Thailand political turmoil imperils foreign and domestic investment

More than $15bn of planned foreign and domestic investment in Thailand is on hold because of political turmoil that threatens to intensify broader industrial trends pushing exporters towards other southeast Asian countries.

About 400 project proposals by companies aiming to expand in southeast Asia's traditional manufacturing hub are frozen because a prolonged showdown between the government and protesters has stopped Thailand's Board of Investment from meeting since October, a senior official said.

The backlog highlights the economic damage Thailand is suffering from a four-month-old crisis that is paralysing government and playing out as foreign investors from Japan and elsewhere outsource production to cheaper neighbouring states.

"Before, this kind of situation didn't affect investment because it was short and only in Bangkok," said Setsuo Iuchi, chief representative for south and southeast Asia for Jetro, Japan's investment promotion agency. "But the growth rate and pace of investment will be affected if the situation is prolonged."

About 400 big proposed projects are now queued up at the Board of Investment, including about 30 from Japan worth 38bn baht, Chokedee Kaewsang, the board's deputy secretary-general, told the Financial Times.

The near-500bn baht total of stalled proposals is equal to almost half the 1,182bn baht of applications - well over half of it from manufacturers - submitted in 2012, according to the board's website.

Mr Chokedee said the board was in limbo because its two-year term had expired late last year and could not be renewed by the caretaker government in charge of Thailand since Yingluck Shinawatra, the prime minister, dissolved parliament on December 9.

<

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

"If we can have a new board in the first half of this year, the impact will be minimal," said Mr Chokedee, who added that the organisation was in talks with lawyers and the national election commission on how to break the deadlock. "But the political uncertainty might make [companies] rethink about investing in Thailand if this takes a long time."

The investment delays are another warning sign that a Thai economic model traditionally based on both Japanese investment and a cars-to-hard-drives export sector risks steepening decline, in the absence of diversification, technological upgrades and improvements to creaking logistics.

A plan to invest more than $70bn in railways, roads and other infrastructure has been another casualty of the near eight-year on-off political struggle between supporters and opponents of Thaksin Shinawatra, a former prime minister and Ms Yingluck's brother, who is widely seen as directing the government from self-imposed peripatetic exile.

Ακολουθήστε το Euro2day.gr στο Google News!Παρακολουθήστε τις εξελίξεις με την υπογραφη εγκυρότητας του Euro2day.gr

FOLLOW USΑκολουθήστε τη σελίδα του Euro2day.gr στο Linkedin

Thailand will be particularly hard hit by any souring among Japanese companies, which accounted for more than a third of the 2,016 projects approved by the Board of Investment last year and which are seen as and important source of growth for the high-technology and small and medium-sized corporate sectors Bangkok wants to promote.

While Japanese executives and officials have mostly remained upbeat in public, Honda and Toyota, the carmakers, have both warned of the potential impact of a crisis that is also hitting corporate bottom lines because it is damping consumer demand.

Japanese companies active in Thailand such as Nikon, the camera maker, and Yazaki, the car parts manufacturer, are at the same time shifting production of lower-value manufacturing processes to neighbouring countries including Cambodia and Laos, where it costs less to operate.

These moves are part of wider shake-out as improving regional transport links increase competition between countries to attract foreign investment and become a trade bridge between China, the rest of southeast Asia and Indian Ocean states beyond.

© The Financial Times Limited 2014. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation