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Thailand Overview

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Location, Area, Topography and Population

Thailand, formerly known as Siam, is situated in Southeast Asia. It is bounded on the north and west by Myanmar, on the north and east by Laos and on the southeast by Kampuchea. In the south it becomes a peninsula bounded by the Indian Ocean on the west, Malaysia on the south and the Gulf of Thailand on the east. The total area of the country is approximately 514,000 square kilometers. 

Apart from the peninsula of Thailand, which consists mainly of narrow coastal lowlands, backed by low and wooded mountain ranges, the country comprises four main upland regions-in the west, north, northeast and southeast-all surrounding a large central plain which is drained by the Chao Phraya River. 

The climate is tropical and, in general, there are three distinct seasons. The monsoon season begins around the end of May and lasts to the middle of November when the cool season takes over until mid-February when it gives way to the hot or summer season. There are some areas of the country where the start and length of the wet season vary; in the south there is no distinct cool season. 

Thais are wellknown for their friendliness and hospitality. A large majority of over 62 million citizens of Thailand are ethic Thai, along with strong communities whose ethnic origins lie in China, India and elsewhere. About 7 million people reside in the capital city of Bangkok.  

Approximately 85% of the population of Thailand is of Thai ethic origin. The largest minority group is the ethnic Chinese who comprise over 12 % of the population. The predominant religion Thailand Buddhism to which 95 % of the population adheres. Islam accounts for 4 % and is concentrated in the South adjacent to Malaysia. The balance of the population is predominantly Christian. The literacy rate is approximately 93% for adults over 15 years of age. The official language is Thai, but the use of English is widespread. 

Government Structure

Government: Thailand has had a constitutional monarchy since 1932. Parliament is composed of 2 houses, The House of Representatives and the Senate. Both representatives and senators are elected by the people. A prime minister elected from among the representatives leads the government. The country is divided into 76 provinces. The Bangkok Metropolitan Administration comes under an elected governor. Appointed provincial governors administer the other 75 provinces (Changwat), which are divided into districts (Amphoe), sub-districts (Tambon) and villages(Mu Ban).

Head of State: H.R.H. King Bhumibol Adulyadej
                      (Rama IX of the Chakri Dynasty)

Prime Minister:
Thaksin Shinawatra

Thailand's present government took office in February 2001 under the premiership of Police Lieutenant Colonel Thaksin Shinawatra, leader of the Thai Rak Thai Party.  One of the main economic policies under the present Government is the Dual Track Development Strategy.  The Dual Track Development strategy is aimed at raising domestic productivity and demand on the one hand, and expanding exports and foreign direct investments on the other.  Under this strategy, the government has initiated several programs to promote growth and development at the grassroot level.  One of the programs, One Tambon, One Product (OTOP) , was created to help communities to use their local knowledge to develop and market their unique products.  Furthermore, a Village Fund, the People's Bank, and provision of Small and Medium Enterprise (SME) credits were created to promote grassroots enterprise. The success of this Dual Track Development Strategy is evident. In 2003, the economy grew by 6.3 per cent, one of the highest rates in the world. 

      For purpose of administration, the country is divided into 76 provinces and the Bangkok metropolis, each under the control of a governor, each province is divided into districts, sub-districts communes and villages. The governors are appointed by the King on the advice of the minister of interior, except for the governor of Bangkok, who is directly elected by Bangkok residents.

