Economic Mid-Year 2001

No more 'think big'

Chartrudee Theparat

INVESTMENT

With national
self-reliance the new priority, the Board of Investment has been compelled to switch its focus in granting promotional privileges for industrial investors

It used to be "think big", with a focus on promoting large-scale foreign industrial investment.

After the election of a new government six months ago, there was a major change in emphasis, especially for the Board of Investment (BoI), the agency that approves privileges for investors.

The BoI's policy has been reshaped to match the government's push for greater national self-reliance. The board is now required to focus on investment that maximises use of Iocal content, promotes small and medium-sized businesses and helps farmers.

In the past, the BoI laid stress on Iarge, costly projects that achieved high industrial growth rates. Other changes are pending, with Staporn Kavitanon, the secretary general, scheduled to retire in September. The BoI chief, who took the helm nine years ago, recently told Chaturon Chaisang, the Prime Minister's Office minister in charge of investment policy, that he intended to step down early, in July. Mr Staporn reportedly disagreed with aspects of the government's new investment promotional thrust, winning sympathy for his views among those who credit him with spear-heading the high level of industrial development over the past decade.

Mr Staporn is now probably the most senior C-ll offlcial. He was transferred to the BoI post 16 years ago from the National Economic and Social Development Board, where he had been an assistant secretary general.

Mr Chaturon said he had asked the 60-year-old BoI chief to see out his term at the BoI.

Deputy secretary-general Chakramon Phasukvanich, whose colIeagues note his ability to compromise with others, is tipped to succeed Mr Staporn. Although Mr Chaturon said that Mr Chakramon had the qualifications and experience to succeed Mr Staporn, Mr Chaturon was non-committal, saying the next chief could be either promoted from within or recruited from outside. He said he needed more time to consider the appointment, but added that the next BoI chief should have extensive experience in economic policies and should be able to achieve a balance between the government's direction and the existing BoI policy. Only two months into the new government's tenure, the BoI's board was revamped to ensure that it followed the government's strategies.

New members include Kosit Panpiemrat, Bangkok Bank's executive chairman and adviser to the prime minister; Somchai Richuphan, a former director-general of the Excise Department; Tawee Butsuntorn, chairman of the Federation of Thai Industries; Vachara Phannachet, secretary-general of the Board of Trade; Somchainuk Engtrakul, the Finance permanent secretary; and economists Somchob Chaiyadej and Peerakorn Thong-ampai.

The board members who were replaced are Chumpol NaLamliang, Siam Cement Group's president; economist Nibhon Puapongsakorn; Boonyasith Chokwattana Saha Pattanapibul Group's president; and Vichien Techapaibul, the chairman of the Board of Trade.

The BoI was given an 18-month mandate to promote investment in line with the new focus. Prime Minister Thaksin Shinawatra said the policy changes would not damage investors who had been granted promotional privileges. As well, current privileges would be applied to investors who submitted applications before the announcement of the new approach.

The move was not against foreign investment, "but we need to strengthen Thai investment in a more suitable direction", he said.

Reform, in particular tax incentives, will be made gradually to allow investors to adjust. The BoI is required to play a bigger role as a matchmaker between large investors and local supporting industries.

Use of local content, technology development, adding value to existing industries and the applicant's role in enhancing the country's international competitiveness are now prime factors in winning privileges. In contrast, incentives were previously granted under a zoning system.

Some critics say the new policy thrust breaches the World Trade Organisation's agreement on trade liberalisation. However, Mr Thaksin disagrees, saying that the changes simply reflect economic reality and that investors who accept the new conditions will probably receive better incentives than before.

Still, the investment figures for the first four months of this year did not reflect investor confidence in the changes. There were 256 applications involving investment of 46.3 billion baht, down from 290 worth 75.1 billion in the same period last year.

Incentives were approved for 205 projects worth 59.6 billon baht, compared with 264 worth 52.9 billion in the same period last year.

Japanese remained Thailand's top foreign investors with applications in the period totalling 83 projects with combined registered capital of 3.9 billion baht, compared with 74 totalling 1.1 billion in the same period last year. European investors were next, with 35 projects totalling 0.8 billion baht in registered capital, while Taiwanese ranked third with 16 projects, also totalling 0.8 billion baht.

Mr Chakramon said the incentives would be revised to support three targetted groups of industries: Local food and crafts, as they are generally labour-intensive businesses run by small and medium-sized enterprises; Automobiles, electronic components, petrochemicals, plastics, textiles, furniture, tourism and jewellery; and Those with strong potential in the new economy, such as computer software, biotechnology and e-commerce.

Aside from implementing the new incentives, the Bol will work on attracting foreign investors. Mr Chaturon is scheduled to visit the US and Europe soon to reassure investors that they are welcome, and explain the new incentives and the commitment to maintain existing privileges. He made a similar pitch to investors in Japan in early June.