Kasikorn researchers see no immediate let-up in foreign direct investment slump

Without the long-awaited mega-projects, the value of projects submitted for Board of Investment (BoI) promotional privileges may be in the range of Bt300 to Bt450 billion, falling short of the BOI target of Bt650 billion. This dim outlook is attributable to the global downturn, tight market conditions and high volatility in global commodity prices.

The research arm of Kasikornbank projects that the net flow of FDI may total around US$7 to $10 billion (Bt248 to Bt354 billion). Any improvement in FDI will hinge primarily on signs of a global economic turnaround.

Despite the global crisis, Thailand may receive a windfall from changes in the business strategies of multinational companies, especially Japanese firms that have been affected by the strengthening yen. This has led to industrial restructuring via mergers and acquisitions, as well as the relocation of manufacturing bases to other countries to save on costs.

In addition, commodity-price volatility in the global market has offered new opportunities to certain industries, alternative-energy and environment-related industries among them.

To attract new investment in these sectors, however, Thailand will have to compete head-on with other countries, especially Vietnam, India, Malaysia and Indonesia. Meanwhile, the report says, Thailand has to try to retain existing investment.

To this end, collaboration with the public sector is much needed, especially in the launch of additional incentives, regulatory flexibility, reduced taxation and streamlined bureaucratic procedures, technology transfer and training. Of paramount importance will be upgrades in infrastructure, such as in expansion of the power grid, transport and logistics - which are still costly here - plus the drafting of contingency plans for emergencies at major airports and seaports in order to restore investor confidence.

This will ensure improved competitiveness and make Thailand more appealing to foreign investment over the long-term. Attention should also be paid to deferred investments on projects that have been granted BOI promotional privileges. Collaborative actions between the BOI and the government are needed to promote actual investment, the report said.