ASEAN Economw Bulletin Vol. 24. No. I 12007), pp. 138-63 ISSN 0217-4472 prim / ISSN 1793-2831 eleclronic

DO!: 10.l355/8c24-lh

Long-term Economic Performancein Thailand

Peter Warr

Thailand's long-term economic growth has been remarkable. This progress has been reflectedin the very significant improvement in indicators of well-being, such as life expectancy, infantand maternal mortality, and literacy. Poverty incidence has declined dramatically, buteconomic inequality has increased. The performance of the education system is chronicallyweak. Environmental problems and institutional failures in resource management areongoing. Reform is needed in .several areas, including political and corporate governance,trade policy, regulation of industry and the education and health .systems. This articleattempts to clarify these issues and to suggest the most important areas for reform.

Keywords: Thailand, economic growth, poverty reduction, inequality, productivity growth.

I. Introduction: Thailand and Its Neighboursin Kong-Term Perspective

The economies of Southeast Asia are diverse.Efforts to achieve closer economic integrationamong them are desirable, but these efforts mustbe based on an understanding of the economiccircumstances of each of the economiesconcemed. The present article attempts to drawout the important features of the Thai economywhich must be taken into account in this exercise.

There is a further, and possibly deeper, reasonfor studying individual country experiences indepth. The countries of Southeast Asia haveemployed quite different development strategies.How have these strategies worked out, and whatlessons niight others draw from this experience? A

good example is the comparison between Thailandand neighbouring country Burma/Myanmar. Thetwo have similar natural resource endowments,and half a century ago these two countries weresimilarly impoverished. But the developmentstrategies employed since then and theirsubsequent economic outcomes could not be moredifferent. Tbe countries of Soutbeast Asia provideseveral natural experiments of this kind. To extracttbeir lessons, the individual country experiencesmust first be examined closely.

II, Long-Temi Economic Growth

In 1945 Tbailand was one of the world's poorestcountries. Its economy had been stagnant for at

A S E A N E c o n o m i c B u l l e t i n 138 Vol. 24, No. 1. April 2007

© 2007 ISEAS

least a century (Sompop 1989), and it had sufferedsignificant war damage. Most economic observersof the time rated its prospects poorly (Ingram1971). By the mid-1990s, half a century later,these negative a.ssessments had been reversed.Thailand was widely considered a champion ofsustained development, having achieved acombination of rapid growth, macroeconomicstability and steadily declining poverty incidence,extending over several decades. The twin currencyand banking crises of 1997-99 interrupted thisprocess, eroding some of the gains that had earlierbeen made, but subsequent recovery has partiallyrestored Thailand's long-term growth path.

This growth performance is summarized inFigure 1. showing the level of real GDP per capitain each year {vertical bars) and its growth rate

(solid line) for the period 1951 to 2006. The figureidentifies four periods of Thailand's recenteconomic history: I — pre-boom (until 1986); II— boom (1987 to 1996); III — crisis (1997 to1999); and IV — recovery (2000 to 2006). Overthe period 1968-86, the average annual growthrate of Thailand's real GNP was 6.7 per cent(almost 5 per cent per person), compared with anaverage of 2.4 per cent for low and middle-incomecountries (World Bank 1998). Then, over thedecade 1987-96 the Thai economy boomed. It wasthe fastest growing in the world. As we shall seebelow, this boom was driven primarily by veryhigh levels of investment, both domestic andforeign, in physical capital.

Even more remarkable than the rate of growthover this long period was the stability of the

FIGURE IThailand: Real GDP Per Capita and Growth of Real GDP Per Capita, 1951-2006

Level of realGDP per capita

Growth rate ofreal GDP per capita

120000

100000

60000-

60000

40000

20000

,-'

20

15

10

CO ui h

-10

•15•- n in

l reaJ QDP pc capita al 2003 prices, bahl, per year - LHS axts

•Growth tale of real GDP per capHa at 2003 prices, per corn, pet year - RHS a)(l«

SOURCE: Author's calculations, using data from National Economic and Social Development Board.

ASEAN Economic Bulletin 139 Vol, 24, No, 1, April 2007

growth. Not a single year of negative growthof real output per head of population wasexperienced over the four decades from 1958 to1996, a unique achievement among oil-importingdeveloping countries. Thailand's peribrmance wasoften described as an example others mightemulate. Its principal economic institutions,including its central bank, the Bank of Thailand,were often cited as examples of competent andstable management.

The crisis of 1997-98 shattered these assess-ments. Domestically, the economy was in disarray:output and investment were contracting; povertyincidence was rising; the exchange rate hadcollapsed, following the decision to float thecurrency in July 1997; the government had beencompelled to accept a humiliating IMF bailoutpackage; the financial system was largelybankrupt; and confidence in the country'seconomic institutions, including the Bank ofThailand, was damaged. Internationally, Thailandwas now characterized as the initiator of a"contagion effect" in Asian financial markets,undermining economic and political stability andbringing economic hardship to millions of people.

The economic damage done by the crisis of1997-99, and the hardship that resulted were bothsubstantial. The crisis eroded some of the gainsfrom the economic growth that had been achievedduring the long period of economic expansion, butit did not erase them. At the low point ofthe crisisin 1998 the level of GDP per capita was almost 14

per cent lower than it had been only two yearsearlier, in 1996. Nevertheless, because of thesustained growth that had preceded the crisis, thisreduced level of 1998 was still higher than it hadbeen only five years earlier, in 1993, and wasseven times its level in 1951.

Since the crisis. Thailand's economic recoveryhas been moderate. The rate of growth of realGDP, at 5 per cent, has been somewhat below itslong-term trend rate of well over 6 per cent (.seeTahle I), and it was not until 2003 that the level ofreal GDP per capita had recovered to its pre-crisislevel of 1996. Foreign direct investment (FDI) hasdeclined dramatically since 1998 and privatedomestic investment has remained sluggish. In2006 the level of real economic output per personwas 19 percent above its 1996 pre-crisis level andalmost 10 times its level 55 years earlier, in 1951.The average annual rate of growth of real GDP perperson over this entire period of five and a halfdecades was 4.2 per cent.

Figures 2 and 3 place the last two decades in acomparative East Asian perspective. Data on realGDP are presented for eight East Asianeconomies, including Thailand. The point made bythese comparisons is the very large differencebetween the periods before and after 1996. Thepre-crisis period of 1986 to 1996 is covered inFigure 2. with each country's 1986 level of realGDP indexed to 100. The cri.sis and post-crisisperiods of 1996 to 2006 are shown in Figure 3,with 1996 real GDP this time indexed to 100.

