Thailand - Current economic position and prospects

RFSTRITFfn Report No. FE-32a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibiUty for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITICiN AND PROSPECTS OF THAILAND 'A E a %-October f.,* i'70.) r East CURRENCY EQUIVALENTS = US $0. 048 us $1 = r5Z2.84 ] 1 million = US $48. 000 $ 1 million = 1 20, 840, 000 No par value has been declared for the BLahtt- rrl rate~S alj., V t b since mid- 1962, as quoted in the International Financial Statistics. TABLE OF CONTENTS CHAPTER Page Basic Data Summary and Conclusions i I. Recent Economic Developments Production 1 T~+rrnlTradepR PavTmen.ts.q Internal Finance 3 ii, Prospects for Production and Exports Prospects in Agriculture Rubber 1ve na f6 Corn 6 71-4 7 Other crops 7 Forestry 8 Manufacturing 9 uter Sectors Summary 10 III. Development Policy & Finance The General Pattern of Resource Use 12 Capital Output Relationships and the Outlook for total expenditure 13 The Role of the Public Sector 1) Current Revenue and Expenditure 16 Capital Expenditure in the Public Sector 17 Financing Public Investment 19 Monetary and Private Credit Considerations 21 External Finance and Creditworthiness 21 STATISTICAL ANNEX A- (.--,- mA MA Area: 514,000 sq. km (200,000 sq. miles) Population: (Census April 1960) 26.3 million Annual growth rate 1947-1960: about 37% Employed Population: Uver 14 years of age - 9.0 million, of whom in agriculture and livestock production - 73% (estimate). National Income Statistics 1962 Gross national product 6 61.1 billion GNP per capita $ 2200 ( = $110) Percentages of GNP Gross fixed investment 17.2 Inventory increase 2.0 Government consumption 9.2 Personal consumption 73.6 Less: current account deficit - 2.0 GNP lo-U.0 FY 1961/62 Cash Result (m n baht) Expenditure - consumption 5173 transfers 1.377 Current surplus adjusted 1618 Caital outlays 3h62 of which foreign financed 1808 Merchandise Exports 1962 (f.o.b.): 09.6 billion (6480 million) of which: Rice 34% Rubber 22% Tin 7% Kenaf & Jute 6% Corn 5% Tapioca flour and meal Teak 2% Othep.r ")0-" Yercnandse Impors 1>o2 (c.0101)1.1. ilion (8550 milion) of which: Manufactures 39% Machinery & equipment 17% Transport equipment 10% Percentages based Chemicals 11% on January-Septem- Fuels and lubricants 11% ber importsonly Other 12% 1958 1959 1960 1961 1962 Current Balance of Payments (Q million) - 79 - 67 - 35 + 2 - 64 Change in Foreign reserves - 19 + 6 + 44 + 79 + 63 Official Reserves of Gold and Foreign Exchange: (August 1963): 1537 million External Public Debt (July 1963): 8 291 million SUEARY AND CONCLUSIOUS 1. In the past five years, Thailand has achieved an average growth ra 4-AI -- -1 --- --1 --U in . real LL ot u of around 6J. 1 UUUII 11 - piiu lLdb ULJt::I C1 major factoUr in this growth. Although the value of rice exports has remained fairly stable, rubOer, COuril, kenaf anduapiuca hdve Uwi uPLbvu bLwU nj Ly UuL- put in manufacturing and construction has also risen rapidly especially since 2. in 19o ana 19o3, exports have levelled off, and it seems probable they will show only slow growth over the next five years, maily- berause of price declines foreseen for rubber and supply limitations in the case of rice. In all probability, this will lead to a slow down in the growth rate of total income for some time. To ensure an increase over the longer run will almost certainly require increases in the investment rate. 3. Fixed investment has risen in recent years to around 175 of GNP and national savings to about the same rate (the import surplus having just about equalled estimated inventory increases). Public sector investment has risen especially fast--doubling in the past five years. 4. Further substantial increases in public investment are being planned by the Government. On the basis of present limited information, it seems likely that the projected rise (of around 70 by 1967) is excessive, both on financial and administrative grounds. Even a considerably smaller rise woul1 require increased use of foreign loans and tax increases, if use of foreign exchange reserves is not to be excessive, and if adequate allowance is to be made for credit expansion to the private sector. 5. In the past two years, gross capital inflow has been over 100 million annually. A good part of this has gone into exchange reserves, which rose from fI300 million at the end of 1959 to $538 million (nearly one yearts imports) at the end of July. With export growth likely to be much slower during the next several years, and imports rising in response to increased investment demand, it seems probable that Thailand's external position will soon become much tighter. Thailand can afford some draw down in its exchange reserves and can also afford to increase its external debt. Peak service on existing debt will reach only 5 to 65 of export earnings in 1967. 6. However, depending on Thailand's ability to continue to expand investment rapidly on a reasonably efficient basis, the requirements for external finance could grow sharply. If this takes place, reliance on conven- tional borrowing for most of the reauired canital inflow could lead to a very substantial increase in debt service. If at the same time, export growth con- tinues to be slow. such an increase in debt service would pose a major external financing problem by the end of the decade. For the present, however, it would b nrematurp tn conrlinde tht such a nrohlem will arise. since it is still rot certain that Thailand will be able to expand investment at a rate which would Chnntpr T Recent Economic Developments 1 Thni nnri 'hn. hA-A nn iynn-re.zzvt Yprn-rrl nf' annnnernie camnxr+b' +brn,nh....rnii+ most of the past decade. Between 1952 and 1962, expansion in real output av ra ar nh ii . r l,, . +m ± "n-; A LI 0tL - 11-1 l n+SVJ estimated at 3.3% annually, per capita incomes have risen significantly. On the basis Of official natio-4al income estm-es I,N? pe hadi now about US ,110, but would be significantly more in terms of real purchasing .For most of this perilod, and partiual duig 9961 demand has provided an important stimulus for the expansion in total inucmes. Because of the boom in exports aLter ly , total income growth between 1957-58 and 1962 averaged about 8% in real terms. Other important actors in demand have been steady growth in government current outlays on development, and a rise in total investment - both public and private - wich has provided a major stimulus to the construction industry, and, less directly, to other sectors. This growth in output and investment has been achieved in the context or a strengthening financial rosition which brought foreign exchange resources to a record level by the middle of 190. Production 3. The expansion of production over the past decade has been accompanied by a striking diversification, particularly within agriculture. Rice output, which accounted for 17,% of GNP in 1952, has grown by only about 1.5% annually, whereas the real value of all other crops has doubled in total over the past decade and now accounts for twice as much as rice in total value added. Most of the major increases have been in export crops - rubber, maize, kenaf and tapioca. These have risen particularly rapidly since 1957. Important growth has also been recorded in a variety of crops which are important in the domestic market. Livestock, forestry and fishing have, on balance, been less dynamic sources of income growth. 4. Mineral output and exports (mainly tin) have risen strongly since the low point of 1956, and manufacturing has also shown accelerated expansion in the past few years. However, together these sectors still account for only about 12% of GNP or less. Activity in the construction and the transport sectors has risen rapidly for most of the decade. Finally, income from services, including tourism and government, has also been a significant factor in total growth. 1/ The understatement of real income by the official. figures (converted at official exchange rates) is probably greater in Thailand's case than in most other countries, because of the valuation of rice sold on the domestic market at about half the world market nrice for this commodity. -2- External Trade and Payments 5. Income from exports of goods and services has averaged about 20% the most important export, at around $;160 million in 1962, but on the 0.V±cLe 1~0 iiLVVV11 11V. LILU C L V U .A l u 1 cLou0. V l.I~i JU.J. * _L ---4'44 ±1.. other merchandise exports have doubled since the early 1950s. Rubber of "130 million in 1960. With the decline in prices, value fell to 100 mI.-ioll in.196 d.lu esPite furthetr inlcredbt: : _L11 v Llu0E.,ports of corn, kenaf and tapioca rose even more sensationally, from a total of '13 mllon in 19't to a peak o oy million in 1961. These also fell 01 moderately in 1962. Tin exports have grown steadily since the decline of 19_5 reaching a post war peak of y)3 million in 162. There has also been siZnificant growth in a variety of miscellaneous agrLcultural exports. In addition, there has been a strong and steady rise since the mid-1950s in earnings from invisibles, the most important being in sales of services to other governments which rose from ULU million in 195/ to $3l million in 1962 (presumably as the result of increased U.S. expenditures in connection with the tension in Laos). The rise in total invisibles during 1962 just about offset the drop in merchandise exports so that total current receipts remained at the record 1961 level of :35 million. To date in 1963, export earnings seem to be maintaining about the same rate. 6. Thailand's imports have, during the post war period, typically followed movements in its exports, with some lag. The absolute level of current expenditures on goods and services has with rare exception been greater than current receipts. The exceptions were during the Korean boom of 1951 and, again in 1961. In 1962 and 1963, imports rose to a new record rate and the current balance of paynents reverted to a deficit of about 960 million annually. 7. The pattern of imports has changed significantly over t1 past decade, reflecting the growth in production for the domestic market and the increased level of investment. Imports of food and tobacco dropped from 15% of the total in 1952 to 8% in 1962, and finished manufactured goods from 50% to 39%. On the other hand imports of fuels, chemicals and raw materials rose from 15% to 21%, while imports of capital goods went up from 20% to 27%. 8. Despite Thailand's current deficit position, its foreign exchange reserves were maintained quite well at around $300 million from 1955 through 1959, and since then have risen each year, reaching a record level of $538 million in mid-1963. Taken together with the current deficit, which has probably aggregated about ';190 million in the Fast y- vears. this rise in reserves indicates that caital inflow has amounted to a total of over !400 million in that period. During the past 18 months. the inflow has annarently been at an annual rate of ! ;120 million. 9. Long term private capital inflow has been rising, but is still quite low - only 7I?7 million in 1962. Short term capital inflow (including errors and omissions) has averaged about 20 million in recent years. Although new cormitments of US grant funds have recently been running at around $15 - 20 million annually, disbursements averaged closer to 30 million in the past four years, reflecting use of pipeline. In addition, grants from other sources (Colombo Plan and UN Special Fund) went up in 1962 to about L0 million. The remainder of the capital inflow has been in the form of net increases in external debt. These increases were fairly moderate in 1960 and 1961, but went up in 1962 to over "0 million, and appear to be continuing at about that rate in 1963. A good part of this recent increase has been in the form of suppliers' credits, chiefly for a Bangkok water project (.