by Kevin Latner
Area: total area: 514,000 sq km
land area: 511,770 sq km
comparative area: slightly more than twice the size of Wyoming
Land boundaries: total: 4,863 km
border countries: Burma 1,800 km, Cambodia 803 km, Laos 1,754 km, Malaysia 506 km
Coastline: 3,219 km; maritime claims: continental shelf: 200-m depth or to the depth of exploitation exclusive economic zone: 200 nm; territorial sea: 12 nm
Land use: arable land: 34 percent; permanent crops: 4 percent; meadows and pastures: 1 percent; forest and woodland: 30 percent; other: 31 percent; irrigated land: 42,300 sq km (1989 est.)
Population: 58,851,357 (July 1996 est.)
Age structure: 0-14 years: 25 percent (male 7,627,916; female 7,351,264)
15-64 years: 69 percent (male 19,994,884; female 20,576,141)
65 years and over: 6 percent (male 1,468,814; female 1,832,338) (July 1996 est.)
Economic overview: One of the more advanced developing countries in Asia, Thailand depends on exports of manufactures - including high-technology goods - and the development of the service sector to fuel the country's rapid growth, averaging 9 percent since 1989. Most of Thailand's recent imports have been for capital equipment and raw materials, although imports of consumer goods are beginning to rise. Thailand's 35 percent domestic savings rate is a key source of capital for the economy, and the country is also benefiting from rising investment from abroad. The government is beginning to address Thailand's serious infrastructure bottlenecks, especially in the transport and telecommunications sectors. Over the longer term, Bangkok must produce more college graduates with technical training and upgrade workers' skills to continue its rapid economic development.
GDP: purchasing power parity - $416.7 billion (1995 est.)
GDP real growth rate: 8.6 percent (1995 est.)
GDP per capita: $6,900 (1995 est.)
GDP composition by sector: agriculture: 10.2 percent; industry: 30.6 percent; services: 59.2 percent (1994 est.)
Inflation rate (consumer prices): 5.8 percent (1995)
Labor force: 32,152,600 by occupation: agriculture 57 percent, industry 17 percent, commerce 11 percent, services (including government) 15 percent (1993 est.)
Unemployment rate: 2.7 percent (1995 est.)
Budget: revenues: $28.4 billion; expenditures: $28.4 billion, including capital expenditures of $6.1 billion (FY94/95)
Industries: tourism; textiles and garments, agricultural processing, beverages, tobacco, cement, light manufacturing, such as jewelry; electric appliances and components, integrated circuits, furniture, plastics; world's second-largest tungsten producer and third-largest tin producer
Industrial production growth rate: 13.3 percent (1995 est.)
Agriculture: rice, cassava (tapioca), rubber, corn, sugarcane, coconuts, soybeans
Exports: $45.1 billion (f.o.b., 1994)
commodities: manufactures 73 percent, agricultural products and fisheries 21 percent, raw materials 5 percent, fuels 1 percent
Imports: $53.9 billion (c.i.f., 1994)
commodities: manufactures 80 percent, fuels 6.9 percent, raw materials 6.6 percent, foodstuffs 4.3 percent
Thailand sprung into the 1990's as one of the new Asian tigers. The economy has moved from a traditional agrarian-based economy to an industrial based economy and Thailand is commonly included in the ranks of the newly industrialized countries. By 1990, GDP was growing by almost 10 percent per year, a trend which continued until 1994. Much of the country's industry is located in Bangkok, and as the country industrialized Bangkok swelled to its current size of over 9 million. As a result land development, and speculation soared.
In 1994, the land speculation bubble burst. Banks, which had loaned large sums of capital to developers counting on spiraling increases in land prices saw the value of their assets evaporate. This led to instability in the financial markets and a 65 percent decline in the value of the Stock Market of Thailand since 1994. Since 1994 the economy has slowed and recent estimates put overall growth for 1997 at less than 6 percent. In response, the government of Thailand has increased spending to stimulate the economy, resulting in inflation, while unemployment increased.
The expected growth of Thailand is still almost 6 percent and foreign direct investment continues, indicating confidence in the international market. Thailand's recovery will depend on increased exports and the ability of the government of Thailand to promote export led growth. Unfortunately, Thailand's ruling coalition government may not have the political will to limit government spending, stabilize the Baht and promote the economy.
Thailand produces principally flue-cured and burley tobacco, and a small quantity of dark air and sun cured tobacco. Approximately 28,000 metric tons of flue-cured and approximately 38,000 tons of burley were produced in 1996. Approximately 9,000 tons of flue-cured and 16,000 tons of burley tobacco were exported last year.
Growers are allocated quota from the Thailand Tobacco Monopoly (TTM). These quotas allow the farmer to sell leaf tobacco to TTM for a price, 53 Baht last year, established by the government. About 60 percent of total flue-cured purchases of domestically produced tobacco are sourced from farmers, with the remainder coming from independent curers.
