Foreign Direct Investment

Global foreign direct investment (FDI) flows in the first half of 2021 reached an estimated USD 852 billion, showing stronger than expected rebound momentum, with an increase of 78% of the partial-year growth rate on the previous year according to UNCTAD’s Investment Trends Monitor released on October 2021. The global FDI outlook for the full year 2021 has also improved from earlier projections. The current momentum and the growth of international project finance are likely to bring FDI flows back beyond pre-pandemic levels. Nevertheless, the duration of the health crisis and the pace of vaccinations, especially in developing countries, as well as the speed of implementation of infrastructure investment stimulus, remain important factors of uncertainty. Other important risk factors, including labour and supply chain bottlenecks, energy prices and inflationary pressures, will also affect final year results. (UNCTAD, October 2021). Covid’s impact on developing markets and shifting investment from China are major trends that will impact foreign investment in 2022.

Foreign direct investment is an important element of Thailand's economic development, and the country is one of the major FDI destinations in its region. However, the global economic crisis triggered by the Covid-19 pandemic has affected the country's attractiveness. According to UNCTAD's World Investment Report 2021, FDI flows are FDI has fallen to USD -6 billion, down from USD 3 billion in 2019, partly driven by the sale of Tesco (UK) to a group of Thai investors for USD 10 billion. The stock of FDI stood at USD 272 billion in 2020. Japan and Singapore are by far the largest investors in the country, accounting for just over half of FDI inflows. Hong Kong, the US, the Netherlands, China and Mauritius are also among the top investors. Manufacturing and financial and insurance activities attract almost 70% of all FDI inflows. Investments in real estate, trade and information and communication are also substantial. On the other hand, outward FDI from Thailand has more than doubled to USD 17 billion in 2020 from USD 8 billion in 2019, mainly in financial services and manufacturing in neighbouring countries. Thai companies have actively pursued cross-border M&A purchases (for example, Bangkok Bank acquired Bank Permata in Indonesia for USD for USD 2.3 billion).

Thailand is among the countries with the most reforms in business regulation over the past few years, which have facilitated the setting-up processes and reduced the time to start a business from 29 days to 6 days. The country has improved considerably its ranking in the World Bank's Doing Business, and it occupies 21st position in the last Doing Business 2020 ranking, gaining six positions from the previous year. The rights of borrowers and creditors have been strengthened as well as the system of land administration. The country has taken steps to clarify corporate governance, ownership and control structures by enacting legislation requiring companies to appoint independent members of the board of directors and to establish an audit committee. Thailand continues to offer more incentives to invest in advanced technologies, innovative activities and research and development through the Investment Promotion Act, and the Eastern Economic Corridor (EEC) Act, which offers benefits to investors in this zone (tax subsidies, right to land ownership, issuing of visas), should provide further support to FDI flows in the upcoming years. The junta's continuing grip on power has reassured many foreign investors previously deterred by potential instability. Growing regional competition risks, however, risk to diminish Thailand's attractiveness as an investment destination.

The latest United Nation Asia-Pacific Trade and Investment Trends Report provides additional information on FDI in Thailand and Asia-Pacific in 2021 and 2022.