The industrial sector in Thailand contributed considerably to economic growth during the 1970s and 1980s. As a percentage of GDP, industry accounted for an average of 25.7 percent in the 1970s and about 29 percent in the mid-1980s. The average annual growth rate was 9.3 percent for the 1970s, with a slowdown to 6.7 percent in 1985, which was still very respectable by international standards.
Manufacturing constituted the most important industrial subsector, providing an average of 17.9 percent of GDP in the 1970s and about 19.8 percent in the mid-1980s. Construction accounted for an average of 4.8 percent of GDP during the 1970s and rose to 5. 1 by the mid-1980s. Mining and quarrying represented an average of 1.8 percent of GDP in the 1970s and remained fairly constant. The annual growth rate was the highest for the public utilities industrial subsector in the 1970s and mid-1980s, 13.1 percent and 8.8 percent, respectively. The annual growth rate for manufacturing dropped from an average of 10.1 percent in the 1970s to 7.3 percent in 1985. A decline in the growth rate of mining and construction occurred during the same period.
Manufacturing was the most important industrial subsector in Thailand, comprising on average 25 percent of each addition to GDP (incremental GDP), or 70 percent of all industrial value added during the 1970s and mid-1980s. Manufacturing was characterized by a high reliance on agricultural products, including rubber products, textile products, food processing, beverages, and tobacco. Thailand’s food and agriculture share of manufacturing value added was about 36 percent by the mid-1980s, compared with 20 percent for South Korea and 22 percent for Malaysia. The next most important area of manufacturing was textiles, clothing, and leather products, produced mainly for export, with 23 percent of manufacturing value added. Machinery and transport equipment, which consisted mostly of repair and assembly of motor vehicles, accounted for 11 percent, and chemicals accounted for 7 percent. The remaining 23 percent included processed minerals, wood, rubber, carpets, batteries ? rope, gunnysacks, plastic goods, tires, footwear, and an expanding domestic small arms production.
The composition of Thai foreign trade reflected the manufacturing sector of the Thai economy. Exports of processed food, leather, wood, rubber, and basic metals represented a considerable share of manufacturing output. The capital and intermediate goods industries were less developed, however, necessitating high levels of imports of those products. Exports of manufactured goods grew from 5.5 percent of total exports in the 1970s to about 30 percent by the mid-1980s. Textiles and garments were the most important contributors in the 1970s, accounting for almost half of the total manufactured exports, but by the mid-1980s they had dropped to about 1 3 percent because of rising foreign protectionism of textiles. Exports of manufactured goods that grew rapidly during this period were wood products, nonmetallic minerals, electronics, electrical machinery, jewelry, and precious stones.
Employment in the manufacturing subsector accounted for 7.9 percent of total employment by the mid-1980s and had absorbed over 16 percent of labor force growth during the 1970s. Textile, apparel, and leather firms had the highest share of manufacturing employment, with 25.8 percent in the early 1980s, followed by processed food, beverage, and tobacco firms, which accounted for 19.9 percent. Furniture and other wood products firms accounted for 15.8 percent of manufacturing employment; minerals, metals, and metal products, 12.6 percent; transportation equipment, 8.5 percent; and other manufacturing firms accounted for the remaining 17.4 percent. The growth in manufacturing employment resulted both from the absolute growth of the subsector itself and from the labor intensiveness of such industries as textiles. Small-scale firms with fewer than 10 workers employed 50 percent more workers at the beginning of the 1980s than all larger firms. However, both groups had the same average annual growth rate of around 10 percent in the 1970s.
Manufacturing was heavily concentrated in the Bangkok metropolitan area, as indicated by its share of 35.3 percent of total manufacturing employment. The next highest area of concentration was in the Center. Industries outside Bangkok were based primarily on the processing of agricultural products, such as rubber, sugar, cassava, and rice, or on the repair of agricultural implements. Bangkok’s role as the manufacturing center resulted from its position as the leading port, the largest market, and the transportation, communications, and financial center of the country.
State-owned manufacturing firms produced tobacco, playing cards, liquor, marble, jute, sugar, paper, textiles, leather goods, glass, batteries, and pharmaceutical products. Each state enterprise was required to submit an annual operational and investment budget to be approved by its board of directors, its parent ministry, the Bureau of the Budget, and the National Economic and Social Development Board under the Office of the Prime Minister. Each firm had on its board of directors between nine and eleven members, all of whom were appointed by the parent ministry. The board was responsible for setting prices with the approval of the parent ministry. State enterprises were more unionized and more powerful than private firms and often had salaries 50 percent higher than those in the civil service and in some private firms. They also offered higher fringe benefits, bonuses, and overtime pay. Planning for privatization of some unprofitable state-owned manufacturing firms was under way in the mid-1980s, but the government faced labor opposition and other difficulties in selling these firms.
Foreign enterprises accounted for about 30 percent of capital investment in the form of joint ventures with some twenty foreign countries. Japan provided more than one-third of total foreign investment, the United States more than one-seventh, and Taiwan less than one-eighth. The general attitude of the people toward foreign firms was favorable until the early 1970s. At that time, world commodities prices collapsed, causing hardship in the country. This collapse was popularly perceived as resulting from foreign involvement in the economy. Students and liberal elements demanded that contracts with foreign enterprises be reexamined and renegotiated. To placate these groups, the government revoked the extensive offshore concession of the foreign-owned Thailand Exploration and Mining Company (TEMCO).