Foreign Relations and International Organizations

     Thailand has historically adopted a flexible approach in its conduct of external relations. The success of this approach is evidenced by the fact that Thailand is the only country in Southeast Asia, and one of the few in all of Asia never to colonized by Western powers . Following the end of the world War II, Thailand's main external concern was to ensure that the spread of communism, first in China and later in Vietnam, Kampuchea and Laos, did not spill over into Thailand. Consequently, in the early 1950s the Thai Government decided to align with the West in general, and the United States in particular. In 1954, Thailand became a party to a regional collective security arrangement called the Southeast Asia Treaty Organization (SEATO). Although SEATO was dismantled in 1975, Thailand and the United States remain allies under the Manila Pact , which served as a basis for SEATO and remains in force today. 
      Thailand is a member of, and enjoys good relations with other members of, the Association of Southeast Asian Nations (ASEAN), namely, Brunei, Malaysia, Indonesia, the Philippines, Singapore and Vietnam, as well as with Myanmar. Since 1989, Thailand has emphasized the development of trade relations with Kampuchea, Laos and Vietnam and its willingness to lead the development of the region through trade and economic liberalization Political differences with these countries have been substantially reduced. In October 1991, the governments of Thailand, Laos, Vietnam, Brunei, Malaysia, Indonesia, the Philippines, Singapore, the five permanent members of the Unites Nations Security Council and the four competing factions in Kampuchea signed a treaty under which the four factions agreed to participate jointly in the government of Kampuchea and to return the country to democratic government. Thailand anticipates that political and economic relations with Kampuchea. Laos and Vietnam will continue to improve. 
     Thailand has shown a strong interest in the development of multilateral regional relations. It has been a signatory to a number of international treaties including: the World Trade Organization (formerly the General Agreement on Tariffs and Trade) (WTO); Agreement between the Government of the Kingdom of Thailand, the Government of Malaysia and the Government of the Republic of Indonesia relating to the Delimitation of Continental Shelf Boundaries in the Northern Part of the Straits of Malacca; the Fifth International Tin Agree-ment ; the Treaty of Amity and Economic Relations Between the Kingdom of Thailand and the Unites States of America; and the International Natural Rubber Agreement. In the international financial context, Thailand is affiliated with major multilateral lending institutions, including; the international Monetary fund (IMF), the International Bank for Reconstruction and Development (The World Bank), the International Development Association (IDA), the International Finance Corporation (IFC), and the Asian Development Bank (ADB). Thailand is also a member of United Nations, as well as a number of specialized United Nations agencies, and of the international Coffee Organization, the International Sugar Organization, the International Natural Rubber Organization and the International Jute and Allied Fibers Organization. 
     Thailand is a party to the ASEAN Free Trade Agreement (AFTA) under which no tariffs greater than 5% will be applied after 2003 on products, other than certain unprocessed agricultural products, traded among the ASEAN member countries. AFTA also requires that tariffs on such unprocessed agricultural products be reduced by 2005. 

ECONOMY

Outline of Recent Economic Trends    

       After a decade of high growth, the Thai economy underwent a period of adjustment in 1996 and 1997. Since the mid-1980s, the Thai baht had been effectively tied to the US dollar. The appreciation of the dollar against other major currencies in the 1990s resulted in a gradual loss of competitiveness of Thai exports, leading to current account and trade deficits. A downturn in investor sentiment led to the Thai economy turning sharly downwards. The baht was floated in July 1997 and the government accepted a $17.2 billion rescue package from the International Monetary Fund (IMF) the following month.

       Under the IMF programme, Thailand instituted a number of reforms, including sweeping changes to the financial sector and a programme to privatize the country's 60-plus state-owned enterprises. A framework to recapitalise the banking sector and support corporate debt restructuring was established. Longer-term reforms for the educational syterm, civil service and legal framework were also launched. Programmes were also established to help

 The Thai Economy
  2002 2003 2004
GDP (US$)
$126.9 billion
$142.9 billion
$170.2 billion
Per capita GDP(US$) 2,014 2,251 2,681
GDP annual growth (%) 5.4 6.7 8.0
Inflation (CPI%) 0.7 1.8 2.5
Exports(US$)
$66.1 billion
$78.4 billion
$91.7 billion
growth (%)
4.6 18.6 17.0
Import (US$)
$63.4 billion
$74.2 billion
$88.0 billion
growth (%)
4.4 17.1 19.0
Current account(US$) 7.0 8.0 7.8
as percent of GDP(%)
5.5 5.6 4.6
Exchange rate (USD/THB) 43.0 41.5 38.5

Source: National Economic and Social Development Board

improved the efficiency and productivity of the industrial sector.

          Thailand has undergone a remarkable revival following the 1997 crisis. Over the past several years, economic growth has been among the strongest the region, with 2002 growth of 5.4% and 2003 growth of 6.7%, second in the region only to China . The fact that growth in 2003 came despite global uncertainties such as the war in Iraq , the regional Sars outbreak and the threat of terrorism is credit to the robustness of the country's domestic economy and the diverse composition of its export base.

 Exports expanded at a record-pace of 18.6% in 2003, with increases in both volumes shipped and prices driving the total exports to an all-time high of approximately $75 billion Low interest rates, high agriculture commodities prices and strong business and consumer confidence helped drive domestic consumption and generate momentum for further growth in 2004.

           A current account surplus of 8 billion in 2003, or 5.6% of Thailand's total GDP, further helped boost the country's external stability.

          Foreign debt at the end of 2003 was $52 billion, compared with $109 billion in 1997. Foreign reserves at the end of 2003 were approximately $43 billion, or well over three times the level of short-term foreign debt.

           The government in mid-2003 completed an early repayment of all outstanding loans owed to the International Monetary Fund (IMF) a strong signal that both Thailand and its economy have indeed moved past the crisis.

