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 working together, transforming Thailand from one of the top performing economies in Southeast Asia 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 resulted in declining estimate as the year end approaches.

As the country failed to boost investors’ confidence, inbound foreign investment dropped significantly.

In the first half of 2015, Thailand 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 Thai market 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 Southeast Asia.

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.

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 private investment.

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 an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. 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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