sea affairs 2012 (a. chongvilaivan)

From Inward to Outward: An Assessment of FDI Performance in Thailand

By Aekapol Chongvilaivan*

1. Introduction

Foreign direct investment (FDI) has long been a crux catalyst of impressive economic and industrial development in Thailand. It not only brings in capital resources and job creation but also offers new technology, knowhow, and managerial and organizational expertise, among others, to domestic industries vis--vis backward and forward linkages. Due to this reason, Thailands economic development strategies have zeroed in on ushering in FDI since the 1980s. Even though the strategy that positioned Thailand as a regional host of FDI with low production costs and a rich source of relatively skilled workers has proven to be successful as it essentially fuelled the process of industrialization and remarkable economic growth, the rapidly evolving business environments in the world highlights that Thailands competitiveness has deteriorated. This was particularly evident in the aftermath of the global economic downturn in 2008-9, thanks to escalating labour costs, the rise of China and India and chronic political unrest, in addition to the recent inundation caused by poor infrastructure and flawed water management. These recent developments caution that the conventional FDI strategy Thailand has adopted will soon reach its limit of offering the pace of economic growth and industrialisation the country once materialised.

Against this backdrop, this paper attempts to take stock of FDI, both inward and outward, in Thailand and assesses its potential and performance. Although the global economic crisis in 2008-9 negatively impacted the prospect of foreign investment in Thailand and spurred a sharp reversal, the recent developments witnessed a resurgence of inward FDI which has by and large set the stage for Thailands robust economic recovery. Concurrently, firms headquartered in Thailand have also emerged as a global investor. The recent trend of outward FDI flows from Thailand highlights that Thai firms have increasingly started to depart from their comfort zones, explore new business opportunities, and thrive on synergies and complementarities with new partners by venturing overseas. Nevertheless, several drawbacks and challenges remain and

* Aekapol Chongvilaivan is Fellow and Coordinator, Regional Economic Studies Programme, the Institute of

Southeast Asian Studies (ISEAS), Singapore. The usual disclaimer applies.

critically hamper the country from fully exploiting its massive potential. These include its passive strategy towards FDI that trapped itself in the low skill-intensive low-end production; inadequate infrastructure and institutional quality that prevents the country from fully exploiting its large potential; and unsatisfactory capacity of local entrepreneurs to venture overseas where new business opportunities and complementarities with foreign partners lie.

The remainder of this paper is organised as follows. Section 2 reviews the current macroeconomic outlook in Thailand. Section 3 examines a primer of inward and outward FDI. Section 4 assesses the performance of inward and outward FDI. Section 5 offers some policy recommendations.

2. Current Macroeconomic Outlook

[Insert Table 1 here]

Notwithstanding a series of political unrests and the global economic crisis in 2008-9, the recent economic developments witnessed a rather sanguine picture of a robust recovery with a real gross domestic product (GDP) growth rate of 7.8 percent in 2010; economic growth is projected to continue, albeit at a slower pace, towards the end of 2011. The economic resilience that has allowed the country to bounce back strongly and swiftly from the global economic meltdown resulted in the persistent increases in gross national product (GNP) per capita, thereby substantiating poverty reduction. The catalyst of Thailands impressive economic performance pertains largely to growing FDI inflows into non-agricultural sectors (e.g. manufacturing and service sectors) which account for more than 90 percent of GDP on average, in addition to rising export demands from emerging countries like China and India. Looking beyond the current rosy outlook, the deliberation of recent macroeconomic variables, however, cautions that several downsize risks remain, increasingly pointing to the signs of weakening economic fundamentals emerge. This may ultimately reverse the upbeat trend of economic development in Thailand.