-.44 million), and for lignite development ( 12 million). As a result, service on existing debt is projected to rise from 018 million in 1962 to $32 million by 1967. Internal Finance 10. In spite of the rise in foreign exchange reserves, Thailand's money supply has grown only slightly faster than real national income since 1957. In 1962 it showed practically no increase, but this was the result of a shift in deposit holdings from demand to time stimulated by changes in the comrr.ercial banking legislation. As a result, domestic prices have risen very moderately over the past five years. 11. This high degree of internal financial stability is largely the result of three factors: a buoyant growth of public revenues, increasing reliance on foreign borrowing to finance public investment, and a strong and steady increase in private time and savings deposits. New tax measures and improved collections helped to increase government revenues by 60% between 1957 and 1962, as compared with a 40% rise in the GNP at current prices. During the same period, the Government substantially increased its use of foreign borrowings. As a result, in spite of rising governrent expenditures on both current and capital account, government finance has had a deflationary impact on the monetary system in the past three years. In 1960 and 1961 increases in private credit exceeded the rise in private time and savings deposits but this was more than offset by the deflationary effect of government finance. 1962 was a somewhat abnormal year due to the very exceptional rise in time dePositS which exceeded even the record rise in private credit (over 20%). In the first few months of 1963, the growth in time deposits returned to normal, while private credit continued to expand at the high 1962 rate. However, the net expansionary effect was again offset by the continued contraction in credit to the public sector. At the same time, foreign exchange reserves continued to rise. going up by $;3 million or 11% in the first six months of the year. Chapter II Prospects for Production & Exports 12 *Durng he nxt iveyears or o hiadI - n - ~on goods and services is not likely to provide the same stimulus to overall E - L 1 W J t- V J.QUO -L JVU 0 _11 -LCLU U, -L U Dz:;t,11J LIU.J- Ut- -A:,-. U1 xt U UJ VUM.L growth in this sector may average no more than 2% annually, as against ,-1 u4 7 C1 4 4 1--4. -1 / the 1- Z- !-- .I- -- I- CLL) U .O J1n LIM~ -ctou L-Lvt i./* 1 al.- jJ1'UUCi)-U U I& jLUW-UUWII ±1n expJorts will lead to a slower expansion in total income growth. Nevertheless, .Lven an adequaue inveUmentklo eurt ,e it pUoLdl e posible to maintai an overall growth rate of between 4 and 5% during the coming five years or so. Prospects in Agriculture 13. Thailands economy remains predominantly agricultural. According to the last census, this sector employed about 73% of the labor force as against oub in 194l. ci Calculating rice at world market prices, The value added by agriculture amounted in 1961 to about 45% of GNP. About 907 of exports are primary agricultural products. 1hile income in other sectors may continue to grow somewhat more rapidly than in agriculture in the future, it is quite clear that this sector will continue to be the backbone of Thailand's economy for a long time to come. 14. The potential for further agricultural development is good, both in terms of more extensive and more intensive cultivation. A large reserve of land is available in areas of inferior forests; moreover, further flood control andirrigation will not only make it possible to raise the yield of rice, but also will expand possibilities for other crops. Crop diversification in the past several years has been limited largely to areas where flooding is a less serious menace than in the major rice growing districts. With water regulation, these districts will no longer have to rely on rice only, and a second crop in the dry season will also be possible. However, for these potentials to be adequately exploited will require substantial public assistance in the form of continued capital investment and agricultural extension. 1/ Based on average export of goods and services in 1955-57 and 1960-62. 2/ See Appendix Table III. n2 r* i--I f i U/_ ) - Jd U, L_3__ j n 1) -4 -1U 1 4 -ons rIL.L.1J1 L'JI* with a post-war low of 5.6 million in 1958, and a previous peak of 8.3 million reacneu in .L'Y and again in1u 1uLue. odmparing "Lug run avera,eo, official statistics indicate a postwar expansion of just about 1.0% a year in paddy output. However, L U ZeemTb ilKely Ud U lf1-6 bOlitwil U UUUUUm.O L<ra the actual trend. Given the probability that domestic consumption of - - , - - - -_ l1 4 -_ - _ . - -- -__- - -J 1 - . L- _ -3__ rice rose by no less than 2-7o per year, it may ue udrmaeu Uha pauy output rose by at least 1.6% annually over the past 12 years (See Table 16. For the future, a somewhat faster growth seems possible, given continued expansion in irrigation and gradual progress in farming practices. Although the p esent average paddy yield of 50 kilos per acre compares fairly well with other countries in Southeast Asia, yields could be substantially higher with more adequate water regulations. Tne potential for economic investment in such regulation is particularly favorable in Thailand and substantial progress has already been made. In the Chao Phya area where over one-third of Thailand's rice is grown, the Bank has since 1950 helped finance three related projects which are estimated to have raised yields in the area by around 25%. By 1970, when the full benefit of all three projects is realized, yields should have risen by another 20-25%. This corresponds to some 500,000 tons of paddy. A number of smaller irrigation projects which are also under way should contribute several hundred thousand tons by 1970. In addition, two large new projects, one on the Meklong river and the other on the Nan, are likely to be started within a year or two, with a combined potential of a million tons or so within the next ten or fifteen years. There is also considerable potential for improving yields by introducing better seeds and more extensive use of fertilizers. In total, it seems plausible to project an annual growth rate in paddy production of 2.2% for the coming five years over the annual average of 1957-63. Allowing for some increase in the growth rate of domestic consumption (as a result of the rising population growth rate) this would still leave a surplus for exports in 1967 of about 1.4 million tons of rice - or slightly more than the recent average. 17. Export prices for Thai rice since the mid 1950's have fluctuated between &100 and .125 a ton. In 1962, the price was close to the latter peak. Present trends in world supply and demand and the encouragement of self sufficiency by the major rice consuming countries, suggest that prices will tend to drift downward over the next several years. An average export price of 4110 per ton would seem to be a reasonable expectation over the longer run. Assuming such a price for 1967 would mean a lowpr tot1 vnliip of rice Prnorts than actually reached in 1962. thecoing it p "ir cion ofpy-7T nerw i rl I N r p I_.qt fipa nd dri ra j fu ti n the coming into production of new trees, planted during and just after the Kor--n' bocM. Tue to the cojucto of iiingpl e nvlinae,ub became in 1960, for one year, Thailand's first earner of foreign exchange, sLign- - ahead of rice. ince then, prices have falIen sharply anu the value of exports declined by 18% in 1961 and 1962 despite a further 17 increase in volume, According to rather uncertain official estimates, the acreage of rubber likely to mature between 1962 and 1967 is about the same as that maturing between 1957 and 1962. On this basis, it may tentatively be estimated that the production increase will be of similar magnitude, that is about 60,000 tons. Allowing for some loss as the result of replanting, 1967 output may thus be projected at 250,000 tons as against 196,000 in 1962. On the basis of a study by the Bank's Economic Staff ("Trends in and Prospects for Rubber" dated May 7, 1963), the average export price for Thailand rubber is projected to level out at around US 18/ per lb. by 1967 as against 24/ in 1962. This anticipated price fall would just about offset the projected expansion in volume, so that the value should be maintained at around the 1962 level of 1U00 million a year. Kenaf 19. Kenaf has been grown on a modest scale for a number of years, but in 1960-61 output expanded in an explosive manner. An important cause was increased export demand as a result of a poor crop of jute in Pakistan. Exports of kenaf (including small quantities of jute) amounted in 1959 to 37,300 tons rose to 143,500 tons in 1961 and reached 238,7.00 in 1962. Production is concentrated in the Northeast region, the poorest part of Thailand, where a new major cash crop is particularly welcome. In 1961, kenaf (and jute) exports brought over 130 million in foreign exchange, surpassing tin, which ranks as Thailand's third traditional export commodity. In 1962, exports dropped 6% by value, due to much lower prices, but the quantity continued to increase sharply even though Pakistani supplies had been restored. However, the Price fall caused a severe drop in the 1962 crop which in turn will affect exports in 1963. The 1962 crop amounted to only 136.000 tons against the nreceding year's neak of 3L0.000 tons. Ihile part of this loss may be recovered, the present state of the world market seems to set narrow limits for Possible future expansion. The world price is largely determined by the price for jute which for the time being is held up by minimum export nrice system in Pakistan. the main producing country. Assuming the price is kept at the present level, Thailand should be able to incream exnorts ;-ain to arnuni i60-0o0 - 200,000 tons over the next several years which would mean a reduction in value from . 