Foreign direct investment collapses

Biggest fall in 10-years, low-technology, rising wages blamed, but BoI numbers show big jump in investment projects.

FOREIGN INVESTMENT

Foreign direct investment collapses: Biggest dip in decade

2/08/2016
Post Reporters

Foreign direct investment (FDI) in Thailand in the first half of the year fell by more than 90% in value to the lowest mark in over a decade at US$347 million, reports the Bank of Thailand (BOT).

The BOT report said FDI declined from $4.2 billion in the same period last year to the lowest value since 2005.

FALLING FOREIGN INVESTMENT DUE TO LAGGING TECHNOLOGY, RISING WAGES

The decline was attributed to the structure of Thai industry, which continues to produce low-technology products even as Thai wages rise relative to neighbouring countries' wages.

The sluggish global economy has also kept foreign investors on the sidelines.

"They are taking a wait-and-see approach until they see solid signs of recovery in major countries," said the report.

POLITICAL UNCERTAINTY ANOTHER FACTOR

Political uncertainty in Thailand may also have discouraged investment.

The country has a referendum on the latest constitution draft on Sunday.

The outcome will likely affect whether a general election takes place as scheduled.

However, the central bank hopes the latter half of the year will see an improvement in FDI as the world economy is projected to improve gradually.

The Thai political environment may be clearer after the referendum also.

INVESTMENT ACTUALLY ROSE IN SECOND QUARTER OF 2016

FDI actually rose in the second quarter of 2016, tallying $1.13 billion compared with a contraction of $789 million the same period last year.

The influx of foreign capital flowing to equity and bond markets should increase FDI again, the report said.

JUNE BREXIT EFFECT

In June, foreign capital to those equity and bond markets totalled $2.23 billion.

The central bank attributed the June inflow to the Brexit effect.

This Brexit effect should delay any Federal Reserve interest rate hike, and also FDI in particular sectors such as telecommunications.

BOI INVESTMENT MEASURE SHOWS INVESTMENT INCREASE

X Hirunya Suchinai, the secretary-general of the Board of Investment (BoI), played down the issue of declining foreign investment.

The nosedive in investment was because of the different way the BoI and the central bank measure investment value, she said.

The BoI calculation of foreign investment is instead based on investment applications the BoI approves.

The central bank figure includes investment value and capital inflow - outflow (FDI and also more volatile portfolio foreign investment in Thailand's stock and bond markets).

If investment is measured in terms of approved investment projects, as the BoI measures it, then investment has increased quite a lot recently.

"The BoI measurement was the real investment value from 328 projects the first five months this year," said Mrs Hirunya, referring to 84.39 billion baht, up 604% from 11.99 billion year-on-year.

HONG KONG, JAPAN & NETHERLANDS BIGGEST FOREIGN INVESTORS

The biggest foreign investors here are Hong Kong, leading with 23.2 billion baht, followed by Japan at 19.27 billion and the Netherlands at 10.95 billion, she said.

Mrs Hirunya said in the first half this year, foreign investment in Thailand rose substantially thanks to a big jump in June, with 758 new investment projects worth a total investment value of 303.66 billion baht.

That was up 327% from the same period last year (i.e. June), which saw 71.14 billion baht of investment value from 408 projects.

The rise was attributed to government attempts to support investment such as its cluster policy, special economic zones and the plan to promote the Eastern Economic Corridor.

Mrs Hirunya is still confident FDI for 2016 will reach the BoI's target of 450 billion baht.

OVERSEAS THAI INVESTMENT SKYROCKETS 42.5%

Thai overseas investment in the first half this year skyrocketed by 42.5% year-on-year to $5.95 billion, reported the central bank.

The BoI put the figure at $7 billion for the first five months this year, with deputy secretary-general Chokedee Kaewsang noting it was up from $2 billion in the same period last year.

The rise was attributed to economic expansion and business diversification, particularly for mining and renewable energy businesses.

"This year the BoI expects new investment in other sectors such as manufacturing and banking outside the country to boost the value of Thai investment abroad. We have seen positive signs that these sectors have the potential to grow in overseas markets," said Mr Chokedee.

The BoI projects Thai investment overseas to exceed $14 billion this year.

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