Thailand, A Foreign Investment Paradox
Thailand saw a record of capital infusion from abroad in 2012, but the country needs critical upgrades, as it remains totally dependent on technology from outside its borders.
BANGKOK — Mother Nature was merciful this year with Thailand and spared the country its usual monsoon rainfalls. The few floods north of Bangkok at the end of September were nothing compared to those that had cost the state $45 billion two years ago as factories trapped in the rising waters and affected production across the whole country.
The shock of 2011 is still on everybody’s minds, especially given that the authorities haven’t done anything since to prevent such a disaster from happening again. As a precaution, some companies that were located north of Bangkok — for instance, in the Ayutthaya province — have tried to relocate southeast of the capital, near the international airport.
Despite these risks, Thailand’s trademark policy — welcoming foreign investments — continues unabated. And there’s no sign that this is going to change, although authorities have softened their stance lately, as they look to move upmarket.
“We don’t want textile industry anymore,” explains Vasana Mututanont, deputy secretary general of the country’s Board of Investment. “We advise investors to go to Cambodia or Vietnam.”
Thailand, which is ranked 17th in industrialized output, wants to move up the list. That’s why it is specializing in food-processing — Thailand is a major rice producer — but also in the automobile industry.
Opening up Bangkok
Located southeast of Bangkok, the eastern seaboard is becoming Thailand’s new industrial center. With a free surface of 17,500 hectares (43,000 acres), this area represents 70% of the space available in the whole country. By developing it, industry is effectively opening up the region of Bangkok and simultaneously positioning itself closer to transport infrastructures such as the international airport and the deep-water port of Laem Chabang.
The whole region is organized around industrial parks or logistics centers highlighted by developers who thus offer land, factories or storage areas for rent. Hemaraj, the current leader in the field, has seven industrial parks for a total surface of 5,800 hectares (14,300 acres). It bought these vast stretches of land more than 20 years ago, when they were still used for farming.
Amata Nakorn, the No. 2 developer, owns more than 3,000 hectares (7,400 acres), which are home to more than 550 factories with 160,000 workers. The company is also interested in newcomers and particularly in Chinese industrials , to which it has devoted a specific area. “We already have 45 Chinese factories, all export-oriented,” explains Amata Director Viboon Kromadit.
Critical missing element
Seeing these production lines spreading almost as far as the eye can see, it looks unmistakably like Thailand’s actions don’t match its words. Officially, authorities want to transform the country into a knowledge economy. But in fact, there is no true political willingness to develop laboratories for research or to improve the education system.
With few exceptions, “Thailand remains 100% dependent on foreign technologies,” according to a businessman specializing in the automobile industry. “The country is a platform, it doesn’t own any technology.” If it is to become a regional hub, the country must upgrade its infrastructure.
In early 2013, the government announced a plan consisting of 55 projects worth a total of $75 billion to be realized by 2020. These are aimed mostly at improving the country’s railroad network by constructing high-speed rail.
In the meantime, nothing should slow down foreign investments. By welcoming $31.5 billion last year, Thailand smashed all its previous records and is expected to do so again this year. On top of its relatively central location in southeast Asia, the country also attracts foreign investment thanks to a friendly tax system. Its corporate tax now stands at 20%, and newcomers are exempted for the first eight years. But the “land of smiles” is facing tough competition with Singapore — which is already looking into biotech and microelectronics — and Malaysia, which is also looking to move upmarket.