2 million in 196P to 90 - 29 million by 1967- Productinn for domestic processing into gunny bags can be expected to expand slowly. Corn 20. Like kenaf, corn has also seen a spectacular development in recent years ndr i n 1962, co-nrn rnkedr fifth.I an export omoritis, w ith n value of $25 million as compared to Gk4 million in 1959. Crops, which were -nnriinu at.a leval of 0 ,000 nns annualli in the fi+. half of the 1950's had risen to over 300,000 tons in 1959, and 600,000 tons in 19613 -7- another 50,000 tons was probably added in 1962, while the 1963 crop is esti- mated at 700,000 tons. Most of the production comes from the fringes of the Central Plain, but about one-third is grown in the Northeast. It has ex- panded in response to the rapidly growing market in Japan, where a conversion from rice farming to animal husbandry has created an increasing demand for feeding stuffs. Areas favorable for growing corn were located by means of experiments conducted by the Ministry of Agriculture with U.S. aid. The areat increase in outnut followed the introduction of a high vielding variety of Guatemalan origin. The humid climate makes it difficult to dry the corn as much as reauired for a first oualitv grade. a fact which constitutes a handicap for Thai corn in its competition with U.S. and South African sup- nlies. On the other hand Thai corn henefit. from Janan's desire to in- crease purchases from Thailand in order to reduce the latter's deficit in the.ir hilptepral +.rqHP_ Thp conrn t.rnp hP.t.wPPn t.hp t.urno nnfrip.c i.q nPrrii-d out on the basis of Government-to-Government agreement covering both quanti- tiesc a"Jnd rice0 Pronc:n sfto fn urhe expnsncion of this t-rde an-Ppear goodr although a fall in price might offset part of a volume expansion. Moreover, the domestic maretill bco1 inpcrsnglyr impornt,q as then nuimbe-r ^f livestock and poultry grows. Tapioca 21. Tapioca (or cassava) is the last of the three agricultural products 1962, exports of tapioca flour and meal totalled $20 million. The flour, which is a starch,l has its main markeU In the U.S.; and the meal, used If livestock feeding, is sold largely in West Germany. By volume, exports of tapioca flour and meal rose continuously from 0o,u00 tons in 19> to over 400,000 tons in 1961; last year, however, there was a 9% fall. The expan- sion in tapioca growing reflects to some extent a shift from sugar cane, as farmers receive a price for tapioca which gives them a higher return per acre than the low controlled price they get for sugar cane. Tapioca is grown mostly along the Southeastern coast. The future of tapioca in Thai- land's economy is uncertain. Flour exports to the U.S. dropped considerably in 1962 but there has been a growing market for tapioca as a feeding stuff in West Germany and, more recently, also in the Netherlands. in the absence of any definite trend, the tapioca trade may be assumed to remain at its present level. Other Crops 22. A number of other crops have also expanded rapidly in recent years. Although they separately do not carry much weight in the over-all picture, they are not without importance when considered as a group. Thus castor seeds, various types of beans, peanuts, products of peanuts and coconut, sugar and molasses were exported to the tune of more than $20 million in 1962, about twice the amount exported in 1957. Further dynamic growth in this miscellaneous group seems likely, either for domestic use or exports or both. The production prospects for many of these commodities will be substantially enhanced by the irrigation projects now under way. The enter- prising attitude reflected in the recent diversification of agriculture justifies a fairly optimistic view on future development of "new" products both for domestic use and for export. -8- Livestock 23. Livestock raising, fishing and forestry provide a 25% supplement to 'crn inonme Park is the mof. imnortant. livestok nrnriut, but nrodnutinn has declined in recent years because of marketing difficulties, however, s+--- h-v-een . +knn nn+1wt +n Vo +ho a-+ii!2+inn TV m +h\Tn+Ic+ -a the principal region for livestock production, its large area of inferior forest poingex+ens-; ye -ashur-e The- -f~,, I.n- offaln wae-44 cattle is increasing. They are mainly utilized as draft animals, but there to Hong Kong. Exports of livestock and livestock products rose from some Y~7 1JL..L.Lull U'J Y~j; .L±7I l o L7,,2 CLLiU J-7VL±, VUU .Le.:.L UVJ S±L4 iI1J_L iL_L_J _11 1962 due to a heavy fall in shipments of eggs. Natural conditions are con- sered favorable "or livestc- rdcini4lreprso h country The prospects for pigs and poultry are particularly promising. There is an expanding domestic market as well as good export potential. risning 24. Fishing is extensive in rivers and canals and the catch constitutes an important and necessary supplement of protein to the farmers' diet. Commercial fishing is, however, modest in scale despite apparently rich and varied marine resources in the gulf. There is no sign at present of any large-scale development in fishing but the potential for such develop- ment is there. Prospects are also good for a substantial expansion of in- land fish production through the expansion of fish ponds. Forestry 25. Thailand is known as a major supplier of teakwood. Teak bearing forests cover more than 16 million acres, or 12-13% of the country's total territory. Due to past overexploitation, the Government is currently restricting felling, not only of teak but also of other hard woods. As a result, teak exports went down by almost a half during the last five years. Other forestry exports, notably kapok, have risen, although not sufficiently to offset the decline in teak exports. Between 1957 and 1962, forestry ex- ports, therefore, fell by 20% to about $20 million. Forestry products also play a role in the danestic economy. Timber, and also bamboo is extensively used as building materials, and charcoal and firewood are common fuels. The prospects for forestry are stagnating export income, but some increase in total output may be derived from domestic sales. Mining 26. Mining has little importance in terms of employment and relative con- tribution to GNP, but is significant as a foreign exchange earner. Tin is one of Thailand's three traditional exnorts. although far less than rice and rubber. After reaching 18,000 tons in 1957, production was cut to 9,000 in 19$8 as +the riilt. nf ninri- imnripr under th Tintprnational Tin Acrpmpnt. Since then, output has risen steadily, reaching 20,000 tons in 1962 and an L4aR_1_rat f aou -2000 o' SoLLIIAALL IP .1± i." 19-3 -9- 27. Although tin has been mined for half a century in Thailand, prospect- ing was rather limited until recently. However, it now appears that Thai- land's reserves of economic ore may be on a par with those of Malaya, the world's largest producer. Thus, prospects for Thai tin exports are quite favorable. Since quotas were suspended in late 1960, Thailand has increased her share in world exports of tin and may well continue to do so in view of the delayed response by competing countries to the present increase in world demand. When the last revision of the Tin Agreement took place early in 1962, Thailand thus obtained an increase in its quota from 9.11% to 9.77% of world exnort. and a further inprnPqP i. not unlikplv if the qnotas should hcnome operative within the next couple of years. Thailand's tin exports can, there- which is expected to grow at 1.5% to 2.0% per year. Assuming a slight fall ,n the ri _ b -he leve where the buffe stock managris5-~~~ make support purchases (L 850 per ton)--the value of tin exports should go Up fyrm $324 milli4n in1062 to-aroun tQ7 1- 1A 2.Anumber ofP oth1,er mct al I Jc mi neral are mined4 but+ in rather- smal volume. These include wolfram, iron, lead, copper, feldspar, manganese, -A - _ V.L1IiJW1LJ , A.I.L VU J. Kt1.yJUJ UQ VJAI1 U U W L JUD~)U L 'PV1i . LJ -LL.JA.L _LL 1961. however, large iron ore deposits have reportedly just been found, and Manufacturng c-7 ihe a.va±±da e sttist ical pic . I II J__LU Id1UuLULL1gr jU~UU1 is at best a hazy one. According to labor force data in the census, employ- ment in manufacturing increabed Zy tImes UebweeU 1L4 aniu LyuUu. Du even in 1960, it accounted for only 5% of the total labor force. On the other hand, the official national income estimates show a .total growth in real output of only 40% between 1952 and 1960 but put value added by manufacturing at 12% of GNP in the latter year. From other partial indicators, it seems likely that the picture presented by the census data is more likely to be the cor- rect one, i.e., that the contribution of manufacturing to GNP is smaller than indicated by the official estimates, but that the growth rate over the past decade has been considerably faster than the 5.0 rate indicated there, 30. There is certainly ample evidence of a substantial increase in manu- facturing investment and production in the past few years. To a significant extent, this appears attributable to the modifications introduced in 1959 to the "Promotion of Industrial Investment Law". The law as it now stands pro- vides quite extensive exemption from taxation, guarantees on the transfer of profit and capital of foreign investment, and permits the use of quotas or protective tariffs to cut competitive imports. Administration of the law has also been improved and the average time for processing an application has been reduced from a year or more to 4 months in most cases. At the end of 1962, 156 investment projects had qualified for benefits under the law, 40 of them during the year 1962. Of the total, 8 were wholly foreign-owned, 70 wholly domestic, and the rest joint enterprises. It is estimated that total capital investment in these projects will amount to nearly $200 mil- lion. Thirty-eight million dollars of this is accounted for by two large projects-.-a $28 million oil refinery and a $10 million tire factory. -10- 31. Efforts are being made to improve facilities for industrial finance, mainly through the Industrial Finance Corporation of Thailand. However. so far its total contribution has been quite small. A proposal for an IFC in- vestment and a Bank loan to the IFCT are currently under active considera- tion. 32. There is every reason to believe that Thailand's industrial sector can continue to exnand ranidlv in the years ahead- An averan grrwth rate of 8-10% over the next five to ten years would not be an unreasonable ex- nPetatio)n_ and this ann nrnhably he nhieved on a reaonably efficient bai provided public policy continues to attract foreign capital and know-how. Adeut sioniin.Pponn^rt. in theo form of bas.icr i nf-rast+.ructuire w.il a -r 1n'lso be especially in the further development of electric power, water and transport Other Sectors in total at a rate of around 5% annually over the next five years. Taking account of the projected fall' in price - o rubr -ric and_ tin, real-4---' income growth might be reasonably projected at between 4 and 5%. In order to acileve such growth rates in the main commoudty producing sectors, it may be expected that activity in the main supporting sectors would have to rise at a somewhat more rapid rate. This probably is true in the case or power, transport and communications, non-residential construction and most public services associated with economic development. 34. On the other hand, developments in some of the other service sectors may well grow at a slower rate than GNP. We assume this will be the case both in local defense activities, and in services provided to foreign governments. An exception should be sales of services to foreign tourists, and other invisible earnings from abroad. Summary 35. As indicated in the foregoing discussion, the value of export income is likely to grow by only around 2% annually in this period, but other sectors are projected to grow by around 5% on the average. Overall, an average growth rate in real income of about h.5% would seem feasible for the next five years, with the prospect of some acceleration after that if the terms of trade stop deteriorating and if economic development efforts in the coming five years are adequate. 36. The following table summarizes the export projections covered above, with actual data for 1957 and 1962 for comparison: -11- Table I Foreign Exchange Earnings, Actual & Projected (value in $) 1957 1962 1967 Rice 189 158 154 Rubber 82 101 100 Tin 26 32 37 Corn 4 24 40 Kenaf 2 28 22 Tapioca 7 19 19 Teak 13 8 8 All other 67 87 120 Total merchandise 390 457 500 Invisible receipts from other governments 10 31 25 Other invisibles 26 47 65 Private transfers (net) - 9 5 10 417 Sho 600 L- .. - rUAPPT'RP TTT Thern Cen.er-,+ Dr.ler 04 DeSurC TTseN r,n 17 T,A-4- VP - -4&4- 1 - - - - - - - 4. 