A Study On The Scale And The Effect Of Attracting Foreign Capital In Thailand

Presently,the rapid and comprehensive growth of the global economy has been reflected in investment,trade,finance and other aspects.International and domestic experiences have shown that the inflow of foreign direct investment(FDI)has a profound impact on the economic development of a country,especially developing countries,and is one of the major driving forces for a country's continuous and rapid growth.The benefits of FDI to the host country includes employment,adjustment of industrial structure,promotion of economic growth and optimization of import and export structure.FDI has become one of the main features of the world economy,both its quantity and its scale have reached a very high level.Despite the effect from economic crisis in recent years,FDI was still able to help various countries attain its economic target.Hence,FDI is contributory to the development of economy,especially for developing host countries in the promotion of trade and economy expansion.This paper begins with the existing theoretical materials on FDI and the results of empirical research on the inflow of FDI.Utilizing the data collected from various databases that reflect the current FDI status quo in Thailand,this paper conducts an empirical analysis to study the effect after the inflow of FDI as well as the factors that affect the inflow of FDI in Thailand,and makes comparative analysis using descriptive statistical methods.After a detailed study of the above contents,the following conclusions are drawn: Thailand has long been correlated with FDI.The government regards FDI as a crucial project,and Board of Investment Thailand(BOI)has been set up to introduce and promote FDI since Thailand's First National Economic and Social Development Plan in 1960,the scale of FDI in Thailand has grown extensively.Various regions and countries have come to invest in Thailand,including the United States,Japan,China and the European countries.The different cost factors in Thailand have attracted investors to invest in differing industries,such as agriculture,forestry and fishery,manufacturing,automobiles,machinery and electronic manufacturing,computers,etc.,in addition to service industries such as accommodation services,finance and insurance services.At the early phase,around seventy percent of FDI were concentrated in the financial industry.In the 1990 s,the distribution of investment industries changed,with capital outflows shifting from financial institutions to primary manufacturing industries,especially in processing foods and textiles.Although the inflow of FDI in Thailand is not stable,the Thai government attaches great attention to the inflow of FDI.Therefore,in order to increase the opportunities for foreign investors,the Thai government has set up the BOI and put forth preferential policies,tax incentives and non-tax incentives to attract foreign investors and services.When FDI flows into Thailand,the increase in capital,technological promotion,economic scale,opportunities for labor force and market development are also presented to Thailand.Therefore,this paper studies the impact of FDI on Thailand's economy and trade.With reference to relevant documents and data collected,this paper analyzes the effect of FDI on Thailand.From the perspective of economy and trade,FDI has caused some effects.This thesis selects GDP,GDP growth rate,labor force,wage rate,inflation rate,exchange rate,import and export effects as variables.Unit Root Test and Cointegration Test indicate that GDP,GDP growth rate,labor force,wage rate,inflation rate,exchange rate,import and export are highly correlated to FDI.This thesis also conducts an empirical analysis on the effect of FDI inflow to Thailand by using gravity model and shows that GDP,GDP growth rate,inflation rate,import and export are highly correlated with FDI.Comparative analysis method is then used to analyze the country's influencing factors,which will be carried out in comparison with other ASEAN countries.Thailand's geographical position,market size,infrastructure and labor force will promote FDI,but exchange rate,government policies,and natural disasters will affect investors' choices.In this regard,some policy recommendations are given by the relevant authorities for minimize damage.Thailand is a developing country that mainly relies on FDI as an important driver in the promotion of the country's economic growth.Although the ratio of Thailand's FDI is increasing year by year,Thailand's competitiveness is challenged by various factors under the backdrop of today's increasingly competitive global environment,such as China's accession to the World Trade Organization,or the ASEAN Economic Community in 2015.Hence,it is imperative to expedite cooperation to achieve greater results,and crucial to study FDI in order to provide policy recommendations to improve the investment environment in Thailand.