ITD calls for adjustment of rules to facilitate expected rise in regional FDI
MORE foreign direct investment (FDI) is expected to flow into Thailand and other countries in East and Southeast Asia following emerging growth of the regional economy and infrastructure development.
Thailand, meanwhile, should amend and adjust its laws to facilitate increased FDI and ensure fair benefit for all involved, according to Kamalinne Pinitpuvadol, executive director of the International Institute for Trade and Development (ITD), referencing a UN Conference on Trade and Development (Unctad) report.
The amendments required concern laws related to the prevention of money laundering and tax avoidance, while the Kingdom should also take further steps to ensure sustainable growth and environmental protection, according to the report.
Unctad’s “World Investment Report” shows that in spite of a decline in global FDI last year, inflows are projected to grow by 11 per cent to US$1.4 trillion (Bt47.3 trillion) in 2015, with most of the investment growth going to East and Southeast Asia.
The report foresees FDI further rising to $1.5 trillion next year, and to $1.7 trillion in 2017. Developed countries should see a 20-per-cent increase in flows this year, reflecting stronger economic activity.
FDI inflows to developing countries will continue to be high, rising by an average of 3 per cent over the next two years, according to the report.
Kamalinne said recovering global economic growth and the relaxation of trade regulations in many countries would promote more FDI around the world, with the focus on emerging countries in Southeast Asia.
“In Thailand, despite a lower level of FDI coming to the Kingdom last year, more investment is expected this year due to regional integration and stable politics,” he said.
Last year, Thailand ranked fifth among countries in East and Southeast Asia for FDI from around the world. Investment inflow to Thailand was worth $14 billion.
The largest recipients in the region last year were China with FDI worth $129 billion, followed by $103 billion to Hong Kong, $68 billion to Singapore, and $23 billion to Indonesia.
Rise in inflows
Inflows to Indonesia rose by 20 per cent from 2013, while those to Vietnam grew 3 per cent as the country is an important location for low-cost production by foreign companies in the sub-region.
As a result of cost advantages, efficiency-seeking FDI in manufacturing to low-income countries in Asean increased, sometimes driven by large projects such as an announced investment of $600 million by South Korea’s Taekwang and Huchems Group in Myanmar, said Kamalinne.
To promote more foreign investment in Thailand, the ITD executive said the country needed to update some of its investment laws and promote more sustainable investment – namely, investment that is more concerned about social responsibility and the environment.
The Kingdom should also amend related laws to facilitate more investment, as well as to reduce disputes among investors, recipients and people in the community, he suggested.
Last year, the institute found about 30 cases globally of investment disputes between foreign investors and recipient countries and local people.
“With emerging investment growth, Thailand should amend and adjust local laws and regulations to ensure fair benefit for investors, recipients and people in the community.
“The country should also amend laws to prevent money laundering via FDI, which can be found in many countries in Asia, and Thailand could be one of the target destinations for money laundering or tax avoidance,” said Kamalinne.
Each year, many countries lose valuable income due to tax avoidance under weak FDI laws, he stressed.
The Unctad report also points out that tax avoidance can be tackled while promoting investment in sustainable development.
“The policy imperative is to take action against tax avoidance to support mobilisation of domestic resources and continue to facilitate productive investment for sustainable development,” said Unctad secretary-general Mukhisa Kituyi.
The report suggests way to promote greater coherence between international tax and investment policies, and ongoing anti-avoidance discussions in the international stages should be continued, he said.
Unctad also found that tax avoidance by multinational enterprises was a global problem relevant to all countries, because investments from offshore hubs are made in developing and developed countries alike.