4.-C, -4.4'. M4 1 - .-L--C-+-4-eA _J 1 U LLC&J_1 L.L~ V±Uill licl U_LUilC2_L L.iUUilia UC Ld UL k,0 ± .L. dI L 11=0 1lC_U 2_L l1A healthy rates of investment and savings in recent years. Fixed investment has been arouud 1'/fu 01 GIV1r SinCe --Lyyr;'; ntd _-_no -vu p inr, eQy-u In addition, comparatively large inventory increases have been consistently recorded, UVinginIg toUal ou1iclal estimates of capitaJ formatlon to arounU 19% in recent years. National q4vings have risen on the average from 15% in 19t-) o to 10.070 in 19611-62o.. During this same period, total government consumption declined in relation to GNP - from 10% to about 9%, mainly as the result of stability in defense expenditures, which today account for around 3% of GNP. The share of private consumption has also declined slightly. 38. Of all these changes, the most striking has been the growth in public sector investment, which doubled between 1957 and 1962 - from 2.0 billion to 4.0 billiono In the latter year, it accounted for nearly 4U'0 of total fixed investment. An important factor in this increase has been the large development projects undertaken with the help of foreign financing and for- eign contractors. Excluding stock increases, private investment has risen more slowly, from $4.9 billion in 1957 to about 76.5 billion in 1962. Table 2 Gross National Expenditure (Billion baht at current prices) 1957 1958 1959 1960 1961 1962 - - - - (est.) Consumption Public 4.3 4.3 4.7 4.7 5.0 5.6 Private 32.1 31.3 34.0 38.3 40.5 45.0 Fixed Investment 1/ Public 2.0 2.2 2.7 2.7 3.4 4.1 Private 4.9 4.7 5.5 6.2 6.0 6.5 Increase in stocks 1/ 0.8 0.4 0.9 1.2 1.5 1.1 Current deficit -0.7 -1.7 -1.2 -0.6 +0.3 -1.2 GNP 43.4 41.2 46.6 52.5 56.6 61.1 1/ Recent studies indicate that the official estimates overstate the absolute levels of investment and savings. A more.accurate estimate for investment in 1962 might he nrnind 17 of' RNP while national savins miglht he nnt at 15%. However, this apparent overstatement also applies to earlier years, cantq+. J+. c irAr n+ 11 ih tmenpt+. +.an sri1 sr1 n.hc+. i.nc hpn q _qCrnJf- cant inocase in both investment and savings since 1957. V 13 - Capital Output Relationships and the Outlook for Total Expenditure 39. At 1962 prices, fixed capital formation in 1958-62 aggregated about 046.0 billion, as compared with an increase in real output between 1957 and 1962 of 15.4 billion, implying a capital output ratio of just about three to one. Lack of data on the distribution of private investment makes it impossible to analyze quantitatively the relationship of investment to output by sector, where such relationships are far more meaningful than for the total. Moreover, it is clear that an important part of the increase in output during this period resulted from investments mna earlier, and that much of the investment during the period will not affect output until later. This is particularly true in the case of tree crops, irrigation, power, roads and education. Even in the case of manufacturing, a good deal of investment underway in o1OLJ the peio wil no eut in- prductio ia ncreases until 1963 or later. On the other hand, important increases in output were particularly, in the case of corn, kenaf and tapioca. 40. Given the inadequacies a data on past investment - output reionshi±ps, i. is hadl worthU± atteptin toL projectLF future relationVL.I ships on a sectoral basis at this stage. However, on the basis of the prouuction possibilties uscuseu in tne previuus chapter, au the analysis of public sector requirements discussed later, it seems probable that the overall capital output ratio in Thailand will tend to be less favorable in the coming five years than during 1958-62. For the future, we expect less dynamic growth in these sectors where output expanded rapidly with relatively little investment in 1958-62. Most of the more promising possibilities seem to lie in activities where investment requirements will be higher - e.g. rice (and other crops) through expanded irrigation, livestock production, commercial fishing, mining and manufacturing. In addition, expanded investment will be needed in transportation, public utilities, housing and other social services, all sectors where the full returns to capital are likely to take a relatively long period to realize. As a very tentative approximation, total fixed investment for 1963-67 might plausibly be projected at a level 35% - 40% higher than 1958-62 in real terms. For the year 1967, this would imply investment expenditures of around $14.5 :illion, which would correspond to about l9k of GNP projected for that year, as against 17% in 1962 1/. 41. In addition, some allowance should presumably be made for at least moderate increases in per capita consumption in the next five years. If it does prove possible to increase total income at around 4.5% annually, a similar growth rate in total personal consumption would seem feasible. This would mean that there would be little change in the rate of national 1/ As noted it is quite possible that the official estimates of investment are somewhat overstated in the past. However, this would not significantly effect our present judgement that the capital output ratio is likely to rise in the future. * 1l6 - savings durine the neriod. However, the recent savines rate has been comparatively high (17% on the basis of official estimates and 15 or 16% -on the basis of unafficial estimates) and to exnpct a significant rie beyond this rate would not seem plausible if total income growth does slow dnwn trl t.hp tynt p indir.t indeed it wuild be some+thing of an accomplishment to prevent the savings rate from falling under these '4'-~_ v J_ c d' v V V J L" vl. ' L U U .J A 1 u A. l u O L U O U L- L 1 1r L .L V 'i ll O U assumptions would require a growth in the foreign deficit from around YWW\ IIJLL-UAI -LIJ -L7VC-~ L QtLJUU Y-.L4V IIJ. UL.L I UY) 7v a0 JLill: Lju~uOiL U1 Thailand's ability to finance this deficit, and its implications for debt service are considered at the end of this chapter. nowever, it should be rioted here that the magnitude of the deficit in this projection is determined as much by specific considerations of the requirements for import growth as by the assumptions about total resource availabilities. 43. For convenience, the model implicit in the foregoing discussion is set out in tabular form in Table 3. Losses from terms of trade are calculated on the basis of projected price declines in rubber, rice, tin, corn and kenaf, plus a moderate allowance for a downward drift in prices of miscellaneous exports 1/. The rise in factor income payments to abroad mainly reflects assumed growth in payments of interest on external debt. Table 3 GNP and Expenditure 1962 and 1967 Billion baht Growth rates 1962 1967 1962-67 Gross domestic product 61.2 78.4 5.0 Factor income from abroad - 0.1 - 0.6 Gross national product 61.1 77.8 Loss from terms of trade 1 - - 1.4 Gross national income 61.1 76.5 4.6 Current account deficit 1.2 2.8 National expenditure 62.3 79.2 4.9 Fixed investment 10.6 14.5 6.5 Increase in stocks 1.1 1.5 6.4 Consumption 50.6 63.2 Public (5.6) (7.2) 5.2 Private (45.0) (56.0) L.5 National savings as % 17.2 17.3 national income 1/ Rubber accounts for O-6q billion. rice for O-I billion and all nthpr for $0.35 billion. - 1 - The Role of the Public Sector 44. During recent years the Government has been playing an increasingly active rnlo in fostering Thailands eonnomic devonnment. This has taken various forms: increases in direct expenditures on public sector programs, provision of financial support for private investment - in manufacturing and .Linr" ' - 4- uer repLn.Lng., Als ofL importance 1-aa ben -h minennco a sound overall public financial position, which has made it possible for without inflationary consequences, 45. During this period progress has also been made in improving the economic planning process. As one outgrowth of the Bank's Survey Mission in 1957-58, the Government established the National Economic Development Board to provide guidance on priorities in the public sector and on the problem of financing development. A number of foreign technical experts have been attached to the Board (and to other agencies concerned with development), including a four-man team sent by the Bank in 1962. Increasing use has also been made of technical assistance from the U.S. Government, the U.N. Special Fund, UNESCO and of private consultants. 46. This increased use of technical assistance is undoubtedly helping Thailand to expand its capacity to carry out a larger development program on areasonably efficient basis. Over the course of the past several years, there have been substantial increases in expenditures - on both current and capital accounts. However, there has also been a substantial increase in financial resources available - both domestic and foreign, so that on balance the Government has also helped to supply non-inflationary sources of finance to the banking system. Changes in the main items of public sector finance between 1957 and 1962 are shown below: Table 4 Public Sector Receipts & Expenditures 1957 and 1962 (billion baht) 1957 1962 Current revenue 5.2 8.3 Current expenditure 1/ 4.9 6.7 Current surplus 0.3 17 Capital expenditure 2.0 4.1 Overall deficit 1.7 2.5 Financed by: Foreign grants and loans 0.8 1.9 Surplus of Govt. enterprises & I 1/ O2 n. Domestic non-bank borrowings 0.2 0.4 Use eof bne credin (ne t) o -0 ent r .1 1/Net of central government transfers to state enterprises. Current Revenue and Expenditure 47. The increasing current surplus of the Central Government since 1957 is the result of rnmnarativelv restrained spendina and a ranid growth of revenue. Between 1957 and 1962, current expenditure rose by $1.8 billion or 17% whreas revenue went nn by 1-1 billion or 60% _lne- third of the increase in revenue is attributable to import duties, mainly as a rRit+. nf Pvranded trade and another third as dne +.o t.he En.iness (turnover) tax, which underwent a major revision in 1960. Improved collectinof incowue andl other- tanems hasz nlson been -onimotnfaor Export taxes, traditionally a major source of revenue made no contribution to the in-n,e -s dun ,4 -1 +Mc -. od + b 11h-7111; 1- -+ 7 .1 - nnAl rapidly are not subject to such taxes. The cautious spending policy is relected 1rain'Q4y ..n1 slow inj. te ..LJA inU oulays on defense po-c an i~ .v-ill administration, which accounted for over half of all current expenses in JL7.)5 j LJUV U OCU L,y' UL.Y ±\J/o _L11 UnLQ Ptel LUUo 114VUeVt± , Lt: %cU.L a yii eUnJJ1: U expenses went up by $1.0 billion or 70% reflecting the growing emphasis 14U.~~-ers revnue a'I present uci.&d ,Icl~ £UiLJ I-) ~ AVdU Uctil Ut: expected to grow more slowly than in the past five, given the slowing UUVI 11 U&Poru trowll alu in overaji UcunicU acUvity. UUInUIU#U Ust U tax exemption to stimulate industrialization will also contribute to slow revenue growth. At present tax rateS, total current revenue in 17 might be projected at no more than $10.0 billion, about 20% above the 1962 level. This implies a reduction relative to national income from l470 in 1962 to 13% in 1967. At the same time, current expenditure is likely to rise at the same rate as in recent years. Tne major item will continue to be recurrent outlays on economic and social development. Education is the largest single component of this category. Despite the 07 increase in the past five years, the present $1.3 billion of recurrent expenses for education corresponds on a per capita basis to just over half the Philippine level and about one-third of the Malayan. Agricultural extension and maintenance of the transportation and irrigation systems will also require substantially expanded outlays. Finally, the increase foreseeable in Government debt as a result of the expanded investment outlays will lead to the debt service by 1967 of perhaps $1.2 billion, as against $0.5 billion in 1962. 