Investment continues nosedive
Dips cause concern over state promotions
New investment in Thailand is declining, with both applications submitted to the Board of Investment (BoI) and actual investment continuing to drop, igniting concerns among investors over investment promotions, particularly in the government’s flagship Eastern Economic Corridor (EEC).
Thailand’s i nvestment proposals dropped 17% year-on-year in the first quarter, but the BoI expects them to accelerate later this year, said secretary-general Hiranya Suchinai.
Investment applications submitted to the BoI came to 62 billion baht in the first quarter of this year, down from 75 billion a year earlier.
Actual investment in the first quarter was 80 billion baht, Ms Hiranya said, only 16% of the year’s total investment target of 600 billion.
She said the actual investment value normally lags far behind investment application value because many companies need some time after approval from the BoI to start new investment.
“That time lag includes loan approval and market evaluation to see whether it is a suitable time to start real investment,” she said. “Sometimes actual investment is also below the application value.”
Actual investment value over the past three years has decreased, according to BoI data. Actual investment dropped from 600 billion baht in 2014 to 500 billion in 2015 and 490 billion in 2016.
Some Thai and foreign investors are concerned with the dips despite the government’s best efforts to promote the segment in order to boost the country’s economy.
Chen Namchaisiri, chairman of the Federation of Thai Industries, said the falling investment data have stirred fears among the business sector about whether the government is on the right track to promote industries and investment.
“It could raise fears, but if we look at the details, I think people should be confident about the EEC, which is the project everyone is keeping an eye on,” Mr Chen said.
He noted how the government’s invoking of Section 44 allows it to accelerate the terms of reference and bidding processes for several massive infrastructure projects.
“I think businesses are awaiting an appropriate civil law to govern the EEC in the long term, as this could make investors more confident and lead to actual investment in the EEC,” Mr Chen said.
The cabinet approved a draft of a law to govern the EEC late last year; the law is being reviewed by the Council of State. The government has vowed to implement it this year.
Meanwhile, foreign investors are voicing their concerns.
Stanley Kang, chairman of the Joint Foreign Chambers of Commerce in Thailand, said he believes that many foreign investors are waiting for government infrastructure investment to materialise, especially the development of the EEC.
The EEC is set to span a combined 30,000 rai in the provinces of Chon Buri, Rayong and Chachoengsao, accommodating investment in 10 targeted industries.
The 10 are next-generation cars; smart electronics; affluent, medical and wellness tourism; agriculture and biotechnology; food; robotics for industry; logistics and aviation; biofuels and biochemicals; digital; and medical services.
Mr Kang said there were other external factors that could raise concerns for investors and delay their activity as they wait for a clearer economic direction. He pointed to the tectonic shifts in the global political and economic landscape, such as Brexit and the US presidential election, which created investor uncertainty.
“More European elections are scheduled for this year and US trade policy is still unclear, which adds pressure to the global market,” Mr Kang said.
But Ms Hiranya said the BoI is still optimistic about investment trends this year, expecting government stimulus projects to boost investment in the new S-curve industries. Investment privileges for the EEC should help raise investment value substantially during the rest of the year, she said.
In the first quarter of 2017, the BoI received 293 applications. Of that amount, 182 projects worth 42 billion baht are new investments, while 111 projects worth 19 billion are investment expansion.
“Some 76 project applications are for S-curve industries worth 7.8 billion baht,” Ms Hiranya said, adding that the BoI expects more S-curve investment later this year.
Japan remained Thailand’s biggest foreign investor in the first quarter, with investment applications worth 16 billion baht, followed by Hong Kong and Singapore.
Ms Hiranya said Chinese and Japanese investors are still particularly interested in the automotive, auto parts, food and medical equipment segments in Thailand.