Introduction

Among the developing countries in Asia, Thailand stands out prominently in terms of economic growth and stability. Although not growing as fast as the newly industrializing economies (NIEs), Thailand's growth performance during the past three decades has been respectable by international standards. The industrial sector, led by manufacturing, has expanded substantially over the years, and there has been significant expansion of manufactured exports since the early 1970s. In recent years, the country also enjoyed a substantial increase in foreign investment inflows and foreign exchange earnings in terms of tourism and other service incomes.

In the early 1980s, Thailand was confronted by a number of external economic shocks: a sharp increase in oil price imports, a significant decline in export commodity prices, a large trade deficit, and increasing foreign debt. But since 1986, the economic situation has turned around rapidly. Economic growth has accelerated, export earnings have expanded, and foreign exchange receipts from tourism, foreign investment, and other forms of capital inflows have helped to alleviate the country's external balance problems. Although some basic economic problems such as rural poverty, disparity in income distribution and a prolonged foreign trade deficit remain, it is widely believed that Thailand's overall economic performance will continue to be strong for the next several years. Some even predict that Thailand will be able to join the club of newly industrializing economies in the 1990s.

Over the last three decades, Thailand has gone through the process of industrialization characterized by import substitution, and, since around the mid-1970s, industrial exports have expanded. Compared with other developing countries in East Asia, industrialization started rather late in Thailand. During the 1960s, when the Asian NIEs -were rapidly expanding their manufactured exports, the process of import substitution had just begun in Thailand. Exports of manufactures were not significant in terms of proportion of total exports until the late 1970s. At present, manufactured exports comprise over 60 percent of the country's total merchandise exports, as compared to less than 30 percent for agricultural exports. With the expected higher growth of manufactured exports relative to exports of agricultural and mineral products, the share of manufactures in total exports will be even larger in the years to come.

This paper reviews the industrialization process in Thailand in the last three decades, with an emphasis on the transition from import substitution to export expansion in the industrial sector.