Recent coup has not affected normal business operations - Thailand - World Trade Outlook 1991

Business America, April 22, 1991 by Jean A. Kelly

In 1990, the fourth year of economic boom, Thailand's GNP growth rate of 9 percent was one of the highest in the world. The economic outlook for 1991 is also good. Exporters and investors should be aware that the February 1991 military coup in Thailand, which overthrew the democratically-elected government, has not affected normal business operations in Thailand to date. In addition, Thailand's investment policies and trade regulations remain unchanged.

Last year, real GNP grew to $79 billion, or about $1,400 per capita. Thailand's industrial sector expanded by approximately 14 percent, while the service sector grew by about 9.5 percent and the agricultural sector about 1.0 percent. Economists in Thailand have predicted somewhat lower growth rates for 1991: 8.5 percent growth in the manufacturing sector and 6.3 percent in services.

U.S. exports to Thailand are expected to reach $3.4 billion in 1991, an increase of 15 percent over 1990. In 1990, U.S. exports of aircraft increased by 287 percent to $368 million, accounting for almost 39 percent of the total increase in U.S. exports to Thailand. U.S. exports of electronic components rose 19 percent to $515 million, accounting for about 12 percent of the total increase in U.S. exports. Other leading U.S. exports to Thailand include turbine engines and parts for aircraft, computers, office machine parts, pumps and compressors, cotton, tobacco, diamonds and precious stones, polymers, chemicals, industrial machinery, and electrical distribution equipment.

Overall, Thai imports rose by about 24 percent during 1990 to $32 billion. Demand from newly constructed plants and export-oriented industries for capital goods, raw materials, and intermediate products made up over 70 percent of total imports. Imports of consumer products were also up significantly due to increased purchasing power, expansion of tourism, and construction of luxury hotels and apartments. Oil imports accounted for about 9 percent of total Thai imports.

Thai exports grew by 14 percent to $23 billion, yielding a trade deficit of approximately $9 billion. However, due to capital inflows, growth in net services, and earnings from tourism, Thailand had an overall balance-of-payments surplus of $5.1 billion.

The best prospects for expanding exports of U.S. goods and services to Thailand in 1991-92 are in food processing and packaging equipment, computers and peripherals, agricultural products, medical equipment and supplies, and telecommunications equipment.

Almost 40 trade exhibitions covering a wide range of industries are scheduled for Bangkok in 1991. The U.S. and Foreign Commercial Service office in Bangkok can provide information on these events, which include: a security equipment exhibition May 8-11, an exhibition of environmental and pollution control equipment June 14-17, a plastics technology show Oct. 19-23, and a machine tools and metalworking exhibition Nov. 8-12.

Investors have been attracted by Thailand's low-cost labor supply, natural resources, free enterprise orientation, and bright economic prospects. Foreign investment is still increasing in Thailand but at a slower pace than in the late 1980s. The total value of applications for investment projects to the Board of Investment was up by 14 percent in 1990. Based on the number of project applications, the leading investors in Thailand in 1990 were Japan, Taiwan, Europe, the United States, and Hong Kong.

The value of U.S investment in Thailand is at least $4 billion, probably accounting for 30 percent of the value of all foreign investment there. U.S. investors in Thailand are highly positive about their operations and are generally reinvesting heavily.

According to the U.S. Embassy in Bangkok, GNP growth is likely to be close to 7 percent in 1991, depending on a number of factors, including global oil prices and economic growth in Thailand's principal export markets: the United States, the European Community, and Japan. Other key factors include the degree of demand restraint implemented to deal with inflationary pressures, future trends in capital inflows, and agricultural price levels. Economists are predicting inflation rates ranging from 7 to 9 percent for 1991, up from 6 percen in 1990.

The trade deficit is expected to worsen in 1991, totaling $9.5 billion or higher. Infrastructure constraints, especially in the power, communications, and transportation sectors, remain major concerns for Thailand.

Beyond these factors, Thailand can point to some positive economic trends. These would include $14.5 billion in foreign exchange reserves at the end of 1990--approximately six months of imports, a debt-service ratio of about 10 percent, and a fiscal surplus due to higher tax collections. Some economists also predict that the Thai economy could benefit from slightly slower growth, which could help keep the trade deficit and inflation down.

For additional information, call Thailand Desk Officer Jean Kelly at (202) 377-3875.