Results of the Sixth Plan
1. The Thai economy has grown rapidly and has become increasingly internationalized. During the Sixth Plan period, the Thai economic growth has skyrocketed with gross domestic product (GDP) expanding at an average of 10.5 percent per year, twice the Plan target, thus representing the highest average growth rate ever for the past twenty five years. Furthermore, the economic structure has become more outward-oriented internationalized, as indicated by an increase in the proportion of international trade to GDP from 60 percent in 1986 to 80 percent in 1991.
Key factors which have brought about the high growth rates include growth of the export sector, investment and tourism, all of which had grown considerably faster than the projected rates. World economic conditions were also conducive to Thailand's economic expansion, in particular the lower oil prices and lower interest rates. At the same time, increase in world commodity prices and the realignment of foreign exchange rates of industrialized countries brought further benefits during this period. Comparative advantages in natural and human resources, and the reasonable low wages, made Thailand highly competitive in the world market, leading to further expansion of investment and exports.
On a macroeconomic level, cautious and monetary policies, together with political stability were also instrumental in boosting business confidence, propelling the Thai economy to grow far beyond the Sixth Plan targets, and making Thailand the fastest-growing economy in the world during the past 5 years.
2. The country's fiscal and monetary position was characterized by stability, higher income, and growing employment opportunities. Sustained high growth had a number of beneficial effects on the economy, including on the country's fiscal and monetary position, employment and income. More specifically:
2.1 The country's fiscal and monetary position was secure and stable. The rapid economic growth and the cautious management of fiscal and monetary policy helped strengthen fiscal and economic stability during the Sixth Plan period.
The volume of international reserves rose close to US$ 17,000 million by mid-1991 with a significant reduction in the national debt burden. The proportion of debt repayment, covering both principal and interest payments in relation to report earnings, declined from 20.6 percent in 1986 to 10.5 percent by 1991. The proportion of external debt to GDP also declined from 38.5 percent to 34 percent during the same period.
A surplus was achieved in public sector finances starting for 1988 onwards, as revenue collection was higher than planned, while disbursements. of public expenditures were low owing to delays of project implementation. Fiscal surplus rose from a low of 11,000 million baht in 1988 to 184,000 million baht by June 1991, representing about 50 percent of the government budget. The historically high level of fiscal surplus has enabled the government to improve fiscal policy management by restructuring tax policy, reducing machinery import taxes, car import taxes and prepayments of loan.
2.2 With regard to inflation, prices have tended to rise steadily, Inflation rate rose from 2.5 percent in 1987 to 6 percent by 1991. This was caused to a large extent by domestic demand for goods and services increasing more rapidly than production capacity. At the same time, world inflation rates have also risen, resulting in an average inflation rate of about 5 percent, which is considered manageable.
2.3 Greater employment opportunities and higher wages. The high economic growth has led to a substantial increase in employment, particularly in the industry and services sectors, with an average employment growth of 554,000 persons per year during the Sixth Plan period. Consequently, the unemployment rate has been reduced to 0.6 percent in 1991. This means that in practice there is virtually no open unemployment, with the exception of some seasonal unemployment during the dry season. At the same time, pressure for wage increased has resulted in higher income and better purchasing power.
2.4 With respect to per capita income, during the Sixth Plan period, it has increased from 21,000 baht in 1986 to 41,000 baht by 1991, due to an average GDP growth rate of 10.5 percent. This, coupled with a decline in the population growth rate to 1.4 percent by 1991, resulted in improvements in the general standard of living, contributing to the national poverty alleviation efforts.
3. Overall development pattern is still unbalanced in a number of ways. Although the high economic growth has had significant beneficial effects on the overall economy, the pattern of growth has led to several structural imbalances, which may become long-term development issues for the country, namely :-
3.1 Income disparities among households of different socio- economic status and between rural and urban areas have increased to an alarming level. Socio-Economic Surveys as conducted by the National Statistical Office indicate that income share of the top 20 percent, or the wealthiest group of households, has increased from 49.3 percent during 1975/1976 to 54.9 percent by 1987/1988, while income share of the lowest 20 percent, or the poorest group of households, has actually declined from 6.1 percent to 4.5 percent during the same period.
Agricultural workers continue to be the group with the lowest income, with about half of the national average income. Other low income groups, such as general manual workers and low-ranking civil servants, still have higher average income than agricultural workers.
