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Thailand Business

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Business and Economy of Thailand BusinessThailand has long been a low-wage country that attracted labor-intensive operations from South Korea, Hong Kong and Taiwan. At the end of the 1980s, Thailand was the country in Southeast Asia that, with its good location and political and economic stability, had the greatest attraction for foreign investment. In the mid-1990s, the business sector was restructured against high-tech industries and wages rose.

According to countryaah, Thailand is now a middle-income country and has the second-largest economy in Indonesia in Southeast Asia. Growth was strong during almost the entire 1990s and GDP per capita increased on average 3.8 percent per year. The driving force in the development was the export of both industrial goods and food. Industry, including mining and construction, accounts for 20 percent of employment. About 42 percent are employed in agriculture, forestry and fishing.

Business and Economy of Thailand

Calculations of the Human Development Index (HDI) for 2017 showed that Thailand was then ranked 83 among 189 countries. Poverty was sharply reduced during the 1990s, but at the same time, income disparities increased between different groups, between cities and rural areas, and between the central part of the country and the distant provinces. The modern business world is highly concentrated in the Bangkok region.

The global economic crisis led to significantly dampened demand for export goods, and Thailand's GDP fell by 2.3 per cent in 2009. Already at the end of that year, however, exports again increased sharply by electric machines, electronics and cars. In 2010, GDP growth was 8.7 percent, despite political turmoil within the country. During the period 2005-10, unemployment varied between 1 and 1.5 percent.

However, Thailand's manufacturing industry is facing increasing competition in the world market, mainly from low-wage countries Vietnam and China. Opportunities to develop the business sector towards knowledge-intensive production are currently limited by infrastructure deficiencies and by the relatively low level of education of the workforce.

In the autumn of 2009, the Thai government presented a comprehensive three-year stimulus program to counter the effects of the economic crisis. The emphasis here is on improved infrastructure, modernized education and rural development. A number of large projects have been started as funding has been found for them.

Rapid economic growth has led to serious environmental problems for several decades. In the population and among many politicians, there is now a considerable environmental awareness and since 2002 there is a special ministry for natural resources and environment.

For information on GDP and other business statistics about Thailand, see Digopaul.

Agriculture

According to estimates in 2017, agriculture, forestry and fisheries contributed 8 per cent of GDP and about 42 per cent of employment. Thailand is self-sufficient in food and, together with Vietnam, is the only country in Asia that is a net exporter of food.

Until 1990, the increase in agricultural production was due to an increase in acreage through the cultivation of forest areas. Then all fertile land was cultivated and what was subsequently put into use is less suitable land in the mountainous regions in the north. The soil shortage has become serious, especially in northeastern Thailand, and soil degradation through erosion is a growing problem. On the river plain in central Thailand, large areas of fertile agricultural land have been taken out of use and there are now urban buildings and traffic facilities. At the same time, rising prices for agricultural products have meant that agriculture has intensified, especially near the Bangkok region. The vast majority of agriculture is still small-scale, and in more remote parts of the country, yields are low, especially in rice. Artificial fertilizers are used to a lesser extent than in most Other Countries in Asia.

Rice has traditionally been the dominant crop. In 1970, rice grew on 68 percent of the cultivated area, in 2000 on 50 percent. In recent decades, and especially after 2000, agriculture has been broadened with the cultivation of rubber trees, fruits and cut flowers for export and intensive poultry farming. It has become commonplace with cultivation on contracts with large food industry companies.

Since 1981, Thailand has been by far the world's largest exporter of rice, especially of special kinds and of high quality. Nowadays, exports of natural rubber are equally generating income for the country. It has been the world's leading producer of natural rubber since 1991, which is harvested almost exclusively by small farmers and mainly in the south. Other important export goods are preserved and fresh fruit, mainly pineapple, as well as preserved chicken meat and sugar. Thailand is also the world's second largest producer of cassava root fruit, exported to Western Europe for use as livestock feed. Also pet food is a Thai export product.

During the 00s, the production of most agricultural products increased only by 1-2 per cent per year, mainly as a result of extreme weather with multi-year drought and even severe flooding. At the end of the 1990s, the state increased subsidies to small farmers for fertilizers and other input goods in order to achieve a higher return. A difficult problem is that many farmers have uncertain right to dispose of the land they cultivate, which means that they cannot invest in improvements.

