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Foreign investment in Thailand is forecast at 350 billion baht in 2001, mostly in electronics and auto industries, but it faces great challenges from China and Vietnam for the investor dollar

 

INVESTMENT

Thailand fights to restore confidence

Chatrudee Theparat

Thailand struggled to restore investment confidence in 2000 by offering many incentives to prospective investors. Its efforts have proven fruitful as the country has enjoyed a steady increase in foreign investment over the past few years.

However, the sustainability of investment growth is facing great challenges from China and Vietnam which foreign investors are eyeing more eagerly.

Staporn Kavitanon, secretary-general of the Board of Investment, said competition for foreign investment was likely to become fiercer in the region in the future, especially once China joins the World Trade Organisation next year.

Vietnam, where wages remain low, is capturing attention from many companies in the United States following President Bill Clinton's recent official visit. China has long been courted by investors from Taiwan who have already invested in 30,000 projects on the mainland. Mr Staporn said China and Vietnam were moving quickly to build telecommunications and transport facilities, and deregulate their markets to attract foreign investors.

At the same time, political turmoil in some Asean member countries had tarnished the region, scaring off potential foreign investors.

Mr Staporn said that in 2001, US investors were expected to enter Thailand in greater numbers than those from Japan, as Japan's economy remained sluggish.

He said Thailand lagged behind many countries in attracting foreign investors because of its poor competitiveness, mainly stemming from lengthy customs procedures and red tape.

Mr Staporn cited as an example the long-delayed law to encourage electronic commerce and successive rounds of rebidding for contracts to build the country's fibre-optic telecommunications backbone. A contract was finally signed in October - five years after the idea was first approved.

Singapore and Malaysia were ahead of Thailand in providing telecommunications facilities for investors, he said.

Mr Staporn forecast that foreign investment in Thailand in 2001 would be around 350 billion baht, the same as in 2000, compared with 162 million baht in 1999. Investment was focused on export segments including electronics and auto industries.

He said the projection was based on the assumption that the world economy would experience a slowdown next year and the recovery in Asia might falter as a result of high oil prices.

Mr Staporn said that in the first 10 months of the year, 967 projects applied for promotional privileges with a total investment of 301.8 billion baht. This compared with 652 projects, worth 127.7 billion baht, in the same period in 1999. Japanese investors ranked first with 254 projects, followed by Europe (148) and Taiwan (88).

Projects that obtained investment promotion in the first 10 months of 2000 totalled 956, up 72% from the 555 successful projects in the same period in 1999. The investment was worth 245.8 billion baht, an 80% increase over 1999, and had the potential to create 197,320 new jobs.

European investors' confidence was restored in Thailand in 2000, with projects approved from Europe rising to 147 rom 75. German-based giants such as Bayer, DaimlerChrysler, Lufthansa and Deutsche Bank expressed renewed interested in establishing new footholds in Thailand.

German investors said they had high hopes in the next Thai government which is expected to be sworn in by early 2001. They wanted to see the new administration push forward with ''open market'' policies, giving priority to the reform of the financial and corporate sectors and emphasising privatisation, education and training.

Mr Staporn said major investment in Thailand still focused on the export sector, particularly the electronic, petrochemical and automobile industries.

The last BoI board meeting before Parliament was dissolved approved 14 major projects worth 111 billion baht, mainly in intermediate and downstream petrochemicals. Most output would be exported to Japan and China.

Mr Staporn said the BoI had also granted privileges to the US-based Micro-chip Technology (Thailand) which intended to expand its electronics production at a cost of 10.5 billion baht. He said the company would increase annual capacity at its plant in Chachoengsao to 1.2 billion integrated circuits, 80% of which would be for export.

The BoI chief said the country's electronics exports looked promising as many major Japanese CD manufacturers were shifting their production bases to Thailand.

Matsushita Electric Industrial had recently decided to make Thailand its production and export base for six-disc, vehicle dashboard CD changers. According to a BoI report, Matsushita Communication Industrial (Thailand) Co, a Thai-Japanese joint venture formed to produce CD changers, planned to invest 100 million baht in new equipment and facilities in Thailand. The company also proposes to increase its staff by 50%, to more than 170 people. It expects to earn 9.9 billion baht through the export of the CD changers over the next three years.

A senior executive said the company's decision was a vote of confidence in the quality of Thai-manufactured automotive equipment.

With tariff barriers likely to ease worldwide, he said, Thailand had a good opportunity to become a global supplier of many products if it could expand its manufacturing and technology base quickly enough.

Procter & Gamble, the US-based consumer goods manufacturer, is another corporate giant that has recognised the potential of Thailand. Martin Nuechtern, president for hair-care products, said Procter & Gamble Manufacturing (Thailand) would become one of the world's largest exporters of personal-care goods, with sales of about 20 billion baht from its new Bang Na-Trat plant within the next seven years.

Mr Nuechtern said personal-care products made in Thailand would be exported to South Korea, India, Indonesia and China once P&G closed its plants in those countries.

Pirote Sompouti, the BoI deputy secretary-general, said the board would still focus on offering more incentives to promote investment in Thailand in 2001. For example, he said the BoI was considering waiving machinery import taxes and corporate taxes for factories that organise training courses for vocational students. A skilled workforce was one of the biggest confidence-boosters for foreign investors, he said. ''There are 20,000 students from 216 vocational institutes nationwide studying in industrial areas. Training courses conducted in factories will allow students to gain valuable work experience.''

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