LOCATIONAL SPECIFIC ADVANTAGES OF ASIAN NEWLY INDUSTRIALIZED ECONOMIES FOREIGN DIRECT INVESTMENT IN THAILAND

Santhiti Treetipbut

Purpose of this research study

To fill this research gap by

identifying and evaluating the factors specific to the economic and local business environment factors in Thailand that have influenced firms from the Asian NIEs to choose Thailand for FDI.

Asian NIEs

Taiwan Korea Singapore

Thailand

Hong Kong

FDI

Significance of the Study

•Assist the host government to structure its national policies, foreign investment laws and regulations and FDI incentives programs

• Interested persons - use the findings of this research to analyze and address the specific motives and needs of foreign investors

•Create a foundation or comparative framework for potential investors to work from when planning investment abroad

•Domestic enterprises may use the outcomes of this thesis to develop strategies that will motivate foreign investors to enter into joint ventures or alliances with them.

Research Questions

• Research Question 1 What are the economic and local business environment factors in Thailand that most important influenced the Asian NIEs firms in choosing to invest in Thailand?

• Research Question 2 What are the important variables in the economic and local business environment factors in Thailand that influenced the investment choices by the Asian NIEs firms when considering investment in Thailand?

• Research Question 3 When selecting a location for foreign investment in Thailand, what are the different economic and local business environment factors in Thailand which influenced that choice by the Asian NIEs firms; looked at from the perspective of each the Asian NIEs firms’ member country?

The benefits of Foreign Direct Investment (FDI)

FDI has contributed directly and indirectly to the economic welfare; social development and educational welfare of host countries.

The benefits of Foreign Direct Investment (FDI)

The main benefits of FDI include increased economic growth, poverty reduction, FDI linkage, FDI spill-over and the development of the human resource capital in the host country.

Why Asian NIEsTaiwan Korea Singapore Hong Kong

Why Asian NIEs

• Asian NIEs have already made a significant contribution to the development of the region

• The Asian NIEs are economically strong

• The Asian NIEs by definition are economies that have upgraded their industrial structure to high-technology based through development of sectors including technology research and

development, telecommunications, banking and finance, property development, supply chain management and medical related industries.

• Asian NIEs reflect the overall health of the economic and financial environment in East Asia (The World Bank 1993).

The study factors and their variables

Mapping of the literature

The study factors and their variables

The Conceptual Framework for this research

Research Method

• Questionnaires were used to collect perceptions of Asian NIEs firms

• To ensure that the study population was both accessible and accurately generalized, the study population comprised the Asian NIEs firms currently investing in Thailand and listed with BOI.

• In this research the sampling frame is relatively small and accessible. Therefore, to obtain accurate and reliable results, this research aims to study all the Asian NIEs firms within the sampling frame

• The questionnaires were addressed to the top executives of the identified Asian NIEs firms

• 122 correctly completed questionnaires were returned; a 12.5% return rated

Summary of the findingsMost important factors

Most important variables

Least important Variables

Significant difference from different Asian NIEs nations

Political factors Political stability Political system

Labor factorsQuality and productivity of

laborAvailability of local

managers

Government legal issues and policies regarding inward foreign investment

Investment guarantees International treatiesKorea had a significantly higher mean compares to

firms from Taiwan

Social factors Social stability Cultural differences

Resources factorsCost and quality of raw

materialsAvailability of raw materials

Government policies regarding trade controlTariffs against import

componentsQuotas against export

components

Infrastructure factorsCost of communication,

transportation and energy

Quality of communication, transportation and

energy infrastructure

Korea had a significantly higher mean compare to firms

from Taiwan

Summary of the findings

TaiwanKorea

Government legal issues and policies regarding inward foreign

investment

Korea had a significantly higher mean compares to firms from Taiwan

TaiwanKorea

Infrastructure factors

Korea had a significantly higher mean compares to firms from Taiwan

Recommendations

Labor factors, Government could focus more on training and labor development programs that enhance workers’ skills - Not lower labor cost

Market size, Government should put in place policies that stimulate domestic consumption and investment as well as at the regional market level.

Recommendations

Market size, Facilitate easier access to the regional markets.

Political and social factors, Seek to improve existing social and political conditions, or at least ensure that the political landscape in known and understood by potential foreign investors.

Infrastructure factors, Continue to develop, extend and enhance physical infrastructure and related services relied on by international investors and local industry alike.

Recommendations

Legal issues and policies Government might consider a systematic review of the legal issues, policies relating to foreign equity ownership, intellectual property protection, financial flow regulations and particularly tariffs on imported components and equipment.

Levels of investment incentives and investment guarantees could also be reviewed in terms of their attractiveness to foreign investors generally.

Limitations of the Study

• This study has focused only Asian NIEs investing in Thailand

• Questionnaires were not sent to Asian NIEs firms personnel resident outside Thailand.

• Each industry possibly having different needs or preferences, the results of this study cannot be extrapolated to all industries.

• This study does not cover other kind of entry mode.

Limitations of the Study

• It should be noted that beyond the timeframe of this research, 1993 to 2006, a number of political events including the coup and post-coup events through to 2008 have been of concern to the investment community.

Further Study

• Parallel studies by the Asian NIEs firms in other countries

• Focusing on the modes of entry might produce a variation in results

• Focusing on the different industry might produce a variation in results

Thank You