Once a leading economy in Southeast Asia, the Thailand economy is no longer what it used to be, especially with its weakening situation ever since the May 2014 coup.
A brief look at economic indicators shows that the country has indeed been going downhill since then. However, it seems the authorities of “The Land of Smiles” know this. They’re giving their all to bring the economy back up to its feet by looking into ways to drive FDI. One of the key ways in which Thailand is looking to drive FDI is by offering more incentives in the form of tax benefits and better infrastructure.
There are many factors, all working together, to transform Thailand from one of the top performing economies in ASEAN into arguably the worst. A major reason is the change in the country’s leadership. The coup in May 2014 resulted in the military junta taking control of the country. Many believe their administration led the economy toward stagnation.
Slowing Growth, High Debt in Thailand Economy
Last year’s 5% GDP growth rate seems like a long time ago. It may as well be called the “good old times” because 2015’s GDP growth is expected to be around 2.8%. This figure went through countless revisions, all of which have resulted in a declining estimate as the year end approaches.
As the country has failed to boost investors’ confidence, inbound foreign investment has dropped significantly. In the first half of 2015, the country only managed to attract 9% of total ASEAN in-bound foreign investment. This was despite being the region’s second largest economy.
Not only does the Thailand economy have a hard time attracting foreign investors, it even has trouble attracting its own local investors. Thais aren’t investing in their own country and are starting to invest abroad, especially in ASEAN.
Household debt is now at the highest point in a decade. More than 80% of the Thailand’s population is incurring debt, an increase of more than 13% from last year’s figures. As household debt increases, the number of homeless people is also on the rise.
More Foreign Direct Investment is Key
According to a panel of experts, the only way out is for Thailand to focus bringing in more foreign investment. But the progress of this is hindered by high labor costs, a low supply of labor, and tough regulatory environment to compared to its neighbors.
The Kingdom has to look for ways to create an environment which welcomes foreign investors. It must meet their needs for a stable and transparent investment climate.
The Finance Ministry and Thailand Board of Investment are the two institutions leading the change.
Taking baby steps towards a brighter future, the Thai finance minister is looking to set up tax incentives to increase investment in the country. Finance Minister Apisak Tantivorawong said these tax benefits would help drive the private investment sector before the starting large public infrastructure projects next year.
The Thailand Board of Investment (BOI) is a few steps ahead of the Finance Ministry, already offering tax benefits for private investors.
According to a press release in September, the BOI approved investment for 17 projects worth 78 Billion Thai Baht in total. These include subsidiaries of multinational firms such as Toto, Ford Motor, and AirAsia.
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