Foreign investors turning away

Thailand's prolonged political turmoil may have already spooked prospective foreign investors to switch to other Asean countries, according to the European Asean Business Centre.

"Political instability always prevents investment flow. One obvious sector is tourism, but new investment will flow to other Asean countries," said Rolf-Dieter Daniel, president of the Bangkok-based agency.

"Long-term investment, particularly Board of Investment-sponsored projects, may be reconsidered and other locations may be reassessed.

"There will certainly be negative implications for the Thai economy from the demonstrations. It has happened already. Whether the demonstrations last one week or one month does not make a huge difference _ it is just the amount of gravity."

Thailand is on track to leave the EU's Generalised System of Preferences (GSP) in 2015, and this will see the country lose its competitive edge.

"That will make Thai products much more expensive in Europe. As a consequence, Thai exports will be hit," said Mr Daniel.

A free trade agreement with the EU could compensate for Thailand losing favourable duty treatment, but negotiations will be delayed by the political turmoil.

"The demonstrations will certainly extend the time frame beyond the GSP's expiry date," said Mr Daniel.

"Due to the caretaker position of the government, many important decisions cannot be taken and infrastructure projects have been cancelled or stopped, which will reduce growth considerably."

Mr Daniel said a democratic system is a key point for foreign governments when considering the political situation of a country.

Thailand must achieve political reform via constitutional means, or else it will place itself outside the international community, which would be a disaster for the country, he said.

The Joint Foreign Chambers of Commerce in Thailand shares Mr Daniel's sentiments, saying it supports positive developments but opposes threats that would undermine the development of Thailand.

"To boost foreign investment, we need predictability and a stable political environment where the rule of law prevails, with zero acceptance of corruption," it said in a statement.

Judy Benn, executive director of the American Chamber of Commerce in Thailand, said US companies remain committed to the country, with employee safety and business continuity the primary considerations.

Toyota Motor Thailand president Kyoichi Tanada said the political crisis may influence foreign direct investment plans.

The situation now is not like the 2011 floods, when most foreign investors remained committed to Thailand and even expanding here, he said.

"Japanese businesses right now are worried about the situation and want to see it end as soon as possible," said Mr Tanada, also vice-president of the Japanese Chamber of Commerce, Bangkok.

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