Pavida Pananond, assistant professor in Thammasat University's department of international business, said most MNCs from developed countries relocate their production plants to countries where they can save money, while retaining their research and development units in their home countries.

Thai MNCs, on the other hand, view investing abroad merely as a way to find new markets, she told a seminar hosted by the Thai Research Fund.

The levels of Thai investment abroad peaked just before the financial crisis of 1997. Investment plunged after the crisis and although it has been rising gradually each year it remains a long way from its previous high.

Pavida said few Thai's MNCs take advantage of investment for increasing productivity.

One exception is Charoen Pokphand Group, or CP, the country's largest conglomerate, which has invested in China's poultry industry to take advantage of its close proximity to Japan, one of the major export markets, she said.

Siam Cement, a construction material manufacturer, has also started to seek value-added investment abroad, she said.

But restaurant operator S&P Syndicate Plc has not yet succeeded in integrating its operations to save costs and increase profits, despite having invested heavily in its S&P Thai restaurant chain in Europe, she said.

Pavida suggested that Thai MNCs should focus more on increasing their competitiveness when they invest abroad, rather than simply seeking new markets.

Competition has intensified in recent years as Chinese firms are starting to invest abroad. They have been expanding aggressively by slashing prices and buying new technology.

With government financial support and the capacity to absorb new technology, Chinese firms can make their presence felt around the globe, Pavida said. Chinese-owned firms also benefit from economies of scale due to the massive size of their domestic market.

However, Chinese MNCs have also had a positive effect on Thai businesses as they provide cheap raw or semi-raw materials for the Thai market, Pavida said, suggesting that more Thai businesses invest in China.

The government should have a master plan to help Thai firms invest abroad, she said. Without investment in foreign countries, Thai firms will lose their share of both local and overseas markets, she warned.

The government currently provides financial assistance via the Export-Import Bank of Thailand, but it pays little attention to how local firms can improve their productivity.

From her study, Pavida concluded that Thai investment abroad was highly diversified, which is quite different from South Korean MNCs, which have concentrated their investment in the electronics sector.

She said Thai firms have a competitive edge in agribusiness, processed food, restaurants and hotel services.

Wichit Chaitrong

The Nation