TABLE 1Thailand; Growth of GDP and Its Sectoral Components, 1968-2006

(Per cent per annum)

Total GDPAgricultureIndustryServices

Pre-hoom1968-86

6.74.58.56.8

Boom1987-96

9.52.6

12.89

Crisis1997-99

-2.5O.I

-1.7-3.6

Recovers2000-2006

5,02,76,24.3

Whole period1968-2006

6.43.38.46.1

SOURCES: Bank of Thailand, data for 1968 to 1986; National Economic and SocialDevelopment Board, data from 1987.

ASEAN E c o n o m i c Bu l l e t in 140 Vol. 24, No, 1, Apr i l 2007

FIGURE 2Real GDP iti East Asia, 1986-96

Real GDP(1986=100)

260 -|

240 -

220 -

200 -

180 -

160 -

140 -

120 -

100

CDCO CO

CO en

- Hong Kong

- Philippines

Indonesia

Singapore

Korea

Taiwan

Malaysia

Thailand

SOURCE: Asian Development Bank, Development Indicators, various issues.

Figure 2 shows that Thailand's boom was thelargest ofthe countries shown, but only marginallyso. Singapore. Malaysia. Indonesia. Korea, andTaiwan were not far behind.

Figure 3 shows that in 1998 serious contractionsoccurred in Korea, Malaysia, and Indonesia, butthat, relative to 1996. Thailand's initial contractionwas the most severe. Along with Indonesia, itscontraction ha.s also been the most long-lasting.Thailand'.s contraction was initially larger thanIndonesia's, but Indonesia did not experience arecovery as large as Thailand's in 1999. It iscommonly said that Indonesia's economic crisiswas more severe than Thailand's, but these datareveal a somewhat different story. Using tbe pre-crisis year of 1996 as a base, their time paths ofreal GDP, relative to that 1996 ba.se. wereremarkably similar. The main difference is thatsince 2002 Indonesia's recovery has beenmarginally slower.

m . Sources of Aggregate Growth

Where did Thailand's economic growth comefrom? Explaining long-term growth involves dis-tinguishing between the growth of the factorsof production employed and the growth in theirproductivity. We now discuss a growth accountingexercise for Thailand, covering the years 1980 to2002. The present section presents this analysis atan aggregate, economy-wide level, and thefollowing section disaggregates the analysis bymajor sector.

The assumption being made in thi.s kind ofanalysis is that during the period covered outputwas primarily supply-constrained, meaning thataggregate demand was not the binding con.strainton output. This assumption seems reasonable forthe period prior to the Asian crisis of 1997-99, butthe crisis and recovery periods from 1997 onwardswere characterized by a deficiency of aggregate

ASEAN E c o n o m i c Bu l l e t i n 141 Vol. 24, No. 1. Apr i l 2007

FIGURE 3Real GDP in East Asia, 1996-2005

Real GDP(1996=100)

150 -|

140 -

130 -

120 -

110 -

100 -

90 -

80

en o)

Hong Kong

Philippines

CO

Indonesia

Singapore

CM CM

1— Korea

•— Taiwan

COooOJ

S 5o ccy o

Malaysia

Thailand

SOURCE: Asian Development Bank, Development Indicators, various issues.

demand. A growth accounting framework, whichfocuses on the determinants of aggregate supply, istherefore of limited relevance for such periods.The data relating to thai period are included heremainly for completeness.

Data on labour inputs are adjusted for changesin the quality of the workforce hy disaggregatingthe workforce by the educational characteristics ofworkers and weighting these components of theworkforce using time series wage data for theeducational categories concerned. Data on landinputs are similarly adjusted for the changingquality of land inputs by disaggregating byirrigated and non-irrigated land and thenreaggregating these components using data onland prices. In Table 2, the resulting estimates offactor growth rates are contained in the firstcolumn. The second column provides averagefactor cost shares over time, compiled from factorprice data. These factor cost shares impose the

assumption of constant returns to scale. The factorcost shares used in the calculations vary over time.The summary data shown in the table are theaverages of these shares.

The third column on factor contributions togrowth weighs the growth rates of factors hy theircost shares, producing an estimate of the degree towhich the growth of output (6,01 per cent) isattributable to growth of each component. Thesedata are then used to calculate total factorproductivity growth (TFP) as a residual. Thefinal column shows the estimated percentagecontribution of eacb component to the overallgrowth rate.

The outstanding point is the rapid growth of thephysical capital stock. The capital stock grewmore rapidly than output in both the pre-boom andboom periods. This growth of the capital stockaccounted for 71 per cent of the growth of outputover the period 1980-2002. Growth ofthe size of

ASEAN Economic Bulletin 142 Vol. 24, No. I, Apri l 2007

TABLE 2Thailand: Aggregate Growth Accounting, 1980 to 2002

OutputAll factors

Raw labourHuman capitalPhysical capitalAgricultural land

Aggregate TFP growth

Annualgrowth rate(% per year)

6.015.412.192,499,051.12n.a.

Averagecost share

(%)

n.a.10040,2l U46,9

1.8n.a.

Contributionto total growth(% per year)

n.a.5.410.880.284.240.020.60

Per centcontribution to

total growth

10090.014.74.6

70.63.3

10.0

NOTE: n.a. means not applicable.SOURCE: Author's calculations, using data from National Economic and Social Development Board. Further detailon these calculations is provided in the text and in Warr (2005fl).

the labour force contributed about 15 per cent ofthe growth of output, but improvements in thequality of the labour force made only a modestcontribution, explaining less than 5 per cent ofoverall growth. Indeed, the performance ofThailand's educational sector has been amongthe weakest in East Asia. Secondary schoolparticipation rates were low and did not improvegreatly during the pre-boom and boom periods(Sirilaksana 1993). Similarly, since the i960s theexpansion of the cultivated land area has beensmall. Growth of the stock of land was not thesource either. TFP growth was only moderatelyimportant, accounting for 10 per cent of outputgrowth.

It is perhaps unsurprising that the explanationfor Thailand's impressive growth lies primarilywith growth of the physical capital stock. Bothdomestic and foreign investment grew rapidly, butthe growth rate of foreign investment was larger,from about 1987 (WarT 1993). Foreign investmentplays an important role in introducing newtechnology and in development of export markets.Nevertheless, the quantitative importance offoreign investment in Thailand's capital stockaccumulation is easily exaggerated. Figure 4

makes this point by decomposing Thailand's totalannual level of investment into three components:domestic private, public, and FDI. It does this foreach of four years, 1975, 1985, 1995, and 2005.Of these three components, domestic privateinvestment is by far the largest and FDI by farthe smallest. In 2005 their percentagecontributions to the overall level of investmentwere: private domestic — 69.5, public — 26.8,and FDI — 3.7. Private investment by Thaisthemselves was the dominant contributor tooverall capital accumulation.

