Aug 17, 2009 - Reassessing Thailand's Export-led Growth Strategy ... has heavily affected Thailand's real sector via the
Reassessing Thailand’s Export-led Growth Strategy Punjaphut Prasitdechsakul Economist Monetary Policy Group Bank of Thailand
Thailand’s export-led growth strategy has been facing the biggest challenge as exports have contracted drastically following the global economic downturn. The question of over-reliance on exports as the major growth engine has been ignited by the observation that the global financial crisis has heavily affected Thailand’s real sector via the trade channel more significantly than through the financial channel. Indeed, in tandem with export contraction, we have observed large cutback in manufacturing production as well as reduction in the employees’ working hours. Moreover, the impacts have not been limited only to the export sector but also spread to the non-export sector because exports have extensive backward linkages to other industries. As a result of the substantial adverse impacts on the real sector, some economists now doubt whether export-led growth would continue to be the right policy direction for Thailand. These economists argue that exports are not truly important to the economy since Thai manufacturing exports have heavily relied on imports of raw materials rather than domestic inputs. Therefore, imports have grown just as fast as exports. Consequently, the net incomes from exports that remain in the economy are actually not very significant. In addition, export growth has been mainly driven by multinational corporations and only a small portion of profits from exports has gone to the hands of Thai citizens. Having said this, many economists continue to believe that exports are very crucial for the economy especially for advancing the industrialization process. They believe that exports are the main sources of income, employment creation, growth in domestic demand particularly private investment, productivity enhancement, as well as technological know-how. Indeed, the Thai economy had enjoyed strong growth for more than two decades mainly due to the contributions of exports. Growth in consumption, investment, and employment would have been much lower had exports not been chosen as a major growth engine.
2 With currently insufficient research evidence, it is important to reevaluate the role of the export-led growth strategy. In particular, the linkages of the export sector with other economic sectors need to be examined and net benefits of exports to the economy need to be properly assessed. Besides, the risks inherent in the reliance on exports as the main source of growth need to be better understood as crisis contagion now spread more speedily and expansively in the increasingly integrated world. We need a clear answer to the question of whether domestic demand could and should replace exports as the main growth driver in the medium- and long-term future. The trade-offs of this alternative policy option needs to be carefully examined. The roles of exports versus domestic demand as Thailand’s future growth engine are investigated in the research paper by Bank of Thailand’s researchers titled "Is There an Alternative to Export-led Growth for Thailand?”. This study will be presented in the forthcoming annual economic symposium organized by the Bank of Thailand on September 15 and 16 at Centara Grand Hotel. Look forward to seeing you there. -----------------------------------------------(The views expressed are the author’s own.) Published in The Nation on Monday, August 17, 2009
