Interview : Nishita Shah Federbush
To what extent is the ongoing political uncertainty impacting local investor confidence?
NISHITA SHAH FEDERBUSH: Although the general economy has not experienced any major impacts due to election delays, everyone wants a stable government. Traditionally, politics has not really interfered with business. Nevertheless, as long as there is transparency and stability the economic situation will continue to improve, and there should be no effect on investments made locally. As of yet, we have not seen investors revise their plans because of the delays. Foreign partners will always be concerned with what happens politically, but politics are not the primary factor taken into consideration when foreign entities decide whether or not to invest in Thailand. In fact, the floods in 2011 had a greater impact on business than political matters. Today, fewer companies are connected to the government, and there has been a great effort to separate politics from business. This is something that Thailand manages well.
What more can be done to further incentivise local investment in the Eastern Economic Corridor (EEC) and other emerging regions?
SHAH FEDERBUSH: The state has taken a very positive stance and shown willingness to support the EEC project. It is important for the state to continue leading the drive for development of the EEC, and this seems to be happening given the interest of key investors from Japan and China. We do not want the EEC to face a false start like that of the Dawei Special Economic Zone, and so far this is not the case. The state would ideally like to decentralise Bangkok and the EEC is a great location to do this. It also presents an opportunity to showcase current-day development in the country.
Local investors in the corridor will not face any disadvantage compared to foreign companies; Thai corporates will also look at investing in the EEC if investments make sense. If there is a belief that foreign investors will have tax benefits or advantages, I am sure the government will look into this and resolve it to make sure it is a level playing field. We actually view the growth of the EEC as an opportunity to build partnerships. Thailand 4.0 is essential for the country’s development, so it is important to highlight that the country is working to boost this through the EEC.
Moving forward, various strategies will need to be implemented to make Thailand regionally competitive. First, we must ensure a steady supply of skilled labour. To achieve this, the education system needs to be revamped, but unfortunately not enough is being done in this area at present. Focusing on the EEC for industrial development should be coupled with improving the quality of human capital. Second, the current population size means Thailand has a relatively small domestic market base, so exports should be enhanced, and in this regard the EEC makes a lot of sense. Thailand is seen as part of a bigger trade bloc, but it needs to increase its access to other blocs to open up new markets and opportunities for domestic manufacturers. An ecosystem for value-added industries must be fostered for local brands to be known and recognised globally.
How do you assess the role of local banks in supporting business activities in Thailand?
SHAH FEDERBUSH: To a certain extent, local banks will always be constrained because of their limited presence in foreign countries compared to international banks. The ratings, size, scale and relationships of local banks have improved, and many have become more competitive in supporting domestic and foreign transactions. If they are unable to undertake a sizeable transaction on their own, they are often willing to syndicate such transactions for their clients.
Due to previous consolidation, many local financial institutions have raised the bar and have become more competitive, and we expect this trend to continue in the future. There is no Thai company not looking at a deal because they lack financial backing from the banks.
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