Data - Vietnam Exports - Imports - A Study of Anchor Economy: The Case of Thailand

B. Vietnam Exports - Imports

III. Data

To determine the sources of Anchor Economy: The case of Thailand, A study is based on secondary data in annual time-series and data covering the period 2008 to 2018.

The major data source for macroeconomic variables in this study from the Office of the Ministry of Labor Thailand, Thailand Information and Communication Technology Center, Customs Department, United Nations Thematic Working Group on Migration, World Bank, and World Trade Organization.

46 IV. Research Framework

The research framework is summarized as follows:

This study in Thailand and neighboring countries economy and look information about numbers of GDP, international trade, imports – exports with neighboring countries, investment and development, migrant workers activity, and use PEST analysis to understand the Thailand economic environment and the theory of gravity model for support thesis information and the last to offer policy recommendations to the government of Thailand.

Figure 3.1: Research Framework Policy Recommendations

Thailand Economy (PEST Analysis, The Gravity model)

Malaysia Economy

Cambodia Economy

Lao PDR Economy Myanmar

Economy

Vietnam Economy

Chapter 4 : Major Findings

I. PEST Analysis of Thailand

A. Thailand’s Political Analysis

Thailand, officially the Kingdom of Thailand, formerly known as Siam, is a country located at the centre of the Indochina peninsula in Southeast Asia. It is bordered to the north by Myanmar and Lao PDR, to the east by Lao PDR and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the west by the Andaman Sea and the southern extremity of Myanmar. Its maritime boundaries include Vietnam in the Gulf of Thailand to the southeast, and Indonesia and India in the Andaman Sea to the southwest.

Thailand is divided into 77 provinces, which are gathered into 5 groups of provinces by location. There are also 2 special governed districts: the capital Bangkok (Krung Thep Maha Nakhon) and Pattaya, of which Bangkok is at provincial level and thus often counted as a prior.

The country is a constitutional monarchy, after the King Rama IX, the ninth king of the House of Chakri, who, having reigned since 1946, is the world's longest serving head of state and the longest-reigning monarch in Thai history go to heaven. Present King Rama X the king of Thailand is titled Head of State, Head of the Armed Forces, the Upholder of the Buddhist religion, and the Defender of all Faiths.

Thailand is one of the great development success stories. Due to smart economic policies it has become an upper middle income economy and is making progress towards meeting the Millennium Development Goals.

Table 4.1: Introduction to Political Environment of Thailand

Country Name: Thailand

Conventional long form: Kingdom of Thailand Capital: Bangkok

Population of Thailand: 69 million

Language: Thai is the national language. English is widely understood in Bangkok and big cities.

Religion: Buddhists 94.2%, Muslims 4.6%, Christians 0.8%, others 0.4%

Currency: Thai Baht (1 US Dollar = 30.28 Thai Baht as of 6 November 2019) Government Type: Constitutional Monarchy Coalification

Constitution: Seven Charter And Constitutions

Legal system: Based on civil law system with influences of common law; has not accepted compulsory ICJ jurisdiction.

Suffrage:18 years of age; universal and compulsory Executive Branch:

Chief of state: King Rama X Maha Vajiralongkorn (since 2016) Head of Government: Prime Minister:- Prayut Chan-o-cha Cabinet: Council of Minister

Elections: The monarchy is hereditary; according to 2019 constitution, the prime minister elected from among members of House of Representatives.

Source: Thailand Information and Communication Technology Center

1. History and Characteristics of Transformation

Strong, centralized control has long been embedded across Thailand’s politics and economy, though the country has witnessed instability with 13 overt military coups d’état.

The country was an absolute monarchy until 1932, when a regime change allowed for the military to dominate the country. In 1957, following another coup, a new alliance between one military faction and the monarchy took over Thailand. By 1980, the alliance remained strong, though the monarchy was now the more powerful partner in the alliance.

Democracy could never challenge these authoritarian actors as it was only superficially rooted in the country, having only existed briefly (1946-1947, 1975-1976, and 1988-1991) and always falling to military coups. Military repression in 1992 tarnished the image of the armed forces and allowed for democracy to once again challenge the established order, especially through the 1997 enactment of a more progressive constitution. Meanwhile, by the 1990s, state-led economic growth had been shunted aside in favor of private sector-led, export-oriented industrialization based upon cheap labor, lax investment laws and tourism.

