Discuss about the Journal of Development Economics for Trade Policy.
Globally, increased rate of Gross Domestic products increases the rate of both local and foreign investment. An increase in the amount of GDP of a particular country is a clear indication that the economic growth and development of that country is booming. Usually, foreign investors often research the level of the Gross Domestic Product of a state before making investment decisions (Bown, 2014). Increase in per capita income and the GDP shows the productivity of a given country, their motivation towards work and how aggressive the inhabitants of that particular country are as far as working is concerned.
This report performs a country analysis of a selected country whose Gross Domestic product is rapidly increasing to create attractive investment opportunities for foreign investors. This report will deal with Thailand as the case study because it has an increasing GDP that has attracted investment opportunities and hence meets the selection criteria. For complete assessment, the report will look at the general overview of the country, its political, economic, socio-cultural and technological influences as far as the increase in the level of GDP is concerned. The report will also look at natural resource endowment of the country that creates its competitive advantage as well as foreign currency and exchange influences. The report will lastly look at the existing trade policies of the state as well as the current levels of direct foreign investment in Thailand. From the discussions, the report will conclude and give recommendations.
Thailand is a country that is located in Northern Asia which borders Lao, Cambodia, and Malaysia. It came into being the mid 14th century initially under the name Siam. It was later named Thailand meaning land of the free in 1939. Thailand is a democratic country, and it is the second largest economy of Southeast Asia after Indonesia. Its infrastructure is well developed, and it has a free enterprise economy as well as pro-Investment policies. From history, Thailand has had a strong economy. Thailand is one of the countries that have experienced a rapid GDP growth over the last few years. Its economic growth in the first two quarters of the year 2017 was found to be the strongest in the previous four years. This rapid growth resulted from an increase in export, agriculture and other key production sectors such as manufacturing, hotels and restaurants, construction among others.
Indisputably, political, economic, cultural and technological factors significantly affect the level of GDP in any given country. In this case, Thailand is no exception. These factors have positively impacted the GDP level in the Thailand economy. Between the year 2013 and 2015, Thailand experienced a slow GDP growth as a result of domestic political disorders that led to sluggish global demand (Petri, 2016). This turmoil dropped the Thailand strong exports such as electronics, processed foods, automobiles as well as agricultural products. However, after the resumption of democratic rule in 6th April 2018, the GDP of this country has been booming thereby attracting foreign investors.
Economically, the country has been doing well over the last four decades. It has managed to migrate from a low-income country to an upper-income country within a period less than a generation. It has been one of the countries cited with successful development stories with strong economic growth and reduction of poverty (Salacuse, 2015). This benefit has been gotten from sturdy and functional economic policies exhibited by this country. It has well laid long-term economic goals for development which address issues such as economic stability, environmental sustainability, competitiveness, human capital, equal economic opportunities and effective government bureaucracies. This step has bolstered its economic growth hence increased foreign investment.
As far as socioeconomic factors are concerned, Thailand has various benefits attested to this factor. Firstly, even though there are various ethnic groups in Thailand, there is no discrimination. Discrimination negatively affects the economic growth of a given country. Again, both genders are motivated towards work (Chunhawong, 2016). Their culture is such that everyone is in a position to work hence reducing the dependency ratio. Thailand has also enjoyed technological benefits as far as the increase of GDP is concerned. This country makes use of new production technologies for agricultural products, food processing, manufacturing among others. This move has increased the level of productivity thereby boosting GDP. This aspect has lead to increased foreign investment attraction.
In any given country, natural resources and factor endowment act as a competitive advantage. When natural resources are located in a particular country, the country uses them free of charge as factors of production thereby reducing the cost of production. This step results in an increased economic growth hence boosting the GDP (Bown, 2016). Contrary to this situation, whenever a country lacks or does not have enough natural resources, it is forced to purchase them from other countries hence increasing the cost of production.
Thailand is one of the countries endowed with quite a good number of natural resources. Some of its mineral deposits are tungsten, tin, lead, gold, coal, zinc, manganese and other precious stones. Another major natural resource in Thailand is the rich alluvial soil that is found along Chao Phraya and other rivers (Teeraananchai, 2017). In 1970, natural gas was discovered in Thailand thereby reducing its reliance on imported petroleum (Tanna, 2014). Thailand also has other precious resources such as beautiful natural plants and many species of wild animals which serve as tourist attraction sites. Other resources are fishing that constitutes roughly 10% of the country’s earnings.
As a result of proper natural resource endowment, Thailand has experienced fast economic growth. The natural resources found in this country have served as a competitive advantage against other countries because it uses cheaper production resources. Other countries have to buy these resources for them to produce (Samah, 2015). As a result, Thailand has enjoyed a steady economic growth that has boosted the country GDP hence inviting foreign investors.
The foreign currency has a significant impact on the economic growth and the GDP of any country. Thailand’s most significant percentage of GDP comes from the export of agricultural products, electronics, and processed food among others. This fact implies that foreign currency gotten as a result of export affects the country’s level of GDP so much. Thailand is associated with the gross export of products to all other parts of the world (Khaenson, 2017). Tourism also earns the country a considerable amount of foreign exchange. All these income sources combined increase to the level of the country’s GDP, and this attracts foreign investors because they believe that that country has a right business environment ranging from raw materials to human resources.