Forestry

In 1965, 65 percent of the country was covered with forest, mainly tropical rain forest. Over the following 25 years, the forest area was reduced at a rapid rate as a result of logging timber for export and partly for the emerging domestic forest industry. Harvesting was rarely followed by replanting. In addition, the rural population increased rapidly and more and more agricultural land was needed. Forests were cleared and even hilly areas unsuitable for farming were cultivated, which eventually led to serious erosion and other soil degradation. In 1989, logging was banned and two years later the forest policy guidelines were set: 15 percent of the country's land would be set aside for productive forestry while 25 percent would be preserved as original rainforest in the form of national parks and other reserves.

Nearly 90 percent of the forest area is owned by the state and much of it has traditionally been utilized by the locals who have sourced food, building materials and fuel there. The new forest policy meant that the villagers would no longer have access to the forest reserves.

However, forest area continued to decline, albeit at a slower rate. During the period 2005-10, the area of natural regrowth shrank, but most of that decrease was offset by new areas planted with forest, mainly with teak and eucalyptus, which are fast growing and produce the best economic result. Illegal forest felling still occurs on the outskirts of the reserve. The wood is smuggled to Burma and then sold to the Thai forest industry. The area of the original rainforest was hardly changed, but current statistics are lacking.

Larger forest areas now remain mainly in northwestern Thailand and along the border with Burma.

In 2010, the FAO estimated that 37 percent of Thailand's area was wooded. Just over 1/3 of this is original rainforest and just over 1/5 planted forest, most within the framework of sustainable forestry. The remainder, ie. just over half, are areas of secondary forest with natural regrowth. Several million residents still live in areas with degenerate natural forest, even within the national parks. Governments' plans to relocate them to provide total protection for forest reserves have met with fierce resistance. The contradiction between the local population's need for traditional habitat and the state's ambition to conserve natural resources has so far only been solved on a small scale, in the form of forest forestry. The residents of a village are then given the responsibility for nearby forest and are allowed to use and manage it.

For a long time, Thailand has been importing timber into the forest industry.

Fishing

Fish is the most important source of animal protein in the diet of most Thais. In 2008, fishing accounted for 1.2 percent of the country's GDP and employed about 2 million people. As a fishing nation, the country was previously among the foremost in the world, but fishing has increased more in some other countries and in 2008 Thailand was ranked 11th in the world. In 2007, about 60 per cent of total production came from sea fishing, 6 per cent from freshwater fishing and the remainder from fish farming.

Most fishermen practice small-scale, coastal fishing using traditional methods, still at or near self-sustaining levels. The commercially oriented sea fishing takes place with trawlers farther out to sea and usually related to industries that process the fish. Thailand has fishing agreements with most coastal states in Southeast Asia and also with countries in eastern Africa. This means that Thai fishing fleets' catches in their waters are landed and processed in Thailand.

Over the past decade, catches have decreased in the waters around Thailand. They have also changed their composition and contain more and more small fish, which indicates overfishing. Shrinking catches of small shrimp and larger sea shrimp also indicate overexploitation. The only catches that have increased are tuna. The state has imposed restrictions on fishing areas, fishing periods and fishing methods and requires annually updated fishing licenses. The number of professional fishermen has decreased sharply in recent years.

Fish farming has a long tradition in Thailand. Catches from there increased in 1990-2008 annually by 8-9 percent. Along the coasts and in pools in the agricultural areas, shrimp is grown which is exported to more than 90 percent, mainly to Japan, the US and EU countries.

Thailand was the third largest seafood exporter in the world in 2009, after China and Norway. In particular, exports of frozen and canned fish have increased in recent decades. But the fishing industry has overcapacity and Thailand is therefore also the world's largest importer of fresh and frozen tuna, which is its most important raw material. Thailand's fisheries policy is now focused on sea fishing in distant waters, sustainable shrimp farming along the coasts and quality control to continue exporting seafood despite fierce competition.