In 1997, a financial crisis severely weakened the Thai economy. This led to the election of populist Prime Minister Thaksin Shinawatra in 2001 (re-elected in 2005), who instituted pro poor policies and cultivated an enormous, loyal voter base. But several elites and senior military officials worried that Thaksin might become a threat to the aristocracy, including to the palace. Amid mostly urban protests against Thaksin in 2006, the military, led by anti-Thaksin senior brass, overthrew anti-Thaksin. By 2008, a new constitution had been implemented which weakened elected civilians and Thaksin himself was in exile.

However, another pro-Thaksin party won the December 2007 election and took office shortly thereafter.

Nevertheless, by December 2008, the courts had forced the government from power and senior officials of the armed forces and the King’s Privy Council assisted in bringing an anti-Thaksin coalition government to office. The new anti-Thaksin Democrat Party-led government was in office from 2008 to 2011, and it generally acquiesced to military priorities during this time. In 2010, a pro-Thaksin (“Red Shirts”) protests against the Democrat Party government were eventually repressed by the military, but the negative fallout from the repression and, to a greater degree, the continuing popularity of Thaksin’s populist policies helped a new pro-Thaksin party Puea Thai, led by his sister Yingluck, win a landslide election in July 2011. Yingluck instituted several populist policies popular among the poor, but her attempt to change the constitution and obtain a legal amnesty for Thaksin sparked anti-Shinawatra protests by mostly urban Thais (People’s Democratic Reform Committee/PRDC). Though Red Shirts backed Yingluck, PDRC protests continued. By May 2014, Yingluck was ousted from office by the judiciary for unlawfully transferring a bureaucrat. Though a Puea Thai prime minister succeeded her, he was ousted by a military coup on May 22, 2014. Since 2014, the National Council for Peace and Order (NCPO) military junta has held absolute rule over Thailand, jailing dissenters, breaking up opposition rallies or meetings, intimidating potential resistance and causing many opponents to go into exile. To shore up a declining economy, it has implemented a neoliberal agenda of megaprojects, Special Economic Zones and greater extraction of

natural resources. It has also sought to dilute some of Thaksin’s earlier populist policies, though it also copied many of them.

Thailand, under the National Council for Peace and Order (NCPO) junta. Junta leader General Prayuth Chan-o-cha simultaneously served as appointed prime minister.

The junta’s absolute rule has since been enshrined in law and the NCPO has muzzled political rights and civil liberties which previously existed under the country’s democracy prior to the 2014 military coup d’état. Opposition groups (such as the New Democracy Movement) have been crushed, and its members imprisoned or intimidated. Political parties have not been legally banned but are not allowed to engage in any functions.

Decentralized democracy has been terminated. By 2017, the economy was increasingly stagnant, having suffered initial shrinkage following the 2014 coup and declining GDP, as well as a lower than expected level of tourism. The recent decline in economic growth is partly a result of the slowing global economy as well as a reduction in trust in the government’s ability to manage the economy.

Meanwhile, the NCPO initiated a process to return Thailand to democracy, where a military dominated National Legislative Assembly (NLA) and National Reform Steering Assembly (NRSA) selected a Constitutional Drafting Committee (CDC). The CDC prepared a new constitution, which was passed by popular referendum in August 2016. Yet the character of the new constitution was decidedly conservative, with the military set to indirectly control an appointed Senate, an electoral system that prevents political parties from obtaining a majority of seats in the Lower House, and the opportunity for nonelected

individuals (i.e., military) to be prime ministerial candidates. The new constitution ultimately facilitates the indirect continuation of military influence across Thai politics.

In October 2016, King Bhumipol Adulyadej passed away after over 70 years on the throne. Given that he was so highly revered by Thai people, his death has initiated a prolonged period of mourning which will continue into 2018. Thais also perceived him as a symbol of durability, and thus his passing could potentially be destabilizing. Following the king’s death Privy Council Chair Gen. Prem Tinsulanond became temporary head of state, serving as regent. In December 2016, Bhumipol’s son Maha Vajiralongkorn officially assumed the throne.

In early 2017, advisers appointed by the NRC and backed by the NCPO were continuing the process of devising organic laws in support of the new constitution. The military promised new elections in late 2017, but has previously back-pedaled on promises of a return to democracy. The death of the king and subsequent monarchical succession offers the junta a rationale for extending its rule. Meanwhile, failing negotiations between the junta and Malay-Muslim insurgents in the Deep South have produced a new wave of violence in the region.

