Award-winning Thammasat economist
focuses on Foreign Direct Investment
By Jon Fernquest[Introduction|Vocabulary|Article]
[Reading Questions|Answers]
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The Puey Ungphakorn Institute has just announced that Dr. Archanun Kophaiboon is the recipient of this year's gold medal award. [Photo]
Dr. Archanun is an economist teaching at Thammasat University and a recent graduate of Australian National University (ANU) PhD program in Economics.
He is also a member of the research staff of the Australian Centre for International Agricultural Research (ACIAR) at Australian National University (ANU). ACIAR has two projects involving Thailand:
1. International Food Safety Regulation and Processed Food Exports from Developing Countries: A Comparative Study of India and Thailand - "The project aims to examine trade conflicts relating to food safety standards; the role of the Sanitary and Phytosanitary (SPS) agreement and the related WTO dispute settlement procedures in resolving these disputes. It proposes do this through an in-depth comparative study of the export-oriented processed food industries in India and Thailand." (Source)2. Technical Change in Thailand and Indonesian Agriculture: Measurement, Socio-economic Impact and Policy Implications - "Research on the socio-economic effects of technology development is a high priority in Thailand and Indonesia. This project aims to identify agricultural industries that have shown productivity growth and determine why they have grown — is it biotechnical change such as improved crop varieties and cultivation methods, mechanisation, management improvements, or other reasons? Researchers will examine the economic and social effects of this technological change, including effects on agricultural trade, income distribution and poverty. They will assemble a large data set encompassing eight major agricultural sectors and undertake a statistical analysis of the rate and factor-saving biases of technical progress in each sector." (Source)
Check out the Working Papers in Trade and Development at ANU that include such intriguing titles as "Does sending farmers back to school have an impact..." and "The Regulation of Professional Migration in ASEAN - Insights from the Health and IT Sectors".
Dr. Archanun's PhD dissertation was entitled Industrialization in Thailand: MNEs and Global Integration. His two publications in English language international economics journals include:
1. Foreign Trade Regime and FDI-growth Nexus: a Case Study of Thailand, Journal of Development Studies, December 2003His work in progress include:2. Foreign Direct Investment and Technology Spillover: A Cross-industry Analysis of
Thai Manufacturing, World Development, forthcoming.
1. Determinants of Protection in the Thai Manufacturing SectorFor further reading, check out ReadBangkokpost's archives of articles on FDI and as well as FDI-related links and International Trade-related links.2. Multinational Enterprises and the Globalization of R&D: A Study of US-based
Firms3. MNEs and Global Integration of Thai Processed Food Industry: A Firm Level
Study4. How Open Thailand is? : An Analysis of Trade in Widgets and Dollars
[Source: Dr. Archanun's impressive Curricula Vitae and list of publications]
Read a previous Bangkok Post article about last year's Puey Ungphakorn award for corporate governance.
Check out an international ranking of of economics journals.
Reading Questions
Here are some questions to guide your reading (See answers at end):1. Why should Thailand's trade and investment policies be liberalized according to Dr. Archanun?
2. What government policies could attract more FDI, according to Dr. Archanun?
3. What are two benefits from foreign companies coming and doing business in Thailand?
4. How important are exports to Thailand's economy?
5. What recent events have damaged Thailand's reputation as a country with policies that are friendly towards foreign businesses and investment?
6. Are the current FDI incentives being offered to encourage foreign companies to invest in Thailand enough, according to Dr. Archanun? (Use inference)
7. How can the example set by foreign companies operating in Thailand help Thai companies?
8. What are some examples of Thai industries that have expanded and grown with FDI?
9. Which has grown faster: FDI or foreign trade?
10. What sectors of the Thai economy have export potential?
Bangkok Post Article #1: May 18, 2007
ECONOMY / TRADE AND INVESTMENT POLICYEconomist urges greater liberalisation
WORANUJ MANEERUNGSEEThe country's trade and investment policies should be liberalised to help encourage more foreign direct investment, says Archanun Kophaiboon, an economist with Thammasat University. Mr Archanun, who won this year's gold medal from the Puey Ungphakorn Institute, said the government should create a more friendly business environment and focus on human resources development to attract multinational enterprises.
Foreign companies not only bring foreign capital to the country, but have helped lead the country's transformation into an export-led economy, he said. Exports currently account for over 60% of gross domestic product.
But Thailand's image as an investment-friendly country has been tarnished since the Sept 19 coup. Policy missteps and political uncertainty has raised questions among business leaders about whether the country's focus is turning inward rather than toward greater openness and engagement with the world market.
Capital controls, moves to restrict foreign business ownership and new rules for the retail sector have all increased concern among foreign businesses about Thailand's economic policies.
Mr Archanun, in a speech yesterday at the Stock Exchange of Thailand, said Thailand needed to reconsider its incentives and strategies to attract foreign investment.
