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 that the authorities of “The Land of Smiles” know this and are 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 that worked together to transform what was once one of the top performing nations into one of the poorest performing economies in the Association of Southeast Asian Nations (ASEAN). One of the major reasons according to leading economic experts is the change in the country’s leadership. The coup in May 2014 resulted in the military junta taking control of the country and many believe their administration has led the economy towards serious stagnation.


Slowing Growth, High Debt in Thailand Economy

Last year’s 5% GDP growth rate seems like a long time ago and may as well be called the “good old times” because 2015’s GDP growth is expected to be around 2.8%. This figure that has been 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, 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 with more than 80% of the country incurring debt, an increase of more than 13% from last year’s figures. As household debt increases, the number of homeless people is also seen to be on the rise.


More Foreign Direct Investment is Key

According to a panel of experts, it seems like the only way out and up for Thailand is to really focus its efforts on bringing in more foreign investment, the progress of which is still hindered by high labor costs and a low supply of labor, and a comparatively tough regulatory environment to its neighbors.

The Kingdom would have to look for ways in which it could create an environment that really welcomes foreign investors by meeting their needs for a stable, transparent, and blooming investment scene.

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. According to current finance minister Apisak Tantivorawong, these proposed tax benefits would help drive the private investment sector before the initiation of large public infrastructure projects next year. It seems that 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.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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