FDI surge driven by banking
Foreign direct investment (FDI) in Thailand’s banking and manufacturing sectors has recorded strong growth as foreign investors aim to use the kingdom as a springboard for regional expansion, says Deloitte Touche Tohmatsu Jaiyos Co.
Managing partner Subhasakdi Krishnamra said Japanese investors have poured capital into these sectors for several decades to leverage their investment strategy into neighbouring countries.
"Japanese investors have shifted from a traditional banking model focusing on corporate loans into retail and consumer lending to expand this market segment," he said.
The Bank of Tokyo-Mitsubishi UFJ acquired the Bank of Ayudhya in a deal worth 178 billion baht last December and turned the bank into a subsidiary to expand its business into the retail sector and other Southeast Asian economies.
After the Japanese bank integrates its local outlets with Bank of Ayudhya within a year, its shareholding in the Thai bank is expected to reach 76.44%.
Since many multinational corporations have adopted a decentralised approach to enhance regional operations, Japanese companies have also implemented this strategy, said Mr Subhasakdi, citing Aeon’s shopping mall in Cambodia, Nikon Corporation’s new factory in Laos and Japan International Cooperation Agency’s Dawei projects in Myanmar as examples.
Despite a decline in auto production and exports last year, Japanese investors still continue to invest in the automotive sector in Thailand, he said, adding that increased domestic political stability will improve confidence in the industry.
Mr Subhasakdi said Thailand’s strengths consist of its manufacturing sector and financial services, whereas labour productivity, customs and tax reforms, and ease of doing business are regarded as challenges.
Although foreign firms avoided investing in the country amid the protracted political turmoil, the junta’s power seizure has returned political stability and FDI, particularly in the manufacturing and auto sectors, said Weerapong Krisadawat, Deloitte’s partner for enterprise risk services.
Cyber security is the greatest concern for private enterprises because greater information has been put online and information leaks could affect business continuity plans, he said.
Chavla Tienpasertkij, Deloitte’s partner for assurance services, said Thai small and medium-sized enterprises (SMEs) have been expanding their investments into Cambodia, Laos and Myanmar because of their size and the ease of complying with business regulations.
Consumer business, health care and multi-level marketing are industries where they have branched out, he said.
These SMEs are not strong enough compared with multinational corporations to expand into Malaysia and Indonesia, said Mr Chavla.
The trend of outbound mergers and acquisitions in the energy sector is expected to continue by major companies, he said.