How was the investment financed? Did thefunds come from domestic savings or fromborrowing from abroad? Table 3 presents anaccounting of this issue based on the identitiesthat: (i) total investment = household savings +government savings + foreign savings; and (ii)foreign savings = long term capital inflow + shortterm capital inflow - change in internationalreserves of the central bank. By far the mostimportant source of finance was the privatesavings of Thais themselves.

Contrary to the common perception thatThailand's boom (1987-96) was financed largelyby foreign capital, this source, consisting of

A S E A N E c o n o m i c B u l l e t i n 14.1 Vol, 24, No, I, April 2007

FIGURE 4Thailand: Composition of Net Annual Investment, 1975-2005

50.00

40.00

I3 30.00

e

• FDJ • Domestic Prlvata BPubllci r ^

^ ^

1975 Iflffi

SOURCE: Author's calculations using data from National Economic and Social Development Board.

private FDI plus foreign govemment investment(overseas development assistance, or ODA),accounted for an average of only 5 per cent of totalinvestment. During the pre-boom period, FDIaccounted for about 61 per cent of this inflow oflong-tenn foreign capital, and ODA accounted forthe other 39 per cent. During the boom period, theseproportions were 73 and 27 per cent, respectively.Short-term capiml inflows, consisting of borrowingfrom abroad plus portfolio inflows plus domesticbank accounts held by foreigners were a moreimportant source, accounting for 23 per cent of totalinvestment. During the boom, govemment dis-saving (budget deficits) reduced the funds availablefor investment by 11 per cent, and increases in theintemational reserves of the Bank of Thailandreduced it by a further 9 per cent.

It is instructive to compare the boom period(1987-96) with the pre-boom period (1973-86).

The major difference between these periods was inthe proportion of tola! investment that wasfinanced by short-temi capital inflows. Thisproportion increased from 2 per cent before theboom to 23 per cent during the boom. The inflowfinanced investment, but it also sowed the seeds ofthe crisis of 1997-99. The accumulated stock ofmobile foreign-owned capital grew to levels farexceeding the stock of the Bank of Thailand'sforeign exchange reserves. If the owners of thesefunds chose to withdraw them from Thailand, theBank of Thailand would be unable to defend itsfixed exchange rate. Unfortunately, this Is whathappened in July 1997 (see Wanr 1999 and 2005a).

In summary, growth of the phy.sical capitalstock was the most important contributor toThailand's aggregate growth, accounting for 71per cent of all growth over the period 1980-2002(Table 2). Most of this investment was flnanced

ASEAN Economic Bulletin 144 Vol. 24, No. 1. April 2007

CN

E g.5 S

m ttJ c

p—I (U * -

H <* 'S

s£il]

2 I

^ i

I

rn odI

iI —

—; oq(N (N O

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—; —; r^ rn rn

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"—• Os r nrn Q rj

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ASEAN E c o n o m i c Bu l l e t in 145 Vol. 24, No. 1, Apr i l 2007

from Thai domestic private savings. The notionthat Thailand's accumulation of physical capitalwas financed by FDI and/or foreign aid is a myth.Total foreign capital inflows, FDI plus ODAaccounted for only about 5 per cent of totalinvestment. ODA was less than one-third of thisforeign capital inflow. That is, the quantity ofODA explains only 1.5 per cent of totalinvestment over this period, and thus under 1 percent of total growth.

Before leaving the subject of Thailand'saggregate economic performance, one furthertopic requires discussion. Why has Thailand'srecovery been so slow? As noted above, the crisis

was a contraction in aggregate demand, rather thana contraction in productive capacity. Labour andcapital were underutilized because there wasinsufficient demand for Thai output. Where didthis contraction in demand come from? Table 4addresses tbis point. The upper section of the tableshows contributions to the composition ofexpenditure on GDP in Thailand during the pre-crisis boom (1987-96), tbe crisis (1997-99) andthe post-crisis recovery period (2000-2005).During the crisis the share of investment in GDPcollapsed by 13 percentage points. Investorconfidence was severely damaged by the eventssurrounding the crisis, and during the post-crisis

TABLE 4Thailand, Indonesia and Malaysia: Contributions to Expenditure on GDP, 1987-2005

(Per cent of GDP)

Country/Period Consumption Investment Government Net exports Total

ThailandPre-crisis

(1987-96) 54.8Crisis

(1997-99) 54.9Post-crisis

(2000-2005) 56.9

38.9

25,7

24,8

9.9

10,9

11.2

-5.0

9.9

4.9

100

100

100

IndonesiaPre-crisis(1987-96)

Crisis(1997-99)

Post-crisis(2000-2005)

MalaysiaPre-crisis

(1987-96)Crisis

(1997-99)Post-crisis(2000-2005)

55.0

76.1

60.6

48.8

42.8

43.6

27.8

29.1

20.8

9.1

8.5

8.7

0.4

7.5

6.2

100

100

too

37.2

30.5

23.0

12.8

10.5

12.9

1.2

16.2

20.6

100

100

100

SOURCE: Author's calculations, using data from World Bank, World Development Indicators. Negativeentries for net exports mean thai gross imports exceed gross exports.

ASEAN Economic I lu l le l in 146 Vol. 24 , No. 1, A p r i l 2007

recovery period this share did not recoversufficiently to restore Thailand's long-term rate ofgrowth.

Why has this occurred? High interest rates arenot the answer. Figure 5 shows that althoughThailand's interest rates increased during thecrisis, they have been at historically low levelssince the year 2000. A clue is provided by Figure6. which shows the relationship between the stockexchange index for Thailand (SET) and the levelof private investment. Investment follows the SET,but with a lag. The stock exchange index may beviewed as an indicator of investor confidence.Investors have lost confidence in the capacity ofthe Thai economy to generate a satisfactory returnon their investments.

This problem is not unique to Thailand. Table 4shows similar calculations for two other crisis-aftected economies, Indonesia and Malaysia. The

pattern is very similar. Finally, Figure 7 showsannual data on the share of investment in GDP infive crisis-affected East Asian economies:Thailand, Indonesia, Malaysia, the Philippines,and Korea. Although the contraction of privateinvestment in Thailand is at least as large as anyother (Malaysia is similar), the figure shows thatthe problem of sluggish recovery of investment isshared by several East Asian economies. It wouldnot seem appropriate to look for country-specificcauses. The decline of investor confidence isregionwide.