First and foremost, an influx of capital inflows has by and large undermined Thailands competitiveness in terms of rapid currency appreciation and escalating inflation. The net capital movement in 2010 reached USD23.9 billion in contrast to a reversal of USD2.6 billion in 2009 and an average net inflow of USD1.45 billion during 2001-6 (see Table 1). The surge in capital inflows into Thailand has translated into drastic appreciation of baht from an average of 41.24

Baht/USD to 30.32 Baht/USD in 2011 as the demand for baht hiked. Likewise, a surge in capital inflows has entailed ever-increasing inflation vis--vis a shift in demands for local products and resources. The headline and core consumer price indices during January-June 2011 hit an all-time peak of 111.75 and 105.72, respectively, critically inculcating unproductive businesses and industries through price and wage spikes.

Furthermore, the persistent government budget deficits have exacerbated Thailands sound economic fundamentals. The situation of government finance in Table 1 indicates that the Thai governments cash balances have consecutively exhibited deficits since 2001; the deficits are, if not intensified, noticeable to date. Even though approximately 80-90 percent of public debt has been financed by domestic sources, the excessive public spending forced an exponential increase in the public debt, deteriorated the fiscal position, and eventually limited room for government stimuli and interventions. A root cause of persistent government budget deficits perhaps rests with a vicious cycle of populist policies whereby unproductive public spending, such as consumer grants/loans, social transfers, and consumption subsidies, among others, are made to gain votes and win the election.

Last but not least, the interest rate is on the rise, putting downward pressure on economic growth in 2012. Table 1 indicates that the maximum interest rate for one-year fixed deposits increased from 1.7 percent in 2010 to 3 percent in 2011, passing the average rate of 2.58 percent during 2001-6. A pivotal factor of the upward trend of the interest rate is attributable to ever-increasing inflation caused primarily by an influx of capital flows on top of sizeable fiscal and monetary stimuli. If this trend continues, the untamed inflation will soon prompt the central bank to step in and take necessary counter-cyclical actions that could result in slower growth in 2012.

3. A Primer of FDI in Thailand

3.1 Recent Trends


In the run-up to the global financial crisis in 2008-9, inward FDI flows into Thailand increased exponentially. From 2005 to 2007, the country, on average, had attracted USD9.65 billion per annum compared with merely USD4.48 billion per annum during 1995-2004 (see Table 2). The

surge in FDI inflows into Thailand is attributed mainly to its solid position in the Asian nexus of production networks, together with its strategic location at the heart of Southeast Asia, relatively cheap labour cost and an abundant pool of skilled workers. The rising dependence on inward FDI as a key driver of economic growth and industrialization is also observed in various Asian countries, particularly Indonesia, Malaysia, China and, not least, India. However, the global economic downturn in 2008 put the mounting trend of FDI inflows into Thailand to a halt as the bleak business climates in the United States and the euro zone triggered the de-leveraging attempts among transnational corporations (TNCs) and new investment projects were postponed, if not put off. FDI inflows into Thailand in 2008, as a result, exhibited a sudden plunge to USD8.45 billion and were later nearly halved to USD4.98 billion in 2009. While other Southeast Asian economies like Indonesia and Malaysia also experienced a sharp FDI inflow reversal, emerging markets in China and India were less affected, thanks to their strong, large domestic demands and buoyant macroeconomic outlooks. Notwithstanding the ripple effects of the global economic meltdown on FDI inflows, an influx of foreign investment, as of 2010-11, bounced back strongly in Southeast Asian countries, including Thailand. The value of FDI inflows into Thailand amounted to USD5.81 billion in 2010 (Table 1) and February-June of 2011 witnessed the persistent surpluses of net FDI inflows (Figure 1).

In contrast to inward FDI flows, outward FDI flows from Thailand had surged consistently from USD0.41 billion per year during 1995-2004 to USD5.12 billion in 2010, and the growing significance of outward FDI continued in the midst of the global economic downturn in 2008-9. This signifies that Thailand, as well as other Southeast Asian countries particularly Malaysia, has emerged as a source of outward FDI as it started to venture overseas and leverage on complementarities with foreign markets. A number of factors serve as a driving force of Thailands evolving investment position from a host to a source of FDI. Firstly and perhaps most importantly, Thailand is losing competitive advantages in terms of low labour costs to China and India and may lose its ground as an attractive destination of FDI. This seems increasingly likely given an enormous increase in FDI flows into the two large economies and a slower pace of FDI flows in Southeast Asia. Additionally, outward FDI offers a panacea for Thailand to seek new business opportunities abroad and enjoy synergies with foreign markets.

