Feb. 22, 2014
By Matt Rusling
Political crises are old hat for Thailand’s foreign investors. They have seen decades of coups, violent protests and political paralysis. While a few have shelved expansion plans, the numbers show most won’t likely pack up and leave.
In 1991, foreign direct investment (FDI) dropped only slightly despite that year’s coup. FDI rose from 2006, a coup year, to 2007, a year of military rule. In 2010 FDI was double from the previous year despite massive red shirt protests and the destruction of shopping malls in central Bangkok, noted Robert Dayley, author of Southeast Asia in the New International Era, citing FDI figures from from IndexMundi.
U.S. trade with Thailand actually rose more than 20 percent during politically tumultuous 2010, other experts noted.
“Thailand in 2014 is not going to find itself in a Syrian-level civil war, and it’s not likely to reverse four straight decades of average and impressive increases of FDI inflows,” Dayley told Borderless.
Indeed, Japanese firms, which form Thailand’s largest group of foreign investors, echoed those sentiments. Nissan Spokesman Paul Miles told Borderless that while his company does not necessarily prefer one country over the other, Thailand’s “rich economic potential cannot be underestimated by a temporary disruption.”
There is “no change in our strategy of having Thailand serve as our strategic production and R&D hub for the region,” he said, but added that at the same time the company is “making investments across Southeast Asia.”
The company’s new and second plant will be operational later this year, he added.
Likewise, Toyota Spokeswoman Carly Schaffner told Borderless the political unrest has not impacted the company’s business in Thailand.
Investment advisory group Ibbotson Associates Japan President Nari Yamaguchi told Borderless that Japanese firms will stay in Thailand, although they will gradually diversify to other countries, a trend Borderless wrote about last summer.
Others said Thailand is still the only country in Southeast Asia – including regional powerhouse Indonesia – with the right combination of inexpensive but skilled labor, world-class infrastructure and a robust supply chain. While Indonesia is often viewed as the next big investment destination, Thailand still beats the archipelago on most metrics important to businesses, including cost of labor and infrastructure, according to a study last year from Boston Consulting Group.
Anthony Nelson at the US-ASEAN Business Council told Borderless that while the seriousness of the political crisis should not be diminished – and it cannot go on indefinitely – U.S. companies have over $11 billion invested in Thailand and are not going anywhere.
“U.S. companies have weathered storms here before,” he said. “Some of the Council’s members have been here for over 100 years.”
Both sides are very foreign investment friendly, and Council companies have been successful in working with this government and the previous government, he said.
Thailand has a strong, pro-business environment and that isn’t going to change regardless of the outcome, Nelson said, although the impasse may stall some major initiatives.
Indeed, recent weeks have seen some investment plans move to the backburner. Last week, the Royal Dutch Shell Group decided to delay investment plans in Thailand’s liquefied natural gas business due to the political crisis, and some merger and acquisition deals have also been postponed.
“Will we see some decline in FDI inflows over the next months and next year as the crisis festers? Probably. But, Thailand in 2014 is not going to suddenly turn into Iceland in 2007,” Dayley said.
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