Thaksinomics: A New Asian Paradigm?

The Thai economy has performed extremely well in recent years. What is especially interesting is the unique set of economic policies implemented during this period of accelerated growth. Often dubbed "Thaksinomics," these policies represent a distinct break from the past. To Prime Minister Thaksin's followers the new economic measures are not only capable of returning Thailand to the pre-1997 glory days of high growth, hut perhaps even more importantly, enabling the country to successfully coexist economically with China. Key Words: Thailand: Asian Economic Crisis; Thaksin; Thaksinomics; East Asian Economic Model (EAEM); Dual Track Development Model; Globalization; Hernando de Soto; Small- and Medium-Sized Enterprises (SMEs); Washington Consensus; Rural development; Terrorism; APEC; Total factor productivity (TFP); Foreign Direct Investment (FDI). We must accept that the global economic landscape in the new millennium is much different than in preceding decades. Thaksin Shinawatra, Prime Minister of Thailand Introduction Prior to the Asian Economic Crisis sparked by the collapse of the Thai haht in 1997, Southeast Asia looked like a sure bet for a long period of high, sustained economic growth. Its membership in the elite group of industrialized countries seemed assured. The crisis came as a complete surprise to many area experts, and brought an end to the era of the "Asian Miracle." While growth rates are gradually edging upwards, the region has not been able to restore the pre-crisis mechanisms that propelled many of its countries out of poverty and into near affluence. As a region, Southeast Asia's economies are the most open to international trade. While such openness spurred their growth for several decades, in the post-1997 period it has left them increasingly vulnerable to adverse economic and political shocks. The region suffered a tremendous blow to its technology exports when the 2001-02 recession spread to the region following the collapse in America's information technology investment. Increasing competition with China for foreign investment and export markets is also making it harder for Southeast Asian economies to sustain growth rates approaching those attained in the pre-1997 period. Compounding the region's economic woes was the powerful Bali terrorist attack and its impact on tourism. U.S. and other Western intelligence sources have confirmed the presence of powerful terrorist networks throughout the region - Indonesia, Malaysia, Singapore, Thailand and Philippines. The openness of these economies makes them especially vulnerable to terrorist acts. Despite these challenges, the Thai economy began accelerating from a growth rate of 1.9 percent in 2001 (the year Dr. Thaksin was elected Prime Minister) to 5.3 percent in 2002, to a projected 6.5 percent in 2003, with forecasts of even higher rates in the next several years.' Compared with the Thailand that went hat in hand to the IMP in 1997, Thailand today is a nation transformed: in addition to its impressive growth, its foreign debt has dropped by two-thirds, and the stock market soared 69 percent during the first three-quarters of 2003.2 Thailand has built on its recent economic successes to quickly become one of the United States' most valued allies in Asia. The country has cooperated closely with the United States in regional counterterrorism operations and, unlike many nations, has actually made good on its pledges to send troops to Iraq as well as Afghanistan.3 The payoff is sure to be substantial, as evidenced by the United States' recent designation of Thailand as a major non-NATO ally4, and the beginning of negotiations for a free trade agreement between the two countries.5 Finally, the country's recent economic success has in the eyes of many observers6 elevated Prime Minister Thaksin Shinawatra to the status of likely successor to fill the void left as Malaysian Prime Minister Mahathir Mohamad steps down as head of APEC (Asia-Pacific Economic Cooperation). …