THE Pacific : Aiming for Big Leagues: <i> Thailand, East Asia’s Next Newly Industrialized Country, Experiencing Growing Pains</i>

Down on the docks at Sattahip, hundreds of gleaming Mitsubishi-built sedans await shipment to Chrysler dealerships in Canada. At Don Muang Airport, international cargo jets are loading up garments, flowers, jewelry and handicrafts for delivery abroad.

And in the shadows of a growing forest of office towers, maniacal motorcyclists move the boxed bits and pieces of commerce through the city, strapped on buddy seats with bungeecords.

Thailand talks like a NIC, and it hums like a NIC. It may be the next newly industrialized country of East Asia. But not quite yet.

Despite 10% economic growth last year and the prospect of 8% or more in 1989, some hurdles remain before Thailand can join South Korea, Taiwan, Hong Kong and Singapore in the march of the Four Tigers, those newly industrialized Southeast Asian nations with the strongest economies.

Looking at the benchmarks that denote the NIC class, a Western diplomat would go no further last week than concede, “Well, you might say Bangkok is becoming an NIC, a newly industrializing city.”

Population of 55 Million

Phisit Pakkasem, the peppery deputy secretary general of Thailand’s powerful National Economic and Social Development Board, agrees that the time has not quite come. “I see the takeoff in about two years,” Phisit said, “but when Thailand becomes a NIC, it will be the biggest in Asia.”

With 55 million citizens, Thailand far outstrips the Four Tigers in population. South Korea is closest, with 42 million. But South Korea’s populace, with $3,700 annual per-capita income, surpasses the NIC standard of $3,000, while Thailand posts just $1,000--with the figure in the rural areas, where most Thais live, at no more than $300. In Bangkok, it’s $2,300.

Phisit listed other areas where Thailand does meet the NIC characteristics: an economy led by exports, with manufactured goods foremost in volume; a high savings rate (it averages 33% among the Four Tigers but is only 23% here), and a youthful, productive population.

“But let’s not talk about NICs,” Phisit said. “Let’s talk about what’s happening in East Asia, and Thailand is a big part of it. What we see is the emergence of three great economic centers--North America, with the U.S.-Canadian free trade agreement; a united (tariff-free) Europe in 1992, and the Western Pacific. I don’t mean the Pacific Rim. That concept is too big.”

The Thai economist’s thinking is centered on what he calls WESPEC, a Western Pacific Economic Cooperation scheme incorporating Japan, the Asian NICs, the Assn. of Southeast Asian Nations (of which Thailand and Singapore are members) and China. WESPEC and its burgeoning economies, he insists, “could become the locomotive pulling the world toward a more balanced economic expansion” and, in tandem, deliver NIC status to Thailand and perhaps Malaysia and the Philippines.

Japan Leading Investor

Saburo Okita, a former Japanese foreign minister and now a senior adviser to the Tokyo government, cited the trend toward an Asian economic pole in an interview here last month, saying, “There is a shift toward more intra-regional trade between ASEAN, Japan and the NICs.”

Japan is dominating new foreign investment in Thailand, followed by Hong Kong and Taiwan. South Korea is getting in the game. “We’re here already,” said a Korean Embassy official, “and this year we may see 30 new Korean businesses coming to Bangkok.”

In foreign investment accumulated over the past two decades, the United States probably still leads the field, and American businessmen operating here remain bullish about prospects. In 1988 alone, Data General, American Telephone & Telegraph and Seagate Technology, the computer disk drive manufacturer, expanded their facilities in Thailand. Like Asian investors, the Americans cited the appeal of stability in government and a well-trained, inexpensive work force, plus government incentives for export-oriented investments. From any source, investments build the Thai economy.

Takashi Murasawa, executive vice president of MMC Sittipol, the Mitsubishi operation here, explained the strategy that delivered Mitsubishi’s 10,000th Thai-assembled Chrysler to Canada last fall.

