Finance Minister Apisak Tantivorawong has asked the Board of Investment (BoI) to explain the lack of growth in new applications in the first quarter this year despite the strong incentives on offer.
Mr Apisak spoke after chairing a discussion among economic-related agencies, where it was revealed that the number of investment privilege applications in the first quarter was close to the same period last year. This was despite greater efforts and further tax incentives offered by the government in a bid to boost foreign direct investment (FDI).
The first quarter of this year saw total new application requests for investment incentives reach 293, compared with 297 in the same period of 2016.
While there was only a small drop in actual projects, the value of investment fell nearly 18% to 62 billion baht from 75.6 billion last year.
"I asked the BOI to figure out the reason behind the declining FDI," Mr Apisak said. "Maybe our incentives aren't generous enough compared with other countries or we might have a weak marketing strategy."
Once the government acknowledges the root cause of the problem, it will be able to find the right way to improve the measures in a bid to achieve the country's FDI target, Mr Apisak said.
Previously, the government approved new incentives for investment in the Eastern Economic Corridor by extending tax breaks for importing machinery and cutting the corporate income tax rate to 10% from 20%, with the time period for those incentives being extended from eight to 13 years.
An anonymous source said the decline in new applications during the first quarter had resulted from a lack of clarity regarding which types of businesses or industries would be eligible for the incentives.
"We have received responses from investors saying they'd prefer to delay their decisions until the third quarter, as they believe the government will be able to provide clearer information," the source said. "If they start applying now and later find out they are not eligible, it will mean they have to start from square one."