"Globalization isnt a new concept - its been around since before Britain ruled the waves - and waived the rules. What is new, is the extent to which information flows have exploded. You all know this, because you now have to deal with the consequences for your businesses not just quarterly or annually, but daily, hourly and sometimes by the minute. The world is a much smaller, and vastly more transparent and democratic place, than when Tulip futures peaked in Amsterdam in the 17th century" (World Trade Organisation, 2010) .
Furthermore it is not something which is unique to us all now 1870 - 1914 was the first flourish triggered by technological developments in transportation. Primarily dominated by America and Europe the outbreak of World War 2 bought to an end. Then there was a second wave which invoked nationalism and the lowering of transportation costs. A significant increase in per capita income for developed nations occurred. The current phenomena commenced in the 1980's. This time a large number of developing nations, including Thailand, are prominent. An increase in capital movement, a lessening of the mobility of labour and the out sourcing of both blue collar and white collar jobs from the USA to low cost nations have become predominate and the key characteristics this time round.
In recent times we find a push towards Neoliberalism which is a market driven approach to economic and social policy based on neoclassical theories such as Heckscher-Ohlin theory. Gains arise because international trade allows a country to specialise in the manufacture and export of products that can be produced most efficiently in the country, while importing products that can be produced more efficiently in other countries (Hill 1994).
According to Hill, globalisation of markets refers to the merging of historically distinct and separate national markets into one huge global market (Hill 1994). Fundamentally there are a number of key issues that need to be present for globalisation to succeed. Economic openness; trading economies free from trade barriers and the GDP is dominated by dominant imports and exports .
Openness - measure of the importance of international trade . The calculation is as follows:
Equation Openness, Source: (Moazzem Hossain 2010).
Table Exports and Imports of Goods and Services. Source: (World Bank 2010).
Table 1 shows countries with a high figure have imports and exports dominating their annual economic trading positions. Competitive advantage, Ricardo's Theory, advocates potential world production is greater with unrestrictive free trade than it is with restrictive trade (Hill, 1994 p. 176).
The textile and apparel industry of Thailand has a low labour comparative advantage a major contributing factor to its economic success and being a key player. Over the past five decades, Thailand's apparel industry has enjoyed continual growth and success. Owing to increased global trade activities, the apparel industry has contributed significantly to the country's economic and social development. Together, the textile and apparel sectors make for the top revenue generating industries in Thailand, employing more than one million workers. In 2007, these industries accounted for 4.5 percent of the total GDP and employed approximately 20 percent of the total industrial labour workforce (Thailand Textile Institute, 2009; TTIS Textile Digest, 2008; WTO, 2008). The World Trade Organisation (WTO), until 1 January 1995 was known as GATT, essentially a key advocate and strongly in favour of the promotion of Free Trade. Where countries have faced trade barriers and wanted them lowered, the negotiations have helped to liberalize trade. Note ably the Agreement on Textiles and Clothing (ATC) and all restrictions there under terminated on January 1, 2005 (World Trade Organisation 2002). This is well illustrated in the following table. Progressively increasing the total exports each year.
Table Import and Exports Trade Balance Source: Thailand Textile Institute's Report (2008) .
The openness of Thailand's economy and the policies of the government, through the Board of Investment (BOI), have been major contributing factors for Foreign Direct Investment (FDI) into Thailand and such industries as the textile industry. The benefits to economy are as follows:
Further promotion and increase of exports strengthens Thailand's balance of payments.
Local employment is increased.
Areas outside Bangkok are developed
Establishment and development of new industries forms a basis for the further development of technological supplies.
Incentives offered by the BOI include; corporate income tax and import tariff incentives are offered to businesses whose activities fall under the BOI's priority industries, or who operate in Export Processing Zones (EPZ) (Thai Portal Co. 2010).
In recent years there have been monumental foreign direct investments Thailand as the untapped potential is finally realised. Table 3 aptly illustrates this point.
Table FDI and GDP Growth for Thailand Source:(Bank 2010).
In the previous paragraph we mentioned further technological supplies. This is an area which is having a major prominence in globalisation. It is referred to as the "New Economy" or the new "Knowledge Century". Two major factors have attributed to its emergence:
1. Technological growth and the subsequent innovation of knowledge based goods and services.
2. The globalisation of international trade and related economic activities.
The key drivers behind these are:
Information and communications technology (ICT)
Foreign Direct Investment (FDI) in IT/Software goods and services.
New IT Enabled Services (ITES)
"The primary challenge for Asia in the new century will centre on how best to meet the increasing pressures of global competition in light of the knowledge-based economy and the equally urgent need to close the digital divide, cope with convergence of diverse technologies, and develop a new paradigm of development based on globalisation and localisation," the Prime Minister of Thailand, H.E. Thaksin Shinawatra (Asian Development Bank, 2001).
We see a lot of activities which are driving Thailand into the "New Economy", an economic system which is driven by knowledge, good management, computer networks and electronic commerce (Koanantakool, 2000).
The Thailand government has taken a number initiatives to ensure this achievable:
A seven billion baht budget , over a five year period for strategic R&D projects particularly in the area of modern telecommunications equipment.
In March 2000 an end to the telecommunications monopoly held by Communications Authority of Thailand (CAT) and the Telephone Organisation of Thailand (TOT) .
Electronic transactions will be supported by legal infrastructure following the passing of new Acts in parliament.
A better focus on optimising the use of computers in schools
Consideration of the availability of free internet access.
Mobile phones will become cheaper as a result of increased competition and FDI.
A stronger Thai software industry the support of the Software Park Project (http://www.swpark.or.th/) as well as new opportunities opened by E commerce.