“We came here originally in 1964 to produce for the domestic market, mainly selling one-ton pickups to the farmers,” he said. Then, about two years ago, the combination of the stronger yen, Korean competition and Tokyo’s policy of voluntary restraints in auto exports to the United States and Canada led Mitsubishi to use Thailand as an “export platform.”

“We couldn’t compete with the small, entry-level Korean cars, with Japanese wage levels, and we were further restricted by the voluntary restraints,” Murasawa said. “Here we use Thai labor, and our exports are not covered by the restraints.”

Has a Trade Deficit

Similar conditions have led other Asian producers to Bangkok, and the Thais have welcomed the development and the jobs and technology it delivers. The offshore operations by Japan and the NICs coincided in late 1986 and early 1987 with the ballooning growth of Thailand’s own diversified exports.

Once a pastoral economy in a postcard country of shimmering rice fields and glittering temples, business on the Thai scene began at that point to look NICish. Luxury cars, imported with a duty of more than 100%, bustled against the Thai-made Toyotas, Nissans and Mitsubishis in the choking Bangkok traffic. New factories popped up along the capital’s superhighway. The growth figures zoomed to the highest rates in Asia.

The agricultural component of exports fell--manufactured goods represented 55% of the 1988 total--and Thailand broadened its markets. Now less than 20% of Thailand’s $16 billion worth of annual exports go to the United States, while Singapore, Hong Kong and Taiwan average about 30%.

Overall, Thailand still records a trade deficit, primarily with Japan, but the booming tourist industry and remittances from Thais working in the Middle East have produced a small surplus in the balance of payments. And, according to foreign diplomats and Pakkasem of the development board, imports have been concentrated in capital goods and equipment, setting the stage for further advances, possibly to NIC status.

But the hurdles have yet to be cleared. “Infrastructure,” said one diplomat. “They’ve got the capital, the work force and sound government management, but the ports can’t handle the growth, the airports can’t handle the traffic, and they’re running on the edge with power generation. If they don’t get more plants on line in the next few years, we’ll be looking at brownouts and blackouts.”

“It’s a problem,” Pakkasem agreed. “We’re running at full capacity (on infrastructure) now. We didn’t expect 4.2 million tourists last year, for instance.” He also noted a shortage of managers and engineers, which has been patched over with expatriate labor.

$3-a-Day Minimum Wage

The government is looking at partial privatization of power generation to relieve the growing pains. Pakkasem insisted that port operations, privatized last year, have improved. Telecommunications, he said, can carry the load, although phones in some areas of Bangkok still go dead during peak hours.

State enterprises, a dead weight here as elsewhere, are also under review by the privatizers, but as elsewhere any change in the state payroll is politically touchy. Wages are both Thailand’s comparative edge and a potential problem, in costs if not stability. Thailand’s minimum wage is $3 a day, and many factory owners, Thai and foreign, dodge the limit by hiring workers on a trainee basis, paying them less and offering no job guarantees. As the visible economy grows, even if inflation is held in check, the workers will want a bigger share.

But for every problem there’s a bright spot. The jewelry industry, for instance, is shining. Theeravat Kanokkul, managing director of Vatana Gems, sells jewelry and loose stones wholesale to foreign buyers. His industry has flourished in the 10 years since the government abolished import duties on gems to promote export of finished jewelry.

Thai sapphires and rubies, augmented by imported diamonds and other gems and colored stones, have made Bangkok a capital of jewelry sales. It’s also become a cutting capital, most recently for diamonds. “Australians send their rough sapphires up here for cutting,” Theeravat noted. “The wages are too high at home. We sent the cut stones back, and they still sell them cheaper there than they could with their own labor.”

For Thailand, it’s a $1-billion-a-year export business, a further diversification of exports and another step toward the ranks of the NICs.

THAILAND’S ECONOMIC GROWTH 1978: 10.1% 1979: 5.1% 1980: 5.8% 1981: 6.3% 1982: 4.1% 1983: 9.7% 1984: 7.1% 1985: 3.5% 1986: 4.7% 1987: 7.1% 1988: 9.4% Source: Data Resources Inc.