IV. Sectoral Economic Performance andProductivity Growth

How do the major sectors of the Thai economycompare in terms of productivity growth? Table I,above, summarizes the sectoral composition of

FIGURE 5Thailand: Real and Nominal Interest Rates, 1994-2006

- Real late {Hi %) -Nominal rate (In %)

NOTE: The real rate is the nominal rate minus the annual rate of CPI inflation.SOURCE: Bank of Thailand.

ASEAN E c o n o m i c Bu l l e t i n J47 Vol. 24 , No. 1, Apr i l 2007

FIGURE 6Thailand: Private Investment and the Stock Exchange Price Index

1

1

1

1

1

,800.0-1

.600.0-

,400.0-

,200.0-

.000.0

800.0

600.0

400.0

200.0

0 0\J.\J

^^—

1 1 y ~T 1 T V

•^ G> -^ m^ r^ CO COO) Oi Oi O)

' \

/ ,f/

—I ^ 1 1 1 I T 1 1 rLo K o T- r sCO CO CO cn O)Oi O) O5 CD O)

SET Index (left axis)

'A\\

\ y

—1 [ T—1 1 T

to h-. CDCD Ol OiOi £7) Oi

Private Investment at )9a8 prtcas (rtghl axis)

1t

—•—1—T—;—-1—•1- CO ino o oo o o

1,600,000

1,400,000

1,200,000

1.000,000

800,000

600,000

400,000

200.000

0

OJ CM CVJ

NOTE: Units on the left axis are the level SET index (Stock Exchange ol Thailand). Units on the right axis are millionsof baht(1988 prices).SOURCES: National Economic and Social Development Board and Stock Exchange of Thailand.

Thailand's growth performance since 1968. Thegrowth of industry, especially export-orientedmanufacturing has far outstripped agriculture,implying that agriculture's share of GDP hasdeclined .significantly. This point is confirmed byFigure 8. which shows the rapidly changingcomposition of output in Thailand.

Observations of this kind are typical for rapidlygrowing economies. As aggregate output perperson expands, agriculture tends to contract as ashare of total output, while the share of industryexpands. But a common misinterpretation of thisphenomenon is that the agricultural sector is"stagnant" while industry is "dynamic". Themisinterpretation lies in mistaking the fact that thelevel of factor productivity in agriculture tends tobe lower than in industry (and in services) with

differences in the rate of growth of productivity.The data for Thailand indicate that although thelevel of factor productivity is indeed lower inagriculture, the growth of productivity has beenmuch more rapid there than in other sectors. Thekey point is that Thai agriculture has beenexpanding its output, albeit tnore slowly than therest of the economy, with declining shares of thenation's resources.

The evidence for this conclusion is summarizedin Table 5. This table summarizes a set ofcalculations for agriculture, industry and services,which mirror the aggregate analysis reported inTable 2 above. The data used in this analysis againcover the years 1980 to 2(K)2 and include:• employment of labour by educational category

by sector;

A S E A N E c o n o m i c B u l l e t i n 148 Vol. 24. No. 1, April 2007

FIGURE 7Investment Shares of GDP in East Asia, 1993-2005

60 n

50

40

30

20

10-

0 -

1993

———

.—•

1994

— • •

•

—

1995

^Tha i land

1996

—

\

1997

s _1998

Incionesia

- ——

1999

2000

Malaysia

2001

2002

— Philippines2003

— -

2004

^ Korea

2005

SOURCE: Author's calculations, using data from World Bank, World Development Indicators.

• physical capital used by each sector;• use of land in agriculture, adjusted by the extent

of irrigation coverage; and• cost shares for each of the above factors of

production by sector.For convenience, the first column of Table 5

repeats the findings al the aggregate level,discussed above. The sectoral findings may besummarized as follows. First, although output(value added) grew more slowly in agriculture(2.64 per cent) than in either industry (8.09 percent) or services (5.53 per cent), it was the onlymajor sector to record positive TFP growth. ThisTFP growth in agriculture contributed one-twentieth of the overall growth of GDP. Inagriculture, the growth of output of 2.64 per centper year was achieved by factor input growth of0.47 per and TFP growth of 2.17 per cent. TFP

growth therefore accounted for 82 per cent of thegrowth of value-added in agriculture.

Second, the analysis decomposes the aggregateproductivity growth component just described intoone component due to growth in productivity inindividual sectors, each weighted by its share ofGDP, and a second component due to thereallocation of resources among sectors ofdiffering TFP. This distinction was apparently firstidentified by Jorgenson (1988) in the context ofU.S. productivity growth. This analysis indicatesthat the level of factor productivity in agricultureremained significantly lower than elsewhere in theeconomy, despite its higher TFP growth over thisperiod. The movement of factors of production outof agriculture thus further contributed to economicgrowth by raising the productivity of these factors.Indeed, this reallocation effect contributed 24 per

ASEAN E c o n o m i c Bu l l e l in 149 Vol. 24, No. 1, Apr i l 2007

FIGURE 8Thailand; Sectoral Shares of GDP. 1965-2005

(In percentages)

60

5 0 -

4 0 -

3 0 -

2 0 -

1965

^

1970 1975 1980 1985

Agricultura shate ol GDP- - - Industry shajs ol GDP— — SmvlomatiareolGDP

1990 1995 2000

SOURCE; World Bank, World Development Indicators, various issues.

cent of the growth of aggregate output thatactually occurred. It was almost five times asimportant for overall growth as the growth in theproductivity of the factors that remained withinagriculture.

The results of the analysis reveal thatagriculture's contribution to economic growth inThailand included impressive rates of TFP growth.But its main contribution occurred throughreleasing resources which could be used moreproductively elsewhere, while still maintainingoutput, rather than through expansion ofagricultural output. It is seriously wrong tocharacterize Thai agriculture as "stagnant", basedmerely on the fact that output growth is slower inagriculture than in other sectors. If agriculture hadreally been stagnant economic growth would havebeen substantially lower because it would not have

been possible to raise productivity significantlywithin agriculture or to release resourcesmassively whiie still maintaining moderate growthof agricultural output.