49. Assuming continued slow growth outlays on defense and police, and allowing for some acceleration in administrative expenditure to meet the need for higher civil services salaries, total current expenditure can be projected at around $9.2 billion by 1967, a rise of 37%1 over 1962. On balance, this would mean that the surplus available for capital invest- ments out of the Central Government ordinary revenue would shrink from $1.6 billion in 1962 to perhaps half that by 1967. - 17- Capital Expenditure in the Public Sector 50. The Government is currently preparing a public investment program for 1964-66. Preliminary indications are that an overall target of around 96.5 billion will be set for the year 1966 1/. By extrapolation. a figure of around $7.0 billion would be implied for 1967, as against an estimated actual of hL.1 billion in 1962. Two onestions arise about an increase of this magnitude. First, is it feasible from a technical and administrative qt.qnnnint? SaPndly, i.q it. finnnciall ossible? Tl t. is inmqsqih1P atF ths.ta e- o rh a definitep judglment. nn t.he- first question, since practically no details are yet available on the pro,osdcm-, oi;ti on ovf the Se e-,fjend iur . Pfv' ,c , +e years has indicated a substantial increase in the Government's capacity i."-, ~ ~ F~~~'h .1.1 V meI1~1 .11 M 1 IUS Q.W.1, 1 U U'. L" V j.I . L v ~ 'JJ . UU suitable for foreign financing. However, it could be that the present rate about projects already started and those under preparation, we cannot yet conclude wLihctany kuctaint'y thal i ncrease_1 kn caPitaLL lipening11 to a 17.0 billion rate could be achieved on an efficient basis by 1967. 52. Table 4 below indicates the changes in the pattern of public investment by mai sources f Linance between -LP anU YU.L/6. It may De seen Uat 60% of the increase in this period is accounted for by power, largely representing outlays on one project - Yanhee. By contrast, expenditures on transport and communications, by far the largest item in 1958, hardly changed - although there was an important shift in sources of finance between the two periods. The other main increases occurred in irrigation, mining and manufacturing (lignite development and a government oil refinery) and in water supplies - both in Bangkok and the provinces. In the miscellaneous group, the increase is due largely to police and defense, government offices and health. 1/ Including investment of state enterprises and local government. M 18 - Table 4 Public Investment by Source of Finance 1/ (Million baht) 1958 1961/62 Budget Foreign Total Budget Foreign Total Irrigation & other agric. 153 31 184 264 27 293 Power 12) 37 161 97n AA 1nA Mining & manufacturing 7 64 71 29 311 340 Trancprft-r%cominicatn+. 276 558 834. 541. 291 832 Education 159 54 213 159 50 209 Water v ad a+her community services 54 4 59 131 105 236 '-~ '- '-1_ ' L417 c-.L.7 r-.7 - c-.) I - _ _L4L4 . n~. 0e).7 -1 7. I flr. '1, Or 7 rin I U.IUV U4.7 U7f .Jf4u LV? ~LUI!' _J 1/ Excludes capital outlays financed from own resources of state enterprises and local governments. In total these are estimated very tentatively, at $300 million in 1958 and 6400 million in 53. For the future, it is clear that there will be a sharp reduction in investment on power, perhaps by 50%, once the Yanhee project is com- pleted. On the other hand, it is probable that there will be - and should be - a sizeable increase of investment in the transport sector. In spite of investments in this sector over the past five years averaging P800 million important transport bottlenecks remain, and will get worse unless there is a significant increase in investment. The Bank recently made a 035 million loan for a highway program totalling $2.2 billion. A need for an early increase in outlays on airport construction and on the port of Bangkok is foreseen. Finally, a sizeable project ($1.6 billion) to increase tele-commudnication facilities recently got underway. On the basis of these indications, outlays in the transport and communication sector as a whole could well double over the next five years. 54. With both the Meklong and Nan River projects likely to be under construction within the next five years, irrigation investment may be expected to rise very substantially in this period. Preliminary govern- ment projections suggest that an annual outlay of around 0600 million might be feasible by 1967. Other aspects of agricultural investment - researchand livestock development stations, forestry development etc. might also justify a significant addition. 55. Education would seem anothir noqihl rnnintA fnr qi7Ph1P increases in capital funds over the next five years, if adequate progress is to be made toward meetin the baklog of need in +hiz aetor. The - 19 - need is probably greatest in the case of secondary and technical training where capital expenditures per pupil are relatively high. More light on these needs should be provided shortly by a UNESCO team which is going to advise on the education investment, program. 55. Vater supplies, sewerage and housing will probably also require considerably more Government attention and funds in the future. Priority is presently being given to expansion of waterworks in the Northeast. In Bangkok, the Government has decided to go ahead with the impleentation of a storm water drainage and flood control work, while plans for a connected sewerage system are under consideration. Slum clearance and low income housing does not appear to have seriously preoccupied public authorities so far, but the problems are growing and the Government can hardly ignore them much longer. 56. In the mining and manufacturing sectors, direct public investment, might be reduced below the 1961/62 level without harm to economic development. In recent years, direct public involvement in manufacturing has risen, but quite a few of these ventures have proved uneconomic. An initiative which may prove useful., is the proposed establishment of an industrial estate. Given careful planning in site selection and implementation, more funds for this type of support for industry might well be justified. In addition, public loan funds for industrial (and other) investment by the private sector (e.g. through IFCT) may well have to be augmented substantially if adequate growth in orivate sectors investment is to be achieved. 57. On the basis of these very tentative impressions, it seems that the technically and administratively iustified level of nublir outlay. including government loans to the private sector, might fall in the range of /5.0 to 6-0 million by 1967.. Tt should be stronly emnhansind that this estimate is a very impressionistic one. Further studies will be made, by thp government- by th Bank, nnci byother outsir anro T.P Prrnt that these studies will provide firmer estimates in a year or so. Pending the resultsq o-f t.his uq he ann1lysq, niv estimayn.tes%f' finanncial fas.ibility-I must also be considered very tentative. For, in part, judgments about nroieets ncl namini.Rtr.tivp rnnity will riPtIrminp finnnrinl nvailabilities - especially of foreign funds. Financing Public Investment 58. Aside from the possibility of new tax measures, the main sources of non-inflationary dosAntic finann onnis+.nf +.he snunn of nulic enter- prises and sales of government bonds to the non-banking sector. The three and the Yanhee Electricity Authority. The surplus funds of these corporations are p rojtdt rise - fromaround Or) m IlIo n i;n 162O T abou /110 n 1 by 1967 even after deducting projected service on external debts amounting to have had no surplus funds after debt service in 1962, but local authorities contributed: aboUt ±±U P VV1i-LL ull UV L JL.1;L1 Uilt::-uLl ±v. U1IV11 L1VZ011t'1 JU102-Us We assume, rather arbitrarily that total funds from these latter scurces will amount to p!uu mi±Llion by i70( ItLer ueU bevice. - 20 - 59. Government bond sales to private investors have risen from around $100 million annually in the mid-19501s to about $250 million recently. In addition, the government savings bank has been absorbing around 0200 million a year recently. The Governmentts target is to increase sales of bonds (8% at nar). to $800 million by 1967. This does not seem an impossible target, if it is assumed that about half this amount will be purchased by the savings bank. 60- As noted. use of foreiqn loans and grants by the public sector amounted to 01.9 billion in 1962. About half of this represented disbursements under the sunnlirls credits for the Bangkok water nroiect and liqnite develonment. Commitments of undisbursed funds for public projects amounted to roughly t;jhn millinn in miri 1Q9YI hnt. rii.1srments from these funds will he snread out over several years, so it seems quite unlikely that the 1962 disburse- mon+. -ntn will bhp mint.ninpd in +.h immrlints fiitre_ Tn vipw o)f thp shift in US policy from grant aid to loans, it is reasonable to expect a decline in gran l"uds. As rears nons, d iscusinq a-re undepr way-t f'or several ,- large projects (Meklong, the new airport, the Nan river project, the Trad increase to the '80 million rate. Assuming (120 million in grants in 1967, U1 L-L tU L.L .11 ± IIi UU L42-L U-LC)U LA. .QtiIi~IJUII VO U.~ LJ. 11 VL"JLUU 1 V Z' only slightly more than the level reached in 1962. Service on the debt in 1967 on the assumntion that it would include only a moderate element of s-app.L-Lui U_ ,±/ * -)'V IiiL L±LJA II _LAL U IIo stJilutalui otJ ±V..Lv uli u,.-;uu outstanding as of mid-1963. 61. Thus, summarizing, we can see the prospect of a current budget surplus after debt service by 1967 of' $5.8 bilion at presen tax rates, borrowng from the non-bank sector (and the government savings bank) of 0.8 billion, surpluses of public enterprises and local governmenu: au pu.5 b0lJI, and foreign funds in the order of $2.0 billion. This total of A.1 billion is just equal. to actual public investment in 1962. Tnu:3, if the investment total is to be raised to even $.0 or 6.0 billion by 1967, it is clear that additional. taxes and/or borrowing from the banking system would be required. 62. In any use of bank credit, the government is competing with the privaut sector. Given the assumption of internal financial stability over the next five years, and achievement of the overall investment rate postulated earlier, it seems probable that the credit requirements of the private sector would severely limit use of bank credit by the public sector, unless foreign exchange reserves are to be drawn down. As noted, Thailand does have sub- stantial reserves at present, and it would not seem unreasonable for the government to draw moderately on them (through use of bank credit) over the next several years to help finance development. On the other hand, this process clearly has to be limited if Thailand is to maintain reserves at a prudent level. Certainly, a draw down at an annual rate of !,70 million by 1967 (which would be involved in financing a $5.5 billion investment program without tax increases) would be excessive. Thus, it seems important that Thailand introduce new tax measures during the next several years. A target 1/ This 0.9 billion equivalent of debt service has already been allowed for in the projections discussed above, of government current expendi- tures and the surplus of government enterprises. - 21 - of $1.0 billion additional tax revenue by 1967 would seem very moderate. In fa i+ ts ere achieved, it. waonl bring the ratio of government revenue to GNP only slightly above that achieved in 1962. The remainder of the pro- jec+ed fiancing cn for lA7 (Q4n million if ue ass:m a billion total) could be met by borrowings from the banking system based on use of exchange reserves at a rate of $20 million over the next several years, 63. OverL the~ pasfve years Thian' moneLOIU i .