Thailand is seeking Chinese investment to help galvanize a five-year, 1.7 trillion baht (US$51.1 billion) development plan for its eastern seaboard to bolster the economy.
While political tension has shadowed Chinese investment in nations from Australia to Sri Lanka, the Thai military government views its so-called Eastern Economic Corridor (EEC) project as well placed to link with China’s Belt and Road Initiative.
The corridor’s goals include adding infrastructure and advanced industries — such as biotechnology, robotics and aircraft maintenance — in provinces better known for traditional manufacturing, such as auto parts.
“China is very important in terms of trade and investment,” Thai Prime Minister Prayuth Chan-ocha said in an interview in London last month, when asked about the nation’s significance for the corridor. “China has the One Belt, One Road policy, which is important — it would create connectivity within the region and throughout the world.”
Investment as a proportion of the Thai economy fell after Prayuth seized power in a 2014 coup and lags behind neighboring nations, IMF data showed.
The government expects the corridor to help close the gap and enacted a law this year offering firms perks such as tax breaks to invest.
Challenges include a workforce skill deficit and elections due next year in a nation with a history of unrest and military intervention after polls.
The five-year plan for the corridor covers last year to 2021, and spans the provinces of Rayong, Chachoengsao and Chonburi, which Thailand says are well located for trade links to other Asian nations.
China’s Alibaba Group is one of the highest-profile investors so far, pledging about US$350 million to build a distribution hub in the region.
The value of foreign direct investment applications from China approved by Thailand, for the corridor and beyond, jumped almost 1,500 percent in January through March from a year earlier to 14 billion baht.
The government is also courting investment from other nations, including Japan — traditionally the top industrial investor in Thailand — Europe and the US.
“Japan and Europe have been the major players for more than 30 years,” Eastern Economic Corridor Office Secretary-General Kanit Sangsubhan said. “Chinese investors can play a bigger role in EEC development in the future.”
Thai GDP growth reached a five-year high of 4.8 percent in the first quarter, but remains slower than in Indonesia, Malaysia and Vietnam.
The corridor should not be viewed as a panacea for Thailand’s economic ills, Thammasat Business School associate professor Pavida Pananond said.
“To engage in more advanced industries, investors need more sophisticated inputs, such as skilled labor, an efficient public sector and transparency in business operations,” she said. “All these require longer-term development and cannot simply be ordered from top-down law and regulation.”
The EEC is linked to the military government’s 20-year national strategy, which the generals expect would guide policymakers, potentially setting up flash-points with civilian administrations that wish to adopt different priorities.
“We need to find new industries in high technology to enhance the overall competitiveness of the country,” Thai Minister of Finance Apisak Tantivorawong said in an interview. “This is a key project and will be the biggest driver for Thailand’s economic development for years to come.”
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