Software Park is one of the most successful projects under taken by the Thailand Government . It is the most unique infrastructure ever built specifically as a result of restructuring the software industry in 1999. Here local software developers can enjoy professional support for international marketing, a one stop shop for potential customers and having such world leading bodies as IBM, Intel and Informix investing in R&D infrastructure. Furthermore to ensure future competition, Software Park is sponsoring further education for Thai software companies.
The Global Financial Crisis (GFC) in 2009, which started in the United States and transmitted to the rest of the world, was also related to problems in the financial sector of developed countries. Thailand should be able to deal with the global recession better than it did 10 years ago because the country has already undergone financial reform after experiencing both banking and currency crises. Unlike the recession in 1998, which was attributed to the precipitous fall in consumption and investment, the current crisis is triggered by the collapse of Thai exports. Nidhiprabha, B.(2009). Thailand's top three trading partners; as indicated in Table 2 for Thailand.
Table Thailand's Major Exporter's Source: (Thailand Government, 2010).
The USA, the EU and Japan are all not performing well in the current Global Financial Crisis. In the USA financial stability has improved substantially however there is still large scale government sponsorship inferring a lot of risk has been transferred from private enterprise to public balance sheets. It is still going to be some time before consumer confidence returns. This is very much reflected in the figures of Table 2. In Europe, the EU, there are coordinated efforts and announcements of ambitious fiscal reform. Many individuals are sacrificing and sharing the burdens of a highly public debt. Such individual nations include the likes of Greece and their financial rescue package given by Germany. Access to funding remains very limited and there is the fact of rising costs. In many instances to ensure the continual rebuilding of the financial systems continues resilient financial systems remain in force. In Japan over time, the factors presently supporting the Japanese bond market-high private savings, home bias, and the lack of alternatives to yen-denominated assets-are expected to erode as the population ages and the workforce declines(International Monetary Fund 2010).
Overall, as is reflected in Table 5, showing Thailand's GDP both before and post GFC the economy has been very resilient to sovereign financial strains of the advance economies.
Table Thailand's GDP Source (National Statistics Office Thailand 2010).
Currently Thailand is in the midst of a twin crisis. Namely an internal political crisis and the Global Financial Crisis. Thailand's ongoing political conflict is about a challenge to the social dominance of the country's traditional elite - the educated Bangkok middle class, including the civil service, the military, and the aristocracy (Warr 2009). Appealing to massive rural sector a challenge rose from a group of political entrepreneurs. Thaksin Shinawatra being the most important. In 2001 and again in 2005, as a clever business tycoon, he was elected to the chair of Prime Minister with an overwhelming majority. In 2006 he was disposed by a military coup for alleged corruption and disloyalty to the monarchy. While in exile a court order saw the disbanding of his political party, the Thai Rak Thai for electoral fraud. Furthermore it was established Thaksin abused his position as Prime Minister, having a conflict of interest, giving support to his wife's business dealings.
In subsequent elections , held in 2008, The People's Power Party (PPP) the successor of the deposed Thai Rak Thai party won power in their own right Samak Sundaravej a veteran politician became their leader. This once again out raged opponents identifying themselves with yellow arm bands the colour of the monarchy, they called themselves the People's Alliance for Democracy (PAD). Wearing red, Thaksin's party opening clashed with PAD due to the fact that essentially they were no more than proxies of Thaksin's party. Once again the Constitutional Court ruled a conflict of interest existed while in the Prime Minister s Office, Samak continued with his interests in television This was ruled to be unconstitutional and he was ousted from power. The ruling party promptly replace him with Somchai
Wongsawat, Thaksin's brother in law. Once again the PAD party seethed with rage. On 25 November they seized Bangkok's Suvarnabhumi International Airport in protest and demanded Somchai step down. After eight day the Constitutional Court voted all three coalition parties, included the PPP be disbanded for election fraud. Behind the political soap opera lies something basic: a dispute about the meaning of democracy, or at least the form that democracy should take in Thailand(Warr 2009). For now with Thailand in the grip of the GFC politics has taken a back seat.
Thailand is not going to see any significant improvement soon. Invariably there has been a contraction of the economy. The key to recovery is in consumer confidence. We can see in the following Graph that imports have dropped of significantly which is indicative in the decline of consumer confidence.
Table Decline in Consumer Confidence Source: (World Bank 2010).
Policymakers must tackle the following key reforms in order to ensure a viable global
financial system and safeguard the recovery:
(1) Deal with the legacy problems in the banking sector, including, where necessary, recapitalization;
(2) Strengthen the fundamentals of sovereign balance sheets; and
(3) Continue to clarify and specify regulatory reform, building on the substantial improvements proposed by the Basel Committee on Banking Supervision (BCBS) (International Monetary Fund 2010).
Research shows that Thailand is very much progressing towards a globalised economy. It is very much evident, too, that Thailand fits adeptly into Professor Akamatsu's "The Flying Geese Theory" (Huang 2010). in which he divided countries of different levels of industrialization and economic development into three categories: late developing countries, industrially advanced countries and newly rising countries (Huang 2010). However due to recent global events the rate of progress has been significantly impeded and the annual rate of growth has been substantially retracted. An interesting phenomena has emerged as a result of this global calamity with the current slowdown in growth in advanced countries, emerging markets, in general, have become increasingly attractive to investors because of their relatively sound fundamentals and stronger growth potential (International Monetary Fund 2010). This is very much apparent in FDI shown previously in Table 3.
Globalisation is here to stay and as a consequence of economic reform measures such as trade liberalisation and foreign trade investment (FDI), new economy indicators and macroeconomic performance the new economy is on a perpetual evolving path. Thailand is emphatically apart of this and is increasing demonstrating its leadership in economies of Asia if not the world.
