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Unabated chaos could fuel rise in overseas investments

Aat Pisanwanich

Aat Pisanwanich

The number of medium-sized and large companies planning to invest in other Asean countries, especially Indonesia, Myanmar and Vietnam, could triple to more than 1,440 due to mounting concern over the fractured political picture at home, according to the University of the Thai Chamber of Commerce (UTCC) .



"The political problem has encouraged more Thai investors to do business in other Asean markets. Some may consider moving to other countries if the political problem prolongs to next year," Aat Pisanwanich, director of the university's Centre of International Trade Studies, said yesterday.

The centre's survey found that 480 enterprises will turn to expanding business in other Asean countries this year due to worries over the domestic conflict. Investment by Thai firms in other Asean countries would increase from Bt39.83 billion last year to Bt123.71 billion this year. Without the political problem, investment in other Asean countries would increase to only Bt77.1 billion.

The major destinations for Thai investment this year will be Indonesia at Bt37.58 billion, Myanmar Bt26.25 billion, Vietnam Bt22.25 billion, Malaysia Bt14.52 billion, Singapore Bt11.93 billion, Laos Bt5.6 billion, Cambodia Bt4.96 billion and the Philippines Bt599 million.

Businesses likely to go overseas are in the food and beverage, retail and wholesale, banking and insurance, computer and electronic, chemical product, property, machinery, garment, transportation, and electricity and gas industries.

According to the survey of 300 enterprises, the attractions of other Asean countries were their greater political stability and lower wages and production costs.

According to the centre's study, Thailand will lose both trade and investment to Vietnam after the AEC goes on stream in 2015.

More products from Thailand - 23 items rather than 12 presently - will lose market share to Vietnam after 2015. Those products at risk include frozen foods, leather, cotton, garments, umbrellas, ceramic products, glasses, steel, hats, vegetables, paper, plastic and chemical products, electric appliances and electronics, and weapons and bullets.

Vietnam would enjoy a competitive edge in many products because its labour is much cheaper. The minimum wage in Vietnam is Bt102 a day, versus Bt300 in Thailand. Office rent is also cheaper at Bt715 per square metre per month, against Bt825 in Thailand. Other basic operating costs, including for utilities and fuel, are also about a half to two-thirds the cost here.

Vietnam would pass Thailand to become Asean's third-largest destination for foreign direct investment (FDI) by 2020.

FDI to Vietnam would surge to US$247.79 billion in 2020 from $99.96 billion in 2012, while FDI to Thailand would climb to $233.52 billion from $135.5 billion.

More FDI will go to Vietnam in the next six years because it has more political stability, lower cost of labour and production, a bigger labour pool and a government policy to grant privileges to investors.

In 2020, Singapore would retain its crown as Asean's largest destination for FDI, followed by Indonesia.


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