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Thailand: Top 20 ranking for FDI attractiveness

Workers clothed in special sterile outfits in the "clean room" of a semiconductor fabrication plant, a typical facility built by large FDI investors (Source: UC Berkeley)

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Thailand foreign investment actually fell last year, but applications rose & Thailand is attractive as ever for big corporate investment, but is this enough?

FOREIGN DIRECT INVESTMENT

Thailand: Top 20 ranking for FDI attractiveness

19/04/2017

Thailand is becoming more attractive as a foreign direct investment (FDI) destination as indicated by its rising ranking in an important index of foreign investor confidence.

FOREIGN DIRECT INVESTMENT (FDI) VS. PORTFOLIO INVESTMENT

To define terms here, "foreign direct investment" (FDI) is when foreign companies buy businesses and build factories in another country.

Portfolio investment is the other type of foreign investment which happens when companies, or individuals, buy stocks, bonds, lend money or purchase financial instruments in a foreign country.

Portfolio investment entails a more passive involvement in the foreign economy and less long-term committment. Portfolio investment can be pulle out of a country quickly.

More formally, FDI is defined as "an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company" (source: Investopedia here).


WHAT EXACTLY HAPPENED WITH THAILAND'S INVESTMENT RANKING?

Foreign investors have turned bullish on the whole Asia-Pacific region recently.

Thailand jumped two places to 19th in A.T. Kearney's Foreign Direct Investment (FDI) Confidence Index for 2017.

FDI ACTUALLY FELL LAST YEAR, BUT APPLICATIONS ROSE

FDI inflows to Thailand actually fell in 2016.

Applications for foreign investment, however, tripled in value year-on-year in the first eight months of 2016.

That, along with investor's optimism and continued interest in Thailand, as well as various government projects and initiatives, suggests that FDI in Thailand will pick up again soon.


INVESTORS LOOKING TO ASIA-PACIFIC REGION AS KEY DRIVER OF GROWTH

The FDI index indicated investors continue to look at Asia-Pacific as a key driver of growth.

Five countries from the region feature in the top 10 rankings this year, highlighting the confidence global business leaders have in the region.

China ranks third, Japan retained sixth place, India was eighth, Australia ninth and Singapore was 10th for a second year running.

The US topped the index for the fifth year in a row. Germany jumped two spots to second with China moving down one position to third. Britain and Canada made up the rest of the top five.


FDI INDEX FOCUSES ON BIG MONEY INVESTORS 

The index is a forward-looking analysis of how political, economic, and regulatory changes will likely affect FDI inflows into countries in coming years.

The index is based on a survey administered to senior executives of the world's leading corporations.

All companies participating in the survey have annual revenue of US$500 million or more.

INDEX RELIABLY TRACKS & PREDICTS BIG MONEY FOREIGN INVESTMENT

Since its inception in 1998, the FDI index and study has reliably pointed toward firms' top choices globally for FDI, with the country rankings reliably tracking with destinations for FDI inflows.

Investor confidence in Thailand has grown steadily.

In this year's survey, 21% of respondents said they were more optimistic about Thailand's economic outlook over the next three years, compared with a year ago.

INVESTORS WANT EFFICIENT & TRANSPARENT GOVT REGULATIONS

"Executives across the globe are putting a strong focus on governance and regulatory factors when making investment decisions," said Soon Ghee Chua, head of Southeast Asia at A.T. Kearney.

"This year's index shows factors they look at include efficiency and transparency of government regulations, tax rates and ease of tax payments, and government incentives. Thailand has been ticking the boxes on all of these"...

GOVERNMENT HAS PLEDGED INVESTMENT FUNDS FOR TECH & INFRASTRUCTURE

...Thailand's cabinet has approved 36 public infrastructure projects valued at around US$25 billion, all of which are open to bid by foreign investors as the government hopes to engage in public-private partnerships (PPPs) to fund these projects.

In addition, the government has pledged about $790 million of technological investment over the next five years in the areas of commerce, entrepreneurship, innovation and content.

IS BIG MONEY INVESTMENT ENOUGH?

Finally, it is worth questioning whether a focus solely on big money corporate investment is enough to achieve a Thailand 4.0 or to escape from the so-called middle income trap.

Sergey Brin, Russian immigrant to US who co-founded Google as a poor graduate student at Stanford University, now 16th richest man in the world.

High tech industries in any future Thailand 4.0 will be driven by highly skilled workers with degrees in engineering, computer science and the sciences.

As this week's articles on the quality of higher education Thailand indicate, there has been an boom in the number of PhD programs and students recently in Thailand, but the quality in these PhD programmes has suffered because there are not enough qualified instructors (see here & here).

Thailand has been plagued by labour shortages due to its overall greying society.

Thai universities also often lack the skilled teachers to teach future skilled employees.

For instance, would an experienced high paid computer programmer take a job at a much lower paying university instructor?

Charles Simonyi, the billionaire pioneer developer of the Microsoft Office suite of programs, also immigrated to the US, along with many others.

In contrast, the US and other western countries have never had this problem because they have proactive immigration policies that attract the highest caliber of the high-tech world to their country.

Sergey Brin, the originally Russian founder of Google, is the most visible example of successful foreign born immigrant tech company founders and entrepreneurs in the US.

Sergey Brin was a graduate student in the electrical engineering department at Stanford University in the heart of America's Silicon Valley and stayed in the US helping the US high-tech industry to grow stronger.

Charles Simonyi, the billionaire pioneer developer of the Microsoft Office suite of programs, also immigrated to the US, along with many others.  

Singapore also attracts the best and brightest in high-tech from the world, including neighbouring ASEAN states such as Myanmar, to participate in its economy and become permanent residents.

Thailand will never have such an opportunity because the country's immigration laws have never changed to attract world talent to the country, and will likely never change.


http://www.bangkokpost.com/business/news/1234410/thailand-reaches-top-20-ranking-for-fdi-interest

https://en.wikipedia.org/wiki/Charles_Simonyi

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