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1、Thailands Illegal Economy and Public PolicyPasuk PhongpaichitSeminar paper delivered at the Centre of Southeast Asian Studies, Kyoto University, November 1999.police had angered Thanachart by refusing to return to him three .38 calibre pistols seized from two aides during a weapons raid on a club. t
2、he military generals son returned to the Phya Thai police station early yesterday morning with a laser-guided assault rifle and five pistols. Are you going to give them back to me or not? Thanachart yelled as he squeezed the trigger of his M16, unleashing a hail of bullets into the ceiling and walls
3、.I was angry, Thanachart said afterwards. (The Nation, 1 July 1997) When asked where he got the M16, Thanachart replied, I got it myself. There are lots along the border. You can get as many as you want. But you must be an influential and widely known person. All my friends have them. (Daily News, 3
4、 July 1997)The host of an underground lottery in Chonburi province set fire to a large tree the villagers believe to be over one hundred years old and sacred. Villagers had rubbed on the tree trunk to look for winning numbers. Many villagers had won the lottery, and the host had lost a lot of money.
5、 (Thai Rath, 4 July 1997)Drug trafficking is a major cause of unrest and social and economic problems in southern border provinces, the Fourth Army Region commander said yesterday. The use of drugs is widespread among teenagers and prostitutes. Local leaders, government officials and influential fig
6、ures have been revealed as traffickers. (Bangkok Post, 30 June 1997)The police station here at Lang Suan, where a police sergeant-major shot five colleagues and himself functions like a big company. Some police officers are involved in illegal money, a lot each month. The money comes from raids agai
7、nst ya baa (amphetamines) selling rings, gambling dens and illegal goods smuggling. All in all, several thousand baht a month, the source claimed, adding that the money is shared among police officers of all levels, from top to bottom. (Bangkok Post, 6 July 1997)The 31-year old woman, Chaweewan gamb
8、led in a bon loifa floating casino in a Bangkok apartment belonging to Papa Aa. After she had disappeared from home for five days, she rang her lawyer husband to bring 500,000 baht to pay the debt she owed to the casino owner. Her husband said he could only bring the money on Monday when the bank op
9、ened. But on Monday Chaweewans broken body was found in the car park of the casino. She was dead. After finding a suicide note in her skirt pocket, police concluded she had thrown herself from the twelfth floor above the casino. According to people in the area, this casino has been operating illegal
10、ly for a long time and has never been raided by the police. After the incident, Papa Aa moved the casino to another location one kilometre away and continued operating without any concern. (Thai Rath, 8 and 11 July 1997)The pretty Burmese woman staggered to the Immigration Office and asked to be sen
11、t back to die in Burma. She is sick with the last stage of AIDS. Five years ago at the age of 14 she was lured to Bangkok with the prospect of a restaurant job, and put to work in brothels in Suthisarn, along with many other Burmese girls in a similar situation. Later she worked as a telephone call-
12、girl in Sukumwit. The manager made her undergo plastic surgery on her nose, after which she became the star of the place, commanded a high price of 2,000-3,000 baht per session, and attracted 10-20 clients a day. Two months ago, she became sick, and was sacked from the establishment. A doctor in Ban
13、grumrat hospital told he she had AIDS and would die within three months. (Thai Rath, 9 and 10 July 1997)Immigration announced the arrest of the leader of a Japanese gang which specialises in smuggling young Thai girls into Japan hidden in large suitcases. Airport officers at Osaka airport found four
14、 girls being brought in that way. The police caught Mr Oyama in Bangkok while he was trying to bribe a policemen for his freedom. He had already smuggled over forty Thai women into Japan in large suitcases. (Daily News, 12 July 1997)The contents of this study are not news. The above stories were tak
15、en from the press over a period of just two weeks. Anyone who reads the newspapers knows Thailand has a large illegal economy. Most can make out that it involves important and influential people. What we have tried to do in this study is to bring this knowledge together in one place, cast it in a mo
16、re systematic framework, and discuss the issues arising.The Illegal EconomyUsually when we talk of the economy, we mean the activities captured in the national income accounts and recorded in GNP/GDP tables. But it is widely recognized that this definition leaves a lot out. This hidden part is vario
