As Thailand reels from the coronavirus-induced economic slowdown, analyst warn that a slowdown in Foreign Direct Investment could hamper the economy even further.
The country is set to see a double-digit decline in the gross domestic product (GDP) this year and the one key area that could have helped to spur economic growth is private investment, especially foreign investment in Thailand.
Yet FDI over the past few years has seen a marked decline which has been exacerbated amid the impact of the coronavirus pandemic.
FDI, which is a key component of Thailand’s economic growth, last saw a surge in 2018 but began to decline in 2019 before running into further problems this year.
Year FDI
- 2017 279,335.13 million baht
- 2018 426,749.64 million baht
- 2019 190,702.04 million baht
- 2020 ( Q1 ending March) 115,176.10 million baht
The disruption caused by the virus has prompted FDI to remain at a standstill as foreign investors have not been able to travel into the country and negotiations have stalled or limited to preliminary talks.
This disruption caused by the virus has prompted a slight decline in the sale of industrial estates, which saw a drop of 3.86 per cent from the numbers seen last year.
Land sales including both sales plot and rental plots in the first 3 quarters of the fiscal year 2020, from October 2019 to June 2020 declined to 1,696.92 rai, down by 3.86 per cent compared to the same period of the last year.
This disruption was accepted by Somchint Pilouk, governor of the Industrial Estate Authority of Thailand (IEAT), who said that as a result of the spread of the coronavirus, foreign investors have not been able to visit the site and contact businesses to make a decision to reserve, purchase or lease land in the industrial estate.
Foreign direct investment
The current Covid-19 situation is estimated to cause a sharp fall in FDI this year. Major countries that have traditionally invested in Thailand have seen a serious downturn starting from the beginning of the year.
What is next to see is how successfully the easing of lockdown will be, which will, in turn, allows foreign investors to return. Analysts are also waiting to see the shape of the government’s incentives will help increase the FDI index. Price reduction is considered to be an investment incentive to promote factory relocation in the rest of the fiscal year but how much it may help is yet to be seen.
| January 2020 | February 2020 | March 2020 | April 2020 | |
| China | 114.44 | -10,201.00 | -3,065.40 | 13,645.10 |
| Japan | 9,682.44 | 15,606.23 | 22,680.83 | 1,236.71 |
| Hongkong | 2,409.87 | -12,873.85 | 5,512.89 | 1,284.17 |
| Taiwan | 822.72 | 1,029.83 | 1,702.94 | 1,683.55 |
| Australia | 481.48 | -29.31 | -86.24 | -82.35 |
| United states | 700.48 | 3,096.50 | 10,283.30 | -1,612.85 |
Source: Bank of Thailand (unit: million baht)
Japan continues to remain the country with the highest investments, up to 28 per cent, followed by 17 per cent from China, Taiwan 9 per cent, Australia 6 per cent, and Hong Kong 6 per cent.
The IEAT stated that Thailand has gained an advantage from the trade war between the United States and China, resulting as investors are still looking for factory relocation. The sales of the latest quarter increased by 3.86% from the time of last year.
New Normal Land Sales
But companies that have been in the business for decades have been adapting to the changing situation and companies like Amata Corp Plc. (AMATA) are adapting its sales and marketing tactics to meet the needs of a ‘new normal’ structure.
Viboon Kromadit, chief executive of Amata Corporation Plc, said the company expected 10 per cent buildup in land sales from last year to 950 rai by the end of 2020, including 200 rai from Amata City Chonburi, 450 rai from Amata City Rayong and 300 rai from Thai-Chinese Rayong Industrial Zone.
The company has around 14,000 rai of land supporting investors in Rayong and Chonburi. As for the industrial estates in foreign countries, such as Vietnam, Laos and Myanmar, the land is still being developed continuously to prepare for the investment.
“Amata have adjusted ourselves to cope with current situation while still maintaining good services to existing customers, we use various digital platforms to promote our products and services to customers.” Mr. Viboon said.
Amata has been implementing advertisement on online platforms (Line, Zoom, WeChat, Skype and etc.) to entice investors while the country was under lockdown.
“However, in closing the deal, customers will want to see the real estate to make a decision again. It is expected that after opening the country, more investors especially the Chinese investors will come to contact to see the land.” Viboon added.
