In this report, it is expected to examine the economic and business strategies used by Thailand in the past years in detail and clearly. As well as, here, it is expected to suggest the business strategies used by Thailand for Sri Lankan application.

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By:
D.M. Sanath Dasanayaka (sanath.dasanayaka@outlook.com)
University of Sabaragamuwa, Sri Lanka

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Abstract
In this detailed report, it is expected to discuss on the economic and business strategies
used by Thailand for gaining a high economic growth rate and uplift the economic
activities in past years such as import substitution, diversification of economy, ensuring
the confidence of the economy in private sector and investors, Participation of the private
sector in export production, developing strategies for alternative power sources,
restructuring economic sectors, privatization, targeted industries and policy formulation
and more other. As well as, the Sri Lankan application of above strategies is also
discussed.

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Content
Topics Page No
1. Thailand in the economic perspective 04
2. Development and Advancement strategies of Thailand 05-10
3. Appropriate strategies in the Sri Lankan context 11-12
4. References

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1. Thailand in the economic perspective
Thailand, the kingdom of Thailand in the official name, formerly known as Siam is in
the center of the Indonesian peninsula in Southeast Asia. It is bordered to Burma and Laos by
the north, to the Andaman Sea by the west and to Gulf of Thailand and Malaysia by the
south. The country is a constitutional monarchy headed by king. Thailand is the world’s 51st
largest country in terms of total area. It is similar to France in its scale which is
approximately 513,000 square km. The population is about 64 million people. Baht is the
currency using in Thailand. The capital and the largest city is Bangkok, Thailand’s political,
commercial and cultural hub.
Thailand is an emerging economy as well as considered as a newly industrialized
country. It enjoyed the world’s highest growth rate from 1985 to 1996- averaging 12.4%
annually. Thailand exports goods and services valued at around $105 billion annually. Major
exports are Thai rice, textiles, footwear, fishery products, jewelry, rubber, cars, computers
and electrical items. The country is ranked as the no.1 exporter of rice, valuing more than 6.5
million tons of milled rice annually. Rice is recognized as the most important crop in the
country as well as about 55 percent of usable land is utilized for rice production.
Electrical items, components, computer parts and cars are identified as substantial
industries in the country also tourism contributes economy about 6% of the total amount. The
economy of Thailand is heavily export-dependent; becoming the 2nd
largest economy in
Southeast Asia, after Indonesia and it is the 4th
richest nation according to GDP per capita,
after Singapore, Brunei and Malaysia.
Forty-nine percent of Thailand’s total labor force is employed in agriculture. In 1980, it
was around 70 percent. Agriculture has been turned into a more industrialized and
competitive sector from labor intensive and traditional one. However, the relative
contribution of agriculture to GDP has declined as the relative contribution of exports of
goods and services has increased. Basically, the unemployment rate was 0.4 percent when the
month of December in 2011.
Selected economic indicators of Thailand (%)
2013 2014*
GDP growth 4.9 5.0
Inflation rate 3.2 3.1
Current account balance( share of GDP) 0.8 0.1
Table: 01 source: Asian Development Bank * Estimates

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2. Development and Advancement strategies of
Thailand
In the 1960s, Thai economy was a mainly agricultural economy heavily Dependent on
production crops, such as rice, cassava, maize, rubber, sugar cane and seafood production.
During the 1980s-1990s, the economy began to boom and it was apparent as a diverse,
modern and industrialized economy.
Below factors have contributed to the growth, development advancement of the
country’s main economic sectors, such as agriculture and fishing, manufacturing and industry
and service, particularly tourism. That means the country has implemented a balance
framework of policies in the major three sectors. Moreover, these policies were formulated
based on requirements of business firms in any scale as small, medium and large.
Import substitution
This is considered as a rational approach to industrialization. Before industrialization,
country had a stable agriculture sector, but after Thailand was altering its strategies, which
centered on food processing and manufacturing for export purpose utilizing its wide-spread
natural resources and low cost labor. This resulted to a rapid acceleration in manufacturing
sector and marked a huge increase in exports. Here, at the first phase, the country exported
only simple agriculture-based products, but when the time passed, Thailand realized the value
of changing export strategies into technology-based manufacture. As well as this strategy
gradually operated towards the development and advancement of Thai economy.
Diversification of economy
This strategy has also contributed heavily on the economic development of the
country. Basically, industrial sector began with simple agriculture-based manufacturing and
sharply progressed into more sophisticated industries through the utilization of available
resources, such as ample of natural resources and low cost labor. Diversification was also
assisted by Foreign Direct Investments made in a wide range of products, like electronics,
chemical, property and processed food.
In the 1980s, Foreign Direct Investments valued at US$8 billion. Also US$ 2.5 was
from Japan and the rest from China, Korea and America. The most important factor that
attracts FDIs is lower manufacturing cost in Thailand. 50% of the country’s total industrial
production is manufactured in foreign investments and 20% of the total industrial workforce