±~y sujpl. asfututdbewe 18 and 20% of GNP. For the future, we may reasonably assume that the annual growth in4 [money sujply cold. be~ slightly above the~ growt rate in' real inom without creating pressure on prices, given increasing monetization of the economy. On this assumption, the annual rise in money might be projected at $750 million by 1967 (5.5% of the money supply projected at the end of 1966). An even more important source of funds to the banking system is time and savings deposits. Even apart from the very sharp increase in 1962, these have risen at an annual rate of around 20U recently. Assuming that some slow- down in this growth rate will follow the exceptional rise in 1962 (especially in view of the expected slow down in growth rate of national income), we might project a 1967 rate of 12%. This would add another $1.0 billion to bank funds during 1967. Other miscellaneous sources, such as increases in capital accounts of the banks and insurance funds, might bring total annual availabilities of financial institutions to as much as $2.2 billion by 1967. Of this, we have assumed $400 million would be absorbed by government bor- rowings from the savings bank. This would leave around $1.8 billion for credit to the private sector, as compared with private fixed investment projected for 1967 at around $9.0 billion, a ratio of about 20%. In 1962, the ratio of private credit to private fixed investment was only slightly less--about 18%. If private investment is to grow by 35% or 40% between 1962 and 1967, as postulated here, an even larger contribution from institutional credit sources may well be required. It has already been suggested that the Government might appropriately channel more public funds to private enter- prise through such specialized institutions as the IFCT. Greater use of foreign equity and loan funds for private investment is another possibility. External Finance and Creditworthiness 64. Forecasts of export earnings have already been discussed. These sug- gest the possibility of an increase in current earnings of around $60 million between 1962 and 1967. The prospects for foreign capital inflow to the public sector have also been considered. These suggest that gross disbursements by 1967 might be moderately higher than the 1962 level but that net inflow (after deducting debt service) is likely to be the same. The main elements which re- main to be considered in the ability of the economy to finance import are capital inflow for the private sector and use of foreign exchange reserves. 65. An increase in direct foreign investment from around $7 million in 1962 to perhaps $15 million in 1967 might be projected on the assumption that special incentives will continue to be given to foreign investors. Miscel- laneou shr emaia and errors and omissions, which totalled $22 mil- lion in 1962 is assumed to remain roughly unchanged., On the other hand, $20 million gross (say $15 million net of repayments), as against negligible amounts in 1962. - 2t? - 66. Finally, a draw-down in foreign exchange reserves of around ';100 million in the next five years, from their present level of .'538 million would seem within the bounds of financial prudence. For 1967, we might project use of $120 million from this source. Thus we can project total funds available for financing imports in 1967 as follows - Table 5 Projected Financin,7 for ImDorts (million $) 1962 1967 Export of goods and services 540 600 Grant assistance 19 20 Private capital (incl.errors and omisqins) i9 35 Disbursements of foreign loans 66 100 Amnrt,ivatinn rof lons - 13 - 3 Use of exchange reserves - 62 20 Less: Interest on debt - 5 - 15 Available for imports of goods & ce- 71 r) to around 22% in the five years. The question arises as to whether this amountu of total import growth would Leave room for the expanson of import of capital goods and raw materials required to achieve the projected growth rates ofp investme' nt C N6-.a of toaloupu (28% -1I isdifcl to arrive at a judgment on this point without detailed analysis by sector, whic L imposible at t1i stage. However, as a tentative Judgment, it would seem that such a pattern of total import growth relative to GMP woulu ye suuainabe, at least for a while. For, given the possibilities for import substitution in production of foodstuffs and light manufactured goods w hi-Lc-h rem11ain, shol e posbe thUL UVj0LJU lrough? approupriLate tax. potJlicies,Z to keep the absolute level of consumer goods imports roughly constant at the 1962 level - a postuwar peak in this category as well as in total imports, This would permit all other imports to rise by around 35%. Since there will also be significant import substitution in some Intermediate products during this period (refined petroleum, rubber tires etc.) this would allow lor the higher growth rate in imports of capital goods (probably between 40% and 50%) needed to achieve the assumed increase in investment. Nevertheless, this overall limit on import availabilities implies a fairly tight situation, and it is quite possible that it would be difficult to maintain a slower growth rate of imports than UNP for more than a temporary period. In Thailand's case, some flexibility is provided in the short run by its large exchange reserves. However, use of these resources is obviously a one-time matter. Over the longer run more basic solutions need to be found. -23 - 68. Even if it is assumed that adequate growth rates of investment and nroduntion nuld hP sustainei with an imnort crowth of around hi annually after 1967, and that export growth picks up to 4% by then, a nq inr ripht service nrnh1Pm wuni pnnra if mn+. nf th fnnital inflo% requirements were met through borrowings on conventional terms. In the mo e t n o-xr i TT n r Qin rrl 4 £ 1 a.± -4 ' be nbl Sk+n4 gross disbursements of loan funds of .350 million in 1963-67, reaching an ani.. _,n+- of ;:-1rc md"Jon b - 047 .A-or44-+Jon and iners on--4 this,4 debt and on existing debt would come to about $0 million in that year 1/ or * e o 1i!1-.2)-' iLL.J.LJL VIA ki1iZ MOO~WIiJpU_LU1O CEUUU t:.&1_JU.LUC) CL1U I11JJJU.E-tO -LnULcaLJu above (and after allowance for some increase in private long-term capital), a e jinflowu oJ. aroUund muiLl±Uin Jin loanL f.unds would. be requirL.ed Uy 1972 To achieve this net amount would require that disbursements from Uorrwins each LZu milion in that Jyear since the aboclateU teb service would by then have reached 10 million. This would correspond to around 13% of export earnings, as against 87% implied lor 19yt. uOviously, ne problem becomes still greater if the required growth rate of imports is assumed to be higher, or if export growth is assumed to be lower than 4/,. C. However, it would be premature at this point to conclude that Thailand will in fact face a debt service problem of this magnitude. For 11 Thailand adheres to a policy of contracting external dents only for sound investment projects then the growth in debt service will depend on the country's capacity to expand its investment effort on an efficient basis. 1hile recent investment increases suggest that Thailand's capacities have probably improved significantly in this respect, it is probable that further efforts to increase technical and administrative capacity will be required. But, given such efforts, there is little doubt that Thailand could usefully increase its investment outlays considerably. If this is done, reliance on conventional borrowing for most of the foreign capital requirements could lead to a major external financing problem by the end of the decade. 1/ We have assumed average terms of 17 years with 2:1 years'grace at 5% interest for all new debt contracted. This includes allowance for some suppliers' credits on shorter terms, but assumes that the bulk of new debt would have a 20 year term with 3 or 4 yearsgrace, STATISTICAL ANNEX Table I External Public Debt Table II Contractual Future Service Payments on External Public Debt Table III Ernployed Population by Industry 1947 and 1960 Table IV Gross Dcmestic Product by Industry 1952 -1962 Table V Tse of Resourre 1957-1962 Tahle VT Prndirtion of Priincnl ProP & Fnrp.Rtry Products 1950-1962 Table VII Rice. Production, Exports & Consumption Table VIII Volume of Principal Exports 1935/39-1962 TableIX Value ofExportsby PrincipalCommodities 1952-1962 Table IX(a) Details of "Other Dcestic Exports"in- Tal - e X Table X Value of Imports (c .i .f.) by Major Caeory 1952-1962 Table XI Balance of Payments 1957-1962 Table XII Central Government Current Expenditure Tld Ue AIl Puuic ivestment ( y 3ector djlu Oource o Finance Table XIV Central Government Revenue 1957-1962/63 Table XV Public Sector Financial Position 1958, 1960 and 1961/62 Table XVI Changes in Factors affecting Loney Supply 1957-1962 Table I: THAILND - EXTERNAL PUBLIC DEBT OUSTANDING INCLUDING UNDISBURSED AS ar nECEtRPR ii 10A9 1HTH MtJOR RnPORTED An1TTTC)Ns JANUARY 1 - JULY 31, 1963 (In thousands of U.S. dollar equivalents) December 31, 1962 additions 1"Z I U J Uliua. Y . undisbursed undisbursed July 31, 1963 TOTAL EXTERNAL PUBLIC DEBT 186_840 249,747 412600 Sterling Conversion Bonds of 1936 742 742 - Privately-placed debt /1 (7,7b0 Ou,109d IBRD loans 87,339 110,60-0 U.S. Government loans 19,061 32,496 - Export-Import Bank 19,061 21,396 AID - 11,100 Loans from -est Germany -22,500 71 Of which :;50,000 is guaranteed by Thailand only as to transfer. Statistics Division IBRD-Economic Staff August 12, 1963 Table Ii: THAILAND - ESTIMATED CONTRACTUAT SERVICE PAYMNTS 0N EXTERiAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1962 WITH MAJOR RPCRTED ADDITIONS JANUARY 1 - JULY 31, 1963 /1 (In thousands of U.S. dollar equivalents) - - Page 1 Deb-t ut- Payments during year Debt out- Payments during year stand ing standing year Year plus un- Year plus Un- ibrsdAmorti- In- Amrt-_n. zation terest Tm.ta disbursed zation teret January l January 1 Total debt Publicly-issued bonds 1963 2h9,7h7 13,157 6,516 19,673 1963 742 364 30 394 1964 278,190 16,844 8,073 24,917 1964 378 378 8 386 1965 261,3>6 19,570 8,919 28,89 1966 241i,776 22,562 9,154 31,716 1967 219,21 22,667 9,203 31,870 1968 196,547 21,127 9,135 30,262 1969 175,h20 20,8>1 8,570 29,411 1970 15>4,579 15,077 7,825 22,902 1971 '139,502 13,019 7,03b 20,053 1972 126,483 10,557 6,418 16,975 1973 115,926 10,943 5,855 16,798 1974 lo ,983 10,183 ,290 15,473 1975 9 ,800 10,606 751 57 1976 8 ,194 10, 238 .,199 1977 73,956 10,731 3,655 1>4,386 Privately-placed debt IBRD loans 1963 8-T0,18 8,300 173 8,h73 1963 116,075 3,86 5,1T78 9,02W 196> 71,884 9,124 664 9,588 196' 151,829 5,378 6,208 11,586 1965 62,760 1,00 750 12,150 1965 ,51A I. ,266 12,838 1966 51,360 13,845 668 14,513 1966 140,2>45 6,753 6,830 13,583 1967 