Foreign direct investment can be broadly categorized into two types: Greenfield FDI and cross-border merger and acquisition (M&A). The former refers to a new venture in a foreign country by constructing new operational facilities from the ground up; hence, this form of FDI tends to target long-term investment projects while creating new long-term jobs. In contrast, the latter pertains to the joining of two firms or the takeover of one firm by another when the parties involved are located in different countries. It can be hypothesised that this type of FDI is relatively foot-loose and has limited effects on enhancing employment in a host country.


During 2005-7, cross-border M&A accounted for approximately 20 percent of total FDI inflows; on average, the net sales of cross-border M&A in Thailand amounted to USD1.84 billion a year (Table 3). These figures imply that although cross-border M&A, whereby foreign ventures buy up local firms, is noticeable, Greenfield FDI serves as a key vehicle of inward foreign direct investment. Cross-border M&A was severely affected by the global economic slowdown in 2008-9. In 2008, the net sales of cross-border M&A were slashed to merely USD0.14 billion more than a 90 percent decline even though total inward FDI slightly dropped from the average of USD9.65 billion a year during 2005-7 to USD8.45 billion in 2008. This can be explained by the fact that cross-border M&A is inherently foot-loose relative to Greenfield FDI. In 2009-10, although cross-border M&A started to pick up again, the pace of the recovery had been slow and the level of cross-border M&A activities was still remarkably lower than the level prevailing in the run-up to the global financial crisis.

The aftermath of the global financial crisis witnessed the trend that Thailand has emerged as a global investor tapping business opportunities overseas. Before the global economic breakdown in 2005-7, the net purchases of cross-border M&A are negligible; however, a structural change is observed during 2008-10 when cross-border M&A soared exponentially, reaching USD2.86 billion in 2010. This development is understandable given the fact that in the aftermath of the global economic downturn, inward FDI flows into Thailand in terms of Greenfield FDI and, in particular, cross-border M&A have substantially declined, triggering the fear that Thailands impressive economic performance driven largely by inward FDI will soon reach its limit should this trend continue. Now that Thailands competitiveness as a host of FDI has been deteriorated by the global economic slowdown, a sluggish recovery in the United States

and the euro zone and, not least, the rise of China and India, it seems imperative for Thai entrepreneurs to switch business strategies away from conventional approaches that put undue emphasis on domestic markets toward more pro-active investment by venturing overseas, exploring business opportunities in new markets and tapping on synergies and complementarities with foreign partners.

3.2 Sources and Sectors of FDI

[Insert Figure 2 here]

Figure 2 portrays the shares of net FDI flows into Thailand by source countries in 2010 in comparison with those averaged during 2000-5. Several developments should be highlighted. First, the European Union took over Japans position as the largest source of FDI flows into

Thailand. During 2000-2005, Japan accounted for 45 percent of net FDI flows into Thailand and had secured its position as Thailands most important investor, especially in the automotive and electronics industries. However, the share of net FDI flows into Thailand taken by Japan plunged considerably to 22 percent in 2010, due to the long-slumbering economic outlook in Japan, on top of increasingly drastic FDI competition from low labour-cost countries like China, India and Vietnam. At the same time, the share of net FDI flows into Thailand from the European Union has surged remarkably from merely 8 percent on average during 2000-5 to 29 percent during 2010.

Second, East Asian countries have emerged as an important investor in Thailand. During 2000-5, the share of net FDI flows into Thailand from Hong Kong was limited to 5 percent, and the amount of net FDI flows from China and Korea was negligible. In 2010, in contrast, Hong Kong took up as much as 9 percent of net FDI flows into Thailand, followed by 3 percent for Korea and 2 percent for China. The exception is perhaps Taiwan, where the share of net FDI flows into Thailand declined from 2 percent on average during 2000-5 to nearly nil in 2010, due largely to the ripple effects of the global economic crisis.