The results of the General Election held on 24 March were widely disputed. And more than three months later, there is still no government in place. The new parliament is comprised of the 250-seat Senate, entirely held by the military appointees, and the 500-seat lower house. Here, the pro-junta Palang Pracharath Party has managed to form a 19-party coalition holding a very slim majority of only four seats. This Parliament formally elected Prayuth Chan-o-cha as prime minister – the former military general’s second term in that

office. We thought this had almost ended the long-standing political uncertainty since the 2014 coup.

2. Political Transformation

a. Stateness The National Council for Peace and Order (NCPO) junta has used the following strategies to achieve its aims. First, military courts have become the highest law in the land, supporting an opaque decision-making process and fewer rights for defendants relative to other courts. Second, the NCPO has created a Peace Maintaining Force, tasked with detaining any Thai deemed resistant to the junta, vaguely defined. In late 2016, over 1,500 people were arrested for opposing and potentially opposing the junta. Third, there has been a much harsher application of lèse-majesté (insults against monarchy) laws. Such laws, though applied before the 2014 coup, have since been used to arrest, try and imprison more people than ever before, although the official figure is difficult to obtain. The vague wording of the law has facilitated its abuse, with political opponents of the regime often charged with opposing the king. Fourth, elections have been terminated at all levels of society: national, provincial, city and sub-district. Fifth, in the deep south of Thailand, where a Malay-Muslim insurgency has been raging, the military has forcibly retaken control over the Southern Border Provinces Administration Centre (SBPAC) which was previously controlled by the elected civilian government at Thailand’s national level. The main competition with the state’s monopoly on the use of force is from the Malay-Muslim insurgents.

b. Political Participation In 2017, Thailand was under the authoritarian control of a military junta, as endorsed by the monarchy. Thailand’s king and his Privy Council were

also significant veto actors. There was no democracy of any kind. The NCPO junta was dominated by the army, although a number of former elected politicians have been working for the NCPO in an advisory capacity. The NCPO enacted a temporary constitution in July 2014 which amnestied the military coup instigators, gave the NCPO head total authority to disrupt or suppress with legal impunity (Section 44), and allowed for a military prime minister and National Legislative Assembly (NLA), mostly composed of military officers.

A constitutional drafting committee (CDC), created by the NLA, drafted a new constitution which potentially allows for a nonelected military prime minister (who can be nominated by any political party) as well as an appointed Senate, heavily influenced by the junta. The constitutional draft was approved via popular referendum in August 2016 and the CDC enacted related organic laws with an overwhelming majority, although some international observers have argued the referendum was conducted unfairly.

c. Rule of Law Under the current military government, there is no separation of powers, as the junta has far-reaching options to appoint and influence legislative and judicial branches of government. The military answers only to the monarch, his Privy Council or its own interests, which are not unified but quite diverse according to each military clique. As of 2017, the NCPO junta exerts veto power over an appointed cabinet and the judiciary while military courts are deemed higher than other courts. Other branches of the judiciary continue to function in a similar fashion as prior to 2014 but are subject to increased government intervention. It is assumed that a democratic separation of powers will exist again with the resumption of democracy, which the military has promised will occur in either late 2017 or 2018. However, the 2016 constitution, under which the new

democracy will exist, gives the military overwhelming power over a new diluted democracy. Thus, though there will be a separation of powers between democratic structures, the military will continue to exert power over the system. Meanwhile, the monarchy holds power over the military.

d. Stability of Democratic Institutions As of 2017, there are still no democratic institutions operating in Thailand. Even before the 2014 coup, most democratic institutions were under the tutelage of institutions which were not monitored by elected civilians, including the monarchy and military. The country is currently under military dictatorship, as enshrined under Article 44 of the 2014 military constitution. A 2016 constitution aims to reinstall democracy in Thailand, though it will be frail given that the monarchy and military will be able to dominate it. It has been said that democracy will return to Thailand in 2017, 2018, or perhaps 2019 or 2020. Nevertheless, this democracy will be weak as the monarchy and military will still hold sway over the system. Performance of democratic institutions 1 Supporters of the 2014 coup and the PDRC movement, which brought about this military intervention, would argue that the return of the military was part of a long-term plan to bring back a “true democracy” – one in which political elites would not be corrupt. The notion of democracy has been highly contested throughout the course of the decade-long political crisis in Thailand.

