Thailand’s net foreign direct investment in the first half of 2016 tumbled 90% year-on-year to $347m, its lowest level since 2005, according to Bank of Thailand (BOT) figures. But the situation is not quite as bad as it looks. BOT governor Veerathai Santiprabhob, was quick to point out that the net plummet was mainly attributable to France’s Casino Group’s $3.5bn sale of its stake in local Big C stores to the TTC Group, a Thai conglomerate, in the first quarter. “In the second quarter we started to see an increase in FDI,” Mr Santiprabhob noted. FDI net inflows amounted to $1.3bn in April-June, still nothing to crow about.

On the bright side, there has been a jump in new FDI applications for Board of Investment privileges during the first half, to 448 projects worth Bt123.7bn ($3.6bn), up from 201 projects worth Bt25bn ($724m) in the same period in 2015. Japanese applications came in first during this year, with 134 projects worth Bt25.1bn. Japan is by far the largest investor nation in Thailand, but over the past three decades the Japanese have concentrated primarily on manufacturing. That seems to be changing.

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A complete ecosystem

“Japanese firms coming to Thailand now are mostly SMEs, and they are not only in the manufacturing sector but also in the service sectors such as logistics and consultancy, creating a more complete ecosystem for Japanese firms operating in the region,” said Mr Veerathai. Thailand has been trying to position itself as a support base for FDI into Cambodia, Laos, Myanmar and Vietnam. 

Since 2015, Thailand’s Board of Investment has rejigged its tax incentives for new projects in an effort to attract FDI to more value-added sectors, an acknowledgement that the country is no longer competitive in the labour-intensive manufacturing that has fuelled its export boom since the mid-1980s. So far, the digital sector has attracted the most interest in 2016. In the first six months, the sector attracted 86 project applications, worth Bt827m. “Digital is the type of business that does not require a lot of capital investment but can create high-value add,” said a board official.