Evaluate the effectiveness of Thailands outward looking strategies

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Evaluate the effectiveness of Thailand’s outward looking strategies [15]

Over the past two decades, according to the article, Thailand has experienced “limits of an inward-looking approach.” Inward looking strategies include import substitution which is the replacement of imports with domestically produced manufactured goods, and protectionism – Using protectionism and import substitution to protect domestic industries from foreign competition. During the first half of the 1970s, much of Thailand’s economic growth was driven through domestic demand. This allowed the country’s economy to diversify in a controlled way until it has built a strong domestic base – most effective where a country’s domestic market is large enough to enable industries to benefit from economies of scale because there is less competition. Once achieved, industry will be strong enough to cope with foreign competition. This inward looking policy had real success with annual growth reaching around 6%. It would seem that this was extremely effective for the measures that the Thai government introduced it for (protecting grassroots companies), however, there are some downsides to inward looking policies such as comparative advantage being distorted. This means that within Thailand resources would not have been allocated efficiently. Also, the distinct lack of competition from foreign companies in an protectionist country could lead to inefficiency.

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Introduced in the latter part of the 1970s, economic policies have become more outward looking. This is most probably due to the fact that Thai businesses had been well established, and ready to compete in the world markets. The outward looking strategies adopted by the Thai government, such as “expanding merchandise exports, tourism and investment activity” had an extremely positive effect on the Thai economy. It meant that, as a proportion of GDP, manufacturing overtook agriculture. As a result, it brought the acquisition of much newer technological know-how, “stronger links with the world market” which meant that it “strengthened ...

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