Mineral

Only a few minerals are found to be of significant value. Tin was previously an important raw material, but that recovery has ceased. The most significant mines in the 1990s were the zinc mine at Mae Sot near the border in the northwest and the gold mine in Chatree in northern Thailand. In both cases, the extraction has fluctuated between different years and it is not enough to place the country among the world's twenty largest producers of zinc and gold. Iron and copper ore has also been mined, periodically and on a small scale. More extensive is the mining of industrial minerals such as limestone, feldspar and plaster.

Bangkok has become Asia's most important center for grinding and shaping precious stones, and Thailand has an extensive export of processed gemstones. In the country, sapphires are extracted and gemstones are imported from the neighboring countries, both legally and illegally. Examples of these are rubies from Burma.

Energy

Thailand's economic development has led to an ever-increasing need for energy raw materials and electricity, and domestic assets do not cover demand at all. At the beginning of the 1990s, 90 percent of all fuel was imported, and oil dependence was very high. It has subsequently declined, while the use of domestic natural gas has increased. Domestic oil recovery more than tripled during the first decade of the 21st century, but it is still small, internationally. Around 2010, it covered only one-seventh of the country's oil needs. Most of the oil used is imported from countries in the Middle East. Oil is now mainly used as vehicle fuel, and the country's energy policy includes developing other types of energy.

In the Gulf of Thailand, the extraction of natural gas has increased continuously since the beginning of the 1990s, and especially during the latter part of the 1990s, when a new field was opened in cooperation with Malaysia. However, one third of the natural gas used is imported through two pipelines from Burma's gas field offshore. In the power plants, natural gas has replaced oil as a raw material. It also uses lignite that is mined in northwestern Thailand. The water energy is expanded to a small extent. Instead, Thailand imports electricity from hydropower plants in Laos. Of the electricity generated in 2010, just over 73 per cent came from natural gas, close to 20 per cent from coal, 6.5 per cent from water and just over 0.5 per cent from diesel oil.

There has been a nuclear program since the 1990s, but it has not been actualized until now, as resistance to nuclear production is great both in the population and among politicians. There is also resistance locally and among environmental groups to expand the coal mining. Measures to develop renewable energy have so far only yielded slow results.

Industry

The manufacturing industry has become increasingly important in Thailand's economy. In 2017, industry accounted for 36 per cent of GDP and 13.8 per cent of employment. Industrial production increased by 6 percent annually in 2000-08. Almost 90 per cent of the export income comes from the manufacturing industry.

The textile industry was the industry that first grew and it has been important since the 1960s. It was the industry that generated the most export income in 1986-94, nearly 16 per cent in 1988. Above all, Japanese-Thai joint ventures were noticed. In 2006, however, the export share was only 3.5 percent. Competition had intensified from low-wage countries such as Vietnam and China. The US and the EU had set up barriers to trade and factories and machinery had aged. About 90 percent of the raw cotton is imported, which also limits the development of the industry.

Manufacture of electrical and electronic products grew from the early 1970s, and the composition of electronic components for export developed from the late 1970s, almost exclusively with foreign capital. After 1986, the industry expanded greatly as large companies in Japan, South Korea, Taiwan and Singapore outsourced their manufacturing and made major investments in the Bangkok region. In 2002, the industry accounted for just over 25 percent of the country's export earnings. However, during the 1990s, the export share shrank, partly as a result of increased competition from the low-wage countries.

Manufacturing of components for vehicles became increasingly extensive during the 1990s, and in the early 1990s, Japanese car manufacturers expanded operations in Thailand by building car assembly plants. Research and development has also emerged in this industry, which at the end of the 1990s was the third largest in terms of exports of industrial goods.

The largest industry in terms of employment is the food industry. It is spread across the country, unlike most other industries that are highly concentrated in the Bangkok region. New industrial areas are also emerging south-east of this, in connection with the new major port Laem Chabang with oil refineries and thermal power plants, among others.

In the cement, iron and steel and chemical industries, there are very large groups of companies, but most typically for Thai industry are small companies, often family companies with low capitalization. Many are subcontractors who produce on contracts to larger companies. In the latter part of the 1990s, there were the brightest prospects for the automotive industry, while the electronics and textile industries showed low productivity and were limited by a lack of skilled labor and infrastructure. In order to promote growth, governments introduced favorable loan terms for SMEs.

