Journal Issue

Harmonious Development in Thailand

International Monetary Fund. External Relations Dept.
Published Date:
September 1966
  • ShareShare
Show Summary Details

Pierre A. Simonet

For the past ten years Thailand’s gross domestic product has grown at an average rate of almost 6 per cent a year, which is equivalent to a per capita growth in the region of 3 per cent. Prices over the same period have been remarkably stable; multiple exchange rates were abandoned in 1955, and since then the par value of the baht, the national currency, has been maintained at approximately B 21 per U.S. dollar. Despite a growth in population of 2 per cent a year during the early 1950’s, and of close to 3 per cent at the present time (causing in recent years an annual increase in rice consumption of more than 70,000 tons), rice exports have remained steady for the past ten years in the neighborhood of 1,400,000 tons. New products such as tapioca, kenaf, and corn have been capturing a growing share of exports (900,000 tons of corn in 1964, against 17,000 tons in 1947; during the last decade the increase has been continuous. This vigorous upward trend in non-traditional exports offsets for Thailand the world-wide drop in the price of natural rubber, whose share in exports has sunk from 25 to 15 per cent.

Official gold and foreign exchange reserves have increased steadily since the end of 1959, rising from $310 million to $700 million at the beginning of 1966, and currently amounting to the equivalent of one year’s imports. Since 1961 the economy has got off to a fresh start. Private capital from Hong Kong, Singapore, and Malaysia is even said to be flowing in for investment in Thailand. These changes have all taken place in a climate of political stability and economic liberalism and without any development plan (the first draft plan dates from 1961) that might have eased or accelerated them.

These are some of the facts of the success of a very successful economy. It is sometimes easier to expose the reasons for failure than to grasp the causes of success. The causes of the Thai success are certainly diverse, but they can at any rate be indicated under three main headings: national consciousness, human factors, and economic factors.


“Thailand” means “Land of the Free.” Prince Damrong, the distinguished statesman who brought in foreign advisors to help modernize the law and administration at the end of the nineteenth century, believed that the three principal national traits are love of national independence, tolerance, and the ability to assimilate. It is perhaps superfluous to dwell on the love of independence, for everybody possesses it individually, but the fact that it finds expression at the national level in real independence proves the existence of a solid and time-honored national consciousness and unity. Since Thailand was never colonized, it was spared the difficult transition from colony to independent country.

Nor has Thailand ever experienced wars of religion; it is a Buddhist country, and tolerance is notably a reflection of Buddhist philosophy, whose appeal is not to the sword but to moral and intellectual persuasion. Buddhist priests have for a long time played an important part in the wide dissemination of primary education, so that there is much less illiteracy in Thailand than in most developing countries. The frontiers have not been closed to foreigners. On the contrary, as long ago as the last century the Western powers were invited to provide technical aid for organizing and modernizing the Government and the army. There also exists a Chinese minority, and the Government has known how to make the best of their notable commercial talents.

The ability to assimilate goes hand in hand, to a certain extent, with tolerance. It implies a respect for foreign beliefs considered compatible with the customs of the country. It rejects fanaticism and ultranationalism. Furthermore, whether as a consequence of the system or of the national consciousness, the pattern of land tenure has not degenerated into the feudalistic type of agricultural exploitation that is still to be found in some Asian countries.


One particularly interesting thing about Thailand is that it provides an excellent illustration of an historic process of social change that goes hand in hand with economic and population growth in an agricultural economy; this is true even in the poor northeastern region which contains almost half the agricultural population. Except for a few low mountain ranges, northeastern Thailand is a very lightly rolling plateau. The undulations are so wide and the valleys so shallow that they are often imperceptible to the naked eye. The prime concern of the peasant is to cultivate rice, which is the staple diet and the traditional crop. To a certain extent this preoccupation acts as a brake on social change, but also, by recoil, it constitutes an incitement to effort when rice can no longer be grown.

The soil is uniform and of only middling quality, so that rice cultivation depends mainly on the quantity of water available. The people make the most of the broad valleys in the rolling terrain, where the streams and rivers flow and rain water collects naturally and can be stored easily between the low dikes of the rice paddies. Even so, the rainfall is barely sufficient and, even during the rainy season, three weeks of drought can seriously damage the crops.

Until a fairly recent historical period, all that had to be done to meet the needs of a growing population was to bring under cultivation new land situated in the most promising low-lying areas. But when—some 50 to 100 years ago—all the suitable land in the traditionally heavily populated provinces was used up, the peasant turned more and more to the marginal land. Since the hazards that attend cultivation of the soil, especially drought, have far more serious effects on marginal land than on other land, a move to marginal land calls for radical adaptation of a society for which the traditional agriculture can no longer provide enough food; the alternative is emigration.

