Investment has fallen in the light of the Kingdom's continuing political uncertainty, which is having a negative impact on the economy and consumer spending.
Yesterday's news of explosives found in a car near caretaker Prime Minister Thaksin Shinawatra's residence has added to the negative mood, as it is a reminder of the political unrest in the country.
The Bank of Thailand recently predicted a further delay in new investment in the second half of the year, as investors prefer to wait and see when and how the political turmoil will be settled.
Somkid attributed the lower-than-expected performance in foreign direct investment (FDI) to the fact that a high number of Japanese investors had already come to Thailand in the previous year. In the first half of this year, more than Bt200 billion of investment received BoI privileges.
Speaking at a BoI seminar celebrating the board's 40th anniversary, Satit Chanjavanakul, the agency's secretary-general, said a new target had been set of at least Bt500 billion of investment receiving privileges. He is confident that an additional Bt200 billion will come in during the last two months of the year, in line with expected major investment projects.
However, he cautioned that future investment decisions also depended on internal and external economic situations.
Satit said that to offset the deceleration in FDI, the BoI would try to increase the portion of Thai investment from the current 30 per cent to 50 per cent of overall investment in the next five years. However, he said this target would only be achieved if the economy continued to grow.
The board does not have strict requirements on the level of investment. Investors with only a Bt1 million project can seek approval from if their business falls under one of the BoI categories, he added.
At the seminar, the Japanese Chamber of Commerce's (JCC) president in Thailand, Tetsuji Banno, warned that investors might shift investment to neighbouring countries, especially Vietnam, if the political tension were not resolved soon.
Banno cited a survey by JCC members conducted in May and June, which suggests Japanese investors have become increasingly concerned over Thailand's political turmoil.
The survey reports that political instability rose to the sixth most worrying issue for investors, a jump from 18th place in the previous survey. The top issues of concern are rising material prices, intense competition - especially from China - lack of human resources, and job-hopping by employees.
Banno told more than 700 participants at the seminar that Japanese investors nonetheless still perceived Thailand as a potential location for investment, at least in the interim, because the Kingdom is ready in terms of infrastructure and management and has a supportive investment policy.
However, compared to other Asean countries, Thailand's political stalemate has made the country less attractive. In the long term he said Japanese investors might shift to Vietnam, which is catching up with Thailand to become an attractive foreign investment destination.
Adisak Rohitasun, vice chairman of Federation of Thai Industries, said all parties should work together to maintain Thailand's investment attractiveness. Otherwise, investors will increasingly relocate their projects to Vietnam.
He said that although some people believed that the industrial index had recently sunk to its lowest point, chances were that it could plunge further because of the worsening political situation.
"Businessmen can accept the fact the election date may have to be delayed from the scheduled October 15, pending the [appointment of the] new Election Commission. However, if the election has to be delayed because of other reasons, it will erode the confidence index," he said.
He added that yesterday's incident, in which an explosives-laden car was found near Thaksin's residence, would further damage the local business environment.
"We have to be careful. Vietnam recently announced its ambition to become the Detroit of Asia if Thailand was still having political problems," he warned.
Satit said the current political tension should be resolved soon before it affected foreign investors' decisions to come to Thailand.
Yesterday, a committee on national overseas strategies - chaired by Thaksin - considered the possibility of opening more official representative offices abroad to boost investment and trade.
Caretaker Deputy Prime Minister Suriya Jungrungreangkit said after the meeting that the Kingdom was narrowly represented overseas. For example, the BoI has only one office in China. Two more should be established - in Beijing and Guangzhou - he said.
"As the ministries of foreign affairs and commerce plan to open more overseas offices, the Foreign Affairs Ministry is assigned to study the worthiness of the opening and present the results to the Cabinet within August. The PM reiterated that we're at the centre of trade competition and all agencies need to work together to take care of international trade issues," Suriya said.
From : The Nation
By : PLA
Date : Aug 25, 2006