Last, the FDI flows from the Association of Southeast Asian Nations (ASEAN) into Thailand were badly affected by the global financial crisis. Although the investment ties within

ASEAN have been firmly strengthened through a series of regional cooperation initiatives such as ASEAN Investment Areas (AIA) and trade and investment facilitation, the share of net FDI flows into Thailand from ASEAN countries dropped dramatically from the average of 23 percent during 2000-5 to 8 percent in 2010 (Figure 2). A closer look into the intra-ASEAN sources of FDI flows into Thailand reveals a root cause of Thailands deteriorating investment tie with ASEAN. Since the past two decades, intra-ASEAN FDI flows into Thailand have been dominated by Singapore, taking up more than 90 percent of net FDI flows (Figure 3). Even though the rising role of other ASEAN countries in cross-border investment in Thailand has been observed, the share of net FDI flows from other ASEAN countries remains infinitesimal relative to those from Singapore. In connection with Figure 2, Figure 3 underlines that the decline in the share of the intra-ASEAN FDI flows into Thailand was driven mainly by an enormous plunge in FDI from Singapore the country in ASEAN that was most vulnerable to the global financial crisis in 2008-9 from approximately USD1.9 billion on average during 2006-9 to merely USD0.23 billion in 2010. In fact, the net FDI flows into Thailand from ASEAN countries, excluding Singapore, have steadily increased from the average of USD 123.2 million during 2006-9 to USD154.8 million in 2010, in spite of a significant slowdown of the global economy in 2008-9.


Figure 4 decomposes the net FDI flows into Thailand by economic sectors. FDI in Thailand has been dominated by manufacturing sectors, particularly electronics and automotive industries, since the past two decades, and its growing dominance has been observed in both absolute and relative terms. During 1981-1990, manufacturing sectors constituted about half of net FDI flows into Thailand; since then, the share has continuous risen to more than 60 percent. Although the decline in net FDI flows into Thailands manufacturing industries was observed in the dollar term from USD4.4 billion on average during 2006-9 to USD3.2 billion in 2010, the share of the manufacturing sectors was hardly affected as it still stood at approximately 60 percent of net FDI flows. The net FDI flows into Thailands service sectors, particularly financial services, have exhibited a decline in their relative importance since the aftermath of the Asian financial crisis. During 1991-2000, more than half of net FDI flows into Thailand went to service sectors; however, the proportion markedly plunged to merely a quarter during 2001-5. The

vulnerabilities of FDI flows into Thailands service sector also played out in the aftermath of the global financial crisis during which the net FDI flows in the service sectors considerably declined from USD3.3 billion a year during 2006-9 to USD1.2 billion in 2010.

4. Assessment of Inward and Outward FDI Performance

The United Nations Conference on Trade and Development (UNCTAD) develops two indices that assess inward FDI performance. One is the Inward FDI Performance index, which ranks countries by the amount of FDI received relative to their economic size. It is essentially the ratio of a countrys FDI share in the worlds FDI to a countrys GDP share in the worlds GDP.

Specifically, the Inward FDI Performance index of a country i, iIND , can be expressed as:

wi

wii GDPGDP

FDIFDIIND = , (1)

where wi FDIFDI is a country is inward FDI share in the worlds inward FDI,

and wi GDPGDP is a country is GDP share in the worlds GDP. Intuitively, the Inward FDI

Performance index captures the influence on FDI of factors other than market size, such as business climate, economic and political stability, the presence of natural resources, infrastructure, skills and technologies, and FDI promotion policy.

The other is the Inward FDI Potential index, which is an average of 12 economic and policy variables other than market size. These include: GDP per capita, the rate of GDP growth over the past 10 years, the share of exports in GDP, the average number of telephone lines, commercial energy use per capita, the share of R&D spending per capita, the share of tertiary students in population, country risk, the world market share in exports of natural resources, the world market share in exports of parts and components for automobiles and electronic products, the world market share in exports of services, and the share in the worlds inward FDI stock.