17、usly called the underground economy, black market, shadow economy, informal economy or parallel economy. See Thomas (1992); Roemer and Jones (1991); Harding and Jenkins (1989). Theoretically this underground economy can be broken down into five major parts.1. Activities which are illegal, such as dr
18、ug trafficking, smuggling, illicit logging, trading of conserved species of plants and animals, trafficking in humans, and activities such as prostitution and gambling where they are banned by law.2. Tax evasion.3. Income from corruption both in government and the private sector.4. Informal sector a
19、ctivities such as vending, self-employment, casual work and household industries which are not captured in the official statistics and are often not covered by taxation.5. Household work carried out by family members, but not included in the value-added of the economy, such as the care of the sick a
20、nd aged, and many household chores which are important to the well-being of household members.If household members refused to do these works, someone else would be hired to do them at a price. For instance caring for the sick and aged by hospitals certainly costs money and is included in the nationa
21、l income statistics. But the same activity is excluded if undertaken by the household.Various attempts have been made to assess the size of these sectors in different countries. For instance, the sum of tax evasion (2) and the informal sector (4) has been estimated at 15 percent of GNP in UK, 27 per
22、cent in Germany and the USA, and almost 60 percent in Thailand. Harding and Jenkins (1989: 60); Feige (1989: 212); Krasaethat, 20 June 1996: 8. The household sector (5) has been estimated at 37 percent of GNP in the USA, and 49 percent in India. Thomas (1992: 24,27). Corruption income (3) generated
23、by bureaucrats and politicians has been estimated at around 1 percent of GDP in Thailand in the period 1960-73. Pasuk and Sungsidh (1994: ch. 2). Among estimates of the illegal or criminal sector (1), the production and trading of marijuana was estimated to be 3-6 percent of GNP in Columbia in the p
24、eriod 1981-1984. Thomas (1992: 318). In the U.S.A. the value added from the illegal drug trade, illegal gambling and prostitution accounted for 2.7 percent of the total private sectors expenditure.Thomas (1992: 286).This study looks only at the first type, the illegal economy, and only at a limited
25、set of six illegal activities: drug trafficking; trading in contraband arms; smuggling of diesel oil; trafficking of labour in and out of Thailand; prostitution in Thailand; and three forms of illegal gambling.We chose to study the illegal economy and focused on these six major activities for three
26、major reasons. First, these are large and highly profitable businesses. Second, businessmen involved in these different activities are linked together in criminal networks, and also linked to powerful figures in the bureaucracy, police, military and politics. Some cabinet members in recent governmen
27、ts have been implicated in various illegal activities. Third, these activities are important as sources of employment and income generation for a large number of people, but also have enormous negative effects on the economy. In sum, these activities have a large impact on economy, society and polit
28、ics. Economists and policy makers need to understand the illegal economy, its structure, its extent, and its implications.SizeThe illegal economy is large. According to our (deliberately conservative) estimates, the six activities generated 286-457 thousand million baht of value added per annum in t
29、he period 1993-5. The figure is equivalent to 8-13 percent of GNP. The largest contributor was gambling, followed by prostitution, drug trafficking, diesel oil smuggling, trafficking labour, and trading in contraband arms.These figures do not include a host of other illegal activities, such as traff
30、icking of people to third countries, smuggling goods other than diesel oil, trading in protected animals and plants, illicit logging, and other forms of unlawful gambling (illegal bookmaking on horse racing and boxing, billiard halls, the stock market lottery, etc.) If these were included, the figur
31、e size may be as large as 20 percent of GNP.-Estimates of the Size of the Illegal Economy in Thailand 1993-5Value added(billion baht/year)-Drug trafficking28-33Trading in contraband arms6-31Diesel oil smuggling9Prostitution in Thailand100Trafficking in people5-7Illegal gambling138-277 - underground
32、lottery(81-98) - football gambling(12-16) - casinos(45-163)Total286-457-Notes: Details on the figures and estimation methods for each activity are given in the respective chapters below. Thailands GDP between 1993 and 1995 averaged 3.6 million million baht a year.-Trends and NetworksOf all these act
