Thailand

K

Currency, Banking, and Foreign Capital Flows

Thailand’s basic unit of currency is the baht. The central bank is the Bank of Thailand (established in 1942), which issues the currency. Until 1997 the Thai banking system combined private and publicly owned banks, with limited participation by foreign banks.

In the late 1980s economic policy reforms greatly facilitated foreign purchases of Thai stocks and bonds as well as international borrowing by Thai banks. Whereas private foreign capital flows had previously consisted mainly of direct investments in factories and equipment, by the early 1990s the major source of foreign capital was short-term loans to Thai banks. The boom in capital inflows placed great stresses not only on the private banking system (to which most foreign loans flowed) but also on the capacity of the Bank of Thailand to monitor and regulate the financial sector. These institutional weaknesses formed fault lines along which the Thai financial economy fragmented when capital inflows abruptly reversed in 1997.

Beginning in the mid-1980s the baht’s exchange rate with the United States dollar was fixed at approximately 25 baht to U.S.$1. However, the 1997 capital outflow forced the abandonment of the fixed rate. Allowed to float, the baht fell as low as 60 to the dollar before stabilizing at around 36 by late 1998. The 1997 crisis also led to a number of reforms in banking and finance. Restrictions on foreign ownership of Thai banks, property, and corporations were relaxed, and measures were passed to improve the structure of the banking sector and the transparency and efficiency of financial transactions.

The Economy section of this article was contributed by Ian Coxhead.

---

---

VI

Government of Thailand

Thailand was ruled by an absolute monarchy from 1782 until 1932, when a small group of rebels seized control of the country and persuaded the king to accept the introduction of a constitutional monarchy. The country’s first constitution called for a government headed by a legislature (the National Assembly), with the king maintaining an advisory role as head of state. When the king sought to dissolve the new legislature the following year, the army moved to prevent him, thus becoming the dominant political force in the country. For most of the next half century, Thailand was under the control of various military governments.

In 1997 Thailand’s 16th constitution took effect. It was the country’s first constitution to be drafted by a process involving public debate, and the first to include a bill of rights guaranteeing equality and basic human rights to all citizens. The constitution was intended to move the center of power away from the military and bureaucracy and toward the elected members of the legislature. It contained guarantees for social welfare and environmental protection and required the government to report its activities. Following a military coup in September 2006, the 1997 constitution was rescinded. The military government drafted a new constitution, which voters approved by referendum in August 2007.

Thailand is a unitary state, in which the authority of the central government is superior to that of the country’s provincial and municipal governments. However, in recent years pressure has increased for more devolution of power to the provinces and municipalities. All citizens age 18 and older are eligible to vote.

A

Executive

The king is Thailand’s head of state and the commander-in-chief of the armed forces. Although the king has little direct power, he may exercise considerable influence on political leaders and moral influence on society as a whole. Since 1946 the king of Thailand has been Bhumibol Adulyadej, or Rama IX.

The country’s chief executive official is the prime minister. The prime minister is designated from among the members of the House of Representatives and is usually the leader of the dominant party following elections. The king formally appoints the prime minister. The prime minister heads the cabinet, which consists of no more than 35 members. Under the 2007 constitution the prime minister is limited to two four-year terms in office.

B

Legislature

Legislative power in Thailand is vested in a bicameral (two-chamber) National Assembly (Ratha Sapha), consisting of a House of Representatives (Sapha Poothaen Rassadorn) and a Senate (Woothi Sapha). The House of Representatives has 480 members; 400 of them are elected from single-member constituencies (geographical areas that each have one representative) and the remaining 80 are elected through a party-list system. House members are elected to four-year terms, but these terms can be cut short if the king decides to dissolve the legislature and call for new elections. The Senate has 150 members, 76 of whom are directly elected from districts corresponding to Thailand’s provinces and 74 of whom are selected by a committee. Most provinces have a single representative in the Senate, but the larger ones have additional representatives. The elected members of the Senate serve six-year terms, and the appointed senators serve three-year terms.

C

Judiciary

Thai citizens are guaranteed due process and equal justice under the law. At the top of the court system is the San Dika (Supreme Court), located in Bangkok. It serves as a court of final appeal in all civil, criminal, and bankruptcy cases. Below the San Dika is the San Uthon (Court of Appeal), which has appellate jurisdiction in all cases. Courts of first instance include magistrates’ courts, provincial courts, and courts with exclusive jurisdiction in Bangkok and its immediate environs. The 1997 constitution recognized, and increased the independence of, the judiciary. As part of the country’s reforms to enhance the rights and freedoms of the Thai people, a royal decree created the 15-member Constitutional Court in 1998. This court makes final and binding decisions in cases involving constitutional issues, and it may recommend amendments to the constitution.

	More from Encarta
	•  Presidential Myths Quiz •  Coffee break: Recharge your brain