FDI inflow has become a volatile factor in Thailands economy, reaching its highest level in 2013 at $15.5 billion followed by a sharp decrease from $5.7 billion to $1.6 billion in 2016

Authors Avatar by gabrielleanne020mailcom (student)

Student ID: w17005765

Topic: FDIs and country attractiveness

Country: Thailand

Committee: United Nations Conference on Trade and Development


Foreign direct investment (FDI) represents an important element of economic development between a foreign business body and a residing economy of a country, created upon an investment and lasting interests of both (UNCTAD, 2007). FDI inflow has become a volatile factor in Thailand’s economy, reaching its highest level in 2013 at $15.5 billion followed by a sharp decrease from $5.7 billion to $1.6 billion in 2016 (UNCTAD, 2017. p 228). In the Global Competitiveness Report (2016), Thailand was ranked 34th of 138, showing sustainable development and growth of productivity, however, Transparency International (2016) ranked Thailand 101 of 176 for corruption, this showing great risk of exposure to corruption in businesses. In 2016 the main sources of FDI in Thailand were coming from Japan, The Netherlands, USA and Singapore, this amounting for 43.5% of the total FDI. Services, agricultural products, paper and chemical goods being the main sectors of investment (Banco Santander, 2017). Thailand’s GDP was at $406.84 billion in 2016, up 150% since 2005 (World Bank, 2017). The unstable political environment of Thailand has been followed by military coups and numerous governmental changes. However, Thailand remains an open-market orientated economy, promoting its employment and transfer technology (International Trade Administration, 2017).

To access Thailand’s market, the government has set out policies such as The Foreign Business Act B.E (2542) which is a law that governorates FDIs in Thailand (Deloitte, 2017). The government also created the Board of Investment (BOI) who encourages the existence of FDI (The Board of Investment, 2017). FDIs contributory to the development of innovation, technology, economic growth and skills are actively promoted under Investment Promotion Act (B.E. 2520) granting tax privileges, tax incentives and non-tax incentives. This Act facilitates FDIs by exempting them on some import tax duties, corporate income tax, tariffs, and dividends on net profits, double deduction of tax on costs of electricity, transportation and water. FDIs can also benefit from corporate tax incentives for a period no longer than eight years if they are investing in provinces with low per capita income or promoted industrialized areas of Thailand (ASEAN Briefing, 2015). In the Investment Promotion Act (B.E. 2520), it is mentioned that the State will not undertake new activities that compete against promoted FDIs, this guarantying their protection of a stable development (Investment Promotion Act, B.E 2520, 2002).

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Student ID: w17005765

The political uncertainty and the corrupt environment poses as a risk factor towards attractiveness of FDI and economic development in Thailand. Military-led government applying protectionist policies aimed to restrict the development of FDI in certain business areas such as trading land, forestry and farming (ASEAN Briefing, 2015). FDIs can be affected by acts of corruption. Competitors in the market area could use bribes to gain advantages over FDIs. FDIs itself can encounter the inability of further development, facing exposure to corruption by bodies associated within the business sectors (Department for International Trade [DFIT], 2017).  The Foreign Business ...

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