           On the fiscal side, higher-than-expected tax revenues, as a result of strong economic growth, have led the country to project a return to a balanced budget position by fiscal 2005, staring in October 2004. This will represent the first balanced budget for Thailand since 1997 economic crisis, and comes a full four years before previous estimates.

Transport

--> Aviation

Thailand currently has 33 commercial airports, seven of which operate international flights and the remaining 26 operates domestic services. Bangkok International Airport (also known as Don Muang) is the main International Airport of Thailand. Thirty million passengers were served in 2002, with the addition of over 900, 000 tons of cargo.
Other international airports in Thailand situate in major cities of Thailand, such as Chiang Mai, Phuket, Hat Yai, U Ta Pao. Chiang Rai Airport was also recently promoted to become an international airport to facilitate the growing tourist industry and cross-boarder trades.

The increasing demand for air transportation has surpassed the current handling capacity of the existing airports. The government planned a second international airport in Bangkok to relieve the air traffic congestion. The construction of the second airport is underway and is scheduled to in full operation in 2005. Thai Airways

The new airport is equipped with 4 runways with a projected handling capacity 112 flights per hour providing services to100 million passengers & 6.4 million tons of cargo yearly.

Thai Airways International has long been the only national carrier of Thailand. Currently, it has been privatized and listed in the Stock Exchange of Thailand under the State Owned Enterprises Privatization scheme of the government. Thai Airways International is expected to face more competitors in the near future owed to the forthcoming launching of new low-cost airlines by private businesses.

The trend should benefit both Thai and foreign passengers in the near future.

--> Rail & Roads

The land transport system of Thailand includes 79,180 km of highways providing efficient passage to all regions of Thailand.

The government also realized the necessity to enhance the inter-city transport infrastructure creat Thai Railwaysing links between Bangkok and other major cities in each region of Thailand. At present, 225km of the inter-city motorways are already in used. On completion of the construction, the inter-city motorway is expected to stretch 4,150 km long. Undoubtedly, it will be an important access to all major transport systems which are vital for economic development of the country.

The other means of transport for visitor is the rail system. The total length of railroads covers 4,880 km. Despite its relatively low speed, trains are reliable, safe and reasonably priced. Currently, the train system is run by the SRT which is one of the state-owned enterprises that could be privatized in the future. Now the government tries to implement policies to increase efficiency of rail services and to reduce its financial losses resulted by its social service provisions.

For The Bangkok Metropolitan Region (BMR), the traffic in this area is always congested considering millions of people travel on the roads everyday and the demand grows even more rapidly owing to the recent economic recovery.

The government plans to ease the traffic congestion by expanding the network of mass transit system in Bangkok as well as improving the facility of express way.

The Bangkok Sky Train (BTS)
, operated by Bangkok Mass Transit System Plc, has started its service in 1999. Its main objective is to help alleviate the chronic traffic problems in Bangkok and to provide people with a fast and efficient means of transportation within the central business region of Bangkok. Bangkok Sky Train

The BTS System can carry more than 1000 passengers per train, which is an equal number of passengers of 800 cars. Today, the BTS carries approximately 300,000 passengers per working day. F urther plan is being made to extend the coverage to a wider area of Bangkok

addition to the operation of BTS, a new means of transport, the Bangkok Subway by Mass Rapid Transit Authority of Thailand (MRTA) will officially start to launch its service on 12 August 2004.

--> Ocean Freight

Currently, there are five major ports in Thailand, of which two are operated by of the Port Authority of Thailand namely, the Bangkok Port (BP) and the deep water port at Lam Chanbang Port (LCP). The rest are the Phuket Port, the Map Ta Put port and the Sonkha Port. In addition, private sector also operates a number of ports along coastal area and Cho Pra Ya river.

The Port Authority of Thailand is on the SOEs list to be privatized in 2004 aiming to achieve greater efficiency of their services by introducing the participation from private sector.

Telecommunications

Telecommunication services in Thailand are on par with international standard, especially in urban areas such as Bangkok. There are two fixed line service provider in Bangkok: Telephone Organization of Thailand (TOT) , a state enterprise, and Telecom Asia (TA) , a private company. Fixed line for offices and residences are abundance and phones can be installed usually in a few days. Local call charge is at 3 baht per call. Outside Bangkok area, phone services are provided by TOT and another private company, TT&T Public Co., Ltd . All these providers combined networks to over 8 million lines available with about 7.1 million lines in use.

International call services in Thailand are also at an international level. Direct connections to almost every country are provided by the Communication Authority of Thailand (CAT) . Since the beginning of the year 2004, there was significant decrease in international rates to many countries around the world.

