Food, agriculture, and agricultural policy of Thailand and the 1997 economic crisis

This paper analyzes the characteristics of Thai agricultural and economic development, their relationship to the economic crisis started in 1997 in Thailand, properties of the policies affecting agricultural sector, and changes in the demand and supply of agricultural products. The very fast economic growth during past few decades emphasizing industrialization and excessive liberalization of international monetary transactions led Thailand into over-flooding with foreign short-run speculative investments and bubble and bubble burst soon after. This is the major cause of the economic crisis in Thailand that is a small Asian economy relative to the huge amount of foreign short-run speculative money. It is s very dangerous policy for a small country to liberalize her international monetary transactions too much based on the idea of market fundamentalism. The Thai agricultural sector had been taxed heavily during the past four decades by over-valued local currency and export tax policy on rice. But since 1987, this taxing seemed to have reversed. This may be because of the start of transformation of agricultural policy from taxing to subsidizing commom in most of the middle income level countries. This transformation seems to have stopped because of the economic crisis after 1997. Since the negative effects of the economic crisis to Thai economy will continue during the first decade of the 21st century, this stoppage of the transformation will also continue. Agricultural growth has been characterized by (1) Diversification of products toward larger income elasticity has occurred, and their production and exports have increased very rapidly until late 80's. (2) Until 1989 growth of agricultural production had been realized by the increase of the harvested area. (3) This increase of the harvested area was done by individual farmers' egoistic burning of the forest and planting crops at the burned forest with the soil fertility exploiting technology. (4) After easily reclaimable forest had been totally exhausted, crops' yield for such crops as rice, maize, and soybean have increased, but not enough to compensate the limitation in the land to plant these crops. The yields of cassava and sugarcane have not been increasing or in fact decreasing. Thus production of the most of the important crops in Thailand have started to decline since 1990, and large amount of imports for maize and soybean have become necessary. Free function of the market mechanism based on the idea of market fundamentalism led to the destruction of half of the forest and severe decline of soil fertility in Thailand. It is important to state that appropriate public interventions are needed to the monetary institution in order to avoid severe economic crisis to occur in Thailand again and to agricultural policy in order to restore forest and soil fertility.