


Full Report: Thailand


1910-1925: The ancient kingdom known to foreigners as Siam remains virtually the only uncolonized land in the region due to skillful diplomacy, modernization, and Britain and France's need for a buffer. Territory and some sovereignty is lost, although King Rama VI as absolute monarch (1910-1925) negotiates greater trading and political freedom from the Western powers competing over the kingdom.

1926-1931: King Rama VII (1925-1935) succeeds his older brother. His reign is beset by financial problems, and he is more easily influenced by competing interests of the princes and the increasingly powerful military. The king explores the idea of a constitution, but no action is taken. Dramatic expansion of the education system continues.

1932-1945: Young army officers and civilians replace the absolute monarchy with a constitutional one. Power shifts to bureaucratic and military elites, beginning seven decades of mostly military rule and frequent coups. Recognizing Japan's military power and seeing a chance to regain lost territory, the country, now called Thailand, joins with Japan in 1942 despite long ties to the U.S. and Britain.

1946-1956: The current king, Bhumibol Adulyadej, takes the throne after the mysterious and violent death of King Rama VIII. Power remains chiefly in the hands of competing military strongmen. The king sometimes backs authoritarian leaders and other times democratization, generally stepping in as a stabilizing force in times of coup or insurgency. Thailand joins the UN in 1946 and the World Bank in 1949.

1957-1967: Army chief Sarit Thanarat takes power in a coup. He suppresses opposition but implements sound economic policies. Thailand tries to industrialize its agrarian economy through import-substitution policies after 1960. Foreign aid and investment is welcomed. After Sarit's death his deputy Thanom Kittikachorn maintains goals of stability, development, and anticommunism while allowing some democratization.

1968-1973: Thanom wins elections under a long-promised new constitution and then carries out a "self-coup" to replace parliamentary democracy with authoritarian rule. After unprecedented demonstrations leave 75 students dead at the hands of the army, the leaders are forced into an exile negotiated by the king.

1974-1978: Pressure for change sparks a period of alternating democratization and authoritarianism. After a 1976 coup returns the army to power, some opposition figures join Communist insurgents in the forests. Import substitution is replaced with policies to boost exports, setting the stage for long-term growth. But exports are slow to take off, and the U.S. army phase-out and the oil shocks end a boom period.

1979-1990: Elections are held in 1979, but after an economic downturn, the prime minister resigns. The National Assembly elects an economically savvy army chief, who encourages democratization and survives two coups. This continuity in policies and stability allows the return to faster growth, and Thailand emerges as a modern diversified economy.

1991-1996: Generals overthrow the elected government, ending a dozen years of relative democracy. But after another round of mass protests ousts the military government, there is some democratic progress under civilian governments. In these boom years, however, economic reform other than limited privatization is slow. The stage is set for the impending crisis.

1997-2000: Years of soaring debt and trade deficits, exacerbated by a massive outflow of funds by speculators and investors, prompts a crash in the baht. Economic crisis ensues. A new prime minister implements reforms, a democratic constitution is drafted, and new agencies begin to monitor corruption and election fraud. After a 10 percent contraction in 1998, growth slowly returns despite lingering problems.

2001-2003: Tycoon Thaksin Shinawatra rides to power in elections marked by better oversight but unprecedented vote-buying. The global slowdown threatens to return Thailand to recession; the government responds by boosting spending and lending. The recipe works: Growth exceeds expectations in 2002. But some impacts of the crisis, such as increased poverty and shuttered plants, will take longer to reverse.

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1957-1962: Army chief Sarit Thanarat suspends the constitution, dissolves parliament, and bans parties, using the motto "Nation-Religion-King." Sarit calls for a new constitution but sits as a powerful interim prime minister for years, laying the basis for development through economic policies that expand education, investment, and infrastructure. U.S. troops arrive in 1962 as war in Vietnam builds.

1963-1967: After Sarit's death, his defense minister, Thanom Kittikachorn, becomes prime minister and continues his policy of political stability, economic development, and anticommunism while allowing some democratization. Insurgencies by Communists and ethnic groups provide a genuine threat, as well as a convenient label for opposition of any kind.

1968-1970: The constitution is at last completed in 1968, and the first elections return Thanom to power, beginning a short experiment in parliamentary democracy.

