Main Industry SectorsEconomic OverviewForeign Direct Investment [FDI]FDI Government MeasuresCountry Strong PointsCountry Weak PointsForeign Trade Overview
The Thai economy is heavily based on agriculture, which contributes around 10% of the GDPand employs almost 40% of the active population Thailand is one of the leading producers and exporters of rice and also hasrubber, sugar, corn, jute, cotton and tobacco as major crops. Fishing is an important activity as Thailand is a major exporter of farmed shrimp. Agricultures contribution to the GDP has relatively declined, while the exports of goods andservices has increased. The manufacturing sector accounts for just under half of the GDP and is well diversified. The main Thai industries are electronics, steel and automotive. Thailand is an assembly hub for international car brands. Electrical components andappliances, computers, cement production, furniture and plastic products are also importantsectors. The textile sector employs around 25% of the active population but is no longer as dynamic astourism which has become the main source of foreign exchange. The tertiary sector, including tourism and financial services, contributes about half of the GDP.
Thailand is Southeast Asias second largest economy (behind Indonesia), and 4th richestnation, according to per capita GDP, after Singapore, Brunei and Malaysia.It functions as an anchor economy for the neighboring developing countries likeLaos, Burma, and Cambodia. Due to its openness to foreign trade, the country was hithard by the international financial crisis and entered into a recession in 2009 (-2.2%) forthe first time since the Asian crisis of 1997-98.Estimated at 7.5%, there was a quick and dynamic growth in 2010, driven by theresumption of international trade, household incentives and investment projects(infrastructure).
With the recovery under way, the authorities will eliminate fiscal and monetary incentivemeasures adopted in order to combat the crisis.Thailand was also involved in a stimulus program called Thailand: Investing for strength€?.This program will go on until 2012, with a budget of around 30 billion Euros, which shouldallow for the creation of about 1.5 million jobs and stimulate private consumption. Mid-term, the government is looking to strengthen infrastructure and develop the finance sector, inorder to ensure a dynamic and sustainable recovery.Significant progress has been made in terms of development: poverty has decreased sharplyduring the last decades.In spite of the crisis impact on the country, unemployment rate has remained low (1.4%).
Foreign direct investment has been an important element of Thailands economic development process. The immense foreign currency influx after Thailands financial liberalization in 1990, helped to increasethe countrys competitiveness. In the context of the recession and relatively slow recovery after the 1997 crisis, the FDIs role becameeven more crucial in helping re-capitalize failing industries, bring in new technologies, generate or savejobs, assist with policy reforms and play a role in addressing the poverty and social inequalities challenges. Thailand is an important FDI destination. In terms of investment, the country offers an attractive and modern legal framework and its economybenefits form the regional dynamism. In 2009, Thailand ranked amongst the first destinations for FDI andwas the second ASEAN (Association of the Nations of the Southeast Asia) country, after Singapore, in termsof FDI stock. Due to the US financial turmoil and the slowing of the global economy, as well as the countrys ownpolitical instability, the FDI influx dried up in 2008-2009. They should continue their recovery which began in 2010.
The Thai Broad of Investment (BOI) offered a series of incentives in six industrial sectors in2008-2009, namely eight years of tax exemptions for companies and 50% tax reduction forcompanies for 5 years, double transport, electricity and re-supply deductions as well as 25%deduction on net profits for establishment and construction costs. The 6 sectors are: - Agriculture and food; - Renewable and alternative energies; - Automobile; - Electronics, information and communication technologies (ICT); - Fashion; - High added value services (including leisure, health and tourism). The BOI will also implement measure aimed at contributing to the increase of companyliquidity. Thailand can offer import tax exemption on raw materials required for production aimed atexport.
The countrys main strong points are: - A skilled work force in a number of sectors; - A strategic location at the heart of Asia: the country is an entryway to Southeast Asia and the Upper Mekong Basin region where the emerging markets have great economic potential; - A government policy which promotes investment and promoting free-trade: According to the World Bank, Thailand is the 4th Asian country and the 20th in the worldwhere it is easy to do business; - The existence of a number of government agencies to help investors; - An investment regime in total harmony with WTO regulations: no restrictions in the manufacturing sector, no local requirements nor export conditions
Other than economic factors, structural factors like the lack of infrastructure orsufficient skilled labor, could influence the level of investments and economic growth. A World Bank report, published in 2009, stresses on a key variable for recovery: politicalstability. Political uncertainty in Thailand was seen by companies as the main drawback toinvestment. The lack of improvement in the infrastructures and the shortage of skilled workers(linked to the quality of the education) have also limited investments.
Thailand is an emerging economy, very dependent on exports, which account for more than two-thirds of the GDP. Thailand is very open to international trade (trade represented on average almost 140% of the GDPin 2007-2009) and is an active member of ASEAN. Thailand three main export partners are: the United States, Japan and China. Main exportcommodities are electric and electronic equipment, machinery, vehicles, rubber, and plastics. The main import partners are: Japan, ASEAN, China, the EU and the United States. Thailand mainly imports electric and electronic equipment, mineral fuels and oil, machinery, ironand steel, and plastics. Thailand shows a trade surplus, a trend which should continue.
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