FDI cash still flowing into Thailand

Despite the recent coup, inbound foreign direct investment (FDI) is expected to continue flowing into Thailand due to the country’s strategic location, clusters of industrial facilities and the new Board of Investment (BoI), says the International Institute for Trade and Development.

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Deputy executive director Runothai Mahaddhananond said the trend of FDI inflows was expected to improve thanks to the recent appointment of BoI executive board members and better foreign investor understanding of the domestic situation.

The BoI, chaired by junta chief Gen Prayuth Chan-ocha, recently approved major investment projects worth 120 billion baht this month, which should allow pending projects worth 700 billion to proceed, restoring investor confidence.

The US government has criticised Thailand’s democratic backtracking and human trafficking record, while the EU has curbed its ties with the country in order to pressure it into holding general elections as soon as possible.

Thailand recorded FDI inflows of US$13 billion last year, although many FDI projects were shelved due to domestic political instability. Singapore led the region at $64 billion, with Indonesia second at $19 billion, noted the "World Investment Report 2014" from the UN Conference on Trade and Development (Unctad).

Thailand still needs upgrades to attract foreign investments such as an online customs system that could integrate with those of its regional peers, rules and regulations on soft logistics and uncompetitive trade incentives, Ms Runothai said.

She said Thailand might not be able to compete with Malaysia, which received $12 billion in FDI last year, as the latter had greater political stability, a halal-friendly port system and knowledge-based product innovations.

FDI inflows are expected to increase over the next three years in both East and Southeast Asia thanks to the upcoming integrated Asean single market, good basic infrastructure and impartial business protection laws, Ms Runothai said.

FDI inflows into Asean rose by 7% to $125 billion last year from $118 billion in 2012, while total FDI inflows to developing Asia excluding West Asia amounted to $382 billion last year, up by 4%, said Unctad.

Developed economies want to limit multinational companies going abroad for fear of "hollowing out" the economy, Ms Runothai said. But developed countries have high labour costs and policies prohibiting pollution, factors obstructing investment incentives.

BoI deputy secretary-general Chokedee Kaewsang said certain investment projects pending BoI approval are expected to be approved by the end of the third quarter, particularly the eco-car phase 2.

The BoI targets 700-900 billion baht in investment tax privilege applications this year, he said.

It will meet with the Joint Foreign Chambers of Commerce in Thailand on Monday to discuss the impact of the EU and US stances on Thailand.

Western sentiment is not expected to affect investment, Mr Chokedee said, citing continued European applications during the 2006 coup.

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