Thailand’s Board of Investment raises 2016 target by 20%

Thailand’s Board of Investment has raised its target for 2016 inward investment by 20% to Bt550 billion ($15.88 billion) following its annual meeting, over expectations of rising inflows on the back of rising international interest in Asian assets.

The state agency’s yearly discussion was chaired by deputy prime minister Somkid Jatusripitak last Thursday, and involved the heads of the BoI’s 14 overseas offices.

Somkid said the improved political stability in Thailand following the 2014 bloodless military coup and improving investment trends towards Asia should benefit the country. He recommended the BoI raise its investment goal and add personnel to handle these anticipated opportunities.

The BoI did not specify exactly what forms of investment flows the increase would take. But the higher target reflects a desire of Thailand’s military-backed government to capitalise on renewed interest among corporates and investors to put money to work into Asia.

The BoI has targeted 10 industries that it considers to hold the best foreign investment potential, and it is planning more than 40 roadshows to Japan, Thailand’s traditional foreign investment ally, plus South Korea, China and northern Europe, to hit its foreign investment target.

According to the BoI, Thailand received 853 investment applications worth Bt320.72 billion in the first seven months of 2016, versus 483 projects worth Bt100.74 billion over the same period of 2015. The country saw Bt200 billion of proper investment in the first six months of the year.

The agency also noted economic growth rose from 3.2% in the first quarter of 2016 and to 3.5% in the second quarter. And in an investor survey it conducted in May, the proportion of those citing concern over government transparency dropped to 19.38% from 30.15% last year, while 32.8% of companies investing into Thailand said they planned to increase their investments.

“Thanks to these positive factors, the overall investment outlook is promising,” said BoI secretary general Hirunya Suchinai.

Stats disagreement

The BoI's figures are worth putting into context. Foreign investment applications in 2015 were very poor, with the BoI gaining Bt218 billion for the whole year. In contrast, it registered Bt1.9 trillion in 2014, as companies accelerated their plans ahead of policy changes.

Additionally, the Bank of Thailand said on August 1 that foreign direct investment (FDI) into the country for the first six months of 2016 fell by over 90% to just $347 million, the lowest amount in over 10 years. It stood at $4.2 billion in the same period of 2015.

One good sign was that FDI rose by $1.13 billion in the second quarter, versus a drop of $783 million in the same period of last year, according to the BoT. At the time, Hirunya blamed the difference in BoI and BoT figures on differing calculation methods over investment value.

Additionally, Thailand’s economic growth remains well below that of neighbours such as Vietnam (5.6% in the second quarter), Indonesia (5.18%) or the Philippines (7%).

And the coup has placed Thailand's free-trade agreement discussions with the European Union indefinitely on hold, even as Vietnam's agreement with the bloc has been concluded and will begin in 2018.

Military stability

The BoI’s efforts come at a time of great political change in Thailand. On August 7 the government gained 59% of votes in a referendum over a new draft constitution, created by military-appointed committee.

The new constitution – Thailand’s 20th in 84 years – marks a power grab by the military. It can now select every member of Thailand’s 250-member-strong Senate, which will also play a role in selecting the prime minister. Plus the military will be allowed to issue emergency decrees without parliament’s consent. In effect, the military can veto any political decision it doesn’t like.

It’s uncertain whether foreign investors will dislike this level of interference or see it as a welcome foundation of stability. Companies and institutional investors had been increasingly leery of investing into Thailand over the past 15 years due to the country’s political volatility.

A succession of popular anti-establishment parties linked to disgraced former premier Thaksin Shinawatra won every election, only to be ejected by various means. Under the new constitution, National Assembly elections will take place next year.