Outward-looking policies and industrialization in Thailand (1970-1989)

In recent years, the outward-looking paradigm has been endorsed as a fundamental concept for economic development, replacing the preceding import substitution model. This is a study of how Thailand's outward-looking policies successfully transformed the economy from stagnation during the early 1980s to a boom economy before the end of the decade.;The export-oriented industrialization (EOI) policies, comprising import tariff reduction, export investment promotion and exchange rate devaluation, were among the most influential factors in this transformation. Under the EOI policies, the industrial sector continued to be the engine of growth. However, the share of the export industries became as large as the share of the formerly predominant import-substitution industries. Export demand expansion, especially of labor-intensive manufactured goods, became the major source of economic growth. The increase in job opportunities in the industrial sector absorbed more and more of the agricultural sector's surplus labor, and this created a positive 'resources reallocation benefit' in addition to the already high rate of industrial growth.;Although increases in the world export demand conceivably opened up possibilities for Thai export expansion, it is estimated that about 60 percent of the total export expansion was attributed by the internal policy changes. Among the EOI policies, exchange rate management played a crucial role in boosting the 'price competitiveness' of Thai exports vis-a-vis other exporting countries. It helped to increase the share of Thai manufactured exports in the world market during 1985-88 by 35 percent. Moreover, under the managing float exchange rate regime, the export price was more stable than when it was under the fixed-to-;Although the outward-looking policies may not be a general strategy that can be applied to all LDCs, the experience of Thailand seems to suggest that a step towards 'less protectionism' may be the right direction for achieving economic progress.