Table 6 summarizes the results of this analysisby showing in the first column, the contributionsto overall growth of aggregate factor growth (90per cent of total growth) and aggregate measuresTFP (10 per cent). It then decomposes thisaggregate TFP growth into its sectoral componentsand the part that is due to the reallocation ofresources from low productivity sectors (mainlyagriculture) to higher productivity sectors (mainlyindustry). Although agriculture generated positiveTFP growth, in other sectors TFP growth wasnegative. Indeed, when each of these other sectors'contributions to aggregate TFP growth are added,the total is slightly negative. Of the 10 per cent of

ASEAN E c o n o m i c Bul le t in 150 Vol. 24, No. I , Apr i l 2007

TABLE 5Thailand: Total Factor Productivity Growth by Sectors. 1980-2002

Aggregate Agriculture Industry Services

Average growth rates (per cent per annum)OutputRaw labourHuman capitalPbysical capitalAgricultural land

Average cost shares (per cent)Raw labourHuman capitalPhysical capitalAgricultural land

Decomposition of output growthOutput growthFactor growthTFP growth

6.012.192.499.051.12

40.211.246.9

1.8

(per cent per annum)6.015.410.60

2.641.509.438.501.12

59.03.9

13.024.1

2.640.472.17

Decomposition of aggregate TFP growth (per cent per annum)Aggregate sectoral TFPG -0.85Reallocation effect 1.45

8.095.25

n.3513.840

30.412.057.6

0

8.099.20

-1.11

5.533.476.90

18.470

31.09.2

59.80

5.537.04

-1.51

SOURCE: Author's calculations, using data from National Economic and Social Development Board. Further detail onthese calculations is provided in Warr (2005a).

TABLE 6Thailand: Percentage Contributions to Aggregate

Growth. 1980-2002(In percentages)

Aggregate factor growthAggregate TfT* growth

Agriculture TFP growthIndustry TFP growthService.s TFP growthReallocation effect

Total

Wholeperiod

1980-2002

90.010.05.0

-7.1-12.0

24.1

too

Pre-crisisperiod

1980-96

80.319.72.9

-1.10.7

17.3100

SOURCE; Author's calculations, using data from NationalEconomic and Social Development Board. Furtherdetail on these calculations is provided in Warr {2005a).

aggregate GDP growth which can be attributed toaggregate TFP growth, all of this amount isaccounted for by the reallocation of resourcesamong sectors. Finally, the second column ofTable 6 shows that these qualitative conclusionsare not reversed if the analysis is confined only tothe resource-constrained, pre-crisis period.

V. Poverty Incidence and Inequality

Is economic growth really so important? Do thepoor actually benefit from it, or only the rich?Within Thailand, as elsewhere, there isconsiderable debate about these matters. Beforeturning to the relation.ship between povertyincidence and economic growth in Thailand, somecharacteristics of poverty in Thailand will bereviewed. Despite much dispute about measure-ment and conceptual issues, all major studies of

ASEAN E c o n o m i c Bu l l e t i n 151 Vol. 24. No. I , Apr i l 2007

TABLE 7Thailand: Poverty Incidence and Gini coefficient, 1988 to 2(X)4

(Headcount measure, per cent of total population)

198819901992199419961998200020022004

(headcount

Aggregate

44.938.232.525.017.018.821.315.511.3

Poverty incidencemeasure, per cent of population)

Rural

52.945.240.330.721.323.727.019.714.3

Urban

25.221.414.111.77.37.58,76.74.9

Incqualitv(Gini coefficient)

Aggregate

0.4820.5200.5410.5220.5180.5150.5250.5010.499

NOTE: Higher values of the Gini coefficient indicate greater inequality.SOURCE: National Economic and Social Development Board website:http://poveny.nesdb.go.th/poverty_new/dtx:/NESDB/wanchat_20()4I220041907.ppt

poverty incidence and inequality in Thailand agreeon some basic points;• Poverty is concentrated in rural areas, especially

in the northeastern and northem regions of thecountry.

• Absolute poverty has declined dramaticallyover the last four decades, but inequality hasincreased.

• The long-term decline in poverty incidence wasnot confined to the capital, Bangkok, or itsimmediate environs, or to urban areas ingeneral, but occurred in rural areas as well.Since 1988, the largest absolute decline inpoverty incidence occurred in the poorest regionof the country, the northeast.

• Large families are more likely to be poor thansmaller families.

• Farming families operating small areas of landare more likely to be poor than those operatinglarger area.s.

• Households headed by persons with low levelsof education are more likely to be poor thanothers.The following discussion draws uj>on the

official poverty estimates produced by the Thai

govemment's National Economic and SocialDevelopment Board (NESDB) which, like allother available poverty estimates, are based uponthe household incomes collected in the NationalStatistical Office's Socio-economic Survey(SES) household survey data. Despite theirimperfections, these are the only data availablecovering a long time period. These survey datahave been collected since 1962. The early datawere based on small samples, but their reliabilityhas improved steadily, and since 1988 the raw datahave been available in electronic form. Table 7summarizes the available official data for the fourdecades from 1988 to 2004.

V.I Declining Poverty Incidence. RisingInequality

Table 7 focuses on the familiar headcount measureof poverty incidence: the percentage of aparticular population whose household incomesper person fall below the poverty line. The tableconfirms that most of Thailand's poor peoplereside in rural areas. Until recently, the SES datawere classified according to residential location in

ASEAN E r o n o m i c Bu l l e t in 152 Vol. 24, No. 1. Apr i l 2007

the categories municipal areas, sanitary districts,and villages. These correspond to inner urban(historical urban boundaries), outer urban (newlyestablished urban areas), and rural areas,respectively. Poverty incidence is highest in iherural areas, followed by outer urban, and lowest inthe inner urban areas. When these data arerecalculated in terms of the share of each of theseresidential areas in the total number of poor peopleand then ihe share of the total population, as in thelast two rows of the table, respectively, a strikingpoint emerges. In 2004. rural areas accounted for93 per cent of the total number of poor people hutonly 64 per cent of the total population.

The final column of Table 7 shows (he Ginicoeificient of inequality. This index takes valuesbetween 0 and 1. with higher values indicatinggreater inequality. The index rose significantlyover the three decades for which data areavailable. Combined with the reduction inabsolute poverty which also occurred, this meansthat the real incomes of the poor increased witheconomic growth, but Ihe incomes of the richincreased even faster.