3. The 20 year National Strategy & Thailand 4.0

The government is implementing a number of measures to shift the country from a production-based to a service-based economy, promoting technology, creativity and innovation in the industries under focus. Successful implementation of the Thailand 4.0

policies could support the country’s development as a regional hub. Due to its abundance of agricultural products, decent infrastructure and road network, combined with investment promotion incentives, Thailand offers attractive investment opportunities.

a. Regulatory reform. The 20 year National Strategy acts as a mandatory guide for policy-making with the aim of creating a stable development path over the next two decades. Targets in the 2012-2016 iteration included a score of at least 5 in the Transparency International Corruption Perceptions Index as well as placing priority on national security and public administration reform.

b. Better intellectual property rights regime. Enacted amendments to the Trade Secret Act to cover online copyright infringement; and the Copyright Act which substantially reduced the penalties for trade secret disclosure by officers. Amended the Trademarks Act and introduced a new trademark filing system to enable Thailand to accede to the Madrid Protocol in 2017. The amendments include streamlining the trademark registration process and prohibiting illegal refiling, in order to bring the country’s regulatory regime up to date with technological changes.

c. Sustained growth. Mainly supported by strong external demand, a growing population and government policies aimed at boosting consumption and investment, including ramping up public spending on infrastructure.

d. Digital economy. Thailand aims to reform five key industries – automotive, electronics, affluent medical and wellness tourism, agriculture, and biotechnology – as part of its ‘S-Curve’ economic strategy, and is now working on five more including robotics, aviation and logistics, biofuels and biochemical, digital industry and medical services. The

government has created new digital innovation-based services and digital infrastructure to boost GDP with the goal of becoming an innovation-driven economy by 2036.

e. Low unemployment rate. Predominantly youthful workforce with basic literacy and numeracy skills. Has a primary education enrolment rate of 96.6% with positive outlook for basic skills. Human resource development to serve next-generation industries according to Thailand 4.0 policy. This will include up-skilling labor and recruiting more foreign workers to help develop Thailand’s existing and new industries such as robotics, aviation and logistics, biofuels and biochemical, digital, and medicine.

f. Tax incentives. Parliament passed an amendment to the Revenue Code permanently reducing the corporate income tax rate to 20%. The initial rate was reduced from 30% to 23% in 2012, and to 20% in 2013, helping to support Thailand to remain competitive in the ASEAN region. To stimulate the Thai economy, a temporary reduction of VAT from 10% to 7% has been extended. A similar trend has been seen in respect to personal taxation. Tax incentives available for Board of investment incentives, International headquarter and international trade center incentives, Small Medium Enterprises, and Accelerated depreciation on newly acquired equipment. And other factors such as No controlled foreign corporation rules, Foreign and domestic dividends exemption subject to conditions, 60 double tax agreements in place, and No indirect transfer rules.

g. Concluded / signed FTAs. Completed negotiations BIMSTEC (Bangladesh, India, Myanmar, Sri Lanka, Nepal, Bhutan, and Thailand). The framework agreement on the BIMSTEC FTA was signed in 2004, but is not yet fully operational. FTA under negotiation Regional Comprehensive Economic Partnership.

4. Foreign relations of Thailand with other countries

Thailand’s foreign policy included support for ASEAN in the interest of regional stability and more emphasizes on a close and longstanding security relationship with the United States. Thailand participates fully in international and regional organizations. It has developed increasingly close ties with other ASEAN members like, Indonesia, Philippines, Singapore, Brunei, Laos, Cambodia, Burma, and Vietnam. The foreign and economic ministers of this ASEAN Member hold annual meetings with Thailand. Regional Cooperation is in economic, trade, banking, political and cultural matters.

The ASEAN Summit is a biannual meeting held by the members of the Association of Southeast Asian Nations (ASEAN) in relation to economic, political, security, and socio-cultural development of Southeast Asian countries. In addition, it serves as a prominent regional (Asia) and international (worldwide) conference, with world leaders attending its related summits and meetings to discuss various problems and global issues, strengthening co-operation, and making decisions. The summit has been praised by world leaders for its success and ability to produce results on a global level. The league of ASEAN is currently connected with other countries who aim to participate on the missions and visions of the league. The league conducts annual meetings with other countries in an organization collectively known as the ASEAN dialogue partners. ASEAN +3 adds China, Japan, and

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