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is employed in projects backed by FDIs. This diversification strategy facilitated the country
to acquire a high economic growth rate and the advancement in the state.
Ensuring the confidence of the economy in private sector and investors
The administration of Prime Minister Prem Tinsulangonda, which existed from 1980
to 1988 developed policies and programs that inspired the confidence of the private sector in
both of the government and economy. These favorable policies created a greater willingness
to invest in the growing manufacturing industry and support further expansion of export
activities. Furthermore, it is clear that favorable policies played the ground role in the inflow
of FDIs into the country. Mainly, Thailand attracted many investors from the USA making
huge investments in a diverse set of projects. This carried out a significant way towards the
economic development and advancement of Thailand.
Participation of the private sector in export production
In 1981, a significant policy was implemented which provided facilities the creation
of the Joint Public-Private Consultative Committee on Economic Problems. This encouraged
businesspersons to influence the public policy making through their participation in the
mentioned committee. As well as it shifted the participation of the private sector up in the
development of state enterprises. Private sector invested a huge sum of money in the
industrial sector and the government’s task was to direct the economy in the proper way.
Thailand has proved that opinions of experienced businesspersons could generate a lot of
benefits in the public policy making towards the development and advancement of the
economy. Mainly, the government has formed a business friendly environment through
flexible laws on labor utilization and it has encouraged the private sector to participate in the
economic activities in an active manner.
Developing strategies for alternative power sources
During the oil crisis of the period from 1970 to 1979, the country had to face severe
hardships which impacted the growth and development directly. After the discovery of the
country’s first natural gas field in the Gulf of Thailand in 1981, the country’s dependence on
imported oil decreased. As well as, Thailand developed and implemented strategies for
seeking alternative energy sources, namely, hydropower, liquefied natural gas, coal and wind
power. Furthermore, Thailand is now studying the use of nuclear power. The most important
benefit in nuclear power is low cost of power generation. So, these alternative power sources
impacted to decrease the cost of production and shifted production levels up. On one hand,

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export income became higher due to increased exports and on the other hand, import
expenditure reduced since decreased import of oil.
From the most basic level, Thai government implemented plans to gain the
contribution of the private sector and foreign investors in these alternative power generation
projects in order to operate them according to global accepted standards. Through attracting
the private sector and foreign investors, the government benefited with the most advanced
technology and a huge sum of funds to make projects a reality. Absolutely, these alternative
power generation projects have been a major factor in determining the development and
advancement of Thailand.
Restructuring economic sectors
In 1999, the International Monetary Fund (IMF) provided Thai government a loan
package of US$17.2 billion for reforming financial sector of the country. Along with reforms
in the financial sector, the government implemented a restructuring process in industry and
agriculture sectors to increase its productivity. Government policies and regulations were
rehabilitated to uplift their accountability and transparency. As well as, social reforms were
carried out in education, social services and human resource development.
In education, job-oriented education and on-job training programs take a specific place.
Also, the government improved the quality of social services, such as healthcare, personal
security and public housing schemes. In human resource development, the government is
focused on the performance improvement of public officers through the transfer of
knowledge and technical expertise. The government expects to equip human resource with all
necessary skills and techniques since human resource is the driving force in the economic
development and advancement of any economy. In this case, technology, knowledge and
skills are exchanged with other countries through several mechanisms, namely, joint
commissions and annual consultation programs.
These reforms in economic sectors, education, social service and human resource
development have played a key role in the development and advancement of the country
through increased productivity of resources, such as natural and labor and increased
efficiency and effectiveness in production processes in all sectors, industrial, agriculture and
service. In the simple term, when skills, competencies and expertise of human resource go
up, productivity increases and cost of production decreases. It affected to the development
and advancement of Thai economy.