1971-1973: Thanom repeals the constitution, ending parliamentary democracy and wielding power through a National Executive Council and a largely appointed assembly. After bloody protests, the king negotiates the coup leaders' exile as new pressures from a more educated and prosperous population begin a period of alternating democratization and authoritarianism.

1974-1975: The king appoints legal scholar Sanya Thammasak prime minister. A 1974 constitution provides for an elected House of Representatives. With many new parties, elections do not produce a clear majority, though center and right parties dominate. A series of coalitions fail to achieve stability or reform. Right-wing power increases, and anticommunist laws are used against labor and student organizers.

1976-1979: Paramilitaries attack student protesters, the army again seizes power, and many students flee to the forests to join communist rebels. An army-backed, anticommunist ex-judge is soon replaced as prime minister by Gen. Kriangsak Chamanand. Kriangsak promises elections, while a new constitution creates an elected House and an appointed Senate.

1980-1987: The effects of the oil shocks increase opposition to the ruling moderate right, and Kriangsak resigns. The National Assembly elects the economically savvy Gen. Prem Tinsulanon, who encourages democratization and with the king's help survives two coups. Continuity in policies and stability allows faster growth, while improved ties with China stanch Chinese resource flow to communist insurgents.

1988-1990: National elections bring to power Gen. Chatichai Choonhavan, a retired major general, businessman, and head of the Thai Nation Party.

1991-1994: Generals overthrow the elected government and name a new prime minister, ending a dozen years of relative freedom. After another round of mass protests, with many students killed, the military government and its undemocratic constitution are revoked. Democratic progress under an interim government is followed by a coalition under Chuan Leekpai running on a pro-democracy platform.

1995-1996: The government falls in a scandal tied to manipulation of forest lands, and a no-confidence vote in 1996 ousts another prime minister, Banharn Silpa-archa, requiring selection of the sixth prime minister in as many years. While this instability raises concerns, no-confidence votes and a free press are among the few checks on power in the absence of an independent judiciary.

1997-2000: As a crisis sets in, the prime minister resigns, and Chuan Leekpai returns to guide recovery. The most democratic constitution yet mandates more public participation, decentralization, and fairer elections. The first-ever Senate elections take place in 2000, and 78 candidates are disqualified for fraud, another first. But reform comes slowly, and parties still rely on money politics to win votes.

2001-2003: In January 2001 telecom tycoon Thaksin Shinawatra's Thai Rak Thai (TRT; Thais Love Thais) Party wins lower house elections with a genuine platform of growth and rural development. Reforms to increase political stability seem to work as TRT wins a large bloc of seats and then absorbs smaller parties to gain a rare majority. TRT's dominance encourages stability, but not necessarily political reform.

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1960-1971: A National Economic and Social Development Board announces the first Five-Year Plan, which pushes industrialization though import substitution beginning in 1960. Army officers head many of the 104 state firms at first, but civilians gain more authority, and the private sector is increasingly emphasized. Foreign investment is welcomed, and U.S. army expenditures help fuel growth.

1972-1979: The 1972 Industrial Promotion Act marks a shift from import substitution to a more diversified, export-led economy. Drawing on cheap labor and natural resources, Thailand diversifies into chemicals, textiles, electronics, iron and steel, and minerals. An Asian model between liberal and central planning maintains a state role in picking winners and intervening in trade, credit, and investment.

1980-1989: Recession follows a second oil shock, but by mid-decade export-led industrialization takes off, helped by devaluations and measures that cut export taxes, while providing credit and foreign investment incentives to exporters. The private sector gains clout and freedom, no longer relying on patrons in the army or bureaucracy. At the same time, economic policy becomes more influenced by politics.

1990-1996: The economy grows quickly, driven by tourism and foreign investment. Demand for efficiency and decline of the command economy model leads the state to reduce its role through privatization. By 1992, tourism accounts for 10 percent of GDP, or US$5 billion, and cars, electronics, and petrochemicals also expand. Despite discussion of liberalization and other reforms, little is done in the boom years.

1997-1998: After years of soaring private debt, a real estate bubble, trade deficits, and falling foreign reserves, sudden outflows cause the baht's crash. Bad loans, 8,000 bankruptcies, and a bank run spur a financial-sector collapse. Poverty surges as GDP falls 10 percent in 1998. As the crisis spreads in an Asian contagion, a $17.2 billion international bailout tries to stabilize the baht and force reforms.

