• 
• 

Published on September 3, 2007

How has the Eastern Seabord Development Plan contributed to economic growth and employment generation in the area?

The ESDP's main objective was to create a "new economic order built on a gigantic industrial zone" to upgrade Thailand's competitiveness and launch the country into a new era of industrial take-off in the 80s and 90s.

It opened up new gateways to connect land, air and sea transport with international export markets by means of new industrial bases at Laem Chabang and Map Ta Phut. The emphasis was on light and heavy export industries, especially in engineering and petrochemicals, with US$10 billion [Bt340 billion] worth of public investment basic logistics and infrastructure.

The new industrial bases included food processing and textiles, chemicals, petroleum, basic metal products, electrical machinery and supplies, auto and auto parts, which together generated more than $45 billion of new investment in the area. By 2005 this had created more than 564,000 jobs at 8,850 new factories.

The automobile industry on the Eastern Seaboard became known as the Detroit of the East, with 1,188,044 vehicles produced in 2006 and 682,161 exported. Thai market leader Toyota made 469,395 vehicles and exported 289,108 last year. Total export earnings for automobile and auto-parts makers reached $10 billion in 2006, and Thailand is the third-biggest auto exporter in Asia.

The ESDP changed Thailand's economic landscape and generated a "structural economic transformation". During the first and second phases (1981-2005) the country shifted from a traditional reliance on agriculture to dependence on the modern industrial and service sectors.

What is the role of strategic cooperation and the link between Thai development policy and Japanese financial and technical cooperation?

The ESDP was a flagship project of the Fifth Five-Year Plan (1982-1986) and was one of the first regional development plans to take an inter-sectorial, top-down approach involving numerous sources of external finance.

In particular Japan's Overseas Economic Cooperation Fund (now the JBIC), the Japan International Cooperation Agency and the World Bank funded 16 major infrastructure projects, with 27 loan agreements signed with the OECF alone amounting to $1.5 billion.

It therefore required much skill development, diplomacy and management with visionary and decisive leadership.

Transparent leadership and competent technocrats were essential at core planning agencies like the NESDB [National Economic and Social Development Board].

A favourable external economic environment was also needed to coordinate and push forward complex regional development plans and to make sure that utilisation of foreign official development assistance as an integral part of development priorities strengthened Thailand's competitiveness and built up export-based industrialisation in the 80s and 90s.

The most favourable external factor then was Thailand's trade negotiations with the Japanese government, which led to the announcement of the First White Paper on Restructuring of Japanese-Thai Economic Relation" in the 80s.

This urged Japan to improve coordination among its trade, investment and aid programmes to assist Thailand to improve its export performance.

Japan was asked to give aid to "strengthen the competitiveness of Thai industries" in particular.

The white paper led to a revision of the ESDP's financial and technical assistance, which was fully and better integrated into Thailand's development policies and priorities outlined in the Fifth Five-Year Plan in order to build up export capacity as top priority projects for the OECF and JICA to pursue.

Another external factor was the Plaza Accord of September 1985, which caused a dramatic appreciation of the yen. The value of the yen against the US dollar, which was 249 at the end of June 1985, rose to 154 at the end of September 1986. Japanese industries thus began to look for alternative manufacturing sites in Southeast Asia, especially Thailand and Malaysia.

Consequently a major wave of Japanese investment began flowing into Thailand in the first half of 1986 when the Board of Investment of Thailand announced that foreign direct investment from Japan had increased by about 50 per cent. This stimulated higher FDI flows to Thailand from Taiwan, Hong Kong and Korea, particularly for export and labour-intensive industries.

At that time Thailand faced serious infrastructure bottlenecks, so the Thai Cabinet instructed the Eastern Seaboard Development Committee to resume the ESDP, particularly the new deep-sea port at Laem Chabang in October 1986 with a new industrial complex and the Map Ta Phut port and industrial complex in 1988.

The Japanese government stressed the importance of enhancing competitiveness. Inevitably some disagreements occurred among the Thai government, the World Bank and the Japanese government.

However, Thai development leaders demonstrated their pragmatism and solved the disputes eventually with workable and pragmatic solutions.

This suggests that donors should listen to and learn from recipients and develop partnership in the true sense of the word in terms of development policy and coordination.

Secondly, transparency of leadership and having competent technocrats was the focal point for the overall success of development policy, cooperation, coordination and implementation of the ESDP, to ensure that the plan achieved its targets and produced development and transformation.

So the coordination mechanism, with a proper alliance between leadership and competent technocrats, played a vital role and was a key driver in terms of providing development direction for transformative changes in the case of the ESDP.

This coordination mechanism also applied strategic and effective use of Japanese financial and technical assistance complying with ESDP policy and projects.