Over the eight years from 1988 to 1996,measured poverty incidence declined by anenormous 21.4 per cent of the population, anaverage rate of decline in poverty incidence of 2.7percentage points per year. That is. each year, onaverage 2.7 per cent of the population moved fromincomes helow the poverty line to incomes aboveit. Over the ensuing two years ending in 1998poverty incidence increased hy 1.5 per cent of thepopulation. Alternatively, over the eight yearsending in 1996 the ahsolute number of persons inpoverty declined by 11.1 million (from 17.9million to 6.8 million); over the following twoyears the numher increased hy I million (from 6.8to 7.9 million). Thus, according to the officialdata, measured in terms of absolute numbers ofpeople in poverty, the crisis reversed 9 per cent ofthe poverty reduction that had occurred during theeight-year period of economic boom immediatelypreceding the crisis.

From Figure 9, it is apparent that the northeastregion dominates poverty incidence in Thailand.This one region accounted for 51 per cent of

Thailand's poor people in 2004. but only 34 percent of the total population. Every other region'sshiu-e of the total number of poor is smaller thanits share of the total population. Poverty is anespecially important issue for rural people,particularly in the northeast.

More dramatic than any of these data, however,are recently released data on the relationshipbetween poverty incidence and education.According to the NESDB's data, of the totalnumber of poor people in 2002. 94.7 per cent hadreceived primary or less education. A further 2.8 percent had lower secondary education, 1.7 per centupper secondary. 0.48 per cent had vocationalqualifications, and 0.31 per cent had graduated fromuniversities. Thailand's poor are overwhelminglyuneducated, rural, and living in large families. Butthey are not necessarily landless.

V.2. Poverty Reduction and Economic Growth

What caused the long-term decline in povertyincidence? It is obvious that over the long term,sustained economic growth is a necessarycondition for large-scale poverty alleviation. Noamount of redistribution could tum a poor countryinto a rich one. Long-term improvements ineducation have undoubtedly heen important, butdespite the limitations of the underlying SES data,a reasonably clear statistical picture also emergeson the short-term relationship between povertyreductions and the rate of economic growth. Thedata are summarized in Figure 10, which plotsthe relationship between changes in povertyincidence, calculated from Table 7 above, and thereal rate of growth of GDP over the correspondingperiod.

Although the number of data points is small, theimplications seem clear. Periods of more rapideconomic growth were associated with more rapidreductions in the level of absolute povertyincidence. Moderately rapid growth from 1962 to1981 coincided with steadily declining povertyincidence. Reduced growth in Thailand caused bythe world recession in the early to mid-1980scoincided with worsening poverty incidence in theyears 1981 to 1986. Then. Thailand's economic

ASEAN Economic Bu l l e t in 153 Vol. 24, No. K Apr i l 2007

FIGURE 9Thailand: Poverty Incidence by Region, 2(X)4

2.00-

1.00-

0.00Centra! Nonh Northeast South

• number of poor -^- poverty incidence (%)

Total

SOURCK: Author's calculations, u.sing data from National Economic and Social Development Board.

boom of the late 1980s and early 1990s coincidedwith dramatically reduced poverty incidence.Finally, the contraction following the crisis of1997-98 led lo increased poverty incidence. Therecovery since the crisis has been associated withsignificant poverty reductions.

On the other hand, no such simple short-termrelationship can be found between the change ininequality over time and the rate of growth. Therate of growth does not seem to be a significantdeterminant of short-term changes in the level ofinequality. Other social factors are undoubtedlyplaying a role, but research on this issue remainsinconclusive.

VI. Non-economic Social Change:Population, Health and Education

The economic transformation that Thailand hasexperienced was achieved with environmental andother costs. Pollution of air and water sources has

been well documented, and expansion of thecultivated agricultural land area has been partly atthe expense of deforestation, with negative effectson land erosion and the siltation of rivers anddams. Economic change has coincided withma.ssive social change as well. Thai and foreigncommentators agree that nol all of ihis socialchange was necessarily heneficial. For example,the decline of village institutions and traditionalvalues are widely lamented. Narcotics trafficking,including both illegal export of drugs such asmarijuana and heroin and domestic use of drugssuch as meta-amphetamines has had a corruptinginfluence. Other social evils such as trafficking inwomen and child prostitution reportedly persist. Inaddition, rising wages in Thailand have attractedillegal migrants from neighbouring countriessuch as Myanmar, Cambodia, and Laos, withoccasional social conflict resulting. Notsurprisingly, it is difficult to assemble solidevidence on the extent of these problems.

ASEAN Economic Bulletin 154 Vot. 24. No. 1. Apri l 2007

FIGURE 10Thailand: Poverty Incidence and Economic Growth

Per cent

12.00 -|

10.00 -

8.00 -

6.00 -

4.00 -

2.00 -

0.00 -

-2.00 -

-4.00 .

-6.00 -

-8.00

s s

Annual GDP growth Annual change in poverty incidence

SOITRCE: Author's calculations using poverty data as in Table 1.4 and GDP data from National Economic and SocialDevelopment Board.

Despite these genuine problems, evidence canbe advanced for substantial social progressaccompanying Thailand's economic growth. Thediscussion will focus on five components of socialchange: population growth; infant and maternalmortality; literacy; access to clean drinking water;and HIV/AIDS infection levels.

VI. 1 Population Growth

In the 1960s, Thailand's population growth rate wasaround 3.5 per cent per annum. Population growthat these rates puts enormous strain on a country'seducation and health systems. A programme offamily planning was instituted in the 1960s, andthese efforts have been an outstanding success.Four decades later, population growth was wellunder 0.8 per cent per annum and still falling(Figure 11). Thailand's population will reach itspeak around the year 2025. The nation's capacity toprovide improved education and health services for

its youth is greatly enhanced by these demo-graphicchanges. But declining population growth ratesbrings adjustment problems as well. Ruraldepopulation is an inevitable consequence of de-clining overall growth rates and rural to urbanmigration. TTiailand's population is rapidly urbanizing,and this requires adjustment to the provision ofgovemment services and infrastmcture facilities.

VI.2 Infant and Matemal Mortality

Improvement in the quality of life has beenaccompanied by startling improvements instandard health indicators. Important examplesare shown in Figures 12 and 13. In 1960 infantmortality rates were around 50 deaths per 1,000births at the national level. In 2002, thecorresponding morality rate was 6.5 (Figure 12).This dramatic decline occurred in all majorregions of the Kingdom. In I960 no region hadan infant mortality rate below 40 per 1 ,(XH)

ASEAN Economic Bu l le t in 155 Vol. 24, No. I, Aprit 2007

FIGURE 11Thailand: Population Growth Rate, 1960-2003

(Per cent per year)

•Ig 2

50

00

50

0050

00

50

00

50

0 ) 0 1 C 1 0 1 0 1 0 1 0 ) 0 ) 0 ) 0 ) 0 > 0 > o(M

-*~ Population Growth Rate

SOURCE: National Statistical Office, Bangkok.