Table 4 portrays the rankings of Thailand in terms of the Inward FDI Performance and Potential indices. As of 2010, Thailand was ranked 83rd by Inward FDI Performance. Although its ranking was slightly improved from 84th in 2008-9 to 83rd in 2010, the result underlines that

Thailand has lacked behind the core ASEAN economies like Singapore (9th), Vietnam (22nd), Malaysia (46th), and Indonesia (79th). The Inward FDI Potential index, in contrast, is quite encouraging. As of 2009, Thailand was ranked 56th, following Singapore (6th), China (27th) and Malaysia (35th). This implies that Thailands economic and policy environments are satisfactorily conducive to foreign investment and largely help the country position itself as an attractive FDI destination. A key message delivered from the rankings of the Inward FDI Performance and Potential is that while Thailand stands in good stead to leverage on inward FDI, its enormous potentials have not been fully realized. There is therefore large room for economic and industrial policies that push forward Thailands FDI performance.


Table 5 sheds light on some weaknesses of Thailand as a host of inward FDI, based on the World Banks Doing Business. Overall, Thailands ease of doing business was ranked 17th in 2012, falling from 16th in 2011. A breakdown of the overall measure into various aspects of ease of doing business reveals that except for starting a business, which has already been falling behind, and trading across borders, all measures of ease of doing business in Thailand deteriorated, particularly registering property, paying taxes, and resolving insolvency, on top of getting credit, getting electricity and protecting investors. Inadequacy of infrastructure and legal and institutional quality that are vital to attracting FDI is attributable largely to the chronic political unrests and, not least, the unprecedented floods that wiped out major industrial parks in the second half of 2011.

Outward FDI performance can also be measured in the same fashion as the Inward FDI Performance index. It can be calculated as the share of a countrys outward FDI in the worlds FDI as a ratio of its share in the worlds GDP. In particular, the Outward FDI Performance index

of a country i, iOND , can be written as:

wi

wii GDPGDP

FDIFDIIND = , (2)

where wi FDIFDI is a country is outward FDI share in the worlds outward FDI,

and wi GDPGDP is a country is GDP share in the worlds GDP. It can be posited that this

measure of outward FDI performance captures two factors that shape performance of TNCs headquartered in a given country. The first pertains to ownership advantages such as innovation, know-how, managerial and organisational expertise, superior information, financial and natural resources, market networks, and size. The other catalyst of outward FDI performance is concerned with location factors whereby economic conditions are conducive to fragmenting and/or disaggregating the production among home and host countries.

[Insert Tables 6 and 7 here]

The rankings of Thailand in terms of the Outward FDI Performance index are reported in Table 6. Thailand was consistently ranked among the least competitive economies in the region in terms of outward FDI performance. As of 2005-7, Thailands outward FDI performance was ranked 66th and lacked far behind its neighbour countries like Singapore (10th), Malaysia (22nd), the Philippines (49th), India (50th), Indonesia (52nd), and China (59th). Even though Thailands outward FDI performance ranking picked up significantly from 84th in 2000-2, its pace has not been able to catch up to the well-established outward FDI players like Singapore and Malaysia as well as the emerging investors like Indonesia and the Philippines. Table 7 demonstrates this point by reporting the top non-financial TNCs from Southeast Asia, ranked by the Transnationality Index in 2008. Among the 16 TNCs from Southeast Asia which were ranked in the top 100, only PTT Public Company Limited was placed on the table at 97th, whereas the rest were occupied by TNCs from Malaysia and Singapore. Given the rapidly evolving landscape of overseas opportunities, Thailand will soon exhaust opportunities in the conventional markets; therefore, it is imperative for Thai companies to venture abroad and explore new markets and sectoral opportunities beyond their comfort zones.

5. Policy Recommendations

The assessment of inward and outward FDI performance in Thailand yields the following policy recommendations.

