Economic Background For Investment In Thailand Part 5

The government adapted strict monetary and fiscal policies to control the rate of inflation during this period. Rigid monetary policies were used to limit credit expansion in the private sector. The fiscal policies were mostly the levying of import and export taxes. The export taxes were imposed on some commodities, such as rice and sugar, as a means to control domestic prices. The import tax on raw materials used for manufacturing was reduced. There was also a tax on raw materials used for manufacturing was reduced. There was also a tax rebate for importing raw materials for producing export commodities.

The Fourth Plan (1977-1981): The Economic Recovery Period

During the Third Economic and Social Development Plan, Thailand was affected by the world economic fluctuations as were other countries. Regional, political instability also acted to weaken the Thai economy, as many neighboring countries changed from democratic to socialist countries. This resulted in investors losing confidence in Thailand. The consequence was a higher rate of unemployment.

By the end of the Third Plan, inequitable income distribution was a major problem. Therefore, one of the main objectives in the Fourth Plan was to distribute economic growth and social services to the remote regions of the to country. The population was targeted to increase at rate 2.3 percent a year. It was expected that this rate of growth was appropriate for cohabitation with the existing natural resources and would be suitable for economic development.

The Fourth Plan was set to be an indicative plan instead of allocative plan, as all earlier plans were. This indicative plan was intended to be a practical guideline for government agencies to improve their policies and set up practical objectives. The Fourth Plan was designed to resolve the economic recession and to maintain economic stabilization. It also intended to solve the basic economic and structural problems. It was planned not only to stimulate economic growth but also to reduce the economic inequality in society.

Concerning disparities in income distribution, the Fourth Plan was unable to find a solution to this problem. The per capital income in the agricultural sector was 5 times lower than manufacturing and commercial sectors, and 2 times lower than the service sector. The people in the Northeastern part of Thailand suffered the most poverty. Per capita income in Northeastern Thailand was five to seven times lower than in Bangkok in 1981. The proportion of regional production relative to GDP declined from 15 percent in 1976 to 14.3 percent in 1981.

With respect to social services, toward the end of the Fourth Plan, the rate of population growth was reduced to 2.2 percent. The government was unable to meet the targeted goals for provided were close to the goal, but not in all regions of the country.

Overall, the Fourth Plan was more successful than the Third Plan. The GDP increased at a rate of 7.5 percent a year. This high rate of growth was the result of attempting to maintain an economic stabilization policy to fight worldwide economic fluctuation. The government increased public investment spending from the target set at 14.6 percent to 24.8 percent a year. Economic expansion on terms of production sectors showed a higher growth rate than the target set in almost every sector except for agricultural and manufacturing sectors. The agricultural sector grew less than anticipated in the plan because of the limited planning area and the deterioration quality of planting soil. The manufacturing sector was curbed by the world wide economic recession so that the export of manufactured goods during the Fourth Plan was not as high as the Third Plan.

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