37,515 13,981 572 14,553 1967 133,492 6,291 6,855 13,146 1968 23,534 1o,461 470 10,931 1968 127,201 7,348 6,880 1>4,228 1969 13,073 8,532 361 8,893 1969 119'853 8, 81 6,563 15,044 1970 4,541 2,296 237 2,533 1970 111, 72 8,94>4 6119 15,063 1971 2 245 185 791 1,92 1971 102, 28 7,327 661 12,988 1972 400 100 22 122 1972 5,101 6 600 7 11,77 197 300 100 16 116 197 8,5o1 6,969 8 11,867 1974 200 00 10 110 197 81:,32 7,372 4,498 11, 870 1975 100 100 4 104 1975 7>4,160 7,793 4,077 11,870 1976 66,36 8,239 3,631 11,870 1977 58,12 8,720 3,159 11,879 See footnote at end of' table. Table II: THAILA.ND - ESTIMATED CONTRACTUAL SETVICE PAYMENTS ON EXTERNAL PUBLIC DFTBT OUTSTANDING INCLUIDING UNDISBURSED AS OF DECEMBER 31, 1962 WITH MAJOR REPORTED ADDITIONS JANUARY 1 - JULY 31, 1963 /1 (CoNT.) (In thousands of U.S. dollar equivalents) Page 2 Debt out- Debt out- standing Payments during year standing Payments during year Year plus un- Year plus un- disbursed Amorti-~ In- Toeal plsuseud Amorti- In- Total dsusd zto tretTotal disbursed zation terestTta January 1 zation -rS January 1 z -.s.iovt. loas T tal U.S.Govt.loans-Export-IMport Bank 1963 32,496 647 1,094 1,741 1963 21,396 647 1,079 1,726 1964 31,849 1,964 1,184 3,1h8 1964 20,749 1,964 1,109 3,073 1965 29,885 1,96, 1,59 3,123 1965 18,785 1,964 1,022 2,986 1966 27,921 1,964 1,111 3,075 1966 16,821 1,964 91h 2,878 1967 25,957 l,964 1,063 3,027 1967 14,857 1,964 806 2,770 1968 23,993 2,077 1,015 3,092 1968 12,893 1,927 697 2,62h 1969 21,916 2,208 915 3,123 1969 10,966 1,900 589 2,489 1970 19,708 2,217 799 3,016 1970 9,066 1,900 82 2,382 1971 17,491 2,227 683 2,910 1971 7,166 1,900 376 2,276 1972 15,264 2,237 567 2,80h 1972 5,266 1,900 270 2,170 1973 13,027 2,254 45o 2,70h 197 3,366 1,907 163 2,070 197 10,773 1,091 350 1,L1 197 1,459 73 73 807 1975 9,682 1,093 297 1,390 197$ 725 725 31 756 1976 8,589 379 25 634 1977 8,210 391 2[3 634 U.S.Govt. loans - AID Loans from West Germany 1963 11,100 - 1963 22,50 1964 11,100 - 75 75 1964 22,250 - 209 209 1965 11,100 - 137 137 1965 22,250 - 378 378 1966 11,100 - 107 197 1966 22,250 - 565 4 1967 11,100 - 257 257 1967 22, 250 431 713 1,1hh 1968 11,100 150 318 h68 1968 21,819 1,241 770 2,i 1969 10,950 308 326 634 1969 20,578 1,620 731 2,351 1970 10,642 317 317 63h 1970 18,958 1,620 670 2,290 1971 10,325 327 307 634 1971 17,338 1,620 611 2,231 1972 9,998 337 297 634 1972 15,718 1,620 552 2,172 1979, 3 7 287 6,; 1973 l 8 1,620 912,111 17 9,314 357 277 6t 1974 12,8 1, 620 3252 1975 8,97 266 6§Z 1975 10,858 1,620 373 1,993 196 8, 89 379 255 6j 1976 9,238 1,620 313 1,933 1977 8,210 391 243 634 1977 7,618 1,620 253 1,873 71 idldues service on all debt listed in Table 1 prepared August 12, 1963. Statistics Division IBD-Economic Staff August 12, 1963 LCLU-LU 1L LJ. 1947 and 1960 thousandrpersons 1/ Agriculture and livestock 2/ 6945.o 6573.4 - - 4gh5. Fishing 53.0 105.0 Manufacturing 195.9 454.8 Food (32.2) (94.9) Bevera,ed cla UUUanUU toU.bc LUtL.4 Textiles and clothing (52.8) (130.8) vvod, incl.funi. r (2515) (87.8 01) Metal products, incl.transport equipt. (12.8) (4.3) Other manufacturing (62.1) (70.6) Construction 8.1 68.3 Commerce 707.0 7t.4 Transport and Communication 65.9 164.1 Government 204.5 260.7 Education 3/ 141.2 Personal services 43.0 195.1 Other services 26.2 46.6 All other 113.5 235.8 Total 6375.0 9052.3 / In 1947 from age 14 upwards; in 1960 from age 15 upwards. In the sources, employment in agriculture is placed at 7,562,1C0 in 1947 and at 10,202,300 in 1960. The number of women included in these totals (,787,400 and 5,184,300 respectively) exceeds the number of men, which seems unreasonable. The figures in the table have been estimated by applying the ratio of women to men in agriculture in the Philippines (31)to the given figure of male employment in Thailand. The Philippine ratio is derived from a statistical house- hold survey which is regarded as quite a reliable source of economic data. Presumably included in "Government". - Of whom restaurants etc. 82,100 persons. Source: Statistical Year book No. 22 (1945-1955) Vol.1; and Thailand Population Census 1960. nbci IV Gross Domstic Prnduct by Industr (Billion Bahlt at constant 1956 prices) 1952 1957 1958 1959 1960 19(1 1962 - ( imi nary) Stimgt- eat Asgriculture, total 14.0 18.2 16.n 17.9 19. 21.8 20.2 Crops 1/ 1n,4 13.6 11.7 13.6 15.0 1(.2 15.6 Livestock 1,.4 2.3 2.1 2.1 2.2 2.3 2.2 Fisheries .8 .1.0 .9 .9 1.0 1.0 1.2 Forestry 1.4 1.3 1.3 1.3 1.3 1.4 1. 2 D.Ining and quarrying . .7 .5 .6 .8 .9 .8 ianufacturing 4..0 4.5 4.6 5.5 5.7 5.9 1.7 Construction 1.2 1.8 1.4 2.0 2.6 3.2: 3.8 iransportation,comÉunication& utilities 1.5 2.5 2.4 3.2 4.0 4.3 5.3 hol,s;le and retail- trade 6.,6 7.7 7.6 8.3 9.4 9.3 10.0 ilublic administration and defense 1,6 2.3 2.3 2.3 2.5 2.( 2.8 Åther services 3.9 4.6 4.6 5.4 5.8 6. . Gross domestic Product 33.4 42.4 39.4 45.3 50.3 53.0 56.3 Äot factor incomc from abroad .0 - .2 - .2 - .1 - .1 - .1 - .1 Gross Kational l-roduct 33.4 42.2 39.2 45.2 5'.2 52.9 56.2 Indcx 100 126 117 135 150 158 18 Valuc a2ded of paddy i, attributed to the ycar in 1hich thE paddy crop is harvcsted. Based on forecast at current prices made by the Ihai Governnent deflEted by lål-X. $,urgc: NaLi onCL T;conomic Development Board, .-ational Income 9ffice. Table V Use of Resources (Billion baht at current prices) 1957 1958 1959 1960 1961 1962 Private Consumption 32.1 31.3 34.0 38.3 40.5 45.0 Government consumption 4.3 4.3 4.7 4.7 5.0 5.6 Gross Domestic fixed investment 6.9 6.9 8.2 8.9 9.4 10.6 Increase in stocks .8 .4 .9 1.2 1.5 1.1 Exports of Goods & Services 8.7 7.0 8.1 9.3 10.9 1019 Less: Imports of Goods & Services 9.4 8.7 9.3 9.9 10.7 12.1 Equals: Gross National Product at market prices 43.4 41.2 46.6 52.,5 56.6 61.1 Plus: Net factor income to abroad .2 .1 .1 .1 .1 .1 Equals: Gross Domestic Product at current market prices 43.6 41.3 46.7 52.6 56.7 61.2 Source: This table has been prepared by the IBRD on the basis of direct information provided by Thai authorities, except for private consumption which is derived as a residual. Table VI Production of Principal Crops & Forestry Products (Thousand mtric tons or m ) 1950 ..1952 1957 1958 1959 1960 1961 1962 Paddy rice 6684 7325 8297 5570 7123 7055 7789 8246 Rubber ... 127 136 11 17 171 186 196 Corn 27 45 137 186 317 544 598 65o Tapioca 256 257 418 487 1083 1222 Kenaf 5 13 18 30 50 18L 339 136 Sugar Cane 839 176 4147 4309 b988 5382 3983 3187 Coconut 694 1309 1150 1l06 1590 1042 1188 Peanut 63 76 118 121 124 152 108 12 liung bean 32 24 41 L2 46 60 1 45 Castor bean 3 10 32 29 34 L3 33 38 Soy bean 12 21 27 22 23 26 24 25 Garlic .. 1 1 15 18 28 30 Onion .. 6 6 15 14 39 L2 Chilli . 39 L2 24 27 07 L9 Fruits 2089 2416 2M87 2562 2639 2718 Vegetables .. 752 870 895 922 950 979 Tobacco (green leaf) 21 42 66 66 67 74 L8 55 Cotton 20 2L 36 35 37 46 38 40 Teak .. 244 188 181 164 154 105 120 Yang .. 267 380 t18 316 321 319 378 Firewood ., 1204 1123 1147 1191 1317 1h46 Bamboo (million stems) .. 38 53 56 52 56 55 .. Source: Information supplied by Bank of Thailand. Tnkle VTT . 'Jlb 4FJJtJ~h 'y L-L L CL C Ul 0~LJ1 AI"-JJ -Z Averages Production less seed & waste l Exports Consumtion Ofj.L.Li OUL U.t. - thoiusand1 IIet rdL( i c Uii0 1950-56 6.94 4.16 1.32 2.84 1957-63 7.56 4.54 1.31 3.23 Adjusted Estimates and Projections 1950-56 6.75 4.05 1.35 2.70 1957-63 7.56 4.54 1.31 3.23 1967 8.80 5.28 1.39 3.89 Assured annual rates of change (percent) 1950/56 to 1.6 1.6 2.5 1957/63 1957/63 to 2.2 2.2 2.7 1967 Estimated at 60% of paddy output Basis for the adjustment to this period is indicated in Chanter II para 17. Table VIII Volume of Principal Exports (Thousand metric tons) 1935/39 Average 1952 1955 1957 1958 1959 1960 1961 1962 Major exports: Rice 1380.7 1548.0 1248.0 1570.2 1132.9 1091.7 1202.8 1576.0 1303.0 Rubber 3h.8 99.0 132.5 135.5 135.5 174.4 169.7 184.6 194.2 Tin' (concentrates) 18.1 12.9 15.7 18.. 9.0 13.7 17.1 18.1 19.9 Kenaf and jute na 1.8 3.4 14.8 27.6 37.3 61.7 13.5 238,7 Corn na. 25.2 68.2 64.3 162.9 236.8 514.7 567.2 4724 Tapioca flour & meal na 29.5 55.8 79.3 125.0 1h9.2 244.4 416.0 379.0 Other exports Teak (1.000 m 3) 57.1 59.0 88.0 78.0 72.5 73.3 100.9 64.5 39.7 Other wood ('000 mn3) 7.7 0.1 82.0 90.0 110.3 68.2 120.3 70.8 61.3 Live cattle ('000 head) 8.0 - 24.2 32.2 34.0 52.3 56.6 68.9 61.7 Hides and skins 6.3 - 6.5 6.2 5.7 8.3 8.3 8.5 7.2 Lggs 2.2 - 2.9 8.2 6.7 8.3 16.1 15.7 4.4 Castor seed - 18.7 13.5 26.c 15.7 31.4 24.0 32.6 Sh.0 Cotton seed - 3.6 3.3 4.9 10.2 7.3 6.6 6.2 9.1 D,1ung bean na 9.5 10.5 10.5 7.2 15.4 23.0 26.4 21.0 Kapok for wadding - 0.7 2.2 4.h 6.7 10.3 11.3 lh.3 15.8 Salt - 201.9 173.8 223.2 247.0 261.1 119.8 190.0 179.3 Sour ce: Annual Statements on Foreign Trade (through Bank of Thailand) Table IX Valuc of Exports by Principal Comirodities (million Baht) 1952 1955 1957 1958 1959 1960 1961 1962 Major exports: Ric e 3870 3133 3943 2968 2576 2570 3598 3301 Rubber 900 1802 1689 1326 2336, 2579 2130 211L Tin 10 44l 531 255 h3L 537 617 690 Kenaf & Jute 7 11 47 69 88 230 626 589 Corn 28 80 74 183 250 551 597 502 Tapio,ca flour & meal 28 57 138 178 19 4 273 428 hoh Sub total 5243 5524 6422 4979 5878 67o40 7996 7597 Other exports: e2k 97 264 262 239 244 356 252 170 Other ioid - 76 89 68 57 102 69 55 Live cattle - 61 58 59 87 100 120 103 Hides & skins 5 68 54 47 71 82 83 70 Eggs - 29 62 45 72 127 129 38 Castor seeds 51 36 87 42 77 71 94 123 iiung tean 17 24 23 2) 37 h8 60 62 Peanut 68 77 Sh 59 46 39 52 56 Tobacco leaves 2 8 100 85 16 21 12 31 Kopok for wadding 1 29 44 52 60 68 82 102 Lac & lac. seed )43 214 81 143 52 59 52 56 Salt 17 22 35 28 25 22 21 18 4.1 other domestic exports 1/ 339 579 518 423 535 587 695 7514 Sub total: other exports 640 1487 1467 1214 1379 1682 1721 1638 Total: dorestic exports 5883 7011 7889 6193 7257 8422 9717 9235 Re-expor ts 68 111 248 254 303 192 280 2714 Adjustment for balance of paym. 32 38 - 70 - 34 - 26 - 72 - 74 0 Merchandise exports f.o.b. 5983 7160 8c67 6413 7534 85Lt2 9923 9509 For]breakdown see Table IX (a) Aott: Trade return figures for rice, rubber and tin in 1952 and 1955 have been adjusted by multiplying the dollar values published in IF% by the averadc effective ,exchange rate fnr irnports,ip the respective years. The 1957 trade return. for rice and rubber have bckn adjuted for unciervaluation, as reported in IMF Balance of fayments Yearbook. Source: Annual Statements of the Foreign Trade of Thailand (through Bank of Thailand). Tabic, IX (a) etails ' "ather Domestic ",5c-orts"' in Table IX (i.illion baht) 1.7. 1252 fl59 .610S1 1962- :. gs ani poultry 11 43 35 47 72 Fi'sh, ciuc tacca 69 36 29 34 40 10 lroducts of corn and rice 20 24 33 32 37 44 Fruits, fresh anc: dried, nute 17 21 24 29 27 28 £cans, oth; i than nung beans 6 7 15 17 17 14 Vef-tables, f'rEsh -nd prepared 8 7 9 7 13 8 Spices, inclucin. chilly 28 13 33 35 31 33 Sugar an! molasses 6 8 12 27 27 67 'Jegetable oils 9 6 11 2 11 18 EeedE of "'apok, cotton and sesame 29 41 44 43 49 72 P'eanut .and copra cakés 11 11 1 14 19 26 T'ood unste for feed 10 12 31 14 11 8 Horns, bones, feathers, bristles 21 17 21 22 30 21 Gunis, resins (not lac) 10 7 12 7 11 7 Charcoal 8 10 li, 18 14 cl Ores and metal waste 56 11 8 23 21 10 Wood products, incl. plyuood 1 3 3 6 7 10 -Pexti,e yarnE and fabrics 14 11 10 23 24 24 .