Industrial Dispersion in Thailand with Changes in Trade Policies

Thailand, which is an industrial core of the GMS, hosts various industries. An understanding of current location of industry in Thailand is important in planning the future industrial network. In particular, as economic linkage within the GMS is becoming stronger, changes of industrial location with trade liberalization are an important correlation. Krugman and Elizondo (1996) provided a theoretical model for this relation. The present author conducted an empirical survey to determine whether industrial location in Thailand conforms to the Krugman and Elizondo’s model. This empirical study uses data on manufacturing of gross provincial product. The proportion of manufacturing within each province, and the Herfindahl index deriving from the proportion, were used. The result is that industrial location of Thailand conforms to Krugman and Elizondo’s model. During the period of import substitution, Bangkok grew to a large metropolis and gradually expanded into neighboring provinces, with escalating congestion costs. After an export oriented policy was implemented, the industries started to disperse, and some provinces became new industrial cores, with ports. In considering the extension of industries to neighboring countries, it appears that promoted investment projects, which could be leading indicators of future production, do not guarantee an increase of production in border provinces, at least in the middle term. As there is little research on this issue for Thailand, this paper will assist in identifying future industrial locations and formulating policy.