The import substitution policy was then replaced in the mid-1970s with the policies to boost exports. The impact of this shift in policy meant that not only Thailand now had a strong agrarian and industrialized economy but it also diversified in a sense that its economic structure became export-led which had a portfolio as diversified that it included textiles, electronics, chemicals, iron and steel, and minerals. One of the reasons for this diversity in the portfolio was the abundance of labor and natural resources. Thus, Thailand took complete advantage of globalization and its economy reported a growth in its average real GDP of 6.6% from 1960 to 1996 (The Brooker Plc p.8-9). This growth is the average growth rate in these years, there were also years in which Thailand witnessed exponential growth rate in terms of GDP and until 1997, Thailand was all set become the regional hub of the business and commerce activities in the region.
Before 1997 Thailand implemented a policy of fixed exchange rate. Its exchange rate was pegged against the dollar. This effectively reduced the transaction costs attached to the inflow and outflow of investments. This obviously resulted in speedy growth as a result of the foreign direct investment. Unfortunately, the lack of foresight and anticipation on the part of Thai government led to the settlement of an economy which was heavily dependent on this direct investment. This policy saw its negative ambiance when in 1997 the investors lost confidence in the recovery of their investments and thus began to keep a check on their investments. The trigger down effect led to heavy speculations against baht and the local investors sold baht and bought more dollars. This caused the capital outflows from the country. But the real impact was felt when the government decided to float the exchange rate.