Ford Motor Company In Thailand

Ford Motor Company in Thailand

Thailand Background and Information

Economic Base

With the population approaching 70,000,000, Thailand is one of the largest South East Asian economies. It had an impressive economic growth rates around 10 percent before the bubble economy burst in 1997. As a low cost manufacturing exporter, Thailand is well known for its automobile manufacturing industry, earning the name "the Detroit of Asia". (Davies, 2002)

Traditionally the economy has been agriculture-based. Today, manufacturing has become the primary force behind the economy, but shortage of skilled labor remains a constraint. About 62 percent (Dunung, 1998) of the population is employed in agriculture-related industries. Many work on the large rubber and coconut plantations in the southern peninsular region.

Thai industries include food processing, cement, consumer products, sugar, beer, tires, electronic goods, computer peripherals and components, and automobiles and auto parts. Major exports include textiles and clothing, electrical appliances, rice, fish products, computers and integrated circuits and parts, rubber, tapioca, leather products, footwear, and precious stones and jewelry. Major crops include rice, rubber, tobacco, cotton, jute, beans, sugar cane, maize, and tapioca. The country has had difficulties with drug trafficking, but the government is making efforts to control and halt it. (Dunung, 1998)

Thailand has also developed strong service sector. Tourism is a key service sector, with Thailand sporting a strong attraction to tourists from the West and East Asia. Tourism is the largest source of foreign exchange. However expenditure per visitor is low compared to neighboring countries as well as internationally. (Davies, 2002)

The Thai economy is export-dependent, with exports accounting for 60 percent of GDP. Thailand's recovery from the 1997-98 Asian financial crisis relied largely on external demand from the United States and other foreign markets. The Thaksin government took office in February 2001 with the intention of stimulating domestic demand and reducing Thailand's reliance on foreign trade and investment. Since then, the Thaksin administration has refined its economic message, embracing a "dual track" economic policy that combines domestic stimulus with Thailand's traditional promotion of open markets and foreign investment. Weak export demand held 2001 GDP growth to 2.1%. Beginning in 2002, however, domestic stimulus and export revival fueled a better performance, with real GDP growth at 7.0% in 2003 and 6.2% in 2004. In 2005, the economy decelerated to a 4.5% annual GDP growth rate due to the tsunami catastrophe, drought, and violence in the three southernmost provinces. For the first quarter of 2006, the rebound of production in agriculture and manufacturing coupled with soaring numbers of tourists increased GDP by 6.0% (year-on-year). (Bureau, 2006)

The Royal Thai Government welcomes foreign investment, and investors who are willing to meet certain requirements can apply for special investment privileges through the Board of Investment. To attract additional foreign investment, the government has modified its investment regulations. The United States is Thailand's largest export market and second-largest supplier after Japan. While Thailand's traditional major markets have been North America, Japan, and Europe, economic recovery among Thailand's regional trading partners has helped Thai export growth (21.6% in 2004, 15.0% in 2005, and 17.9% in the first quarter of 2006). Further recovery from the financial crisis depends heavily on increased exports to the rest of Asia and the United States. (Bureau, 2006)

The recent report on vehicle manufacturing by EIU (Economist Intelligence Unit) said that for the fourth quarter of 2006, the output of the commercial cars manufacturing fell by 7.3 percent while passenger cars fell slightly at 0.3 percent on the year-on-year basis. The output remained sluggish in January this year, as did the sales volume. The total number of vehicle sales dropped by 23 percent year on year in January, but the contraction in sales of one-ton pick-up trucks was substantial, at 60 percent. Despite the drop in local sales, Thailand remains an important regional hub for vehicle manufacturers, and in 2006 total exports of completely built units (CBUs) reached nearly 540,000, up from around 440,000 in 2005. (Thailand, 2007)

Political Structure

Thailand is a constitutional monarchy with a parliamentary system. The bicameral legislature consists of the Senate, whose members are appointed to six-year terms by the king upon the recommendation of the prime minister, and the National Assembly, whose members are elected to four-year terms by the people. Both the senate and the National Assembly elect the prime minister, who then selects his cabinet and leads the government. The judiciary has been influenced by the British legal code. (Davies, 2002)

The king, who functions as the head of state, provides stability in an unstable political world. Many Thais revere and trust the monarch as the true ruler of the country. Despite the various coups and subsequent transfers of power, the king has remained at the helm and is perceived as the symbol of national unity. (Davies, 2002)

On September 19, 2006, a group of top military officers overthrew the caretaker administration of Thaksin Shinawatra in a non-violent coup d'etat. Soon thereafter, the coup leaders issued an interim constitution and appointed Surayud Chulanont as interim Prime Minister for the approximately one-year period until a new constitution could be written and ratified and new democratic elections held. (Bureau, 2006)

People, Values, and Social Customs

The population of Thailand is about 70 million. Almost 82 percent of the people are ethnic Thais, making the country relatively racially homogeneous. The ethnic Thai can be divided into Central Thai, Thai Lao, and Southern Thai. There are four dialects of Thai language, but they are somewhat mutually intelligible. Central is the official dialect. Minority groups include Chinese, Malays, Mons, Khmers, Phuans, Indians, and recent refugees from Vietnam, Burma, Laos, and Cambodia. (Dunung, 1998)

The largest minority are the Chinese, constituting more than 12 percent of the population. The earliest Chinese immigrants were the Hokkiens, who came to Thailand in the eighteen century to serve primarily as tax collectors for the royal family.