First and foremost, Thailand has adopted a rather passive strategy towards FDI. Naturally, the sectors thriving on the passive approach to attracting FDI would be low skill-intensive production like assembling and low-technology parts and components now that TNCs tend to re-allocate labour-intensive, low-end stages of production in a labour-abundant location

like Thailand. This type of production fundamentally taps on lower production and labour costs and rich production resources in a host country, yet renders modest backward and forward linkages the vital elements of productivity spillovers from FDI with other related industries. To tackle this, a new phase of FDI policy must be more pro-active and better targeted at high-quality foreign investment in the sectors that generate the backward and forward linkages with domestic firms through technology transfers, sharing of knowledge and know-how, training and capacity building.

Second, limited infrastructure and legal and institutional quality, particularly weak rule of law, contract enforcement, tax payment and investor protection, impose a serious constraint to unleashing Thailands full inward FDI potential. These impediments have made setting up operation plants in Thailand uneasy, if not unattractive, given drastic FDI competition from China, India and, not least, Vietnam. More recently, unending political uncertainties and poor water management that allowed the floods to do away with major industrial parks and disrupt production of TNCs have perilously undermined foreign investors confidence in Thailand as a regional production hub. Although the adverse effects tend to be transitional, the political and natural shocks reflect poor infrastructure and low quality of institution which in turn exacerbate Thailands competitiveness of FDI attraction. In 2012 and beyond, several infrastructure projects that enhance water management and electricity supplies as well as a series of institutional and political reforms are needed; Thailand will lose its ground as a major host of FDI otherwise.

Last but not least, in the aftermath of the global financial crisis, Thailand has experienced a rapidly changing economic landscape. An economic recovery in traditional economic powerhouses in the United States, the euro zone and, not least, Japan has been slow and patchy due to unresolved sovereign debt setbacks. China and India at the same time have emerged strongly and their large market size, cheap labour cost, and outward-looking economic policy have diverted FDI flows away from the traditional hosts in Southeast Asia including Thailand. In light of these developments, Thailand has to become less reliant on inward FDI flows from the traditional sources, especially the European Union and Japan, which are inclined to deprive in the years to come, and depends on outward FDI flows to flourish in new business opportunities and new markets. Nevertheless, the deliberations of Thailands outward FDI underline that its outward FDI performance is relatively limited, due perhaps to the lack of experience and insights

into new business opportunities overseas among Thai entrepreneurs. To overcome this, FDI policies and initiatives have to shift away from attraction of inward FDI towards promotion of outward FDI by putting in place incentives such as tax exemption, training and information services, and necessary physical and institutional infrastructure.

Table 1: Thailands Selected Macroeconomic Indicators, 2001-2011.

Indicators 2001-2006 2007 2008 2009 2010 2011 Population (million persons) 62.56 63.04 63.39 63.53 63.88 n.a. GDP

GDP at constant 1988 price (billions baht) 3,563.21 4,259.0 4,364.8 4,263.1 4,596.1 2,358.1 Agriculture (billions baht) 345.45 369.7 385.2 390.3 381.4 198.5 Non-agriculture (billions baht) 3217.7 3,889.2 3,979.6 3,872.7 4,214.7 2,159.6 GNP per capita (baht: person) 94,293.83 124,377.1 131,717.8 129,875.1 143,655.1 76,783.0

Inflation Headline Consumer Price Index (2007=100) 89.65 100.00 105.40 104.50 107.96 111.75 Core Consumer Price Index (2007=100) 95.83 100.00 102.30 102.60 103.57 105.72

External Account Export (BOP basis) (billions USD) 89.86 151.2 175.2 150.7 193.6 176.6 Import (BOP basis) (billions USD) 80.43 124.6 157.8 118.1 161.4 153.7 Trade Balance (billions USD) 9.38 26.6 17.3 32.6 32.2 22.9 Current Account Balance (billions USD) 1.96 15.6 2.1 21.8 13.6 10.4 Net Capital Movement (billions USD) 1.45 -1.6 12.6 -2.6 23.9 n.a. Balance of Payments (billions USD) 4.9 17.1 24.6 24.1 31.3 5.6