1999-2001: Recovery is slow in part because of the lingering effects of bad loans and remaining structural weaknesses. Under the steady hand of Chuan, Thailand appears to recover from the worst of the crisis as exports rise due to the devalued baht. But the global slowdown causes the recovery to stall. Half of industry remains idle in an economy smaller than it was in 1996.

2002-2003: Thailand stages a dramatic recovery: Growth for 2002 is estimated to exceed 4 percent, while exports grow still faster. Prime Minister Thaksin's "Thaksinomics," based on boosting domestic demand, have stimulated consumption and sparked the economy. Thailand is on pace to repay IMF loans early. But the crisis has increased poverty levels, and populist reforms of social services appear ineffective.

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1960-1969: Most National Economic Development Plans include strategies to increase equity and social services, create employment in rural areas, and increase access to education. The poor are still mostly made up of rural agricultural workers.

1970-1979: Large state firms are the focus of unionization efforts. The post-1973 parliamentary period stands out for labor's influence and progress. New laws create a minimum wage law and allow true unions to form, armed with the right to bargain collectively. The army's return to power in 1976 ends the labor heyday, and many labor leaders, like student and peasant activists, are killed or forced underground.

1980-1987: With industrial take-off, demand for manufacturing workers now exceeds agricultural workers, and a wage gap develops. Poverty decreases over time, but inequities widen. Many laborers work in the informal sector with little or no social protection.

1988-1996: Poverty levels fall from 33 to 11 percent. Though partly co-opted, unions get a Social Security Act passed in 1990. The 1991 coup dissolves unions in state firms, and subsequent civilian governments do not relax restrictions. Now the reasons are more economic than political, as foreign investment is at a premium. Below-minimum wages and job hazards are common, as a 1993 toy factory fire kills 189.

1997-1998: An economic crisis turns social as millions are laid off, many returning to rural areas. Poverty rises to 13 percent, an additional 1.1 million people. Between 1996 and 1999, real income falls almost 20 percent for the less educated. Help from neighbors and relatives helps cushion the worst effects, while public work schemes target the poor. A new law restricts child labor, but the problem persists.

1999-2003: The World Bank notes that "the poverty problem has come back." The poorest fifth of Thais accounts for 4 percent of national income while the richest fifth enjoys nearly 60 percent. Compulsory schooling rises from six to nine years, with plans for 12 years of free education by 2004. Thaksin's successful platform includes a million-baht development fund per village and universal health care.

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1960-1979: Increasing population and commercial logging accelerates deforestation. The new military government responds by mandating that 50 percent of all land be public forest land. But lax enforcement means illegal logging continues, and forest coverage falls quickly.

1980-1989: Industrialization increases natural resource use and environmental pressures. After massive flooding in 1988, the government bans logging and intensifies reforestation. The National Forestry Policy sets the forest minimum at 40 percent and calls for resettlement and commercial reforestry, especially in the North, where 4.5 million people live in forest areas. Protests force an end to evictions.

1990-1996: Growing energy demand leads to offshore oil exploration and new plant construction. New laws again mandate a minimum forest coverage, now down to 23 percent. The natural fisheries, long an important export, are depleted, but fish and shrimp farms are up, a factor in the disappearance of half of all coastal mangroves by 1993. Tourism development also affects coral reefs and other fragile ecosystems.

1997-2000: The effects of the crisis are mixed, as a fall in production and consumption leads to less pollution. But spending by firms and state agencies on pollution control and natural resource management falls dramatically. The financial crisis also fuels encroachment and illegal logging or mining in a search for income. The 1997 constitution encourages public participation in environmental management.

2001-2003: After 30 years of development, half the forest is gone, a third of surface water is unsafe for consumption, and the fishing yield is down 90 percent. The health effects of pollution cost city residents a 10th of their income, and another 10th is spent on drinking water. In December 2001 Thailand receives international funding for a plan to phase out ozone-harming chlorofluorocarbons (CFCs).

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Rule of Law

1960-1974: Autocratic rule suppresses rights but leaves most private enterprise to operate freely. But the persistent problem of corruption at all levels hampers growth and investment. The judiciary is under the Ministry of Justice, and there is no effective judicial review. The bureaucracy makes rules that supercede whatever constitution is in force, and new governments revoke the constitution altogether.

1975-1979: Leftist student and labor groups are frequent victims of violence by rightist paramilitaries, with police support. A corruption watchdog is set up, but it has weak investigatory powers and cannot prosecute suspects at all, so complaints go nowhere. Prime Minister Kukrit Pramoj attempts to raise corruption cases and is forced to resign by the army.