Furthermore, regional disparities have also been on the rise as the Bangkok Metropolis and surrounding towns continue to have a dominant role and rapid economic growth rates. In 1981, Bangkok contributed about 42 percent to GDP. By 1989, this share increased to 48 percent, while in most other regions, these share had actually declined. For instance, the shares of the northeast, the north, and the south declined from 14.7 percent to 12.9 percent, 13.5 percent to 11.4 percent, and 10 percent to 9 percent respectively during the same period.
3.2 Infrastructure bottlenecks have become more severe during the Sixth Plan period. Virtually all types of basic infrastructure services were inadequate to meet the strong demand, resulting from the rapidly growing economy. This was the case despite special additional investment programmes undertaken during the Sixth Plan period. In addition, the policy to promote private sector provision of infrastructure services has not been implemented in an effective and timely manner, thus impeding both current and future development efforts.
3.3 Savings and investment gap have widened. Although there has been a reasonable degree of fiscal and monetary stability during the latter part of the Sixth Plan, the savings-investment gap grew alarmingly with the current account deficit reaching 8.5 percent of GDP in 1991. This was caused by the growth in the proportion of investment to GDP from 24 percent in 1987 to 36.5 percent by 1991. At the same time, savings in relation to GDP grew from 23 percent to 28 percent during the same period. This problem requires close monitoring, together with the formulation of appropriate measures.
3.4 Thai society has a greater difficulty adjusting to the new economic changes. The structural changes from a fundamentally agriculture- based economy to a more industrialized one has transformed the Thai society from being a primarily rural society to a more urbanized one. Traditional ways of life are undergoing changes toward a more modernized lifestyle, with impact on the spiritual, moral, cultural, and general patterns of living. These changes have brought about numerous urban-related problems, in particular increase in crime. During the past 10 years, although the number of crimes has been reduced from 185.5 cases to 154.5 per 100,000 population, the nature of crimes committed have become more severe and complex. Similarly, durg addiction continues to be a major problem. The number of drug-related arrests increased 2.8 times from 21,730 cases in 1980 to 60,546 cases in 1989, In addition, the problems of urban poverty and urban slums have also become serious.
3.5 Regarding deterioration of natural resources and the environment, the rapid and high economic growth rates in the past were associated with extensive exploitation and destruction of natural resources, particularly land, forests, water, fish, and mineral resources. Inefficient natural resources management has contributed to a more rapid deterioration and depletion of natural resources. For instance, the national forest area declined from 109.5 million rai, representing 34 percent of total land area in 1978, to less than 90 million rai or less than 28 percent by 1989.
Furthermore, expansion of economic activities, particularly industry and tourism, coupled with urban population growth, have resulted in increasingly more serious population problems of various kinds, such as contaminated water, polluted air, noise pollution and industrial and hazardous wastes. The quality of water in major rivers, including the Chao Phraya and Tha-Chin rivers, and along tourist destinations in coastal areas has deteriorated beyond acceptable levels. The deterioration of natural resources and environmental problems have direct impact on the quality of life of the people. All of these problems represent constraints for future development.
3.6 The bureaucratic system is unable to adjust to changes and cannot adequately respond to national economic and social transformation. While the economy and society are changing rapidly, the bureaucracy has been unable to restructure and adjust itself to respond to this dynamic because of constraints in manpower, legal framework, rules and regulations, administrative system, and organizational structure of the government. All of these need major modifications.
With respect to manpower, the government is facing problems of braindrain from the public to private sectors, particularly in science and technology areas facing shortages of manpower. A major reason is the much lower pay in the government sector. Another reason is the government organizational structure, which offers very few top administrative and technocratic positions, thereby limiting opportunities for career advancement.
The existing legal framework and government rules and regulations have not been modified to be in harmony with changing economic and social conditions. Furthermore, the highly centralized administrative system and organizational structure of the government are in need of appropriate decentralization of power and authority to the provincial and local authorities.
4. In summary, the Thai economy has been able to grow with a reasonable degree of stability and security, providing a generally better standard of living for the people. However, the exceptionally high economic growth rates have led to the imbalances as mentioned earlier, which will be obstacles and constraints for high quality and sustainable development in the long term. Therefore, the next plan has to define and appropriate direction for development to serve as a firm foundation for well balanced and sustainable growth.