In northeastern Thailand emigration leads the peasant or the young members of his family either to the city, where they find employment as manual laborers, or to other regions of the northeast, where they are offered work as agricultural laborers. There is no systematic exodus to the city, and Thailand is relatively little urbanized; a real attachment is felt to the rural environment, in contrast to the situation in feudal countries. In these countries the peasant emigrates to escape because of his mode of being; in Thailand peasants move because of an active desire for improvement that has a good chance of fulfillment.

Even so, adaptation is the preferred alternative. The peasant is more and more ready to change his techniques and to make the transition from flooded rice cultivation to dry crops and even to rice grown on dry land. The extraordinary increase in the production and export of corn, tapioca, and kenaf in recent years is an illustration of this process.

Nowadays, in a world in which population is rising so rapidly, we naturally have a very clear view of the dangers of overcrowding. The disadvantages of underpopulation, and the advantages that may be derived from a relative overpopulation, are not so easily seen. In areas where a more clement natural environment has enabled a sparse population to make a living, where there is no need to struggle hard for survival, and where people have not acquired the habit of exerting themselves in order to live better, taking things easy has become second nature. In his econometric studies of all the overseas countries of the French franc area, Mr. Maldant was able to prove that there was a definite correlation between population density per acre of arable land and per capita agricultural output measured at constant reference prices. Furthermore, in Africa the economically most advanced countries are generally those with the greatest population density. Nigeria is a good example of such a country, whereas other countries in tropical Africa illustrate the evils of underpopulation. In Cameroon, the most dynamic element in the population is the people who occupy the southwest plateau, where the population density is in excess of 150 inhabitants per square kilometer (against an average of 10 for the country as a whole).

Where there is relative overpopulation1 the transition to a modern economy is less difficult, and a progressive society is a prime asset in bringing about the change. People are already psychologically and socially prepared for new ways of thinking and acting.

A Favorable Social Structure

Nobody works for his own pleasure, especially when it comes to working under a hot sun in a rice paddy with his feet in the mud, when it would be so pleasant to stay at home in a thatched teakwood hut, lifted above the ground and reached by a ladder that always has an uneven number of rungs because that is pleasing to the gods. The Thai peasant might well be content to make just enough of an effort to maintain his standard of living. In reality, per capita output is rising and the sector of the economy that depends on marketing—the more modern, progressive sector—is growing even more rapidly than the traditional sector that lives on what it grows.

The sizable Chinese colony forms an integral part of the community, yet makes its own distinguishable contribution to progress. The Chinese Thais make up a class of entrepreneurs and merchants who are essential to the process of economic development. They are not concentrated in the cities only. Visitors are very happy to find them in small towns, where they run shops, hotels, and restaurants; in the country they make their presence felt in the spheres of rural credit and the marketing of agricultural produce and industrial enterprises for processing it. Although they are easily recognizable by their features, dress, and customs, they have succeeded in becoming a part of the nation.

This Chinese population, hard working and eager for power, probably would have brought the peasantry completely under it’s control, had it been permitted to do so, by the familiar stratagem of usury. This in turn might have led to a state of feudalism similar to that which came into being in China and Viet-Nam. But Thailand’s national feeling and old administrative traditions made it possible to curb the ambition of these promoters of economic liberalism, which, however, was throttled without being completely put out of action; and an equilibrium has been established whereby the Chinese entrepreneur exerts enough pressure on the Thai peasant to cause him to produce a marketable surplus without driving him to extremes.

The native peasants have indeed responded positively to all these incitements of the natural and the human environments. It is not unusual to find a peasant far out in the country trying out a new crop upon the advice, sometimes of the Government, but more often of a neighbor or even a Chinese who wants, for instance, to supply his new sugar refinery or who has been contacted by business circles in Bangkok to supply tapioca for export. In Roiet, the agricultural expert responsible for popularizing agricultural information succeeded in persuading a number of peasants to plant dry-soil rice, which grows very well. Peasants will travel 30 miles to see the results of innovation and, if convinced, will bring the new method back home.

In November 1962 the University of Kasetsart in Bangkok published the results of an excellent study on problems of cultivating and marketing corn in Thailand. Production rose from 17,000 tons in 1947 to 600,000 tons in 1961, 80 per cent of which is exported, mainly to Japan. Most farmers growing corn could read and write, and the majority were between the ages of 35 and 50. The growers got the idea of trying this new crop mostly from their neighbors, but when it came to deciding on methods of cultivation, they ranged further, and collected information from various sources, including the radio and the officials responsible for popularizing such information. Some of the new seed was provided by neighbors, but most of it (65 per cent) was bought from merchants sufficiently well informed by exporters about the marketing possibilities. The majority of the farmers questioned kept accounts and were able to show the cost of day labor, seed, interest, and hiring of draft animals. They secured loans from corn merchants (43 per cent), relatives (23 per cent), and grocers (14 per cent). The corn harvested is either brought to a local market by the growers or collected by merchants, the nature of the service being determined by criteria of cost in the broad sense of the term. Most contracts between local merchants and exporters are by word of mouth; the market functions very smoothly and there is very little government intervention.

