Thailand's share of agriculture in GDP has declined from more than 30 percent in the 1970s to about 9 percent today. This long-term decline reflects in part the slow growth of demand for farm products compared to the faster growth in demand for manufactured goods and services due to rising incomes. It also reflects supply side factors, especially capital accumulation, which resulted in resources moving out of labor intensive agricultural industries and into more capital- and skill-intensive manufacturing and services industries. In addition, Thai economic policy has contributed to the long-term decline in agriculture. Although expenditures by Government are high by regional standards, public investment in agricultural research and investment has been modest. Private capital investment in agriculture, especially in crop production, is also rather limited. In addition, trade policies have encouraged the development of capital intensive manufacturing, giving that sector an edge when competing for domestic resources. As a result, yield improvements in Thai agriculture are among the lowest in the region. While agricultural production did not grow as rapidly as output in other sectors during the economic boom, neither did it contract as in other sectors during the economic crisis. In 1998, manufacturing production fell by 7.5 percent, construction by 22 percent, and services by 7.1 percent; agricultural production, by contrast, increased by 2.5 percent. The policy debate on agriculture sector development has increased sharply since the emergence of the economic crisis. The sector not only absorbed large numbers of the urban unemployed, but also became an important source of increased foreign exchange earnings without the need for large capital inputs.

An estimated 60 percent of Thailand's population of 62 million people live in rural areas, and 90 percent of this number are farmers. Nonetheless, rural households derive only 35 percent of income from farming; the balance is attributable to non-farm activities and remittances from relatives who work in urban areas and overseas. An estimated 17 percent of rural inhabitants live below the poverty line. The agriculture sector contributed about 10 percent of total GDP in 1999, decreasing from about 20 percent in the mid-1980s. The agriculture sector cushioned the social impact of the economic crisis by allowing re-migration from urban areas for an estimated 1.2 million people. Land and natural resources, already stressed before the crisis, have given way to increased environmental pressures (e.g., accelerated deforestation, soil degradation, and desertification). Improving productivity, enhancing export competitiveness, and improving sector management are the three key challenges facing the agriculture sector.

The Government's development strategy in the agriculture sector centers on generating employment for rural households, especially those that lack income stability. The Government intends to induce employment generation through investments in natural resource conservation, special agroeconomic zones, and nonfarm rural activities. To this end, communities will be at the core of development, and the Government aims to focus on developing the Tambon Administrative Organizations to take on primary responsibility for agricultural development at the rural level. The Government's agriculture sector objectives are currently embodied in a framework for restructuring the agriculture sector approved by the Cabinet in May 1998. The twin objectives of sustaining agricultural growth and enhancing export competitiveness are underpinned by the policy measures under the Agriculture Sector Reform Program.

Source: Asian Development Bank