1980-1996: Economic growth expands the scale and opportunity of corruption. The practice of "money politics" entails buying of votes and positions, and politics remains a matter of dividing spoils, not making policies. Corporate governance, auditing, and antitrust measures are extremely weak. In 1995 the prime minister and his Cabinet resign in a scandal tied to manipulation of forest lands.

1997-2000: The most democratic constitution to date includes a National Counter-Corruption Commission (NCCC) and an Electoral Commission. A constitutional court at last introduces control to the bureaucracy's unchallenged authority. Politicians must now make their assets available to the NCCC, and in some cases the public, to the delight of the press. These are key reforms, but corruption is well entrenched.

2001-2003: Despite the Electoral Commission's work, roughly $460 million goes to buy votes in the January 2001 elections. New prime minister Thaksin is cleared of corruption charges by a court in August 2001 in a decision that brings short-term stability but also less confidence in the rule of law. Pledges to fight corruption do not result in any major prosecutions or charges.

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Trade Policy

1960-1971: After centuries of trade agreements, most exports are still based on farming and natural resources, with just 3 percent of exports from manufacturing in 1965. The first two economic plans seek industrialization by substituting imports, not promoting exports. The Ministry of Commerce oversees trade, supervising prices of key commodities such as rice.

1972-1979: Policies shift from import substitution to export-led growth, though these measures are only moderately effective until the 1980s. Strengths such as cheap labor and natural resources are used to diversify the economy into chemicals, textiles, electronics, iron and steel, and minerals that can be sold overseas.

1980-1989: With farm goods half of exports in 1980, industrialization is slow and trade deficits persist. Exports finally take off due to devaluations, lowered tariffs, incentives, and Export-Processing Zones. Thailand helps found the Asia Pacific Economic Cooperation to foster trade in the region. But in 1989 the U.S. cites Thailand for failure to protect intellectual property rights.

1990-1996: Rapidly expanding throughout the '70s and '80s, Thailand's trade deficit rises to $14 billion in 1995. Tourism and investment dollars, however, have helped balance its ill effects in the short term. An Intellectual Property and International Trade Court is established, partly to appease foreign critics, and Thailand helps initiate an Asian Free Trade Area.

1997-2000: After the Asian crisis sets in, the trade balance becomes positive in 1998 due to the drop in consumption and the currency devaluation. By 1999 electronic exports reach US$21.4 billion. Tariffs fall slightly, but non-tariff barriers such as complex import licenses remain.

2001-2003: The global economic slowdown of 2001 curtails the trade recovery; exports drop almost 6 percent in that year. But they stage a rapid revival in 2002, stoking the overall economic revival, and exports account for close to two-thirds of GDP.

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1960-1980: The baht is pegged to the dollar. The Central Bank therefore has less control of monetary policy, as keeping the currency stable requires buying and selling foreign exchange, which effects money supply. But the Bank is able to control inflation through interest rate regulation, credit, bonds, and capital controls. The Bangkok Stock Exchange begins operation on April 30, 1975, just as Saigon falls.

1981-1984: A series of devaluations are meant to help exports, but increasing state intervention and international imbalances weakens the financial sector. Responses include restructuring of monetary, exchange rate, and interest rate policies and fostering more competition among financial institutions.

1985-1996: The currency is kept stable within a range of values in a "managed float" until 1997. The Bank of Thailand is less politicized, but state banks lend money to connected borrowers. External debt of US$16 billion in 1990 rises to US$90.5 billion by 1997, leaving the economy exposed to the currency crash. Liberalization ends interest rate caps and relaxes capital controls, spurring foreign investment.

1997-2000: Trade deficits, debt, and a real estate bubble put pressure on the currency. Huge outflows from currency speculators and nervous investors overwhelm the Central Bank's ability to maintain the managed float. Massive foreign borrowing by firms confident of a stable baht balloon, and many firms and banks fail. The state takes over some banks for reorganization. The cap on foreign ownership is raised.

2001-2003: To stimulate the economy, Thaksin increases spending, credit, and public debt. The markets are initially skeptical, but the strong economic performance in 2002 earns Thailand improved credit ratings and allows it to reenter the international bond market. Repayments to the IMF are ahead of schedule, and the stock market is up, bucking world trends.

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