--National Economic and Social Development Board, Office of the Prime Minister--
1. The Thai economy has grown rapidly and has become increasingly internationalized. During the Sixth Plan period, the Thai economic growth has skyrocketed with gross domestic product (GDP) expanding at an average of 10.5 percent per year, twice the Plan target, thus representing the highest average growth rate ever for the past twenty five years. Furthermore, the economic structure has become more outward-oriented internationalized, as indicated by an increase in the proportion of international trade to GDP from 60 percent in 1986 to 80 percent in 1991.
Key factors which have brought about the high growth rates include growth of the export sector, investment and tourism, all of which had grown considerably faster than the projected rates. World economic conditions were also conducive to Thailand's economic expansion, in particular the lower oil prices and lower interest rates. At the same time, increase in world commodity prices and the realignment of foreign exchange rates of industrialized countries brought further benefits during this period. Comparative advantages in natural and human resources, and the reasonable low wages, made Thailand highly competitive in the world market, leading to further expansion of investment and exports.
On a macroeconomic level, cautious and monetary policies, together with political stability were also instrumental in boosting business confidence, propelling the Thai economy to grow far beyond the Sixth Plan targets, and making Thailand the fastest-growing economy in the world during the past 5 years.
2. The country's fiscal and monetary position was characterized by stability, higher income, and growing employment opportunities. Sustained high growth had a number of beneficial effects on the economy, including on the country's fiscal and monetary position, employment and income. More specifically:
2.1 The country's fiscal and monetary position was secure and stable. The rapid economic growth and the cautious management of fiscal and monetary policy helped strengthen fiscal and economic stability during the Sixth Plan period.
The volume of international reserves rose close to US$ 17,000 million by mid-1991 with a significant reduction in the national debt burden. The proportion of debt repayment, covering both principal and interest payments in relation to report earnings, declined from 20.6 percent in 1986 to 10.5 percent by 1991. The proportion of external debt to GDP also declined from 38.5 percent to 34 percent during the same period.
A surplus was achieved in public sector finances starting for 1988 onwards, as revenue collection was higher than planned, while disbursements. of public expenditures were low owing to delays of project implementation. Fiscal surplus rose from a low of 11,000 million baht in 1988 to 184,000 million baht by June 1991, representing about 50 percent of the government budget. The historically high level of fiscal surplus has enabled the government to improve fiscal policy management by restructuring tax policy, reducing machinery import taxes, car import taxes and prepayments of loan.
2.2 With regard to inflation, prices have tended to rise steadily, Inflation rate rose from 2.5 percent in 1987 to 6 percent by 1991. This was caused to a large extent by domestic demand for goods and services increasing more rapidly than production capacity. At the same time, world inflation rates have also risen, resulting in an average inflation rate of about 5 percent, which is considered manageable.
2.3 Greater employment opportunities and higher wages. The high economic growth has led to a substantial increase in employment, particularly in the industry and services sectors, with an average employment growth of 554,000 persons per year during the Sixth Plan period. Consequently, the unemployment rate has been reduced to 0.6 percent in 1991. This means that in practice there is virtually no open unemployment, with the exception of some seasonal unemployment during the dry season. At the same time, pressure for wage increased has resulted in higher income and better purchasing power.
2.4 With respect to per capita income, during the Sixth Plan period, it has increased from 21,000 baht in 1986 to 41,000 baht by 1991, due to an average GDP growth rate of 10.5 percent. This, coupled with a decline in the population growth rate to 1.4 percent by 1991, resulted in improvements in the general standard of living, contributing to the national poverty alleviation efforts.
3. Overall development pattern is still unbalanced in a number of ways. Although the high economic growth has had significant beneficial effects on the overall economy, the pattern of growth has led to several structural imbalances, which may become long-term development issues for the country, namely :-
3.1 Income disparities among households of different socio- economic status and between rural and urban areas have increased to an alarming level. Socio-Economic Surveys as conducted by the National Statistical Office indicate that income share of the top 20 percent, or the wealthiest group of households, has increased from 49.3 percent during 1975/1976 to 54.9 percent by 1987/1988, while income share of the lowest 20 percent, or the poorest group of households, has actually declined from 6.1 percent to 4.5 percent during the same period.
Agricultural workers continue to be the group with the lowest income, with about half of the national average income. Other low income groups, such as general manual workers and low-ranking civil servants, still have higher average income than agricultural workers.
