Investment in Thailand: How to unleash the new investment cycle?

Manop Udomkerdmongkol, Sra Chuenchoksan and Nutthikarn Vorasa-ngasil
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Manop Udomkerdmongkol: Bank of Thailand
Sra Chuenchoksan: Bank of Thailand
Nutthikarn Vorasa-ngasil: Bank of Thailand

No 2010-05, Working Papers from Monetary Policy Group, Bank of Thailand

Abstract: The notion that Asia will be the new economic growth center for the next decade has prompted Thailand to rethink her investment strategy. We explore investment dynamics in details using both macro and micro analysis in order to formalize appropriate investment policies for Thailand. Our findings from macro analysis indicate that lower investment during post 1997 crisis were mainly attributable to lower GDP growth, lower domestic credit growth and lower terms of trade. Moreover, Thailand’s relative lacks of public investment in comparison to neighboring countries were one of the reasons which caused sub-par private investment performances. At the micro level, we found that structural issues such as degree of competition, product standards, financial access and financial costs are inhibited factors affecting firm’s probability of investment. Legal issues which delayed investment projects were also examined. In order to unleash Thailand’s investment, the government must tackle the problems at both macro and micro levels. Not doing so would risk Thailand falling behind her competitors.

Pages: 63 pages
Date: 2010-05
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