1 International Trade and Finance of Thailand (Part 1)

2 References พรายพล คุ้มทรัพย์ เศรษฐศาสตร์การเงิน ระหว่างประเทศ : ทฤษฎี และนโยบาย 2547 บทที่ 10

3 International Economic Relations 2 types: Exchange of goods and services – exports and imports Investment and loans

4 Benefits of International Economic Relations  Specialization, based on comparative advantage  Expand market size  Transfer of knowledge and technology

5 Benefits of International Economic Relations Economic growth  Income and employment

6 Costs of International Economic Relations  Fluctuations in world trade and capital flows  Foreign domination

7 Costs of International Economic Relations  Economic and social imbalance among people with different opportunity, education, and economic status

8 International Trade and Financial Structure Foreign trade has increased rapidly (exports and imports as % of GDP)

9 Year(X+M)/GDP % % % % % % % % % %

10 Year(X+M)/GDP % % % % %

11 Import structure has hardly changed, mainly capital goods, raw materials, and crude oil International Trade and Financial Structure

Consumer goods 7.82%8.56%9.91%10.43% Non-durable 3.91%3.77%4.28%3.90% Durable 3.92%4.79%5.64%6.52% Intermediate, raw materials 35.74%34.08%30.94%28.86% For consumer goods 23.72%23.49%20.67%19.08% For capital goods 12.02%10.60%10.28%9.78% Capital goods 37.71%39.55%42.14%45.19% Others 18.72%17.80%17.00%15.52% Total % Import Pattern of Thailand

13 Import Pattern of Thailand

14 Import Pattern of Thailand

15 Mostly import from industrial countries (esp. Japan), but declining share Recently import more from ASEAN and China International Trade and Financial Structure

Japan27.50%30.08%29.96%28.06%24.30%23.18% U.S.A.13.38%10.88%11.75%12.83%12.74%10.17% E.U.15.44%13.86%14.21%14.48%11.32%11.03% ASEAN13.57%12.42%12.52%12.58%15.70%16.56% Middle East4.53%3.92%3.44%5.71%9.04%9.49% China3.41%3.11%2.62%3.10%4.94%7.25% South Korea2.57%3.51%4.05%3.59%3.50%3.73% Taiwan3.91%4.99%5.20%4.58%4.83%4.32% Others15.69%17.23%16.26%15.06%13.63%14.27% Total100% Sources of Thailand’s Imports

Japan 21.7%19.2% U.S.A. 7.5%6.5% E.U. 9.2%8.5% ASEAN 17.9%17.6% Middle East 13.0%13.9% China 9.6%11.8% South Korea 3.7%3.9% Taiwan 4.0%3.7% Others 13.4%14.9% Total 100.0% Sources of Thailand’s Imports

18 International Trade and Financial Structure Diversify exports in type and market High growth of manufactured Declining trend in labor-intensive Increasing trend of hi-tech products

19 International Trade and Financial Structure Diversify exports in type and market High growth of manufactured Declining trend in labor-intensive Increasing trend of hi-tech products

Agriculture11.83%11.39%11.40%11.84%10.18% Fishery5.95%5.97%5.06%4.50%4.00% Manufacture80.41%81.12%81.87%81.54%82.42% Labor-intensive22.35%21.42%19.28%16.20%14.34% Hi-tech42.84%44.25%46.86%49.39%52.46% Natural resource-based9.19%9.12%9.14%9.57%9.02% Others1.81%1.52%1.67%2.13%3.40% All groups100% Export Pattern of Thailand

Agriculture9.39%8.35%7.11%7.36%7.57%8.30% Fishery3.97%3.56%3.31%3.12%2.41%2.19% Manufacture % % % % % % Labor-intensive % % % % % % Hi-tech % % % % % % Natural resource-based 8.65%8.97%8.04%8.56%8.60%8.25% Others4.33%3.87%4.08%4.51%4.36%3.70% All groups100% Export Pattern of Thailand

22 International Trade and Financial Structure More than half depend on developed countries (largest market in the U.S.), but declining shares Increasing share of export to ASEAN and China

Japan15.17%17.50%17.19%16.09%14.23%14.68% U.S.A.19.09%21.84%21.61%18.57%21.72%18.91% E.U.21.39%20.52%16.79%15.75%16.72%15.24% ASEAN12.95%11.60%15.55%18.85%17.83%19.98% Middle East8.82%5.50%4.27%3.88%3.37%3.55% China3.12%1.60%1.61%3.11%3.55%5.64% Hong Kong4.25%4.44%5.10%5.67%5.08%5.29% Others15.20%17.01%17.88%18.06%17.50%16.71% Total100% Markets for Thailand’s Exports

