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close this bookEmerging World Cities in Pacific Asia (UNU, 1996, 528 pages)
close this folderPart 2. Changing Asia-Pacific world cities
close this folderThe changing urban system in a fast-growing city and economy: The case of Bangkok and Thailand
View the document(introductory text...)
View the documentIntroduction
View the documentGrowth and transformation of the Thai economy
View the documentUrban population, settlement patterns, and employment distribution
View the documentThe international dimension of the changing urban system
View the documentThe internal dimensions of the changing urban system
View the documentThe urbanization of bangkok: its prominence, problems, and prospects
View the documentConclusions: towards a new national urban development policy for Thailand
View the documentAcknowledgements
View the documentNotes
View the documentReferences

Growth and transformation of the Thai economy

The modern era of the Thai economy began with the launching of its first National Economic Development Plan in 1961. Prior to that, the economy was expanding at a rate of 2-3 per cent a year, with rice being the most important crop in domestic production and export. A few other crops and other primary products joined rice as major foreign exchange earners for Thailand, namely, rubber, maize, kenaf, cassava, teak, and tin. From the beginning of the first Plan, the government decided to play an active but different role in the systematic process of economic development compared with its role in the 1950s. It did so by concentrating on the provision of the necessary infrastructure for the economy, and allowing the private sector to lead the economy through private investment and transactions.

The Thai economy has been growing well since the launching of this first Plan. The growth rate of GDP in the first 10 years between 1960 and 1970 averaged about 7.9 per cent per annum. Across sectors, industrial activities (which included manufacturing) grew the fastest, at 10.9 per cent per annum. Agricultural growth was lower at 5.5 per cent, but this was still higher than its historical trend. The service sector consequently benefited from the growth in both agricultural and industrial sectors.

During the second decade of systematic development, the overall economic expansion became slower. The GDP growth rate during 1970-1980 averaged about 6.9 per cent per annum. Still, this was a satisfactory rate of growth, with all sectors performing well across the economy. The early 1980s were of course the period of world recession, which also affected the GDP growth of Thailand. In 1985, GDP grew at 3.5 per cent over the previous year. Although this was one of the lowest growth rates ever experienced in Thailand, it is still considered to be quite satisfactory during a time when many other successful economies were experiencing zero or negative growth rates. In 1987, however, there was a dramatic economic upturn, and the trend continued in 1988 when a growth rate of 13.2 per cent was achieved. This has been the highest growth rate ever experienced in modern Thai economic history.

The economic transformation between agriculture and industry had taken place even before the first Plan, but the process was heightened when the economy entered the modern era in 1961. The share of agriculture in total GDP in 1960 was estimated at about 39.8 per cent. This share was progressively reduced to 28.3 per cent in 1970, 25.4 per cent in 1980, and finally to about 15.0 per cent in 1989. Over the same period, the share of industry increased from 18.2 per cent in 1960 to about 37.5 per cent in 1989, with manufacturing being the most important component in industrial development. Based on this simple index of relative productive contribution, the share of the manufacturing subsector in GDP surpassed that of the agriculture sector around 1984. For some, this is regarded as an important turning point in Thailand's economic development on its road to becoming a full-fledged NIC.

It should be noted that, although the share of the industrial sector in GDP continued to increase, this growth in production and income was not matched by a growth in industrial employment. In other words, the economic transformation from agriculture to industry occurred only in terms of value-added, but not much in terms of employment. As will be discussed in detail later, despite almost three decades of active development, an overwhelming proportion of the population were still engaged in agriculture. For example, the census data showed that, in 1960, 82.4 per cent of the population were found in the agricultural sector, whereas the corresponding proportion in the manufacturing sector was only 3.4 per cent in the same year. In 1980, the agricultural population was still very high at 72.5 per cent. The latest labour force survey for 1988 put the proportion of the agricultural population at 66.4 per cent and the industrial population at 18.8 per cent. With the share of agriculture in 1988 GDP standing at 16.4 per cent and industry at 34.0 per cent, respectively, it is not difficult to see the "imbalance" in the economic development of Thailand.