Government Finance Cash Balance (% of GDP) -0.51 -1.1 -0.2 -4.7 -2.0 n.a. Total Public Debt (billions baht) 2,631.38 2,948.3 3,118.9 3,661.4 3,917.4 3,972.6 Domestic Debt (billions baht) 1,881.86 2,482.9 2,692.7 3,248.0 3,539.0 3,609.7

Monetary Statistics Narrow Money (billions baht) 767.65 1,000.0 1,041.2 1,174.6 1,302.4 1,327.8 Broad Money (billions baht) 7,321.03 9,109.0 9,944.3 10,617.0 11,778.8 12,912.5 Interest Rate (1 yr. max.) (%) 2.58 2.38 2.00 1.00 1.70 3.00

Exchange Rate (average) (baht: 1 USD) 41.24 34.56 33.36 34.34 31.73 30.32 Source: Bank of Thailand. Note: Indicators for the year 2011 are the average for January up to June.

Table 2: Foreign Direct Investment (FDI) Flows in Selected Countries, 1995-2010. (US$ billion)

Economy (Annual Average)

(% of gross fixed capital formation)

1995-2004 2005-2007 2008 2009 2010 1995-2004 2010

Thailand Inward 4.48 9.65 8.45 4.98 5.81 11.1 7.3 Outward 0.41 1.50 4.05 4.12 5.12 1.0 6.4

Indonesia Inward 0.76 6.73 9.32 4.88 13.3 1.7 5.8 Outward 0.63 3.49 5.90 2.25 2.66 1.4 1.2

Malaysia Inward 4.07 6.24 7.17 1.43 9.10 14.2 18.9 Outward 1.88 6.80 14.97 7.93 13.33 6.6 27.7

China Inward 46.48 76.21 108.31 95.00 105.74 10.6 4.1 Outward 2.98 18.63 52.15 56.53 68.00 0.7 2.6

India Inward 3.79 17.77 42.55 35.65 24.64 3.1 4.5 Outward 0.82 11.5 19.40 15.93 14.67 0.7 2.7

Southeast Asia Inward 26.67 57.73 46.95 37.98 79.41 15.7 16.4 Outward 10.91 34.12 25.19 33.85 42.22 6.8 8.8

Asia and Oceania Inward 114.43 280.41 377.86 309.41 359.36 9.5 7.6 Outward 50.4 153.17 218.56 219.58 244.66 4.2 5.2

Developing countries Inward 199.79 444.94 658.00 510.58 573.57 11.8 9.6 Outward 74.3 214.3 308.89 270.75 327.56 4.5 5.5

World Inward 718.54 1,471.78 1,744.10 1,185.03 1,243.67 9.8 9.1 Outward 703.78 1,487.43 1,910.51 1,170.52 1,323.33 9.6 9.7

Source: UNCTAD, World Investment Report 2011, available at www.unctad.org/wir.

Table 3: Cross-border Merger and Acquisition in Selected Countries, 2005-2010.

(US$ billion)

Economy Sales (net) Purchases (net)

2005-2007 2008 2009 2010 2005-2007 2008 2009 2010

(Annual Average)

(Annual Average)

Thailand 1.84 0.14 0.35 0.46 - 0.02 1.42 0.87 2.86

Indonesia 2.76 2.07 1.33 1.67 0.34 0.91 - 2.59 0.89 Malaysia 3.54 2.78 0.35 3.44 2.76 9.75 3.27 2.31 China 9.28 5.36 10.90 5.97 4.49 37.94 21.49 29.20 India 3.12 10.43 6.05 5.54 12.56 13.48 0.29 26.42 Southeast Asia 11.66 22.74 12.91 10.39 14.35 18.92 4.33 14.00 Asia and Oceania 59.14 68.17 38.30 45.73 69.95 95.17 67.53 78.05 Developing Countries 84.45 104.81 39.08 82.81 109.47 105.85 73.98 96.95 World 703.43 706.54 249.73 338.84 703.43 706.54 249.73 338.84

Source: UNCTAD, World Investment Report 2011, available at www.unctad.org/wir.

