Indonesia, Malaysia, Vietnam and Thailand attract the majority of Foreign Direct Investment (FDI) spent within The Association of Southeast Asian Nations (ASEAN). The leading investment destination in the 2000s, Thailand, has in recent times fallen to fourth place, partly due to concerns about stability under military junta rule. However, it remains a leading destination for Japanese inward FDI.
Following the Asian Financial Crisis that began in Thailand in 1997 and wreaked havoc on the economy, globalisation and economic liberalisation were convenient scapegoats. A period of political populism ensued led by billionaire businessman Thaksin Shinawatra. Protectionist measures were introduced and economic recovery flagged. Following a period of political turbulence, in 2014 a military coup ousted Prime Minister Yingluck Shinawatra, the sister of Thaksin.
Then the death of the revered King Bhumibol Adulyadej in late 2016 produced an outpouring of Thai nationalism and sparked concern that the government would follow the king’s preferred path of inward looking, self-sufficiency.
Many expected General Prayuth Chan-o-cha and his military government to revert to policies of populism and economic nationalism and implement protectionist policies restricting foreign involvement in the economy. Such fears have proven to be unfounded. General Prayuth has set a long term vision of making Thailand into a developed country by 2036. To this end, Thailand’s pragmatic military government has encouraged trade and investment. Following repeated delays, the military has pledged to hold a general election between February and May of 2019. The re-emergence of political parties could re-open long standing fissures in Thai society and once more give voice to economic nationalists.
Recent legislation is designed to propel the kingdom forward from its ‘Thailand 3.0’ dependency on heavy industries such as steel and automobiles towards a Thailand 4.0 economy characterised by advanced, high-tech industries including next-generation automotive, smart electronics, affluent and wellness tourism, biotechnology, robotics, and biofuels/bio-chemicals.
Thailand is also trying to attract more value-added and high-tech investment outside of Bangkok through its Eastern Economic Corridor initiative.
To read more about developments and trends in ASEAN please see 'ASEAN Insights – a report for business on the regional policy and regulatory environment'.