Thailand in the global economy Lecture 11
Case 1: The 1997/8 Asian Financial Crisis Timeline: http://www.washingtonpost.com/wp-srv/business/longterm/asiaecon/timeline.htm
Possible causes • Internal deficiencies such as excessive financial liberalization, extreme mobility of financial capital, risky activities of multinational conglomerates and the build-up of non-performing loans. • Speculation of currency traders • Conspiracy theory???
Effects • More expensive imports for Thailand • Cheaper for tourist to visit Thailand • Construction skeletons in Thailand, for example the unfinished hotel near Kosa Hotel in Khon Kaen.
Effects • Increasing poverty levels between 1998 and 2001, especially in the hard hit countries Indonesia, Thailand and South Korea. • Rise of Dr. Thaksin Shinawatra???
Case 2: Rubber tappers Southeast Asia has been a major producer of natural rubber since a long time. In 1950 Malaysia produced 761000 tons and Thailand 114000 tons; in 2001 Malaysia’s production volume was around the same as in 1950, whereas Thailand produced not less than 2300000 tons. Currently Thailand is the largest exporter and Thailand, Malaysia and Indonesia together produce 73% of the world production.
The majority of rubber production is carried out at smallholdings, but the Figure on the next slide shows that the rubber has been quite instable. Moreover, the Figure reveals that rubber smallholders in Southern Thailand are linked to international capital markets
Between 2003 and 2009 the natural rubber price in Thailand was volatile as well. It first increased, then started decreasing in 2007 and now it is expected to increase again due to more demand for emerging economic giants such as China and India.
In sum, the income of rubber tappers in Southern Thailand and increasingly in Northeastern Thailand as well, is not only dependent on agricultural product markets, but also on the behaviour of traders at commodity exchanges of Singapore, Tokyo, London, Shanghai and Mumbai.
Case 3: The current global financial crisis Timeline: http://english.aljazeera.net/business/2009/09/200991411202730896.html
Dow Jones Industrial Average 5 years 2005 2006 2007 2008 2009
Causes 1 Deeply flawed institutions and practices within money and capital markets particularly a lack of a smart global regulatory framework 2 Overconsumption in the United States of America 3 Under-consumption in Japan, China and other emerging markets with high savings rates creating current account imbalances
Effect Recession in Thailand: the decline of economic output (Gross Domestic Product) of more than six months
Thailand's economy slips into recession May 28th 2009 From The Economist Intelligence Unit “Thailand has slid into recession after real GDP fell for a second consecutive quarter, new government data show. In the first three months of 2009, real GDP contracted by 7.1% year on year, following a revised 4.2% contraction in the fourth quarter of 2008”
Conclusion It is hoped that the leaders of the G20, a group of 20 very large economies in the world, could eventually come up with coordinated policies that will reduce the negative impact of financial globalization. Smarter regulation of product, money and capital markets really seems to be necessary.
Conclusion Without improvements you and your children will experience future financial bubbles ultimately leading to financial meltdowns with serious repercussions for product markets and temporary increases in poverty levels.
Watch the you tube movie “The great crash of 2008”