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The economy of Isan, Thailand's largest region, composed of 20 provinces in the northeast, is dominated by agriculture, although agricultural output is low and decreasing in importance while the trade and service sectors are growing. Much of the population is poor and badly educated. Many labourers have been driven by poverty to seek work in other parts of Thailand or abroad.
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Isan accounts for around a third of Thailand's population and a third of its area. In 2013 it contributed 10.9 percent of the kingdom's GDP. The gross regional product (GRP) per capita in 2013 was 74,532 baht per year, the lowest of all Thai regions, 5.8 times lower than that of the leading eastern region.
Politically-driven upturn
The first decade of the 21st century saw improvements in Isan's economy. Economic growth in the region reached 40 percent from 2007 to 2011, versus 23 percent for the country as a whole, and just 17 percent for greater Bangkok. Monthly household income rose 40 percent between 2007 and 2011, the biggest jump of any Thai region.
Former prime minister Thaksin Shinawatra came to power in 2001 and initiated a series of populist policies—-from virtually free healthcare to low-interest loans to the rural poor—that stimulated Isan's economy. Thaksin was ousted in a 2006 coup, but his sister, Yingluck was elected prime minister in 2011. The economic renaissance of Isan coincided with the expansionary policies, from wage increases to farm subsidies, that were begun by Thaksin and continued by his sister. Yingluck's government brought in a nationwide minimum wage of 300 baht a day in January 2013. In some Isan provinces, that was an increase of 35 percent, among the biggest gains in the country, on top of a nationwide 40 percent increase in April 2012. Yingluck was deposed in early-2014 and replaced by a military government in May.
The military government's economic initiatives of 2016 call for two trillion baht (US$57 billion) to be fast-tracked into nationwide infrastructure projects. Only 10 percent of the funds are allocated to projects in Isan despite its accounting for 33 percent of the population. The majority will be spent on a new Khorat-Bangkok motorway.
Sectors
Agriculture is the biggest sector of the economy. The following table shows the percentage of gross regional product (GRP) by sector in 2013:
Agriculture
Agriculture remains the largest sector of the economy, but its importance is decreasing. Its share of GRP fell from 45 percent in 1980 to 33.2 percent in 1990, and to 27.1 percent in 2013. During the 1990s, the agricultural sector grew at 3.8 percent per annum, compared to 9.7 percent for the service sector. Although 76 percent of the population engages in some form of agriculture, only 46 percent of the workforce is formally employed in the sector, reflecting the fact that for many it is a part-time occupation.
Of the region's 155,400 km2, only 92,204 km2 is cultivated, and only 7,770 km2 of that is irrigated. There are a number of reasons for this. Saline contamination makes a third of the land unfit for cultivation. Although average rainfall is not much less than in other parts of the country, its unpredictability often causes droughts or flooding. The latter is worsened by the generally flat terrain of the plateau, while both are exacerbated by the sandy soil, which is poor at retaining water. Deforestation reduced forest cover from 25 percent in 1975 to 14 percent in 1995, again inhibiting water retention.
Attempts to improve the agricultural sector through irrigation and diversification have caused unforeseen environmental damage. Increased irrigation has raised the water table in some areas, bringing salt to the surface and contaminating the soil. The same effect has also been observed following forest clearance and the planting of cereal crops, cassava, and sugar cane.
Irrigation has also proved somewhat ineffective in increasing agricultural production. Workers commonly work in agriculture during the wet season and turn to non-farm activities during the dry season. Using irrigation to increase dry season production would therefore reduce the labour devoted to these other activities and so reduce the income they provide, rather than supplementing it.
The cultivated land is relatively unproductive: paddy fields produce only 424 tonnes of rice per square mile, compared to 547 nationally. Most farmers can produce only one crop of rice a year. Many farmers still use water buffalo rather than tractors.
Sixty percent of cultivated land is devoted to rice paddies. The concentration on rice farming has made the farmers vulnerable to fluctuating prices. This has been reduced somewhat by increased diversification, but Isan still accounts for half of Thailand's exports of rice, cassava, and sugar. These crops employ 700,000 Isan families. Other crops include, tobacco, cotton, and watermelons.
Other sectors
Other sectors of the economy have been growing more quickly than agriculture, although this growth can be misleading. The number of factories grew from 1,908 in 1975 to 44,000 in 1995, but 34,312 of these were rice mills. In 2000, 76 percent of Isan factories were breweries or food or tobacco processors.
A study conducted by Khon Kaen University estimated that each year 8.67 billion baht is sent by foreign husbands to their wives in Isan.
Poverty
Isan's economic disadvantages have caused great poverty. Most of Thailand's rural poor live in Isan. In 1995, 28 percent of the population was classed as below the poverty line, compared to just seven percent in central Thailand. In 2000, per capita income was just 26,317 baht, compared to 208,434 in Bangkok. Even within Isan, there is a rural/urban divide.
In 1995, all of Thailand's ten poorest provinces were in Isan, the poorest being Sisaket Province. In 2012, six of Thailand's ten poorest provinces were in Isan, Kalasin being the poorest province in the region. From 2000 to 2012, half of Thailand's eight provinces with chronic poverty were in Isan. Most wealth and investment is concentrated in the four major cities of Khorat, Ubon, Udon, and Khon Kaen. These four provinces account for 40 percent of the region's population.
Workforce
A survey in spring 2001 found a total labour force of 10.7 million. Almost 600,000 of those were seasonal labourers between work, and 5.2 percent were unemployed. The remaining 9.5 million were employed as follows:
The population is poorly-educated, with 6.4 million over 15 not having completed primary school. Four million have a primary education, 2.2 million secondary, and 829,736 have a university level education (all as of 2001). There is little incentive for better education, as most job vacancies require few or no educational qualifications.
Economic migrants
Many Isan people have sought work elsewhere. In the first half of the 1990s, 420,000 workers moved elsewhere in Thailand (60 percent of them to Bangkok). Many of the taxicab drivers, shop and factory workers and construction workers in the capital are from Isan. The economic advantages of migrant labour have come at a social cost. While some workers migrate annually, other families are divided, often for many years.
The Thai government's National Economic and Social Development Board estimates that remittances from Isan women overseas amount to US$35 million per year, equivalent to six percent of the region's economic output. Researchers estimate that at least 15,000 Isan women are married to foreign men.
Rural Isan is a disproportionate supplier of workers to the sex trade, both domestically and abroad. This is partly a legacy of Vietnam-era US bases, but mostly due to the region's poverty. As one researcher summed it up, "The equation looks like this: One working day in a tapioca field pays $8 (300 baht). One working day at a multinational chicken factory pays $11 (400 baht). One working day at a metal factory in Denmark pays $91 (3200 baht), and one busy working day at a Danish brothel pays $450 (15,800 baht)."
Sex workers from Isan see prostitution as a way out of poverty. One former sex worker from Maha Sarakham said she entered Bangkok's sex trade at the age of 19 and earned up to 5,000 baht (US$143.14) a night, nearly 20 times the minimum wage of 300 baht (US$8.59) per day. "No one wants to work in this business, but it's fast and easy money," she said.