Mobile phones services are also plentiful. There are 3 service providers utilizing GSM technology: Advance Info Service (AIS) , Total Access Communication (DTAC) , and TA Orange . Further more, there is one CDMA provider, Hutch, and one Digital PCS provider, Thai Mobile . Therefore, mobile phones in Thailand are easily available at competitive price and wide range of options. Most of the providers have both prepaid and subscription option as choices for customers. Mobile phone subscribers has been growing in number quite rapidly from less than 2 million in 1997 to about 15 million in January 2004.

As for internet connection service, there are 18 commercial ISPs, and 5 non-commercial providers providing services to about 4 million personal and corporate account nationwide. Connections available in the country are range from 56K dial-up to ISDN to broadband. Both prepaid and subscription service is available. About 10,000 domains are registered under ?th?

Radio Broadcasting station in Thailand are summed up to the number of 334 FM, 204 AM, and 6 shortwave stations. There are 7 free television broadcasting network, 5 of them are state own, and 1 cable TV broadcaster (broadcast through both satellite and cable) providing service throughout the country.

Tourism

Tourism Authority of ThailandAs the country's largest earner of foreign exchange, tourism is given every encouragement by the Royal Thai Government, including full support to the Tourism Authority of Thailand (TAT) in order to carry out its mission and objectives

Economic Program

           Since the onset of the financial crisis in 1997, Thailand has undergone a remarkable economic transformation. One of the instrumental policies that propelled a swift economic recovery for Thailand is the Dual Track Policy of Dr. Thaksin Shinawatra, the Prime Minister of Thailand which focuses on the duality of the exports and domestic sectors to bring economic growth with stability, through the actively supporting role of the public sector in a global context but not necessarily dependent on the traditional economic powers of the world.
           Thailand's economic growth trend has improved from -10.2 percent in 1998 to 6.3 percent in 2003. In addition exports, private consumption and private investment have all displayed encouraging signs. Despite global uncertainties such as U.S.-Iraq war, terrorism, and SARS, Thailand has been able to withstand competently the knock-on effects from those events owing much to the robust economic fundamentals embedded within the root of the Thai economy.

FOREIGN TRADE AND BALANCE OF PAYMENT

         Export value rose substantially in 2003, in line with the growth of trading partners’economies as well as the recovery of the world electronics industry and agricultural prices. Import value grew in tandem with domestic
demand and the need for imported raw materials for the production of exports. Overall, the trade account registered a higher surplus compared to the previous year, but the services, income and transfers account recorded a smaller surplus because the outbreak of SARS adversely affected tourism revenues. Nonetheless, a large trade surplus led to a bigger current account surplus than in 2002. Meanwhile, net capital movements
registered a much larger deficit due to debt repayment by the BOT, the government and state enterprises coupled with an accumulation of foreign assets by commercial banks. As a result, the balance of payments recorded only a slight surplus this year compared to a surplus in excess of US$4 billion in 2002.

--> Exports
          Export value totalled US$78.4 billion, rising by 18.6 percent year-on-year as export volume expanded by 10.0 percent while export prices surged by 7.9 percent. A key factor behind this robust growth of Thai exports is the expansion of major trading partners?economies, particularly the ASEAN countries and China. As a result, Thai exports to the ASEAN countries and China together grew by 30 percent and accounted for 27.7 percent of total exports in 2003. At the same time, manufactured exports benefited from the recovery of the world electronics and vehicle markets, while demand for agricultural products also rose, contributing to both higher agricultural export volume and prices.

--> ImportsImport-Export Bank
In 2003, import value amounted to US$74.2 billion, up by 17.1 percent from the previous year due to a 9.3 percent surge in volume in line with recovering domestic demand and greater need for raw materials to produce export products, while import prices rose by 7.2 percent.