Independent curers contract with farmers for future production and may supply various inputs, including seed and fertilizer. Both farmers and independent curers will sell leaf not sold to TTM to leaf trading companies. In the last five years there has been a shakeout in trading companies. Five years ago there were seven leaf tobacco traders in Thailand. After Chiengmai Commercial Company, Ltd. stopped operating its processing plant last year, only Intebex (recently purchased by Dimon) and Standard Tobacco Company (doing business as Thailand Tobacco Company) continue operating. These two tobacco traders are responsible for all tobacco exports. The United States is the destination for 32 percent of total exports.
Curing barns are traditional brick structures fueled by firewood. These old curing barns are increasingly not cost effective, and the future flue-cured tobacco production will be limited by the cost of curing. Curing costs between 7 and 9 Baht (US $ 0.28 to US $ 0.36) per kilogram. Costs are expected to rise with declines in the availability of firewood and increases in concerns over the environmental impact of deforestation and the use of lignite, the most common alternative to firewood. This may change if two new flue curing barns, installed under contract by Australian and Zimbabwe concerns, are successful. These new facilities have pulled the cost of production down to three to four Baht (US $ 0.12 and US $ 0.16)per kilogram.
Because TTM is expected to absorb most flue-cured production, the traders are pushing farmers to expand domestic production of burley tobacco. Future production goals are 55,000 tons by the year 2000.
The Thailand Tobacco Monopoly (TTM) controls all production of cigarettes in Thailand. Thailand's domestic market is protected through high tariffs, and the control of distribution channels. Production is forecast meet consumption demand and increase at 4 percent per year. Operating at approximately 60 percent of capacity, current production is approximately 43 billion pieces, most of which is of premium cigarettes. Premium cigarettes generate 95 percent of TTM's revenue. Exports are insignificant and as TTM does not have any export marketing programs, they are not expected to rise.
TTM has three major cigarette manufacturing factories, all located in Bangkok or the surrounding area. The slowest cigarette manufacturing machines operate at about 1000 sticks per minute. While the fastest operate at about 2300 cigarettes per minute. Planned upgrades in 1997 will include several cigarette production facilities that operate at 10,000 cigarettes per minute.
Domestic leaf content makes up 80 percent of TTM cigarettes, with the remaining imported almost exclusively from the United States. Last year Thailand imported some tobacco from Brazil, pulling U.S. exports down to 7,200 metric tons in 1996, down over 16 percent from 8,600 in 1995. However, TTM representatives indicated dissatisfaction with the blended cigarettes using Brazilian leaf. TTM indicated that it will import exclusively U.S. tobacco for the foreseeable future. There are 3 factories, which produce all cigarettes for TTM, all located in Bangkok. One factory produces exclusively low cost cigarettes, including non-filters, while the other two produce medium and premium brand cigarettes.
Most taxes are based on the retail price of cigarettes. Prices are controlled by the Ministry of Finance excise department. The maximum price of the domestic premium cigarettes are 31 Baht (US $ 1.23) per pack; actual prices on the streets are 32 to 33 Baht (US $ 1.27 to US $ 1.31) per pack. Taxes include a unit tax, a consumption tax and an excise tax. The excise tax is about 2.11 times the wholesale price. The unit tax is 17 percent of the wholesale price. The consumption tax is paid by the wholesaler and is 2 percent of the difference between the wholesale price and the retail price. Imported cigarettes pay a tariff of 30 percent. However, in addition, the excise tax is calculated in such a way as to effectively be over three times the wholesale price.
In addition to the taxes it pays, 80 percent of TTM's profit goes to the national treasury. Of the remaining 20 percent, 9 percent is distributed to the employees as a type of bonus program and the remaining 11 percent is available for reinvestment and capital investments. While a new law permitting TTM to float new bonds for capital for reinvestment and capital improvements, the production facility to be built outside of Bangkok has been shelved. However, TTM significant war chest generates income from savings of over 400 million Baht (US $ 15 million) per year.
TTM also obliges its distributors to enter into exclusive agreements requiring them to distribute only TTM cigarettes. This agency agreement limits distribution of imported cigarettes especially in areas outside Bangkok where there is only one distributor. In combination with the tax burden, official consumption of imported cigarettes has been kept to less than 4 percent of total domestic consumption.
Thailand continues to maintain strong trade barriers against imports of both leaf and tobacco products. While it is unlikely that these barriers will decline significantly in the foreseeable future, Thailand could increase exports if increased unemployment drives down the cost of production and foreign market demand for Thailand tobacco increases. Additionally, TTM will also increase cigarette production to keep pace with demand. Because of their current commitment to keep their cigarettes blended with 20 percent U.S. tobacco, Thailand's demand for U.S. tobacco will increase. Thus, the forecast for continued, and even increased, U.S. exports to Thailand is good.
* Commodity information is based on a fact finding trip to South Asia by the Author. Country profiles are based on the World Factbook.