Table 4: Country Rankings by Inward FDI Performance Index and Inward FDI Potential Index, 2008-2010.

Economy Inward FDI Performance Economy Inward FDI Potential 2008 2009 2010 2008 2009 2010 Singapore 61 20 9 Singapore 4 6 - Vietnam 20 22 22 China 30 27 - Malaysia 82 103 46 Malaysia 37 35 - Indonesia 111 117 79 Thailand 63 56 - Thailand 84 84 83 Vietnam 77 73 - China 97 83 86 India 86 79 - India 80 67 97 Philippines 81 82 - Philippines 122 108 116 Indonesia 89 84 - Source: UNCTAD, World Investment Report 2011, available at www.unctad.org/wir. Note: (i) The ranking covers 141 economies; and (ii) The potential index is based on 12 economic and policy variables.

Table 5: Ease of Doing Business in Thailand, rankings in the East Asia & Pacific region.

Topic Rankings 2011 2012 Change in Rank Starting a business 97 78 19 Dealing with construction permits 14 14 No change Getting electricity 8 9 1 Registering property 18 28 10 Getting credit 64 67 3 Protecting investors 12 13 1 Paying taxes 94 100 6 Trading across borders 19 17 2 Enforcing contracts 24 24 No change Resolving insolvency 57 51 4 Overall ease of doing business 16 17 1 Source: Doing Business, the World Bank, available at http://www.doingbusiness.org/rankings.

Table 6: Country Rankings by Outward FDI Performance Index, 2000-2007.

Economy Outward FDI Performance 2000-2 2003-5 2005-7 Singapore 5 12 10 Malaysia 29 29 22 Philippines 122 60 49 India 63 65 50 Indonesia 80 42 52 China 59 61 59 Thailand 84 70 66 Vietnam n.a. 89 84 Source: UNCTAD, World Investment Report 2011, available at www.unctad.org/wir. Note: (i) The ranking covers 125 economies.

Table 7: Top Non-financial TNCs from Southeast Asia, ranked by the Transnationality Index, 2008.

Rankings Corporation Home Country Industry TNI 23 Axiata Group Bhd Malaysia Telecommunications 67.7 26 Flextronics International Ltd. Singapore Electrical & electronic equipment 65.2 29 Singtel Ltd. Singapore Telecommunications 63.2 33 Capitaland Limited Singapore Construction and real estate 60.9 34 Wilmar International Limited Singapore Food, beverages and tobacco 58.4 40 Fraser & Neave Limited Singapore Food, beverages and tobacco 54.7 45 Neptune Orient Lines Ltd. Singapore Transport and storage 52.3 47 Tanjong Public Limited Company Malaysia Pharmaceuticals 49.5 50 Genting Berhad Malaysia Other consumer services 47.9 51 YTL Corp. Berhad Malaysia Utilities (Electricity, gas and water) 47.8 55 Sime Darby Berhad Malaysia Diversified 45.7 66 Keppel Corporation Limited Singapore Diversified 38.3 79 Petronas - Petroliam Nasional Bhd Malaysia Petroleum expl./ref./distr. 29.6 84 San Miguel Corporation Philippines Food, beverages and tobacco 21.7 97 PTT Public Company Limited Thailand Petroleum 10.0 Source: UNCTAD/Erasmus University Database. Note: (i) All data are based on the companies' annual reports; (ii) TNI, the Transnationlity Index, is calculated as the average of the following three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment to total employment; and (iii) Industry classification for companies follows the United States Standard Industrial Classification as used by the United States Securities and Exchange Commission (SEC).

Figure 1: Net Flow of Foreign Direct Investment in Thailand, 2011.

Source: Bank of Thailand.

Figure 2: Shares of Net FDI Flows in Thailand by Countries.


Figure 3: Net FDI Flows in Thailand vis--vis ASEAN countries (million US$).


Figure 4: Net FDI Flows in Thailand by Sectors (million US$).


sea affairs 2012 (a. chongvilaivan)

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