From NIC to NAC or NIC-NAC

16 July 1998

The Cabinet imposes a ban on prawn farms in freshwater areas. Northeastern farmers plan to descend on Bangkok. Rice millers threaten to close their mills. Ministers act against international piracy of the Thai jasmine rice strain. Resolutions on land tenure spark fierce debate between rural pressure groups. Logging scandals won’t go away.

Over recent weeks, the rural economy has claimed an unusually large share of national attention.

This amounts to a small revolution. Over the boom years, the countryside was ignored. The dominant economics said: we will grow quicker, not by trying to upgrade the peasants, but by turning them into factory workers. Every low-productivity farmer transformed into a more-productive urban worker would be a gain for GDP.

But ever since the urban economy began to shrink so spectacularly, attitudes to the rural economy have changed. The backwardness of Thailand’s agriculture has become an opportunity – a potential to find some growth in the economy somewhere. Rice is already confirmed as the star of this year’s export statistics. Many hope the rural economy still can serve as a social shock-absorber, feeding and accommodating those thrown out of urban work by the crisis.

The ranks of those who have touted agriculture as Thailand’s "saviour" in this crisis include think tanks, government planners, the Finance Ministry, the Bangkok Bank, even stockbrokers.

But for many, this new enthusiasm about agriculture is probably short-term. Thailand’s urban leaders, and much of urban opinion, want Thailand to be modern, developed, industrialised—part of the select club of advanced, successful economies. For the last two decades, this vision was summed up in the description, Newly Industrialised Country or NIC. Within this vision, agriculture had no serious place. The countryside was treated as a supply depot for cheap labour and natural resources. Farmers were part of Thailand’s past, not part of its future as a NIC.

While many are now enthusiastic about the countryside’s role as a cushion against the crisis, they probably hope that before long Thailand can get back on the road to NICdom.

But this is the right moment to face up to the fact that the old vision of Thailand as a NIC was always a one-eyed vision. It could be kept in focus only by closing one eye and refusing to see half of the population and much of the natural resource base.

It is also the right moment to open the other eye, because getting back on to the old road to NICdom will not be easy.

Even when Thailand has done cold turkey for its addiction to the finance drug, the old pattern of growth, based on inflows of foreign investment and outflows of industrial exports, will not be easily restored. The Asian crisis will dampen investment flows for a long time to come. The export markets will be tougher and slower now that there are more competitors. Already policy-makers are waking up to the fact that any future growth will depend more than in the past on growing the domestic market. And that means paying more attention to the agricultural sector which is still the main support of the largest number of people.

Besides, the end result of the crisis will be that the economy is opened up further, and the scope of the government for independent policy-making will be narrowed down. There will be less room to tinker with Thailand’s competitive advantages in the world. The economy will have to leverage its existing advantages. Any two-eyed assessment of Thailand’s advantages must include the large area of agricultural land, the largely benign climate, the established rural community, and the heritage of being one of the world’s major agrarian exporters for over a century.

So is the age of Thailand as a Newly Industrialised Country over, and is there a future as a Newly Agricultural Country? Should Thailand stop trying to become a NIC and become a NAC instead?

There is no reason to stop being a NIC.. The deindustrialisation brought on by the financial crisis should be temporary. The industrial assets built up over the past two decades, and the experience gained from both boom and bust, will be a base for the future. With the political reforms and financial reforms achieved by this crisis, industry should return before long to a trend of growth which may be more modest but also more stable.

But it is the right time to take seriously the idea that being a NIC does not mean that agriculture has to be ignored.

Thinking of "Thailand as a NAC" is more than just a fancy phrase. The term NIC has always stood for progress, modernity, optimism. The idea of NAC transfers the same values onto the agricultural sector. It says: the rural sector too can be part of modern Thailand.

This would be a huge change in mind-set. Over the last twenty years, agriculture has been dragged along behind the urban economy. The economic gap between city and village has become wider and wider. The social, political and cultural gaps have become wider too.

Dragged along this way, the rural sector acts ultimately as a drag on growth. More and more, too, it creates political complications. The central bank governor recently listed the potential obstacles to economic recovery. The top two items on his list were not the IMF programme, the size of the debt, or the possibility of a second Asian crisis. Rather they were party political fighting and the prospect of farmer’s protests. The neglect of agriculture lies behind both.

Looking beyond the crisis, Thailand should set out to be a NAC, or at least a NIC-NAC. No other strategy will preserve the rural cushion for use in future crises, close the gap that runs right through Thai society and politics, and build the home market needed to sustain the growth of the urban economy.

The change in mindset is specially difficult because of the weight of the recent past, and because the Thai elites have been so obsessed with growth based on manufactured exports and foreign capital inflow. But this moment, when the urban collapse has brought the countryside back into the forefront of national attention, is the moment to make the leap—form NIC to NIC-NAC.