The growers adapt quickly to changing market conditions. Thus in 1961, when production of sugar cane, which was experiencing a boom as great as that of corn, finally resulted in a surplus, the peasants replaced part of this crop with manioc. It is generally thought that the income from the supplementary crops does not go only into the pockets of middlemen, but that a fair share is left for the peasant, whose indebtedness is not greatly increasing.


It is impossible to deal in a few lines with all the economic factors involved in the development of Thailand, but although they give only part of the picture, two are inescapable.

Type of Economic Growth

Growth has depended very heavily on agriculture. This is in no wise at variance with the fact that agricultural production has grown less rapidly than industrial production, and can be explained on a number of grounds. Rice is husked increasingly by machine rather than by hand, even rice intended for family consumption. Thus even if there were no increase in agricultural production, industry would play a growing part. And the new ventures, such as cotton, kenaf, and sugar cane, give rise directly to industrial activity through backward linkage (fertilizers) or forward linkage (processed goods). Lastly, since industrial production starts from a very low level, it has much greater growth potential than agricultural production. In other words, if agricultural production increases in value by 3 per cent, B 50 million, as a result, for example, of an increase in the production of sugar cane, the processing of this sugar cane increases the production of the manufacturing sector concerned by B 30 million, that is to say, by 5-6 per cent. The same holds true for most agricultural production requiring some kind of processing operation.

The role of private foreign capital used to be negligible, but since 1962 it is being invested on a larger scale.

Foreign Aid

Foreign economic aid and public investment arrived in Thailand at a propitious moment in the country’s economic history, when there were easily identifiable economic bottlenecks, to which known and effective remedies could be applied in an area where foreign aid is particularly appropriate.

There was a great need to improve the communications network, increase the power supply, and expand the existing irrigation system. Foreign aid (from the United States and the World Bank) was, therefore, channeled toward this economic infrastructure and was easily absorbed because elements favorable to growth already existed.

The construction of roads and railroads led in turn to increased production because favorable geographic and human conditions were there already—the Chinese merchants were waiting for the roads to increase their volume of trade, and the Thai peasants were waiting for the Chinese to buy more and varied produce, which in turn was rendered possible by the light but effective incentive of the land-to-man ratio. The way was opened for a state of “equilibrium in motion” rather than one of “stationary equilibrium” or stagnation. Irrigation was a success because it was not new in a rice-growing country with a long tradition in this domain. Finally, the additional power found a natural outlet in small industries closely connected with agriculture and helped to expand them.

Furthermore, the increase in the production of rice, together with extensive diversification of agricultural production, and with the inflow of capital from foreign aid, have made it possible to maintain an ample balance of payments and, consequently, monetary and price stability.

Some Observations

The studies that I have made of development in Thailand lead me to offer some observations. These, like the studies themselves, are personal; other observers might derive other lessons. The study itself may seem optimistic and appear to present only the encouraging features. Actually, it is an analysis of the sociocultural setting against which development has been enabled to follow a course that has been, on the whole, harmonious. It will remain harmonious only to the extent to which the disequilibrium and tensions brought about by rapid growth are corrected as soon as they arise. Subject to this caveat, however, I hope my observations may have validity beyond the frontiers of Thailand.

• Progress may come from the “traditional” sector: It is often said that underdeveloped economies are two sided, with a modern sector and a traditional sector. The modern sector, because of its dynamism, productivity, and management and production methods, may be regarded as akin to the economies of developed countries. By contrast, the traditional sector seems set in its ways and entrenched in a subsistence economy. I do not agree with this division of the productive economy into two opposed segments. The example of Thailand, where the incentive to progress also comes from the traditional sector, is at any rate an exception to this dualistic theory.

• The demonstration effect is no substitute for self-induced social change: In Thailand, the change in the peasant’s mentality was not brought about by the demonstration effect, but rather by natural and human surroundings. Accustomed to effort in a demanding environment, the people have learned above all that wealth can be acquired only through work. In some other societies, the demonstration effect has displayed a whole arsenal of attractive consumer goods and possible forms of recreation to populations who behave like “economic man” only 50 days a year. Where this is the case, adjustment to new, artificially created needs has been achieved by speculation and guile, not by work.

• Aid is effective only in a favorable environment: Thailand carries its economic development within itself, as the vine bears fruit if it is planted in the right place at the right time. Aid has been effective, because it has indeed been applied to worthwhile projects, but also because the capacity for absorption was high. By capacity for absorption I mean not only the universal economic concept according to which a country is capable of transforming foreign capital into production, but also a whole set of historical, social, and natural preconditions that prepare a society in advance for harmonious economic development.

• Development and civilization: My study of Thailand has impressed me above all by the extent to which development is tied to civilization, religion, national consciousness, and national character, and also by the degree to which it is fashioned by history, thrown off balance by accidents (colonization, economic domination), or proceeds harmoniously when the course of events is less contrary.

This must be sharply distinguished from absolute overpopulation which means a population in excess of available resources.

Other Resources Citing This Publication