Not surprisingly, with the political leadership distracted by crises, the economy suffered as two decades of policy neglect left it unready to face a rapidly changing environment — surging competitiveness of rivals such as Vietnam and technological changes which undermined its existing growth engines such as its once-successful automotive sector. Thailand’s impressive technocrats did come up with new strategies such as the Eastern Economic Corridor but these were beset with implementation delays while political uncertainty deterred investment.
It's been a long and wearying last 20 years for Thailand. Beset by political crises, demographic decline and diminishing competitiveness, its economy once seen as an Asian tiger has been listless. Things got worse this year as Thailand took a double whammy from the war in the Middle East: Tourism, a major engine of growth, wilted and the energy price shock hurt it more than others because its economic structure is more exposed to oil.
Many years of disappointing performance have left investors with a wary view of Thailand. However, there are signs of a turnaround and it would be wrong to be too despondent about the country. The key change is political — the government formed after this year’s election appears to have brought a bit of a bounce back in Thailand’s step. Thailand still possesses great strengths — a good manufacturing base that is popular with foreign investors, its location within the growing Mekong region, competent technocrats and a flexible corporate sector that adapts effectively to a changing world. With political continuity and some reforms, the economy can regain some of its lost lustre — and help Thailand regain the clout it has lost in the region.
What has changed for the better?
Real power in Thailand lies with the “establishment”, representing the Palace, military and bureaucracy. From late 2004 until recently, Thailand suffered continuous political strife as the establishment fought off the influence of new emerging political forces then represented by the controversial former prime minister, Thaksin Shinawatra. The period saw two military coups, a long period of contentious military rule and then a series of short-lived prime ministers associated with Thaksin who did not survive the hostility of the establishment.
