‘Rural industrialisation’ represents an approach to development which has become popular in many developing countries because it is seen as addressing many of the key challenges facing rural areas. It can be defined in terms of nonagricultural activities in household production for family and local needs. In particular, it represents an approach which can contribute to a better distribution of development benefits. Rural industrialisation can be looked at as a means to reduce employment problems in less developed areas of the country, providing better employment opportunities for the un- or underemployed labour force in the agricultural sector (Panpiemras, 1987).
Rising rural unemployment and persistent rural poverty are two such problems. In order to tackle them, and the associated problem of out- migration, the Thai government has sought to create employment opportunities in the rural sector, particularly outside farming (Parnwell, 1990: 2).
Thailand’s rapid industrial growth since the 1980s has considerably affected the country’s economic structure. The contribution of the agricultural sector to GDP has progressively declined, while the manufacturing and service sectors have become more significant. Nevertheless, the growth within these two sectors has not been equally distributed across the country. Bangkok and its periphery attract massive investment, thereby creating various problems ranging from congestion and pollution to inadequate infrastructure. Hence, the decentralisation of industry to the provinces became accepted as one of the country’s strategies to achieve more spatially balanced industrial growth (Nartsupha, 2003).
Table 3.4 Structure of Thai Economy in 2008
Source : BOT (2008) ‘Structure of Thai Economy in 2008’. [Online]. Available at :
http://www.bot.or.th/English/EconomicConditions/Thai/genecon/Pages/Thailand_Glance.aspx (Accessed: 10 November 2009).
Even though decentralisation does not directly impinge on rural spaces and the economy – the main target centres are secondary urban areas – it does potentially re- orient the migration of rural labour and allows for easier maintenance of links between migrants and their home communities (Hirsch, 1994). Parnwell (1990) has discussed the potential role to be played by rural industries in rural and regional development in Thailand:
Put very simply, the modernisation and development of small-scale industries in peripheral rural areas might help to achieve a number of the objectives of national development policy makers which ‘conventional’ planning approaches such as urban-industrial decentralisation and rural job creation have been singularly unsuccessful in accomplishing (Parnwell, 1993: 244).
Underlying policies to promote rural industry is the belief that if industrial activities can be enticed to locate in rural areas where most of the poor in Thailand live, and the necessary labour could be released from farms to work in the factories nearby, then rural poverty could be reduced, rural-urban inequalities challenged, excessive urbanisation controlled, and living standards for rural people improved. Furthermore, investment in rural industries would help to stimulate the local economy. Therefore, the rural employment generated will not only improve the income conditions of rural people, including the rural poor, but will also help the move toward a more balanced transformation of the economy (Quibria, 1996). To quote Parnwell again:
Sector GDP by Sector (%) Labour force by sector (%)
Agriculture 8.9 39.0
Manufacturing 40.1 14.5
Wholesale and Retail Trade
13.8 15.3
Other services * 37.2 31.3
* Other services include the financial sector, education, hotels and restaurants, etc.
Given that the insufficiency of income in their local areas is one reason why large numbers of people regularly migrate to urban centres, especially Bangkok, the promotion of industrial production in the countryside might also help to stem the haemorrhage of the region’s human resources towards the capital primate city (Parnwell, 1993: 244)
The potential significance of rural industries, regularly discussed in conjunction with small-scale industries, was not really accepted by Thailand’s economic planners until the 1970s. In the First and Second Plans, small-scale industries were mentioned as being important to economic development, but no specific policies were outlined. In the Third Plan, regional industrial development was mentioned as a means to deal with the industrial concentration in Bangkok and surrounding areas. It was not until the Fourth Plan, however, that both small-scale industries and provincial industrial location received explicit attention. However, this was short-lived. In the Fifth Plan, the interest of development planners in small-scale and rural industries was replaced by an interest in large-scale industries, propelled by foreign direct investment and geared to exports. A new policy framework for rural development called the National Rural Development Programme (NRDP) was formed at this time. Coordinated by a national committee headed by the Prime Minister, the NRDP included a range of government agencies’ projects aimed at making activities more effective. Another important change was that, really for the first time, rural people were permitted to contribute their own project ideas and played a role in the formation of development- oriented organisations (Shigetomi, 2004). In the Sixth Plan, the promotion of small- scale and rural industries received little attention. The success of exports in the first few years of the Fifth plan had apparently reoriented the government toward large- scale, capital-intensive industrialisation approaches (Quibria, 1996). That said, it should be noted that under the Fifth and Sixth Plans there was increased official interest in rural industry, marked by the establishment of the Rural Industry Fund in 1988 (Dixon, 1999).
Parnwell argues that the case for rural industrialisation in Thailand “as part of the strategy for alleviating the problems of rural areas and peripheral regions in Thailand is not a difficult one to make” (Parnwell, 1990: 5). Therefore the rural sector and rural areas should be more centrally drawn into the country’s industrialisation process, to
enable the benefits of Thailand’s modernisation to be more equally and equitably distributed. This in turn would have the dual benefits of easing some of the social, environmental and welfare pressures on the metropolitan region, and at the same time stopping the haemorrhaging of human resources from the rural periphery (Parnwell, 1996).
It can be noted that the key development of the second half of the twentieth century in Thailand was its rapid economic and social change from an agriculture-based economy to one based on industry and services. Beginning in the 1930s and reaching a peak in the 1950s and 1960s, the national development project in Thailand centred on efforts to build up state-supported and protected domestic industries and to promote the growth of the internal market for the consumption of industrial goods. Starting in the 1970s, and reaching a peak in the 1990s, the export-oriented approach has been marked by the encouragement of exports of manufactured goods, the expansion of banking, property and tourism and rapid urbanisation (Goss and Burch, 2001).
Rural industrialisation might help not only achieve a more balanced pattern of industrial development in Thailand but it would also serve to slow the rate of urban concentration. An additional potential benefit of rural industrialisation would be to increase the female labour force participation rate in rural areas, as women regularly play a key role in cottage industry (Islam, 1987):
…If traditional rural cottage industries are to be ‘brought into the modern world’ in order to achieve some of these objectives. In essence, a larger volume of more marketable and better quality goods must be produced more cheaply, more reliably and more efficiently. To achieve this, the supply of raw materials and finance capital must be improved, production skills enhanced, entrepreneurship developed, designs changed, new technology introduced and marketing systems extended…It is clearly unrealistic to expect all of these changes to take place spontaneously and independently of external involvement and support (Parnwell, 1993: 247-248).