Ammar (2011) is an account of political and economic developments in Thailand after the Asian financial crisis in 1997. The paper introduces and discusses the measures undertaken to address the 1997 Crisis which led to deleveraging of the Thai economy, and liberalization and reform of the banking system, including greater independence of the Bank of Thailand through the 2007 Bank of Thailand Act which specifies inflation targeting as its official mandate.
Ammar describes in great detail some of the populist policies, such as the universal health care, the agricultural debt moratorium, the one million baht per village program, the agricultural price support, and privatization, including their financing and impacts on the Thai economy. He also gives some insights into the political developments in Thailand from 1997 to the present.
In addition, the paper demonstrates the close linkages between politics and economic policies. The Thaksin government was able to form a one-party government with a majority in the House of Representatives (through merging a few small parties into its own) which allowed the government greater freedom to set and implement its policies (though political infighting occasionally occurred among different factions in the governing party). Many of these (populist) policies were designed to deliver on the promises made during the election campaign.
But as far as off-budget financing is concerned, it is not an unusual practice since most governments try to support their policies off-budget, where possible, in order to enhance fiscal space and thus their capacity to intervene in support of the country's economic activities when needed.
For example, the agricultural price support was replaced by a price insurance scheme in October 2009 whereby farmers are compensated when the benchmark market price of rice falls below the insured price level set at the beginning of the season. Initially, the cost of the scheme was absorbed as part of the second stimulus package, but the government plans to eventually charge a premium for the insurance and hedge its position through a commodity exchange.
The unprecedented power and control, however, led to overconfidence of the then Prime Minister and subsequently to his downfall. In addition to his efforts to gain control of various independent agencies, the evasion of income taxes on his share sales was considered the last straw. Instead of setting an example of a law-abiding citizen, Thaksin chose to act more like a businessman who exploited a loophole in the tax law.
In terms of overall economic policies, the dual-track strategy, regardless of how it was developed, seems to serve Thailand well except when the global financial crisis dampened consumer demand in the USA and Europe which caused Thailand's export and gross domestic product growth to drop sharply in 2008–2009. The deleveraging and banking reform since the Asian financial crisis has strengthened the balance sheets of financial and corporate sectors and allowed them to recover quite strongly when global demand started to pick up. The state of recovery of the advanced economies, however, remains fragile and jobless. This development underscores the need for Thailand to rebalance its growth toward greater reliance on domestic and regional demand.
Some progress has been made in this area. Recent statistics show that Thai exports to East Asia have recovered more strongly than those of advanced economies, while Thailand continues to expand its export markets to countries like Australia and Switzerland. In the tourism sector, about half of the visitors to Thailand are from East Asia.
Another notable development is the auto industry in Thailand which has grown to become the largest automotive producer in Southeast Asia and the largest producer of light pickup trucks in the world. Despite the lingering concerns about the political situation, Thailand continues to attract investment into the auto industry, the latest being Ford's announcement in June 2010 that it planned to set up new operations with the construction of a US$450 million passenger vehicle manufacturing facility in Rayong. Planned to be completed in 2012, the plant is expected to create 11,000 new jobs and produce 150,000 units a year, 15% of which will be for the local Thai market while the balance will be exported to countries in the Asia–Pacific and Africa. Ford will also be spending almost US$800 million on local components through Thailand's supplier network for production at the new plant.
In support of this development, through the intermediation of the Automotive Institute, producers, secondary schools, and universities are working together to provide appropriate education and training for workers in the sector. Another trend is the greater willingness of automakers, particularly Japanese, to relocate or build R&D center close to the production facilities.
I would also like to note the increasing awareness of environmentally sustainable development during the past decade. As Thailand embarks on regional integration and participates more in the regional production network, increasing attention has been paid on balancing the needs for economic growth and the quality of life. For example, section 67 of the 2007 Constitution requires all industrial projects to undergo both a health impact assessment and an environmental impact assessment. The current court case on the Map Ta Phut Industrial Estate provides additional evidence of the increasing concern by Thais for their environment and quality of life.