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Peter G Warr
Agriculture remains an important sector of the Thai economy and its performance will be critical in determining Thailand's rate of recovery from the present crisis. First, Thailand's debt overhang following the crisis means that it is essential that exports be increased. The agricultural sector is heavily export-oriented and is far less dependent on imported raw materials than the manufacturing sector. Expansion of exports from the manufacturing sector requires heavy imports of raw materials and the availability of these inputs is severely affected by the present liquidity problems of the financial system. These problems are less relevant for agriculture. Second, the crisis has created at least two million unemployed workers in urban areas. Jobs have been lost not only in manufacturing, but also in the service sector and especially in construction. Many of the newly unemployed people are returning to rural areas, from which they had migrated to urban areas in search of better jobs less than a decade or so before. In the short run, these workers desperately require incomes and this means that they must be absorbed into rural-based economic activity. This does not necessarily mean direct involvement in agricultural production but in most cases it does mean economic activity related to agriculture. In the long run, then, agriculture must make its contribution to expanding Thailand's exports. In the short run, it must contribute to absorbing the large pool of unemployed created by the crisis. While the first is essentially a macroeconomic matter the second is an urgent social problem. In one sense, it is fortunate that Thailand still has a large agricultural sector which is potentially capable of receiving the large number of people involved. Because a high proportion of them are recent migrants to urban areas they retain strong family and other links to rural communities. Nevertheless, when the returnees arrive in the village they find that agricultural production has changed considerably from what they knew. Rural areas have been seriously affected by a drought. Agricultural employment has also contracted; the absolute number of people employed in agriculture declined throughout the boom years of 1988 to 1995 as agricultural output declined as a proportion of total national output. Agricultural production also became more mechanised over this period, in response to the rural labour shortages of those years. In addition, at least 1.5 million illegal migrants from Myanmar (Burma), Laos and Cambodia are now working in rural areas. During the boom years, the Thai government was willing to overlook these illegal migrants because their presence eased a critical shortage of rural labour caused by the departure of Thai people for brighter lights in the cities, especially Bangkok. But now that these Thais are returning, urgently requiring jobs, the illegal migrants are suddenly unwelcome. For them, conditions in Thailand may have degenerated but they are still better than the rural poverty back in their countries of origin. They are reluctant to return and are willing to undertake jobs more arduous and unpleasant than the Thais.
WATCHPOINT: Will the underlying economic situation prove to be a recipe for ethnic conflict?
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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