Incentives for Exports: The Case of Thailand

During the 1980s Thailand's economy grew very rapidly and between 1988 and 1990 GDP growth averaged 11.7 per cent, with the growth in exports of manufactured goods playing an important part in this growth. A large number of factors contributed to the rapid growth of exports from Thailand, but a number of government policies also created disadvantages (distortions) for the competitiveness of Thailand's exports. This article examines the effects of the protective measures and the ways they were offset. It also looks at the changing relative importance of export incentives in Thailand since 1975. In the absence of import liberalization, protection offsets are becoming vital to the competitiveness of exports. A rise in the use of protection offsets involves increasing administration costs for both the exporting firms and the government. Removing import-substitution policies is a preferred alternative to second-best offsets to protection.