The trade policies stipulated by a particular country as well as available incentives determine the business environment. It determines whether investors will be attracted to the industry or they will shy away from investing in that given country (Gheewala, 2014). For instance, Thailand has favorable trade policies that have enabled it to exploit a wider market. It prioritizes in making strong international relations and partnerships for development through regional economic associations. Thailand also exploits international relationships for the enhancement of national competitiveness.
Thailand makes use of a fully computerized trading system which began in April 1991 through the Automated System for the Stock Exchange of Thailand usually abbreviated as (ASSET) (Supasa, 2015). This move brought about trade fluidity, transparency, and effectiveness. Due to the changing nature of the business environment, this system changed to Advance Resilience Matching system which featured increased risk management and redundancy of the system.
In the zeal to protect domestic industries as well as the balance of trade, Thailand has several trade barriers which are achieved through various ways such as high licensing and import requirements, price controls and excise tax (Regnier, 2017). In Thailand, incentives are given to those projects that are expected to bring new technologies to the country especially those that are ready to invest in provinces that are less developed.
Thailand has enjoyed direct foreign investment for quite some time now. This investment has been one of its essential elements in economic prosperity (Tulevech, 2016). This country offers a legal framework that is attractive and modern and regional dynamism has given it a lot of benefits as far as economic prosperity is concerned. As spelled out by the Bank of Thailand, the level of foreign investment drastically declined from USD 15.5 billion to USD 3 billion in the year 2016. This decrease was as a result of political tension (Todoc, 2015). However, the foreign investment level increased to USD 8 billion in 2017.
This country is experiencing an increased level of direct foreign investment due to some reasons. The presence of a skilled workforce and a strategic placement of the country in the heart of Asia are some of the factors that have led to increased direct foreign investment (Fujiwara, 2014). Other factors which increase the level of direct foreign investment in Thailand are excellent government policies promoting free trade and investments, presences of several government agencies that help visitors, and the presence of an investment supporting the regime.
From the above research, it has been found that the Gross domestic product of a given country is an attractive force for foreign investors. Political stability and good socio-cultural practices favor economic growth. Natural resource endowment leads to low costs of production improving the productivity of the host country. Foreign currency resulting from exports and foreign exchange increases the Gross Domestic Product of any given country.
Following a detailed assessment of Thailand as the case study in this report, I would recommend that other countries adopt the trade policies, systems, and incentives exhibited by Thailand. I would also recommend other countries to ensure that they are politically stable and that their socio-cultural patterns boost economic growth.
References
Bown, C., 2014. Emerging economies, trade policy, and macroeconomic shocks. Journal of Development Economics, 7(4), pp.59-72.
Bown, C., 2016. The empirical landscape of trade policy. In Handbook of Commercial Policy, 5(9), pp.77-90.
Chunhawong, K., 2016. Sugar Industry and Utilization of Its By-products in Thailand: An Overview. Sugar Technology, 5(9), pp.57-67.
Fujiwara, M., 2014. Overview of the Past and Future G&G Activities in the Pattani Trough, Gulf of Thailand. CHIANG MAI JOURNAL OF SCIENCE, 6(8), pp.75-97.
Gheewala, S., 2014. Water stress index and its implication for agricultural land-use policy in Thailand. International Journal of Environmental Science and Technology, 5(8), pp.45-53.
Kenson, W., 2017. Assessment of the Environmental Impact of Biomass Electricity Generation in Thailand. International Journal of Renewable Energy Research, 5(7), pp.47-66.
Petri, P., 2016. The interdependence of trade and investment in the Pacific. In Corporate links and foreign direct investment in Asia and Pacific, 6(8), pp.67-88.
Regnier, P., 2017. Small and Medium Enterprises in Distress: Thailand, the East Asian Crisis and Beyond. Thailand, the East Asian Crisis and Beyond, 6(8), pp.98-102.
Salacuse, J., 2015. The growth of bilateral investment treaties and their impact on foreign investment in developing countries. In Globalization and International Investment, 65(7), pp.12-21.
Samah, M., 2015. Muslim Family Law in Southern Thailand: A Historical Overview. Journal of Muslim Minority Affairs, 9(5), pp.77-89.
Supasa, T., 2015. Has energy conservation been an effective policy for Thailand? An input-output structural decomposition analysis from 1995 to 2010. Energy Policy, 34(8), pp.53-66.
Tanna, S., 2014. The Relative Importance of Trade vs. FDI-Led Economic Growth in Thailand. Foreign Direct Investments (FDIs) and Opportunities for Developing Economies in the World Market, 7(9), pp.34-54.
Teeraananchai, S., 2017. The loss to follow-up and associated factors of patients through the National AIDS Program. Journal of Business Assessment, 7(9), pp.54-65.
Todoc, J., 2015. Overview of Thailand Energy Sector. Energy Indicator for Sustainable Development. United Nations Department of Economic and Social Affairs, 3(8), pp.65-77.
Tulevech, S., 2016. Life cycle assessment: a multi-scenario case study of a low-energy industrial building in Thailand. Energy and Buildings, 5(4), pp.44-56.
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