FDI in Thailand
FDI in Figures
Foreign direct investment has been an important element of Thailand's economic development process. The immense foreign currency influx after Thailand's financial liberalization in 1990, helped to increase the country's competitiveness. In the context of the recession and relatively slow recovery after the 1997 crisis, the FDI's role became even more crucial in helping re-capitalize failing industries, bring in new technologies, generate or save jobs, assist with policy reforms and play a role in addressing the poverty and social inequalities challenges.
Thailand is an important FDI destination. In terms of investment, the country offers an attractive and modern legal framework and its economy benefits form the regional dynamism. In 2009, Thailand ranked amongst the first destinations for FDI and was the second ASEAN (Association of the Nations of the Southeast Asia) country, after Singapore, in terms of FDI stock. However, due to the US financial turmoil and the slowing of the global economy, as well as the country’s own political instability, the FDI influx dried up in 2008-2009. They should continue their recovery which began in 2010.
|Foreign Direct Investment||2007||2008||2009|
|FDI Inward Flow (million USD)||11,355||8,544||5,949|
|FDI Stock (million USD)||94,112||93,046||99,000|
|Performance Index*, Ranking on 141 Economies||73||83||70|
|Potential Index**, Ranking on 141 Economies||61||62||-|
|Number of Greenfield Investments***||123||330||273|
|FDI Inwards (in % of GFCF****)||17.4||11.4||14.8|
|FDI Stock (in % of GDP)||38.1||34.2||37.5|
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
FDI Inflows By Countries and Industry
|Main Investing Countries||2010, in %|
|Main Invested Sectors||2010, in %|
|Electrical and electronic products||36.6|
|Metal products and machines||13.2|
|Minerals and ceramics||8.0|
Source: Board of Statistics
Why You Should Choose to Invest in Thailand
- Strong Points
- The country's main strong points are:
- A skilled work force in a number of sectors;
- A strategic location at the heart of Asia: the country is an entryway to Southeast Asia and the Upper Mekong Basin region where the emerging markets have great economic potential;
- A governement policy which promotes investment and promoting free-trade: According to the World Bank, Thailand is the 4th Asian country and the 20th in the world where it is easy to do business;
- The existance of a number of government agencies to help investors;
- An investment regime in total harmony with WTO regulations: no restrictions in the manufacturing sector, no local requirements nor export conditions.
- Weak Points
- Other than economic factors, structural factors like the lack of infrastructure or sufficient skilled labor, could influence the level of investments and economic growth. A World Bank report, published in 2009, stresses on a key variable for recovery: political stability. Political uncertainty in Thailand was seen by companies as the main drawback to investment. The lack of improvement in the infrastructures and the shortage of skilled workers (linked to the quality of the education) have also limited investments.
- Government Measures to Motivate or Restrict FDI
- The Thai
Boad of Investment (BOI) offered a series of incentives in six industrial sectors in 2008-2009, namely eight years of tax exemptions for companies and 50% tax reduction for companies for 5 years, double transport, electricity and re-supply deductions as well as 25% deduction on net profits for establishment and construction costs. The 6 sectors are:
- Agriculture and food;
- Renewable and alternative energies;
- Electronics, information and communication technologies (ICT);
- High added value services (including leisure, health and tourism).
The BOI will also implement measure aimed at contributing to the increase of company liquidity. Additionally, it can offer import tax exemption on raw materials required for production aimed at export.
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