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Privatization
Thai government’s aim is to encourage capital inflows into the key economic sectors of
the country. In 2006, the government of Thaksin Shinawatra implemented a privatization
process for state-owned enterprises. In this, several state-owned enterprises were privatized
other than the Petroleum Authority of Thailand, Airport Authority of Thailand and Mass
Communication Organization of Thailand. Also, the 1999 State Enterprises Corporatization
Act facilitated the framework for formulating government organization into stock companies
and corporations as an alternative to privatization. Foreign investors were also allowed to
participate in privatization with several restrictions provided by the Foreign Business Act of
1999.
This strategy encouraged capital inflows to the country and facilitated to bring advance
technology and techniques into the economy. Through privatization, effectiveness and
efficiency of enterprises increased also the quality of the manufacturing and service sector
was uplifted. This privatization program strengthened the process of development of
Thailand. As well as, Thai government has taken appropriate steps to avoid the drawbacks of
the privatization process.
Targeted industries and policy formulation
The government of Thailand is highly concerned about the position in which the
country should be put in the competitive world. It expects to improve industries that can add
value to the domestic economy (creating more jobs, preserving environment and managing
natural resources in the proper way). As well as Thai government is more willing to find
market niches (market segments that are not large in the scale to attract many competitors)
that have been served by no other country, specially, market segments in which China is not
competing. The below market segments have been identified as valuable. These industries are
more suitable for Thailand according to its expertise. Here, they are the industries that the
country can work upon at the best productivity and efficiency.
 Automobile and parts
 Agriculture
 Fashion, such as jewelry, leather goods and Thai silk
 Healthcare, spa and long-stay tourism
 Electronic
 Energy and renewable energy

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Thai government has already prepared action plans to work on selected industries.
Here, government authorities are responsible for designing, implementation, monitoring and
trouble-shooting in selected industries.
In the present, Thailand has become the finest country in agricultural industry in the
entire world. Thailand promoted its agricultural programs in the name of kitchen of the
world. In this, the government has identified industrial segments that the country can operate
with available resources at low cost, achieving higher productivity and efficiency as well as
the government reviews that the country’s expertise is match with the selected industries.
Now, Thailand is working upon suitable industries, increasing its resources and labor
employment also the country is heading to sustainable development and growth.
Favorable policies for FDIs
In recent years, laws and policies for FDIs have been reviewed according to changing
development objectives and investors’ needs. Laws and policies are reviewed every five year
time.
Mainly, policies and laws for FDIs in Thailand are more flexible than policies of other
countries in the region, such as Vietnam and Indonesia. Basically, FDI incentives and
approval are centralized in Thailand, but in Vietnam, it is not centralized. Furthermore, in
Thailand, FDI marketing is so strong. It provides all details on economy, Thailand’s
attractions and opportunities, promotion policies, investment incentives, international cost
comparison, BOI services and approval procedure to foreign investors accurately and on
time. Details are summarized in brochures also websites and slide presentations on FDIs are
frequently updated. These details can be downloaded from the website of the Board of
Investment. Moreover, details are presented in six languages (English, German, French,
Japanese, Chinese, and Thai). So, investing in Thailand is more convenient for foreign
investors. Currently, the country has attracted more investors mainly, from the USA and the
European Union than other countries in the southeast region. However, ultimately, attracting
foreign investors has become a directly-related factor with the development and advancement
of the country.
Research & Development and infrastructure development
Research and Development has been a key factor in the development process of any
country. R&D facilitates innovations, lowers the cost of production and finds new ways of
manufacturing. Absolutely, it changes operations of a country and an economy in the proper
way.
Basically, Thailand has made reservations on R&D activities focused on hardware,
automation systems, computer-based control technology, total quality management, supply