FIGURE 12Thailand: Infant Mortality. 1960-2002

(Deaths per 1.000)

60.00

50.00o§ 40.00

Q .30.00

20.00

10.00

0.00

-*- Infant Mortality

SOURCE: Public Health, Division of Vital Statistics, Ministry of Public Health, various issues.

oo>

COOi

CDCDOl

Ol

Oi

(MOl

inh-a>

1 J

CO

Ol

1 —

COC31

• 1

GOOl

1 1 1

r-csOl

— 1 —

o<TOl

1 1CO0101

1 1

CDOlOl

• 1' IOlOlOl

OJ

oCJ

ASEAN K c o n o m i c B u l l e t i n 156 Vol. 24 , No. I , Apr i l 2007

«Q

§

»

I

FIGURE 13Thailand: Matemal Mortality. 1960-2002

(Deaths per 1,000 births)

4.50 1

4.00

3.50

3.00

2.50 H

2.00

1.50

1.00

0.50

0.00oCOOl

Tf-(S3O)

00CDOl

fVJ

Ol

CD

Ol

oCO61-

COOl

00CO61-

CVJOlO l

CDOlOl

oooCVl

Maternal Mortality

SOURCE: Public Health Statistics, Division of Vita! Statistics, Ministry of Public Health, various issues.

births; by 2002 no region was above 7.5 deathsper 1.000 births.

Matemal mortality rates have declined evenmore rapidly. The data are summarized in Figure13. In 1960 the average rate of matemal mortalitywas 4.2 deaths per 1,000 live births, at thenational level. By 2002 this same national ratewas 0.15 deaths per l.CXK) live births. Theseachievements in public health were widespreadthroughout the Kingdom. In 2002 no majorregion had a matemal mortality rate above 0.3deaths per 1.000 live births.

Thailand's economic progress has contributedto demonstrably improved health conditions forthe Thai population.

VI.3 Literacy

Data on literacy rates are available from theNational Census, conducted by the NationalStatistical Office every ten years, beginning inI960. These data are summarized in Figure 14. In1960, literacy at the national level was 71 per cent.For males it was 80 per cent and for females 61per cent. In 2000 the corresponding rates were 95per cent at the national level: 97 per cent for malesand 94 per cent for females. Clearly, the overalllevel of basic literacy has improved significantlyand the gap between male and female rates ofliteracy, which often characterizes poor countries,has declined. Figure 15 shows that at a regionallevel these same trends are evident throughout the

ASEAN E c o n o m i c Bu l l e l in 157 Vol. 24 , No. 1. Apr i l 2007

cn(S

• -cou

FIGURE 14Thailand: Literacy Rates among Males and Females, 1960-2000

100.00

95.00

90.00

85.00

80.00

75.00

70.00-

65.00-

60,00

1960 1970 1980 1990 2000

- • - Total - • - Male • - Female

SOURCE: National Statistical Office. Bangkok, National Census, various issues.

O)

I

100.001

95.00

90.00

85.00

80.00-

75.00-

70.00-

65.00-

60.00

55.00

FIGURE 15Thailand: Literacy by Region, 1960-2000

1960 1970 1980 1990 2000

-•-Central -"-Northern

- * - Northeast - South

SOURCE: National Statistical Office, Bangkok, National Census, various issues.

ASEAN E c o n o m i c B u i i e t i n 158 Voi. 24, No. 1, Apr i l 2007

country. For example, in the northeast, thecountry's poorest region, literacy rates at theaggregate level increased over the correspondingfour decades from 75 per cent to 92 per cent. Formales, the increase was from 83 to 94 per cent,and for females from 68 to 91 per cent.

V/.4 Access to Clean Drinking Water

Because water-borne diseases are a major healthproblem in all poor countries, improved access toclean drinking water is a necessary condition forimproved public health. Since 1981 data on thisaspect of public health has been available from theSocio-economic Surveys conducted periodicallyby the National Statistical Office. These data aresummarized in Figures 16 and 17. Increasingly,Thai people have enjoyed access to privatelyprovided piped water, the proportion of thepopulation with such access increasing from 16per cent in 1981 to 23 per cent in 2000. Two-thirdsof the Thai population still reside in rural areas

and access to clean water remains a problemthroughout rural Thailand.

One aspect of the data provided in Figure 17 isespecially notable. The proportion of tbepopulation of Greater Bangkok with access topiped water actually declined from 1981 to 2000.Tbe reason is that the population increase inGreater Bangkok has been concentrated in outer,peri-urban areas. Tbe population of inner Bangkokhas actually declined. These outer areas ofBangkok bave received migrant populations fromrural areas and provision of basic public servicesto these peri-urban areas remains poor. Only balfof the population of Greater Bangkok bas accessto piped water.

V/.5 mV/AlDS

The Thai public health system was slow torecognize tbe dangers of tbe worldwide HIV/AIDS epidemic. Throughout most of the 1980s theproblem was denied. Concerted efforts began in

HGURE 16Thailand: Access to Piped Water. 1981-2000

0)

25.0-1

20.0-

15.0-

10.0-

5.0-

0.0

981

986

988

990

992

994

996 CO O)

cn CDcn o> 20

00

T - ^ ^ 1 - • . - CJ

— Piped, private

- ^ Piped, shared

-*- Piped, outside

SOURCE: National Statistical Office, Report of the Household Socio-Economic Survey, Whole Kingdom (variousissues).

ASEAN Economic Bu l le t in 159 Vol. 24. No. 1, April 2007

HGURE 17Thailand: Access to Piped Water by Region, 1981-2000

01981 •2000

SOURCE: National Statistical Office, Report of the Household Socio-Economic Survey, Whole Kingdom (variousissues).

the late 1980s with campaigns encouragingcondom use. Thai non-government organizations(NGOs) were on the forefront of these efforts. Theefforts paid off. Today, Thailand is considered asuccess story in the global fight against HIV/AIDS. Figure 18 shows a significant reduction inthe number of new HIV infections reported,beginning in 1996. From Figure 19, this reducedinfection rate resulted in a reduction in both thetotal number of Thai people suffering from AIDSand the number of AIDS-related deaths, beginningin 1999. Thailand has demonstrated to the worldthat concerted action to reduce HTV infection ratescan reduce the social costs of the HIV/AIDSproblem. Regrettably, it cannot eliminate thesecosts.

