to
further enhance her agricultural productions. This ensured slow but steady growth until
the 80s, when East Asian economies started to boom and Thailand started to look for other
income sources.
While a value-adding sector and manufacturing had been jump-started in other South East
Asian countries, Thailand's traditional craftsmanship had ensured a more gradual emergence
of it's related sectors.
This is the reason for a rather unique growth aspect of the Thai economy. While her
neighbours were recording double digit growth mainly based on growing export markets, the
Kingdom's growth was also based on growing domestic demand.
Agricultural exports had ensured a steady growth over several decades with this same
growth being sustained through continuous development of land for agricultural use, paired
with the introduction of technological and chemical applications. As the revenue increased
and more and more people where required to further increase production, Thailand developed
a services sector. During the late 80s, as more and more industries gained ground the
existing services sector grew with it until it was responsible for some 35% of the GDP. As
the boom in other industries began to speed up, living standards of a growing middle class
improved, feeding a services sector which now was growing well ahead of all other
industries. The income generated by this sector provided additional fuel for growth and
subsequently an explosion in demand for more services. One building boom surpassed the
other, urbanisation was speeding up, literacy and academic skills improved and a
Western-style consumer middle class emerged - and grew.
In the mid 90s the services sector, by now feeding on itself, exploded and clearly
outstripped industrial demand. The gap between middle class and rural population became
bigger by the day but the desire to consume fed the services sector to ensure continuous
growth - until this same growth had lead to oversupply of consumer goods and the building
frenzy had outstripped the demand for top accommodation and office facilities. Bangkok's
skyline is by now comparable only to Singapore, Hong Kong and even American metropolitan
areas.
However, the overheated property market, financed through easy loans was suddenly
offering more top class facilities than the market required. Other industries had steadily
grown but had not kept up with the pace set by the services and construction sectors.
This resulted in mounting bad debts from same services sector and the construction
industry to their respective banks. During 1996, when this same bad debts became a problem
for several major banks, the bubble burst. The fact that Japan, one of the biggest foreign
customers of the Kingdom's new manufacturing sector experienced similar problems at the
same time, lead to a reduction in exports subsequently to less growth, which in turn,
further reduced the demand for services and created more problems for the services sector.
The second major market for Thai products is that
the other nations that are part of ASEAN
experienced the same problems and hence also reduced their orders for Thai produce. At
that time the 'Asian crisis' was well underway, buildings were auctioned off below
replacement value, banks faced foreclosures and the economy experienced the first
contraction in decades. Mounting foreign debts, lack of currency reserves and a subsequent
slump in the Baht paired with high inflation completed the picture.
Just like Thailand lead the way into what had all the characteristics of a looming
depression, it seems now, two years after, that it will be the Kingdom, leading the way
out and back into industrial growth.
Per average the Thai Baht has recovered most of the ground it lost during it's free-fall,
early in the crisis.
A new government has introduced vigorous lending guidelines for banks and reformed the
banking sector as a whole. Unemployment, mainly in the services sector seems to be under
control, exports are rising again and both, the agricultural and manufacturing industries
are predicting modest growth for 1998 while inflation has been steadily dropping for the
past few months, foreign debt is about half of last year's and the trade surplus is
steadily rising again.
Statistics show a negative growth of about 6% and an inflation rate
of about 5.9% for 1998 and both indicators have improved significantly since
then.
Given that a substantial part of Thailand's exports consist of basic and value-added food
products and that the existing infrastructure makes Thailand one of the best choices for
basic manufacturing, the overall outlook for the Kingdom can well be seen as positive.
Once the services sector recovers (which the expanding tourism sector might well trigger)
and rising incomes lead to increased retail sales, Thailand could well be the
second (behind Malaysia) of
the 'Young Tigers' to roar again.
Despite 'the worst being over' there are still plenty of bargains to be had for informed
foreign investors as not only real estate is sometimes being sold below replacement value
but also several public companies' shares are traded on the local exchange below
capitalisation value - simply because foreign investors lack confidence (or information)
and local investors lack capital ...
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