Foreign trade

Between 1986 and 1995, Thailand's export income increased by 18.5 percent per year. This was followed by a seven-year period of slower growth, mainly due to increased competition from other countries in Southeast Asia, but also as a result of the Southeast Asian financial crisis in the late 1990s. Then came a strong recovery, and between 2003 and 2007, export revenue increased by 17.5 per cent annually.

The composition of foreign trade has changed dramatically. Raw materials from agriculture and fisheries are processed before export and an increasing amount of industrial raw materials and semi-finished products are imported, processed and exported as increasingly advanced industrial products. In 1980, goods from the manufacturing industry accounted for 20 percent of the export value, in 2007 for just over 88 percent. The most important export goods in the late 00s were electrical appliances, circuit boards and computers, cars, rubber and food.

Rapidly rising oil prices have meant that oil now accounts for close to a fifth of import costs. Other important import goods are iron and steel, chemicals, electronic basic components, advanced machinery and timber. The current account balance shows a large surplus in most years. Until about 2000 was the United States. The EU countries and Japan are important markets for Thai industrial goods. Subsequently, countries in Southeast Asia and China have become increasingly important, and since 2006 Asia and Australia receive more than half of Thailand's exports. The most important exporting countries in 2009 were the US, China and Japan (10-11 per cent each) and Hong Kong, Australia and Malaysia. In 2009, 18.7 percent of imports came from Japan and 12.7 percent from China. Other important importing countries were Malaysia, the United States and the United Arab Emirates.

Tourism

Thailand was the country in Southeast Asia that developed tourism on a large scale at the earliest, and since 1982, tourism has been Thailand's most important source of foreign currency. Long-distance tourist flows increased each year, except for short periods of stagnation following international terrorist attacks in 2000 and 2001, after the 2004 tsunami and in connection with influenza epidemics. In 2007, Thailand was visited by more than 14 million tourists. Nearly half of them were return visitors, a comparatively high proportion. Then followed two years of significant decline, but in 2016 the number was up to just over 32 million. The large preponderance of Europeans and Americans among tourists has declined in recent years, while the share from China and countries in Southeast Asia has increased. Of the tourists in 2010, 13 percent came from Malaysia and about half as many from each of China, Japan and the United Kingdom. For Swedish tourists, Thailand is a popular long-distance destination, but Sweden first came in 16th place.

Despite the monstrous traffic, the capital Bangkok has an unmistakable charm. Visits to the many monasteries (wat), the old royal palace and markets and business streets are memorable experiences, as well as boat trips on the larger canals. The royal ceremony boats and Kamthieng House, moved here from northern Thailand as a museum of folk art and folk customs, are also worth a visit. Likewise, the National Museum with large collections of eg. sculptures worth a visit.

Thailand's ancient capital Ayutthaya is located 85 km north of Bangkok on an island surrounded by rivers and has many stately ruins of monastery and palace. At about the same distance to the west lies Nakhon Pathom with Pathom Chedi, Southeast Asia's oldest and largest pagoda; still further west is the bridge over the River Kwai, notorious for the many Allied prisoners of war who perished here during the Second World War. The city center of northwestern Chiang Mai also has interesting buildings, and the city is also a good starting point for trips to picturesque villages in the surrounding area. Northern Thailand offers opportunities for hiking in the areas inhabited by the mountain people, with their interesting housing conditions and crafts. Many people visit the Khao Yai National Park in the northeast to see wild elephants, monkeys and rhino birds. Some of the country's national parks include some of the islands off the Kranäset, which still contain untouched nature. The island of Phuket on the west coast of the nose is known especially for its many excellent beaches. Large-scale bathing and entertainment tourism, adapted for mass tourism, is located in Pattaya, southeast of Bangkok. Thailand can offer comfortable and safe rail travel; a popular route is Bangkok - Kuala Lumpur - Singapore, which takes two days. Textiles (mainly the Thai side) and jewelery tones (such as sapphires and zircons) are advantageous to trade in Thailand. Not least through the media, Thailand has gained a reputation as a destination for sex tourism, a stamp that, despite efforts, has proved difficult to completely wash away.

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