Since coming to power on the back of the May 2014 coup, the government of Thailand’s prime minister, General Prayuth Chan-ocha, has launched a series of policies designed to attract FDI, with poor results. Annual FDI inflows averaged $5.6bn between 2014 and 2016, compared with $10.4bn from 2011 to 2013, according to Bank of Thailand figures.
Immediately after the coup, Mr Prayuth launched a policy to promote 10 special economicz (SEZs) along Thailand’s borders with Cambodia, Laos and Myanmar – all boasting high economic growth rates and cheap labour that would be allowed to cross the border to work in the zones. There were few takers, however, chiefly because of the lack of existing infrastructure in these border areas.
The government then launched a promotional scheme for 10 high-tech clusters designed to realise the “Thailand 4.0 policy” by shifting the country’s economic base from labour-intensive industries to value-added sectors including next generation automotive, smart electronics, environmental technology, agricultural farm technology, “food for the future”, robotics, aviation and logistics, biopharmaceuticals and chemicals and digital and integrated healthcare. Again, investors failed to rush in.
Finally, Mr Prayuth and his technocrats launched the Eastern Economic Corridor (EEC) in June 2016, and a special EEC law passed its first reading in the National Legislative Assembly in September.
The EEC combines aspects of the three former schemes. It is essentially a huge SEZ in a 4800-hectare plot of land spanning Thailand’s eastern coastal provinces of Chachoengsao, Chon Buri and Rayong. The board of investment will offer special tax incentives, including corporate tax waivers of up to 13 years (the previous maximum was eight years) to industries based in the EEC as long as they are also in the 10 designated cluster industries. If successful in attracting FDI in these sectors, Thailand 4.0 will be achieved, albeit only in a small part of the country.
“The EEC policy is the right policy to implement the Thailand 4.0 policy,” said Somkiat Tangkitvanich, president of the Thailand Development Research Institute, a private think tank. World Bank director for Thailand Ulrich Zachau agrees. “I think the concept of promoting economic development in the EEC is actually good policy,” he said.
There are caveats; for example, some clusters are likely to attract more FDI than others. Thailand already has a well-established auto-manufacturing base, so a move to “smarter” cars is feasible. Another bright cluster is logistics and aviation because of U-Tapao International Airport in Rayong. Originally an air force base built by the US military in 1966, it is being converted into a commercial facility, and both Airbus and Boeing have expressed interest in establishing maintenance and training centres at U-Tapao.
Less attractive are the robotics and digital sectors, with human resources a major challenge in both. Thailand’s state-dominated education system has been an underperformer for decades, especially in the fields of engineering and science.