--> Trade, Services, and Current Account Balances
            Although imports grew briskly in 2003, the more rapid expansion of exports led to a higher trade surplus of US$4.2 billion this year compared to US$2.7 billion in 2002. However, the services, income and transfers account registered a narrower surplus of US$3.8 billion, compared to US$4.3 billion in 2002, due to the outbreak of SARS which led to a 7.8 percent year-on-year drop in the number of foreign tourists and thus a significant decline in tourism revenues. Furthermore, investment income receipts, especially of the public sector, fell in line with declining rates of return. On the contrary, service payments rose as outbound tourism expenditures increased by 5.8 percent despite a fall in the number of outbound Thai tourists of 4.4 percent. In addition, investment income payments rose from the previous year due to higher interest payments as well as higher profit and dividend remittances by the private sector, which more than offset the decline in interest payments by the public sector due to the early payment of the IMF loan package.
            Nevertheless, as the increase in the trade surplus was of greater magnitude than the reduction in the services surplus, the current account surplus widened from US$7.0 billion in 2002 to US$8.0 billion this year.
--> Net Capital Movements
           Net capital movements were in deficit by US$8.6 billion this year, widening from a deficit of US$4.2 billion in 2002 due mainly to the debt repayment by the public sector as well as the accumulation of foreign assets by commercial banks. The details of net capital movements in 2003 are as follows.
           Capital flows of the private sector recorded a deficit of US$8.8 billion, which was larger than in the previous year. Of this, the banking sector switched from registering a surplus of US$1.8 billion in 2002 to posing a deficit of US$2.4 billion this year with an accumulation of commercial banks?/STRONG> foreign assets by US$1.6 billion as opposed to a reduction of foreign assets by US$3.6 billion in the previous year. This accumulation of foreign assets owed mainly to the commercial banks?swap transactions with the BOT. Meanwhile, debt repayments by Bangkok International Banking Facilities (BIBFs) were close to the previous
year’s level. As for the non-bank private sector, a large deficit of US$6.4 billion was registered; nevertheless, this was smaller than a deficit of US$7.5 billion in 2002. Foreign direct investment, particularly equity investment, recovered from 2002 because foreign investors increased their direct investments in the metal and automobile industries, whereas in the previous year foreign companies underwent financial restructuring by converting equity into debt which resulted in a large outflow of equity capital. Portfolio investment switched from a deficit of US$1.1 billion in the previous year to a slight surplus this year with inflows of foreign investment in equity securities and a smaller amount of debt security redemption relative to the previous year. At the same time, other loan repayments (between unaffiliated private entities) fell from US$2.2 billion in 2002 to US$1.5 billion this year, largely in the form of net debt repayment and early payment by the chemical, machinery and transport equipment, and petroleum-product trading industries.

          Capital flows of the public sector (including the BOT) recorded a surplus of US$0.2 billion this year. The BOT registered a net surplus of US$2.6 billion despite the early payment of the IMF loan package which amounted to US$4.9 billion. The public sector (excluding the BOT) registered a deficit of US$2.4 billion, due largely to the repayment of long-term loans under the debt refinancing and prepayment plan of the government and state enterprises. Loans that were refinanced were mostly for public projects from Japan Bank for International Cooperation (JBIC).

--> Balance of Payments
            Although the current account registered a large surplus, a much wider deficit in the net capital movements compared to the previous year resulted in a balance of payments surplus of only US$143 million in 2003, significantly smaller than that of US$4.2 billion in 2002. Nonetheless, as a result of the surplus in the balance of payments, international reserves at end-2003 rose to US$42.1 billion, equivalent to 6.8 months of imports, while the outstanding net forward obligations of the BOT stood at US$5.2 billion.

CURRENCY AND FINANCIAL SYSTEM

The main institutions with responsibility for policymaking and supervision of the financial system are the Ministry of Finance and the Bank of Thailand (BOT, the central bank). The BOT also supervises banks, finance firms and housing loan officials, and plays a key role in instituting market reforms.

--> Stock Market
The Stock Exchange of Thailand (SET) under the Securities Exchange of Thailand Act, BE 2517 (1974), or the SET Act, enacted on May 20, 1974. In 2003, the Thai stock market index ranged from 350.98 to 772.15. These figures undoubtedly displayed signs of marked improvement from the beginning part of 2003. Market value has continued to increase to 4,789,857.03 Million baht at the end of 2003.

--> Bond Market
Thai BDC , the applicant must be financial institutions holding debt securities trading license granted by the Securities and Exchange Commission (SEC) . Currently (as of January 15, 2003) Thai BDC has 46 members which represent nearly 100 % of financial institutions that have debt trading license (Dealers). Trading is conducted on an over-the-counter basis. Thai BDC registers all government debt securities automatically. For corporate bonds, dealer-members together with an issuer must propose for the registration. Although listing is not compulsory, in practice most bonds are registered with Thai BDC except for the bonds issued without purpose to trade such as bonds issued for debtor.

-->Money Market: Currency
Until the baht went into freefall in July 1997, the Thai currency was regarded as a strong and stable currency. The baht has been strengthening against the US dollar since the beginning of 2002. A peak of less than 40 THB/USD was reached in July 2002. Strong portfolio inflows, speculative interest rate arbitrage trading and rising confidence in the domestic economy also contributed to the strengthening baht. The BOT, which is targeting exchange-rate stability and the level of foreign reserve, has expressed concern about the loss of export competitiveness signaled by a stronger baht, and there has been some buying of US dollars to prevent further baht appreciation.

 



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