>arongs, shawls ctc. 1 2 4 6 13 12 Cerent 15 13 15 14 53 41 i'recioi, : stone, silverware 32 29 34 36 34 37 -on.specified 146 126 114 143 159 192 Total "0.ther doeinstic exports" 518 423 535 5E7 695 75Å, EstImat,:d on basis o£ first eleven months Table X Value of Imports (c.i.f.) by Major Category Millions of bah 1952 1955 1957 1958 1959 1960 1961 1962 1. Food and Tobacco 829 820 897 978 983 692 962 P2 Products of which: milk products 164 294 380 332 407 411 410 452 - tobacco 77 134 183 179 154 93 181 125 :2. Crude Materials 82 - 76 74 73 71 13 207 207 3. Mineral Fuels and Lubricants 420-- 692 928 901 914 1025 1011 1204 Tf whFich: - gasoline 154 259 353 350 358 374 389 - fuel & diesel oils 103 228 323 337 342 :370 367 428 4. Animal & Vegetable Oils & Fats 18- 28 19 25 31 20 19 . emcals of which:7T 17 -medicTal & pharmac. - fertilizers 3 29 62 45 73 70 71 85 6 ianufactured iGoods of which: 2692- 3677 640 3433 36C3 3812 4257 UY 0 - paper, paperboard7 292 21 2 30 - textiles, clothing & footwear 1078t 1381 1319 1137 13:L6 1:12 1619 4 - iron and steel products 268 407 611 654 7L3 761 84 7 7 - sim-ple etal mfg. 230 304 370 3273299 9353( 7. Non- e ctrical Mchry. & Equipmt. 632 73191 1018 1060 1300 b. Electrical Mchry. & Lquipmt. 392 305 9. Transport Equipment of h ich: T71 '-TuT, i-77yle, bicycles etc. T71 329 33 309 - busses, trucks, lorries, chassis 185 159 250 254 392 40 468 592 10. Miscellaneous Transactions of which: 76 246 318 209 232 :367 7,0J-- u Tm E 31 213 10.6 22 0 62174- 11. Total 9622 287 1i 'A TJ'ustment for balance of paymts. 127 -575 - 170 - 183 - 141 -:L84 - - 225 2Q2 Mverchandise imports-, ci 77 - 927 73 - -7.7 T7 1 11149 Source: kanual 6tatements of the Foreign Trade of Thailand (-through Bank of Thailand) 1/Annual. rate based. on first nine rronths, exc ept the adjusted total uqhich is taken from preliminary balance of pa yments data. Table XI Balance of Payments, 1957-1962 Rkdilions of US Dollars) 1957 1958 1959 1960 1961 1962 1.0 Goods and Services 1.1 Receipts 428 350 400 463 5143 51k2 Merchandise exports, f.o.b. 390 307 357 4078 777 Foreign travel 3 4 5 5 8 9 Transportation & Insurance 8 10 6 10 12 14 investment Income 6 6 5 7 9 10 Government n.i.e. 10 12 13 17 21 31 Other services 9 8 8 10 13 1M Sub-total: Goods & Services 426 348 395 1457 536 535 Private donations 2 2 5 5 7 7 1.2 Exponditures 474 430 6 893 536 601 Merchandise imports, c.i.f. 308 537 24 T7 0 373 Non-monetary gold 5 1 - 3 6 8 Foreign Travel 13 10 9 12 12 16 Transportation, Insurance 9 6 5 6 7 6 Investment Income 17 13 11 11 13 15 Government n.i.e. 5 3 4 5 5 4 Other services 9 7 8 7 11 12 Sub Total: Goods & Services 463 427 462 491 534 597 Private donations 11 3 2 2 2 2 1.3 Net Goods & Services - 46 -80 -64 -32 7 - 59 2.0 Errors & Cmissions - 5 21 10 22 14 10 3.0 Capital & Official Donations Private capital (net) a/ 3 h 10 10 15 18 Direct lon, -term 2 3 3 2 7 7 Other / 1 1 8 8 9 11 Official donations (net) 35 25 41 34 22 39 US Grants 31 21 37 32 19 27 Colombo Plan, UN Special Arf-n(ies etj- 1 1 1 2 2 9 Settlement with Japan 3 3 3 - - 3 (Continnation & footnot,s spz next nace) Table XI (cont'd) Balance of Payments, 1957-1962 (Millions of US Dollars) 1957 1958 1959 1960 1961 1962 Official loans, dravinps V 8 15 _Q 66 ICA/AID 6 1 2 4 7 2 IBRD 8 5 12 11 12 17 DLF - - 5 6 3 Export-Import Bank - - 7 5 2 8 Suppliers' credits 11 9 3 4 15 36 Bank of America 3 - - - - hejia=P.nt, nn loans 6 - ~ ~ - - 16 - Miscellaneous (net) - 1 - - 1 - 4 - 1 + 1 4.0 Foreign Assets, net (- increase) - 8 19 - 6 -45 - 80 - 62 - Before 1959, estimated. From 1959, based on exchange records. Excluding banks. Includinc trade crmaits_ 2/ Tnoliviinry rawings on Ioans recedived by,N Govenmenlt enterpr"i C-s and private companies under Government guarantee. Of which, suppliers' credits: 1957:5 ; 1958:2 ; 1959:8 ; 1960:8 ; 1961:11 and 1962:10 Snirrp, 74F nnrl Rnnl- n~f Th)niln"A Table XII Central Government Current Expenditure (Cash basis) .(Mi1lion Baht) 1957 1958 1959 1960 1961 October 1 to septerber 30 1960/ 196172 1962/63 (budget) Defense & Police 19hC4 1830 1858 1888 2010 2022 2123 2209 Civil kdministration 830 800 789 871 915 1024 907 1175 Recurring development 1400 16co 1683 , 18h3 1981 2087 2163 2712 Total consumption 4170 4230 4555- ,602 4905 5133 5173 6096 Repaym. of Govt. external debt 2/ 29 37 33 111 4:2 35 46 45 Other service paymt. on Govt. debt- 211 253 292 330 388 :351 374 436 Grants to NLDCOL for ext.debt repaymt. 0 0 122 140 128 128 0 0 Transfer to local Govt. 90 90 110 118 127 94 139 150 " " State enterprises 130 250 107 68 271 134 245 268 " Others h10 380 126 h09 472 1430 573 547 Total transfers 870 1010 1091 1106 1428 1172 1377 1446 Current Expenditure total 50h0 5240 5646 5708 6333 6305 6550 7542 1/ Includes also some miscellaneous expenses of 022h mi-lion Lxcludes repagments (refinatcin ) o internal debt, amounting to-3ß771.6 million in 1961/62 and budgeted at ß 7h6.5 million in 1962/63 Source: Comptxoller General's Department through Bank of Thailand. Table XIII Public Investment by Sector & Source of Finance 7million Bt on a cash basis) CY 1958 CY 1959 CY 1960 F 1960/61. FY 1961/62 Cettral Foreign Central voreign Central Foreign Central Foreign Central Foreign Budget Finance Budget Finance Budget Finance Budget Finance Budget Finance - Agriculture, etc. 153 31 138 45 168 32 228 22 264 :27 Power 124 37 191 4l5 285 4l 298 376 270 836 i.ining & IMnuf. 7 64 182 7 217 50 170 118 29 311 Transport & Commun. 276 558 374 393 237 375 327 208 541 291 Health 15 25 27 36 21 16 24 31 35 h7 Education 159 5h 136 98 105 69 167 63 159 5o Housing 0 0 0 1 0 1 0 2 0 - Community Services 5h 4 58 32 72 50 123 l 131 105 General Admin. 25 21 23 33 36 20 69 8 76 31 Justice & Police 35 1 4h 31 L9 16 53 13 93 12 Others 0 102 1 76 4 45 2 50 55 142 Total 849 897 1175 1167 1192 l088 1461 905 1654 1857 Note: Investmeat financed out of State enterprises' and local government's own earnings roughly estimated at '190 mnillion and 9100 million respectivelv. in 1962. is not included. Investment of state enterprises financed cut of transfers from the Central Government is also excluded; in 1961/62 such transfers totaled $245 million. 1/ U.S. iraat aid included represents disbursements during calendar year. Sour ce: Information supplied by Bank of Thailand and the NEDB. Table XIV Central Government Revenue Million of Baht) Calendar Year Fiscal Year' I- 1957 1958 1959 1960 1961 1962 1960/61 2961/62 1962/63* 1. Income taxes 344 363 380 528 662 736 682 727 681 1.1 Individual 199 239 270 375 440 - 462 450 436 1.2 Corporation 145 124 110 207 222 - 220 277 245 2. Business taxes 452 522 623 827 1052 1491 927 1474 1366 3. Export & Similar taxes on: 1436 1248 1307 1407 1457 1267 1437 1354 1369 3.1 Rice 1033 942 883 887 1061 - l019 976 951 3.2 Rubber 160 129 260 288 195 - 215 166 173 3.3 Tin & other minerals 88 46 55 85 103 104 94 113 127 3.4 Teak & other wood 112 118 101 117 95 - 102 93 l09 3.5 Other exports 43 13 8 30 3 - 7 6 9 4. Import taxes 1490 1617 18C6 2061 2359 2516 2287 2504 2734 5. Other indirect taxes 807 921 921 984 1017 1143 992 1080 1336 6. Education & Health stamps na. 132 139 123 106 28 135 29 na Total tax revenue 4528 803 5176 5984 6653 7181 6460 7168 7486 7. Fees,fines & Licenses 270 356 421 11 426 LOS 414 431 415 8. Profit from State Lottery 118 118 37 L1 41 34 41 41 41 9. Other receipts 144 206 298 328 315 383 297 317 424 Total non-tax revenue 532 680 756 780 782 822 752 789 880 Total reported revenue 5060 5483 5932 6764 7435 8003 7212 7957 8366 Adjustment to cash basis na - 67 -133 - 15 na na + 193 + 184 Total Revenue on cash basis 416 5799 6751 7405 81L1 Revenue from Govt.utilities 138 135 123 22 24 25 24 27 29 Grand total 5198 5551 5922 6773 7429 8168 Source: Comptroller General's Dept. through Eank of Thailand * Budget est-imates. Table XV Public Sector Financial Position 1958, 1960 and 1961/62 (Million Baht) 1. Central Government current revenue (unadjusted) 5618 7984 2. Central Government current expenditure 1/ 4990 6305 3. Central Government current surplus 628 1679 4. Adjustments to cash basis - 67 +184 5. Central Government, adjusted current surplus 561 1863 Capital Outlays 6. Central Government (budget financed) 840 1654 7. Central Government (foreign financed) 2/ 897 1857 8. State enterprises 3/ - 350 435 9. Local Government 37 L00 100 10. Total public capiTal expenditure 2187 4046 11. Overall public sector deficit 1626 2183 Financed by: 12. Foreign grants and loans 2/ 464 1585 13. Counterpart fund disburseTents 2/ 432 272 14. Bond sales to private non-bank sector 88 376 15. Surplus of State enterprises (excl.transfers) and local Government (after debt service) 3/ 200 290 16. Total non-expansionary financing 1184 2523 17.-- Bond sales to commercial banks 13 480 18. Borrowings from monetary authorities 302 - 349 19- Chqnpe in cash reserves (- = increase) 89 - 466 20. Total expansionary financing 404 - 335 21. Residual (- = deficit) -38 + 5 1/ Excluding transfers to State enterprises which are assumed to be used -)for irnvstmnt hv them- 2/ Due to lack of specific information use of foreign funds (lines 12 and I 'AP.nps, ti niq tA-i (nial to investmrient exoenditure (line 7). 3/ Local Government investment expenditure is a rough estimate, assumed +.n rniin +ho Qivrnlimq nnr InnnI rr -nmrnPn..q n-nnnliclat'PA accounts,. Investment outlays by State enterprises are defined as the sum of the transfers received frcm the Central nvernment and the cnmbined surnlus (excluding Government transfers) of the three enterprises, SRT, PAT and VlA udng Goen mnt transfers) oth Tn R nrises R, th nir - -------------------- --------- ------ , surplus amounted to 150 million and 190 million,respectively. Source: Information supplied by Bank of Thailand, except for the ebIm1c tes mentioned in the note. Table XVI Changes in Factors affecting Money Supp;Ly (Billion Baht) Changes during Outstanding 1957 1958 1959 1960 1961 1962 1963 end March 1st Qtr. 1963 Fublic Sector Govt.borrow'ing from Central Bank .47 .56 .27 -2.43 - .56 - .03 - 1.12 1.97 Govt.borrowing from other banks .07 .06 .16 .28 .38 .8) .15 2.23 Tot al .54 .62 .43 -2.15 .18 .81 -. 4.20 Less: Govt.deposits in Central Bank - .Ch .08 .01 .52 .22 .89 - .68 1.45 Govt.deposits in other banks .10 - .04 .20 .0b .11 - .52. Counterpart funds .10 - .07 .07 .01 .08 .03 - .01 .56 Capital and Reserves of Central Bank .23 .25 .10 .18 1.15 .21 0 3.24 Otle£r Central Bank lilbilities (net) .15 .07 .01 -2.37 - .79 .13 - .09 .95 Total offsets .54 .29 .39 -1.62 .77 1.14 - .72 6.70 1. Net Public Sector 0 .33 .C4 - .53 .95 - .33 - .25 2.50 Private Sector Private borroT;ing from barks .h9 .64 .56 .85 .83 1.20 .27 8.06 Less: Tiie¯md Savirgs deposits .28 .30 .13 .h3 .61 1.66 .25 4.85 1on-specified bank liabilities (net) - .09 .08 - .11 - .08 - .18 .3 0 - .07 Total offsets .19 .36 .02 .35 .43 2.09 .25 4.78 2.. Net Private Sector .30 .26 .54 .50 .)4 - .89 .02 3.28 3. Domestic f'actors (1+2) .30 .59 .58 - .03 -.55 -1.22 - .23 .78 4. iet Foreign ix.chari e Transactions .19 - .27 - .07 1.06 1. 9 1.17 .62 10.46 5. Lrrors and Omissions - .02 - .07 .12 - .03 .o4 .06 02 .24 6. Money Supply .L7 .25 .63 1.00 .98 .Cl .41 11.48 % annual increase in money supply + 6 + 3 + 8 + 11 10 0 Money supply ii of i'p 18 20 19 18 19 18 / Accumulated profits on exchange traisactions from the Ccntral Bank's operations at multiple rates in the early 195O's were included under Govt.borroing until october 1960. Then, Baht 2.16 billion of the total Baht 3.16 billiLon was transferred to the Government, and the remainder was transferred to the Capital account in January 1961.. These transfers do not change the net effect of the Public sector on money supply. Source: t tional Financial Statistics, except for counterpart fund.s i ich are taken from Mlonthly Report :of Bank of mai arxl.,