An Asian Tiger Cub Sharpens Its Claws

Here's a riddle: Name a country whose growth has averaged 10% over the last five years, whose consumer prices are up only 2.8% over the past 12 months, whose wholesale prices have declined 1.3%, whose currency has been stable against the dollar for more than seven years, and whose investment last year came to nearly 38% of GDP.

The answer is Thailand, and according to economist Lawrence A. Kudlow of Bear, Stearns & Co., its sound economic policies suggest that it will follow the fast track of its Asian Tiger neighbors. Kudlow points out, for example, that the government spends only 17% of GDP and consistently runs a budget surplus, which hit 2.5% of GDP last year.

As for taxes, capital gains on stocks are tax-free, and social security contributions, shared by workers and employers, are only 3% of wages. The top individual income-tax rate is 37% on incomes over $160,000, and the corporate tax rate is cut from 35% to 30% if a company is listed on the stock exchange.

Thailand has a big trade deficit, but Kudlow thinks its attractive investment climate will let it keep expanding fast without relying on an export-led policy that suppresses imports. "Low inflation, a strong, stable currency, an open financial system, and low tax rates will enable Thailand to follow the Hong Kong and Singapore fast-growth models of high investment rates and balanced expansion of imports and exports," he says.

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