33、ivities, only contraband arms trading shows a falling trend, as a result of the decline of armed conflicts in the region. All others have a tendency to increase, because of their high profitability and the ineffectiveness of law enforcement.Increasingly these activities are linked together in networ
34、ks of organized crime. Guns are exchanged for drugs. Gambling profits are invested in prostitution. Routes and systems for smuggling drugs are adapted for traffic in people. Protection networks span across the whole range of the illegal economy.Thailand has acquired an international reputation as a
35、country where illegal businesses can flourish because of poor law enforcement. This is bad for the nations international image. It also attracts international illegal business to use the country as a base. Gangs of Pakistanis, Chinese Haw, Taiwanese, and Japanese Yakuza have recently been reported o
36、perating in Thailand. The Pakistani gang specializes in protection rackets, faking of passports, and drug trafficking in collaboration with gangs from Iran. Prachachat thurakit, 9-12 May 1996. The Taiwan-Chinese Haw gang is involved in drug trafficking. Prachachat thurakit, 6-8 May 1996. Bangkok has
37、 become a clearing house for the shipment of girls from China to third countries, and from south Asia into Malaysia. In the drug trade, prostitution, and illegal trafficking in humans, Thailand has become a centre of international significance.Economic impactThe illegal economy has both positive and
38、 negative impacts. On the positive side, illegal businesses are relatively labourintensive and help to generate employment. The underground lottery, for example, employs some four million people on a parttime basis of 46 days a month. Casinos provide employment to many people in the dens and in asso
39、ciated services such as preparing food, selling of garlands, and parking cars. The rise in football gambling in recent years has been a major factor in developing a new sports-oriented press. Prostitution employs an estimated 200,000 directly, plus a number possibly several times larger in associate
40、d services. Oil smuggling has generated employment among former fishermen.On the negative side, the illegal economy has several distorting effects.Illegal activities often generate superprofits which are then redeployed in the mainstream economy. Honest businessmen are often discouraged when faced b
41、y competitors who have access to large reserves of cheap funds.Illegal funds are often laundered through legitimate markets suchas real estate, stocks, and entertainment businesses. Generally they are channelled through the more speculative parts of these markets, and tend to magnify the tendency to
42、wards boom and slump.Despite the employment creation, the net effect of the illegal economy is probably bad for income distribution. Gambling in particular transfers money from the poor to the rich - from a mass of often poor punters, to a handful of wealthy entrepreneurs. Drug trafficking also make
43、s money for the rich at the expense of students, youth, workers and vulnerable groups such as sex workers and slum dwellers.The illegal economy is detrimental to the nations human resources. Drug abuse, AIDS and STD, and the element of child abuse in the sex services trade, inflict direct damage on
44、people, and very often on young people who represent the nations future stock of human resources. Prostitution in particular diverts people away from education and skill acquisition through the enticement of high earnings at an early age.The illegal economy complicates and undermines the management
45、of the economy. The profits are often spent on luxurious consumption, or invested speculatively in the stock and property markets. These flows may counteract government policies to control consumption, promote saving, combat inflation, and regulate eccentric movements in speculative markets.The high
46、 profits in the illegal economy help promote a spendthrift consumerist culture. They also create social values in favour of risk and speculation for superficial and illusory gains, and tend to erode the work ethic.In sum, there are two sides to the illegal economy. On the one hand illegal businesses
47、 generate employment and income just like any other business. On the other hand, they tend to distort resource allocations, damage human resources, undermine government policies, and contribute to economic instability. These negative effects entail economic costs which are difficult to quantify, but are undoubtedly large.Political ImpactProfits from the illegal economy have contributed to the rise of itthiphon meut (dark influences) or jao ph
