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.
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.
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.
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.
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.
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.
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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