Crisis? Foreign investment in Thailand drops 78%

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Thai army patrolForeign investment in Thailand plunged 78 per cent between January-November 2015 year-on-year despite new incentives offered by the government. The total amount listed in direct investment applications fell to 93.8 billion baht ($2.62 billion), and the number of applications tumbled 37 per cent to 513, the country’s Board of Investment said.

Japan – historically the largest investor in Thailand by far – maintained its lead in the amount invested, but its figure sank 81 per cent to 28.3 billion baht. Investment applications from China tumbled 21 per cent to 13.3 billion baht.

EU investment also plunged from 86.7 billion baht in 2014 to just 2 billion baht last year. Investment from the US was also heavily down.

Thailand enjoyed years of impressive growth after the Asian financial crisis, but since political volatility returned and a junta finally took over in 2014 to run the country, the Kingdom’s economy is struggling with high household debt, stuttering exports, weak commodity prices especially for rice and rubber, and low consumer confidence. It also faces stiff competition from increasingly attractive regional peers like Vietnam, Cambodia and Myanmar.

Investment incentive reforms launched in January last year seem also to have backfired. Somkid Jatusripitak, appointed last August as deputy prime minister in charge of the economy, launched the so-called Super Cluster strategy the following month as part of his stimulus package. The strategy cut the number of qualifying industries from 243 to 190, trying to shift the economy away from labour-intensive industries and toward ones requiring advanced technologies and providing added value. Metalworking and some garment businesses, among others, found themselves shut out.

The result was that companies rushed to take advantage of the old system while they still could at the end of 2014. As a result of the drop-off from that, the amount applied for is seen by some as falling as much as 90 per cent for all of 2015.

However, some economists feel that the reduced investment activity is a sign that more “quality investment” is coming in. But analysts say in reality years of political instability have drastically hampered the country’s economic potential – often referred to locally as the “lost decade”.

Earlier this month the World Bank forecast that Thailand’s GDP growth rate would slip from 2.5 per cent in 2015 to just 2 per cent this year, by far the gloomiest prediction in the Association of Southeast Asian Nations except from oil-dependent Brunei which just entered its third year of recession.

 

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Reading Time: 2 minutes

Foreign investment in Thailand plunged 78 per cent between January-November 2015 year-on-year despite new incentives offered by the government. The total amount listed in direct investment applications fell to 93.8 billion baht ($2.62 billion), and the number of applications tumbled 37 per cent to 513, the country’s Board of Investment said.

Reading Time: 2 minutes

Thai army patrolForeign investment in Thailand plunged 78 per cent between January-November 2015 year-on-year despite new incentives offered by the government. The total amount listed in direct investment applications fell to 93.8 billion baht ($2.62 billion), and the number of applications tumbled 37 per cent to 513, the country’s Board of Investment said.

Japan – historically the largest investor in Thailand by far – maintained its lead in the amount invested, but its figure sank 81 per cent to 28.3 billion baht. Investment applications from China tumbled 21 per cent to 13.3 billion baht.

EU investment also plunged from 86.7 billion baht in 2014 to just 2 billion baht last year. Investment from the US was also heavily down.

Thailand enjoyed years of impressive growth after the Asian financial crisis, but since political volatility returned and a junta finally took over in 2014 to run the country, the Kingdom’s economy is struggling with high household debt, stuttering exports, weak commodity prices especially for rice and rubber, and low consumer confidence. It also faces stiff competition from increasingly attractive regional peers like Vietnam, Cambodia and Myanmar.

Investment incentive reforms launched in January last year seem also to have backfired. Somkid Jatusripitak, appointed last August as deputy prime minister in charge of the economy, launched the so-called Super Cluster strategy the following month as part of his stimulus package. The strategy cut the number of qualifying industries from 243 to 190, trying to shift the economy away from labour-intensive industries and toward ones requiring advanced technologies and providing added value. Metalworking and some garment businesses, among others, found themselves shut out.

The result was that companies rushed to take advantage of the old system while they still could at the end of 2014. As a result of the drop-off from that, the amount applied for is seen by some as falling as much as 90 per cent for all of 2015.

However, some economists feel that the reduced investment activity is a sign that more “quality investment” is coming in. But analysts say in reality years of political instability have drastically hampered the country’s economic potential – often referred to locally as the “lost decade”.

Earlier this month the World Bank forecast that Thailand’s GDP growth rate would slip from 2.5 per cent in 2015 to just 2 per cent this year, by far the gloomiest prediction in the Association of Southeast Asian Nations except from oil-dependent Brunei which just entered its third year of recession.

 

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