The recent inflow of foreign direct investment (FOI) into Thailand, particularly from the Northeast Asian countries, has partly contributed to Thailand's economic growth. The theory of FOI is an attempt to understand the pattern of FDI.
To investigate the driving force of foreign investment, understanding the internal and external motives is important. The external factors examined here are the economic restructuring in Northeast Asia as well as in Singapore. A number of significant variables stimulate these countries to invest in Thailand. These are the balance of payments surplus and a rise in labour costs in those countries, and an increase in protectionism in the developed countries.
The internal motivate factors identified in this research report include the demographic features of Thailand as well as government policies. A comparison of Thailand's demographic character to those of Taiwan and Japan is included in the report.
Among the government policies in Thailand, the industrial protection policy is vital for foreign investors aiming for the domestic market. The investment incentives in the ASEAN countries are compared and the conclusion is derived that Thai investment incentives are not the sole driving force behind FOI. Government policy problems are also examined.
Having identified the contributing variables to the inflow of FDI into Thailand, the patterns of FOI in Thailand in various sources and sectors are examined and compared. The characteristics of FDI in terms of ownership patterns, the market orientation and the location of firms are explained.
With respect to costs and benefits of FOI, the benefits seem to outweigh the costs. These benefits include a contribution to the Thai balance of payments surplus; an increase in competition and production efficiency; an increase of employment levels, technology transfer and economic development. The costs are reflected in the rise in land prices, a shortage of skilled labour and inappropriate technology transfer.
The problems facing foreign investors in Thailand are examined in two broad areas: management problems and the shortage of infrastructure in Thailand.
Finally, recommendations are put forward to improve the investment environment for the good of both Thailand and the investing countries.