Furthermore, regional disparities have also been on the rise as the Bangkok Metropolis and surrounding towns continue to have a dominant role and rapid economic growth rates. In 1981, Bangkok contributed about 42 percent to GDP. By 1989, this share increased to 48 percent, while in most other regions, these share had actually declined. For instance, the shares of the northeast, the north, and the south declined from 14.7 percent to 12.9 percent, 13.5 percent to 11.4 percent, and 10 percent to 9 percent respectively during the same period.
3.2 Infrastructure bottlenecks have become more severe during the Sixth Plan period. Virtually all types of basic infrastructure services were inadequate to meet the strong demand, resulting from the rapidly growing economy. This was the case despite special additional investment programmes undertaken during the Sixth Plan period. In addition, the policy to promote private sector provision of infrastructure services has not been implemented in an effective and timely manner, thus impeding both current and future development efforts.
3.3 Savings and investment gap have widened. Although there has been a reasonable degree of fiscal and monetary stability during the latter part of the Sixth Plan, the savings-investment gap grew alarmingly with the current account deficit reaching 8.5 percent of GDP in 1991. This was caused by the growth in the proportion of investment to GDP from 24 percent in 1987 to 36.5 percent by 1991. At the same time, savings in relation to GDP grew from 23 percent to 28 percent during the same period. This problem requires close monitoring, together with the formulation of appropriate measures.
3.4 Thai society has a greater difficulty adjusting to the new economic changes. The structural changes from a fundamentally agriculture- based economy to a more industrialized one has transformed the Thai society from being a primarily rural society to a more urbanized one. Traditional ways of life are undergoing changes toward a more modernized lifestyle, with impact on the spiritual, moral, cultural, and general patterns of living. These changes have brought about numerous urban-related problems, in particular increase in crime. During the past 10 years, although the number of crimes has been reduced from 185.5 cases to 154.5 per 100,000 population, the nature of crimes committed have become more severe and complex. Similarly, durg addiction continues to be a major problem. The number of drug-related arrests increased 2.8 times from 21,730 cases in 1980 to 60,546 cases in 1989, In addition, the problems of urban poverty and urban slums have also become serious.
3.5 Regarding deterioration of natural resources and the environment, the rapid and high economic growth rates in the past were associated with extensive exploitation and destruction of natural resources, particularly land, forests, water, fish, and mineral resources. Inefficient natural resources management has contributed to a more rapid deterioration and depletion of natural resources. For instance, the national forest area declined from 109.5 million rai, representing 34 percent of total land area in 1978, to less than 90 million rai or less than 28 percent by 1989.
Furthermore, expansion of economic activities, particularly industry and tourism, coupled with urban population growth, have resulted in increasingly more serious population problems of various kinds, such as contaminated water, polluted air, noise pollution and industrial and hazardous wastes. The quality of water in major rivers, including the Chao Phraya and Tha-Chin rivers, and along tourist destinations in coastal areas has deteriorated beyond acceptable levels. The deterioration of natural resources and environmental problems have direct impact on the quality of life of the people. All of these problems represent constraints for future development.
3.6 The bureaucratic system is unable to adjust to changes and cannot adequately respond to national economic and social transformation. While the economy and society are changing rapidly, the bureaucracy has been unable to restructure and adjust itself to respond to this dynamic because of constraints in manpower, legal framework, rules and regulations, administrative system, and organizational structure of the government. All of these need major modifications.
With respect to manpower, the government is facing problems of braindrain from the public to private sectors, particularly in science and technology areas facing shortages of manpower. A major reason is the much lower pay in the government sector. Another reason is the government organizational structure, which offers very few top administrative and technocratic positions, thereby limiting opportunities for career advancement.
The existing legal framework and government rules and regulations have not been modified to be in harmony with changing economic and social conditions. Furthermore, the highly centralized administrative system and organizational structure of the government are in need of appropriate decentralization of power and authority to the provincial and local authorities.
4. In summary, the Thai economy has been able to grow with a reasonable degree of stability and security, providing a generally better standard of living for the people. However, the exceptionally high economic growth rates have led to the imbalances as mentioned earlier, which will be obstacles and constraints for high quality and sustainable development in the long term. Therefore, the next plan has to define and appropriate direction for development to serve as a firm foundation for well balanced and sustainable growth.
--National Economic and Social Development Board, Office of the Prime Minister--