Japan 13.3%11.1% U.S.A. 15.4%11.7% E.U. 14.1%13.1% ASEAN 21.6%21.7% Middle East 4.1%5.3% China 8.3%9.7% Hong Kong 5.4%5.8% Others 17.7%21.5% Total 100.0% Markets for Thailand’s Exports

25 International Trade and Financial Structure Trade in services: always in surplus due to income from tourism and Thai workers abroad

26 International Trade and Financial Structure Foreign Direct Investment (FDI): Large influx of investment from Japan and NICs in late 1980s Another wave to buy companies after the 1997 crisis Insignificant Thai overseas investment

Direct investment2,4021,8662,0151, ,1691,4553,180 Foreign direct investment2,5422,0332,1511,7321,3262,0042,2713,627 Thai direct invest abroad Others loans4,5355,6612,846-2,432-5,8451,5185,451-3,688 Foreign loans4,5355,6612,846-2,429-5,7781,5195,531-3,735 Thai loans Portfolio investment ,8521,1103,4203,4884,550 Equity securities , ,2541,1233,987 Debt securities ,1651,5041,1662, Non-resident baht account1,3362,0421,7072,6852,0663,4072,924-5,812 International Capital Flows of Thailand

Direct investment5,0193,2182,7613, ,394 Foreign direct investment5,1433,5622,8133,8731,0231,815 Thai direct invest abroad Others loans-3,713-4,359-4,509-2,786-2,200-1,373 Foreign loans-3,769-4,312-4,495-2,797-2,226-1,326 Thai loans Portfolio investment , Equity securities Debt securities , Non-resident baht account-4,300-2, ,286-5,042-6,006 International Capital Flows of Thailand

29 (Million US$) p2007p Direct investment 4,9526,4379,1916,134 Foreign direct investment 4,9566,50310,0317,451 Thai direct invest abroad ,317 Others loans 708-1,3572,8811,373 Foreign loans 548-1,3082,8671,356 Thai loans Portfolio investment 1971,8761,642-5,180 Equity securities 1801,6142,3532,366 Debt securities ,546 International Capital Flows of Thailand

30 Portfolio investment: Fluctuate a lot Increasing impact on Thai stock market International Trade and Financial Structure

31 Foreign loans: Before the 1997 crisis, government borrowing declined, but the private sector borrowed heavily Continuous debt repayments after the crisis International Trade and Financial Structure

32 (in million US$) Government 13,068 14,171 15,715 16,402 16,801 24,082 Private sector 30,553 37,936 49,152 84,430 91,941 85,194 All debts 43,621 52,107 64, , , ,276 Long-term 24,707 29,473 35,688 48,434 60,999 70,982 Short-term 18,914 22,634 29,179 52,398 47,743 38,294 All debts/GDP (%) Reserves/S-T Debts (%) Foreign Outstanding Debts of Thailand

33 (in million US$) Government 31,578 36,228 33,913 28,306 23,305 16,959 Private sector 73,484 58,823 45,802 39,203 36,154 34,723 All debts 105,062 95,051 79,715 67,509 59,459 51,682 Long-term 76,641 75,512 65,021 54,120 47,540 40,830 Short-term 28,421 19,539 14,694 13,389 11,919 10,852 All debts/GDP (%) Reserves/S-T Debts (%) Foreign Outstanding Debts of Thailand

34 (in million US$) Government14,93013,99414,09212,043 Private sector36,38238,04545,55149,695 All debts51,31252,03959,64361,738 Long-term39,13835,63141,08940,098 Short-term12,17416,40818,55421,640 All debts/GDP (%) Reserves/S-T Debts (%) Foreign Outstanding Debts of Thailand

35 Chronic deficits in current account before 1997 Continuous surpluses in trade and current accounts since 1998 after floating the baht International Trade and Financial Structure

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37 Current Account and GDP of Thailand Year Current a/c balance Nominal GDPCurrent a/c balance (mill. baht)(bill. baht)As % of GDP ,2224, % ,1704, % ,9884, % ,5124, % ,8105, % ,0295, %

38 Before 1997, the balance of payments was always in surplus because of large inflows of foreign investment and loans, leading to accumulation of international reserves International Trade and Financial Structure

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40 Year End of Year Reserve s 19761, , , , , , , , , ,725 Thailand’s International Reserves Unit : mill. US$

41 International Trade and Financial Structure Big drop of reserves from defending the baht in 1997 After the crisis, large outflows of capital to repay foreign debts, causing deficits in BOP

42 International Trade and Financial Structure The baht depreciation greatly helped exports, causing surpluses in current account and BOP Reserves started to grow again

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45 Thailand’s Reserves (including net forward position) Unit: mill. US$