Thailand's Economy

The Free essays given on our site were donated by anonymous users and should not be viewed as samples of our custom writing service. You are welcome to use them to inspire yourself for writing your own term paper. If you need a custom term paper related to the subject of Tourism or Thailand's Economy, you can hire a professional writer here in just a few clicks.
Asia has been the world's economic miracle for the last 30 years. South Korea, Hong Kong, Taiwan, Indonesia, and the Philippines have achieved remarkable rates of growth, building high quality manufacturing industries in everything from clothes to computers. Why then, are these economic tigers now struggling with collapsing currencies and plunging stock markets? The simple answer is debt. Thailand provides a very good example of the reasons for the Asian crisis. Thailand borrowed vast sums of money as their economy boomed. Even worse, they borrowed much of it in U.S. dollars whose interest rates were much lower than on their own currencies. The exchange rates of local currencies were pegged against the dollar so they had no fears about having to earn money in local currency to pay back loans in dollars. This was fine while the economy was booming. But from the middle of 1995, the U.S. dollar started to rise against most of the world's currencies. Asian currencies pegged against the dollar rose with it--making exports more expensive and less competitive on world markets. It was obvious that Asian currencies would have to abandon the dollar peg in order to revive exports. However, the Thailand government tried to resist knowing that devaluation would cripple firms who had borrowed huge sums in dollars. The money traders won. They sold massive amounts of Thailand baht, often selling it forward (concluding a sale today but promising to deliver the currency at a date one month or more in the future), betting that when the time came, they would be able to buy the baht needed for much less than they had already sold them for, making an instant profit. Capital came in dramatically - huge flows of capital - much of it through the banking sector. The government allowed an offshore banking sector to be set up. So when foreign banks would come in; they didn't have to pay taxes. Thai banks could borrow from this offshore dollar resource and fling the money round the country to anyone who wanted to pick it up. Much of that money didn't go into investment for export capacity (i.e. new factories or new manufacturing processes). It went into golf courses, hotels, real estate and speculation on the stock market. Dangerous and unsound financial investments began to take place. First, a huge credit bubble built up. Then - and this was the key to the whole region's problems - the US dollar shot up against all other currencies from April 1995 until fairly recently. All these economies shadowed the dollar. The Thai baht (country currency) in particular suffered as it was fixed to a basket of currencies in which 80% of the total amount was the US dollar. The result was that the Thai baht became an expensive currency and exports died. Even worse, all the money coming in didn't get a return because Thai companies, even the productive ones, weren't making a profit (mostly due to their foolish investments). There were defaults and the whole process began to unravel. Thailand went first into the asian economic crisis. But because it's ahead in the process of re-tructuring the economy and implementing IMF prescriptions, Thailand may also be the first out. Thailand is currently trying to restructure and nationalize their banks. This involves diving into the public purse, stripping off bad bits and reorganizing them in an attempt to put them back on the market, allowing foreign capital to buy them. The process is sti

Our inspirational collection of essays and research papers is available for free to our registered users

Related Essays on Tourism

Phad Thai, A Small Taste Of A

Phad Thai, a Small Taste of a Large Cultural Heritage Whenever Americans think of oriental cuisine it seems they automatically visualize Chinese food, but the Orient has many other cultures each wi...

read more
Thailand

THAILAND International Marketing October 13, 1998 Thailand was Siam for most of its history. It is unique among southeast countries because it was never co...

read more
Thailand

THAILAND International Marketing October 13, 1998 Thailand was Siam for most of its history. It is unique among southeast countries because it was never colonized by Europe. This p...

read more
Tsunamis

TsunamisThere are Earthquakes, Volcanoes, Floods, Fires and Avalanches. Then there are Tsunamis, The often overlooked stress relief system of the earth. Tsunamis are huge waves often called Tid...

read more
Tsunamis

TSUNAMIS There are Earthquakes, Volcanoes, Floods, Fires and Avalanches. Then there are Tsunamis, The often overlooked stress relief system of the earth. Tsunamis are huge waves often called Ti...

read more
Tsunami 2

Tsunamis have occurred on many occasions all around the world. Volcanic eruptions, landslides, earthquakes, and other natural disasters have caused these massive waves. A tsunami is a towering ocea...

read more