2009 Index of Economic Freedom

Quick Facts

Population:

• 63.4 million

GDP (PPP):

• $482.1 billion
• 5.1% growth
• 5.7% 5-year compound annual growth
• $7599 per capita

Unemployment:

• 1.4%

Inflation (CPI):

• 2.2%

FDI Inflow:

• $9.8 billion

Thailand’s economic freedom score is 63, making its economy the 67th freest in the 2009 Index. Its score is 0.7 point better than last year, reflecting improvements in three of the 10 economic freedoms. Thailand is ranked 10th out of 41 countries in the Asia–Pacific region, and its overall score is higher than the world average.

Showing a moderate degree of resilience, Thailand has continued its steady economic growth in recent years. The regulatory environment has become more efficient and streamlined. Opening a business takes less time than the world average, and overall licensing procedures are simple and transparent. The financial sector continues to be strengthened and is more open to competition. Private property is generally protected, although the judiciary is subject to inefficiency and corruption.

Thailand scores less well in monetary freedom, investment freedom, and freedom from corruption. Though inflation is moderate, the government directly subsidizes the prices of a number of staple goods. Foreign investment is subject to a variety of serious restrictions that are not enforced uniformly. Corruption is significant, although not as extensive as in many neighboring countries.

Background Back to the top

Thailand is a constitutional monarchy with a turbulent political history. Since 1932, the country has experienced more than five coups. In December 2007, a civilian government was elected and started the process of unwinding the former military government's protectionist economic policies, which included capital controls and restrictions on foreign investment. Thailand's economy is dependent on agricultural exports, particularly exports of shrimp and rice, and much of its population remains employed in the agricultural sector.

Business Freedom 71.1 Back to the top

The overall freedom to start, operate, and close a business is relatively well protected under Thailand's regulatory environment. Starting a business takes an average of 33 days, compared to the world average of 38 days. Obtaining a business license takes less than the world average of 18 procedures and 225 days. Bankruptcy proceedings are fairly easy and straightforward.

Trade Freedom 75.6 Back to the top

Thailand's weighted average tariff rate was 4.7 percent in 2006. Import bans and restrictions, services market access barriers, import taxes and fees, prohibitive tariffs, burdensome standards and import licensing requirements, restrictive sanitary and phytosanitary rules, non-transparent government procurement, non-transparent and inefficient customs implementation, export subsidies, and weak enforcement of intellectual property rights add to the cost of trade. Fifteen points were deducted from Thailand's trade freedom score to account for non-tariff barriers.

Fiscal Freedom 74.4 Back to the top

Thailand has burdensome tax rates. The top income tax rate is 37 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax (VAT) and a property tax. In the most recent year, overall tax revenue as a percentage of GDP was 17.0 percent.

Government Size 90.6 Back to the top

Total government expenditures, including consumption and transfer payments, are low. In the most recent year, government spending equaled 17.7 percent of GDP. Government intervention persists, and privatization has suffered several setbacks that are due in part to political instability.

Monetary Freedom69.0 Back to the top

Inflation is low, averaging 3.0 percent between 2005 and 2007. The government controls the prices of more than 200 products; can set price ceilings for basic goods and services; and influences prices through regulation, subsidies, and state-owned utilities. Twenty points were deducted from Thailand's monetary freedom score to account for policies that distort domestic prices.

Investment Freedom30.0 Back to the top

With few exceptions, the government prohibits majority foreign ownership in most sectors and reserves certain professions for Thai nationals. Investment regulations are burdensome and non-transparent, and bureaucracy is cumbersome. Residents and non-residents may hold foreign exchange accounts, subject to approval in some cases. Foreign exchange transactions, repatriation, some outward direct investments, and transactions involving capital market securities, bonds, debt securities, money market instruments, real estate, and short-term securities are regulated and usually require government approval. In general, non-Thai businesses and citizens may own land only on government-approved industrial estates.

Financial Freedom60.0 Back to the top

The government has made financial regulation and supervision more efficient and adheres to international best practices. The Financial Institutions Businesses Act empowers the Bank of Thailand (BOT) and the Finance Ministry to ease restrictions on foreign ownership and the number of foreign directors in commercial banks. The BOT's Financial Sector Master Plan Phase II focuses on increasing competition through a more flexible regulatory framework. Credit is generally allocated on market terms. As of March 2008, there were 17 domestic banks and 17 foreign banks. The government still owns more than 40 percent of Krung Thai Bank, Siam City Bank, and BankThai, which are among the 10 largest domestic institutions. Roughly 100 insurance companies are registered, including many foreign firms, and capital markets are relatively well developed. The stock exchange is active and open to foreign investors.

Property Rights50.0 Back to the top

Private property is generally protected, but the legal process is slow, and litigants, vested interests, or third parties can affect judgments through extralegal means. Despite a Central Intellectual Property and International Trade Court, piracy (especially of optical media) continues. The government can disclose trade secrets to protect any 'public interest' not having commercial objectives, and there are concerns that approval-related data might not be protected against unfair commercial use.

Freedom From Corruption33.0 Back to the top

Corruption is perceived as significant. Thailand ranks 84th out of 179 countries in Transparency International's Corruption Perceptions Index for 2007, a steep drop from 2006. Allegations of customs irregularities continue. The lack of administrative transparency is attributable to Thailand's complex hierarchical system of laws and regulations. The government is trying to make the evaluation of bids and awarding of contracts more transparent. Convictions of public officials on corruption-related charges are rare.

Labor Freedom76.5 Back to the top

Thailand's relatively flexible labor regulations enhance overall employment and productivity growth. The non-salary cost of employing a worker is low, and dismissing a redundant employee is not burdensome. Regulations related to the number of work hours are quite flexible.