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chain management, just-in-time production system and manufacturing process control. As
well as, the government is encouraging the private sector to invest in R&D activities and
providing facilities needed for the sustainable development. In the present, the country
allocates 0.2% of the country’s GDP in R&D activities also the amount of expenditure is
expected to increase in the upcoming fiscal year.
Thailand is more concerned on developing infrastructure facilities, such as water,
electricity, transportation (road, aviation and water) social facilities, like housing in both
urban and rural areas with the view of facilitating and developing small and medium scale
enterprises. Through focusing more on rural areas, unemployment rate of these areas has
decreased and living standards of people have uplifted. Thai government developed rural
according to certain standards since developing rural areas and improving people’s living
standards and expanding their earning capabilities were identified as key strategies for
development.
In the simple term, the country was able to expand its production capabilities by using
its unemployed resources and low cost labor at a lower cost with higher earning also profits.
Mainly, public-private partnership is very important in infrastructure development in
Thailand. Currently, the government is willing to commence the biggest infrastructure
development with US$ 60 billion. 64% of the total budget will be spent on 31 railways
including 4 high-speed rail projects. 24% will be allocated on road development and 12% is
planned to spend on water and aviation transportation. The main aim is to boost the
production capability of the construction sector in these projects.
With all these projects and programs, the government expects to increase per capita
income to US$ 10,000 from the present amount of US$ 5000 during the next 10 years.
3. Appropriate strategies in the Sri Lankan context
In the Sri Lankan application, several development strategies are most appropriate for
realizing a high economic advancement.
Selected industries
Sri Lanka has more ancestral knowledge in several economically significant industries,
such as agriculture, jams and tourism. So, the country can be specified in those industries
with a high level of competitive advantage. In this strategy, Sri Lanka should select industries
in which the country can operate more efficiently and effectively at a lower cost level with a
higher productivity. Here, talents of employees, resources availability and cost effectiveness
have to be considered. Then, this directly affects on the development of the economy.

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Mainly, when the productivity goes up cost tends to decrease as well as that leads to a high
development level.
Increasing private sector participation
Basically, the government can encourage private sector in many significant sectors in
the economy. It is very important to uplift the competitiveness of the economy. Mainly when
the competitiveness goes up quality of products and services eventually exceeds to previous
level. But, on the other hand there should be a fair and transparence procedure of rules and
regulations to ensure the confidence of private investors. Private investments can be
implemented in many sectors, like transportation, production, agricultural and infrastructure
development programs. As well as, the government can attract foreign investors in to the
country.
Developing alternative power sources
In the present, the country is mainly dependent on imported crude oil and hydro power.
But in the long-term, the country is capable in investing for alternative power sources, such
as nuclear, solar power, thermo power and wind power. That can bring the cost of production
down at a considerable proportion also those projects give benefits in the long run. It is easy
to find appropriate lands for solar, thermo and wind power plants mainly in Northern and
Eastern provinces. On the other way round, the government is capable in encouraging private
investors to invest in these projects. In this strategy, the expenses on imported oil decrease
also the country benefits with long-term sustainable power sources.
Research and Development
Every developed country allocates a considerable amount of their GDP on Research
and Development activities. It has been identified as crucial factor for getting a high
development level. The government of Sri Lanka can also allocate an appropriate proportion
on R&D. In R&D, new methods of manufacturing are created also it reduces cost of
production. Basically, the government can implement R&D activities in industrial and
agricultural sectors.

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Encouraging small and medium scale enterprises
The government should encourage not only large-scale enterprises but also small and
medium scale enterprises in both urban and rural areas. Furthermore, through this strategy,
the resource utilization and labor employment are expected to uplift. This leads to a higher
development level. Small and medium scale industries can be mainly encouraged through
favorable regulations, subsidies and providing market facilities for their productions. As well
as, developing rural infrastructure facilities can make more favorable impacts on those
industries.

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References
Asian Development Bank (2013), Asian Development Outlook, Manila.
Bank of Thailand (2011), Economic Summary of Thailand in 2010, Bank of Thailand,
Bangkok.
Buampongpattana, W. (2013), Infrastructure and PPPs Development in Thailand, Kyoto
University.
Chancharoen, N. (2012), Study Results and City Case: Private sector-local government
interactions in Thailand, Thailand Environment Institute.
Daniel, I.P., Tritos, L., Amrik, S. and Sukun, B. (2007), Manufacturing Strategies and
Innovation Performance in Newly Industrialized Countries.
Pathmanand, U. (2001), Globalization and Democratic Development in Thailand.
Vietnam Development Forum (2005), MOI-VDF Joint Mission on Industrial Policy
Formulation of Thailand.