VII. Thailand and the ASEAN DevelopmentDivide

Thailand is a highly unequal economy, both withinand between the major economic regions of the

country. Moreover, the inequality within Thailandhas increased over recent decades. This fact hascontributed to some of Thailand's most intractableregional problems. For example, the continuingconflict in the southern Muslim provinces ofNarathiwat, Pattani, and Yala has at least a partialfoundation in the pronounced and growingimpoverishment of these provinces (Warr 2005^),compared with adjacent southern provinces. Thesethree Muslim provinces are markedly dis-advantaged relative to the southern region as awhole. This conflict has in tum produced cross-border disagreements which have raised tensionswith Malaysia.

Inequality between Thailand and its northernneighbours has been a source of intemationaltension as well. The affluence of Thailandcompared with Myanmar, Laos, and Cambodia hasled to inflows of low-skilled workers from thosecountries, especially agricultural workers. Innormal times, these inflows have been overlooked.This has been especially tme during periods of

ASEAN Economic Bulletin 160 Vol. 24, No. K April 2007

HGURE 18Thailand: New HIV Infections Reported, 1984 to 2003

(M

- ^ HIV Cases

SOURCE: Center of Epidemiological Information, Bureau of Epidemiology, Ministry of Public Health.

FIGURE 19Thailand: Total AIDS Infections and Deaths Reported, 1984^2003

O) O)

1

992

1 1

994

T —

r 1

996

1—

\ 1866

1—

r 1000

1 1 1

002

-*- Infected - ^ Fatality

SOURCE: Center of Epidemiological Information. Bureau of Epidemiology. Ministry of Public Health.

ASEAN Economk BulletiQ 161 Vol. 24. No. 1, April 2007

rapid growth in Thailand, when rising wages haveled to shortages of rural labour. Al such times,Thailand's immigration authorities have beenwilling to overlook the illegal status of economicmigrants. But crackdowns occur from time totime, and temporary migrants are often treatedbadly, exacerbating resentment in their homecountries towards Thailand.

In short, inequalities within Thailand itself andinequality between Thailand and its poorer,northerly neighbours have been an impediment tothe ASEAN integration process. Unfortunately,ASEAN as an institution has been able to makeonly minor contributions towards resolving theseproblems. But this is not to say that an enhancedcontribution of this kind cannot occur in thefuture. By promoting continued economicintegration between Thailand and its neighbours,ASEAN could improve the prospects forachieving its stated goal of an EconomicCommunity by 2015.

But is this goal truly feasible? Establishing anEconomic Community implies three things. First,erecting a common protective trade policybarrier around the ASEAN countries, therebydiscriminating preferentially in favour of intra-ASEAN trade relative to trade with outsiders. Thiscorresponds to the textbook case of a customsunion. Second, it also implies establishing fullmobility of capital and labour within the group.This is the definition of a common market. Third,an economic community (economic union)implies establishment of a common currency andtherefore the surrender of independent exchangerate and monetary policies.

There seems little prospect of even the first ofthese three conditions being implemented. Morethan half of all intra-ASEAN trade currentlyinvolves Singapore, which has virtually no pro-tective trade policy barriers. Unless Singaporewas willing to abandon its very high degree ofeco-nomic openness, which has been thefoundation of its prosperity, a common tariffbarrier would mean Singapore's trade regime —no protection at all. While this might well bedesirable, it is hardly likely that Thailand, thePhilippines, Indonesia, not to mention the new

ASEAN members — Lao PDR. Cambodia,Vietnam and Myanmar — would agree.Moreover, such an agreement would undermineall of the bilateral and multilateral preferentialtrading agreements involving the ASEANcountries which are currently in place or underconsideration. The prospect of an ASEANEconomic Community being established withinthe foreseeable future therefore seems remote.

Vlil. Conclusions: Thailand's EconomicProspects

The experience of Thailand over the past half-century confirms the importance of sustainedeconomic growth, at least in poor countries, forthe achievement of basic social objectives ofpoverty reduction, improved education, and publichealth. Life expectancy, infant and maternalmortality and literacy have all improveddramatically. Absolute poverty incidence hasdeclined markedly, but inequality has increased.Thailand's recovery from the crisis of 1997-99 isnow complete, despite unexpected setbacksincluding rural drought, Asian influenza, SARS,political violence in the south, the tsunami of26 December 2004, and political turmoil in 2006.

The govemment of Thaksin Shinawalra (2001-2006) did mueh to restore economic confidencebut did little to reform or strengthen Thailand'skey institutions, particularly those mandated bythe 1997 Constitution to provide checks andbalances on the operation of the centralgovemment. Many observers claim that il did theopposite, by undermining these institutions. Keyissues of reform remain to be addressedadequately. The country's archaic educationsystem must be the most important of these areasneeding reform, and the promotion of improvedcompetition within the domestic economy isprobably the second. The continuing problem ofhigh and rising levels of inequality wilhinThailand remains to be addressed at a policy leveland its underiying causes are not properlyunderstood.

Thailand's continuing macroeconomic problemis the restoration of investor confidence, severely

ASEAN E c o n o m i c Bul le t in 162 Vol. 24 , No. I , Apr i l 2007

damaged by the crisis and ils aftermath. Privateinvestment has declined as a share of GDP, andgetting it back to levels consistent with themaintenance of high rates of growth has proven tobe surprisingly difficult. This applies to bothforeign and domestic investment, but becausedomestic investment is so much larger,encouraging it is the most crucial issue. Politicalturmoil has not helped, including both the military

coup of September 2006 and the continuedsecurity problem.s arising from insurrection in theMuslim south. Restoration of the rates ofinvestment of the boom decade from 1987 to 1996would not be a sensible target, but the currentlevel of private investment needs to be increased.As the discussion in this paper has shown,Thailand shares this problem with several othercrisis-affected ASEAN countries.

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Cambridge: Cambridge University Press, 1993.Solow, Robert M. "Technical Change and the Aggregate Production Function". Review of Economics and Statistics

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Cambridge University Pre.ss. 1993.. "What Happened to Thailand?". Worid Economy 22 (July 1999): 631-50.. "Boom. Bust and Beyond". In Thailand Beyond the Crisis, edited by Peter Warr, pp. 3-65. London:

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Peter Warr is the John Cravi'ford Professor of Agricultural Economics and founding Director of the Poverty ResearchCentre in the Division of Economics, Research School of Pacific and Asian Studies, at the Australian NationalUniversity.

ASEAN Economic Bulletin 163 Vol. 24, No. 1, April 2007