Thailand's FDI has been challenged by the global gloom, and the Japanese economic recession – which began in 3Q08 and is poised to continue into mid-2009 – amid Thai domestic political uncertainty. Looking over 11M08, the value of investment projects submitted for BOI promotional privileges dropped 30 percent, over-year. KASIKORN RESEARCH CENTER (KResearch) forecasts that Japanese investment in Thailand may experience continued slowdown into 1H09 due to the deterioration in global economies, especially the Japanese economic recession. Among the main casualties will be automobiles, auto parts, electronics and electrical appliances. The automotive industry is expected to be hardest hit due to a domino effect of the US struggling auto industry, which is on the brink of collapse.
Japanese investment here may experience recovery during 2H09 in line with the expected improvements in the global and Japanese economies, with help from accommodative monetary and fiscal polices. Other positive factors may include the Thai government's investment promotional plans for 2008-2009, the benefits of the Japan-Thailand Economic Partnership Agreement (JTEPA) and the more stable Thai politics in early 2009, especially in light of the formation of a new government that may help restore confidence among Japanese investors. In KResearch's view, the Thai government and related agencies should establish strategies and action plans to attract greater Japanese investment into Thailand by:
Ø Creating a favorable investment atmosphere to restore investor confidence battered by the recent political strife.
Ø Employing proactive investment promotional policies and streamlining investment-related regulations to ensure greater flexibility for investors
Ø Supporting potential SMEs that are expected to generate THB5-20 billion in new investment, especially in processed food businesses
Ø Promoting sustainable development of infrastructure-related projects and logistics to attract FDI.
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