The Nation, Bangkok
23 September 2004
Foreign investors alarmed by FTAs
By Jeerawat Na Thalang
Foreign investors in Thailand are reconsidering their business plans in the Kingdom due to the spate of free-trade agreements the government is negotiating, representatives from European chambers of commerce said.
They said investors were naturally pro free trade, but the government’s policy shift from regional to bilateral FTAs had “changed the whole strategic equation” in some company’s business model. This was because the FTAs were complex and, in some cases, still unpredictable.
Vic Tee, president of Netherlands-Thai Chamber of Commerce and chairman and CEO of Philips Electronics (Thailand) Ltd, said he could not reveal Philips’ business model but noted, “I can tell you that a number of foreign companies are re-considering their business models in anticipation of the FTAs.”
The government is negotiating around a dozen FTAs with countries such as the US and Japan - but not the European Union.
However, Tee said EU investor tended to look for regional opportunities.
Some foreign investors are reluctant to enter Thailand at the moment because they are waiting for a clearer picture, said Stefan Buerkle, chief of the business economics and advisory division of the German-Thai Chamber of Commerce.
“Most investors came here for Afta [Asean Free Trade Area]. But suddenly the government said Afta does matter much any more,” he said at the Asian and European Regional Arrangements seminar at the Foreign Ministry.
Each FTA the government is negotiating is different, the German economist said. Some are really FTAs while others are only preferential treatment.
“It will certainly affect a company’s business strategy if the FTA is a key factor in the business model,” he said.
“Perhaps, the Thai government may be over-extended and be doing too much too soon. The US is negotiating one FTA at a time, but the Thai government is negotiating 11 FTAs at the moment,” Buerkle said.
Over the past couple of years, Buerkle said German investment and trade in Thailand had declined, with only 12 investment projects approved by the Board of Investment last year. The combined investment value was only €8 million (Bt404 million).
The slowdown in investment has resulted in a declining trade value, he said.
He said Thailand still had strengths such as social stability and relatively low production costs, with Shanghai a much more expensive place to invest than Bangkok.
Thailand also had a strong network of suppliers, which reduced the foreign-exchange risk for investors.
For example, a garment factory in Thailand used 90 per cent local materials while investors in Vietnam imported 90 per cent of materials.
Buerkle said that while most big foreign companies were already here, few small and medium-size enterprises knew Thailand was the best economy to invest in. China, on the other hand, was aggressively targeting SMEs.
Some foreign SMEs were also scared away from Thailand by changing investments and increasingly red tape.
“German investors tend to invest a little to test the water first. But the government’s regulation requiring investors to pay at least Bt3 million in paid-up capital has discouraged SMEs which normally have high technology from coming to Thailand,” he said.
Commenting on red tape, Tee said the number of documents he had to sign each day had increased.
“It’s not consistent. The number of documents have increased and I need to sign almost every page,” he said.
Tee said Thailand nonetheless remained an attractive place to invest for the foreseeable future due to relatively low wages, its geographical location and stability.
However, he said Thais should do more to improve their human resources and technical know-how by promoting endeavours such as internship exchanges between universities and companies.