Led by Prime Minister Surayud Chulanont, Thailand is scheduled to sign the delayed Jtepa in Tokyo.

Pannee Chengsuttha, the BoI's economic counsellor, said last week the signing of the trade pact would attract more foreign investors to the Kingdom because restrictions and duties on exports to Japan would be reduced.

The BoI's report showed that European applications for investment privileges dropped by 17 per cent in the first two months of this year.

Investors have been waiting since late last year to get a clearer picture of the government's policy on foreign-investor restrictions under the draft amendment to the Foreign Business Act (FBA).

The investment projects proposed under the European applications were valued at Bt30.53 billion last year, down from Bt35.551 billion in 2005.

The amended FBA would have a small impact on those European investors' confidence, Pannee said, adding that they would learn to adjust.

"The European investors aren't concerned about the country's political change and the strong baht because trading is done in euros," she said. High property prices are a more important investment factor than political issues for them, she said.

"Many of them criticised ground leases in Thailand as being just as expensive as in Italy," she said. For example, they have to pay Bt4 million per rai to purchase a manufacturing site in the Amata Industrial Estate.

They also want the government to accelerate building a pool of skilled workers and to solve the problem of high labour turnover to ensure smoother manufacturing.

The BoI would encourage Europeans to invest in six priority industries - car parts, agricultural products, electronic and electric products, machinery, metals and services.

The investment promotion office also wants to attract more European companies to invest in SMEs here.

During the official visit of France's president, Jacques Chirac, he agreed to increase French investment in Thai SMEs from 350 projects last year to 400 this year.

Pannee said European investors were interested in outsourcing businesses, particularly for the metal, auto parts and plastics industries.

Last week, the BoI arranged a "business- matching" session for 16 French car and parts makers with local manufacturers. The foreign investors and executives also visited the Bangkok Motor Show to learn more

about the car industry here. The strategy worked in attracting more direct investment from European countries, she said.

Thailand cannot compete against Vietnam's cheaper labour wages.

"But we have advantages in better infrastructure and plentiful raw materials such as rubber and sugarcane," Pannee added.

Chalida  Ekvitthayavechnukul

The Nation