Tax-holiday packages offered by the Board of Investment, he said, were unlikely to remain competitive in today's global market, as numerous other countries offer similar incentives.
Mr Archanun said Thailand's successful automotive industry was a classic example of how trade liberalisation could be used to attract foreign direct investment.
At the same time, multinationals played a key role in encouraging local companies to reach out to the export markets, he said.
The canned pineapple and tuna industries were two sectors that have grown considerably in recent decades as local companies have learned to expand abroad. Multinationals have also played a key role in technology transfer to local firms.
"I am quite interested in multinationals as they represent the new engine for growth under globalisation. Foreign direct investment has actually grown faster than international trade," Mr Archanun said.
He said Southeast Asian countries, including Thailand, were increasingly focusing on parts and components for export to assembly plants in China.
Over the next five years, the automobile and electronics parts sectors are expected to remain the key exports for Thailand.
M.R. Pridiyathorn Devakula, the former finance minister and the chairman of the Puey Ungphakorn Institute, agreed that foreign direct investment was largely beneficial to economic growth.
Vocabulary (in discussion above)
liberalisation, liberalised - remove restrictions (See glossary)
trade liberalisation - eliminating or reducing barriers to trade such as import tariffs, quotas, quality restrictions, and subsidies (See Wikipedia on free trade)
Foreign Direct Investment (FDI) - "Investing directly in production in another country, either by buying a company there or establishing new operations of an existing business" (See The Economist)
Thammasat University - one of Thailand's oldest and most prestigious universities (See Wikipedia, university, and economics department, and library catalogue)
Puey Ungphakorn - famous Thai economist, Thammasat professor, and Bank of Thailand governor, awarded the prestigious Ramon Magsaysay Prize for the social relevance of his work (See Magsaysay Award, Wikipedia, and biography)
Puey Ungphakorn Institute - a research institute in memory of the economist Puey Ungpakorn
gold medal from the Puey Ungphakorn Institute - an annual award given to an economist
friendly business environment, an investment-friendly country - encourages business and investment (government policies try to make it easier to invest and do business in the country)
human resources development - improving the skills of the people working in the economy, so these workers as well as the whole economy can prosper (See The Economist on Human Capital)
multinational enterprises (MNEs) - also known as Multi-National Corporations (MNCs) or Trans-National Corporations (TNCs) (See Wikipedia in Multinational Corporations and the OECD Guidelines for Multinational Enterprises)
foreign capital - investment money from foreign countries
export-led economy - (See Wikipedia on Export-Oriented Industrialization and the South Korean leader Park Chung Hee)
Gross Domestic Product (GDP) - measure of economic activity in a country (For details see The Economist)
tarnished - when a metal becomes stained and loses brightness
x has a tarnished image or tarnished reputation - public opinion about x has grown worse
policy missteps - policy mistakes
openness - allowing interaction with the outside world (the openness of an economy is whether people, capital, goods and services can flow freely in and out of the country from other countries; See The Economist)
engagement - getting involved with (for example, she has had trouble getting critically "engaged with" the issues she is supposed to be writing about)
capital controls - government regulations on money and investment funds moving in or out of a country (For more details see The Economist)
tax-holiday packages - a government incentive program that offers a tax reduction to foreign investors
Board of Investment (BOI) - a Thai government agency that formulates policies and incentives to encourage companies to invest in Thailand (See website)
technology transfer - when a developing country acquires advanced technology from an industrialised country, FDI is an important avenue for technology transfer
globalisation - "the trend for people, firms and governments around the world to become increasingly dependent on and integrated with each other" (See The Economist and Wikipedia)
components - parts
work in progress - currently working on this, but not yet finished
Answer Key:
1. Why should Thailand's trade and investment policies be liberalized according to Dr. Archanun?
To encourage more Foreign Direct Investment (FDI).
2. What government policies could attract more FDI, according to Dr. Archanun?
a. Create a more friendly business environment with government policy.
b. Focus on human resources development to create skilled workers.
3. What are two benefits from foreign companies coming and doing business in Thailand?
a. They have brought foreign capital into the country.
b. They have helped transform Thailand into an export-led economy.
4. How important are exports to Thailand's economy?
Very important since "exports currently account for over 60% of gross domestic product."
5. What recent events have damaged Thailand's reputation as a country with policies that are friendly towards foreign businesses and investment?
The economic policies that followed the September 19th Coup:
a. Capital controls
b. Proposed restrictions on foreign business ownership
c. New rules for the retail sector
These were a sharp and sudden deviation from previous policies. The protests and political uncertainty preceding the coup should also probably be added to this list.
6. Are the current FDI incentives being offered to encourage foreign companies to invest in Thailand enough, according to Dr. Archanun? (Use inference)
No, since the other countries are offering similar incentives for investment, the BOI has to upgrade the incentives that Thailand offers to remain competitive.
7. How can the example set by foreign companies operating in Thailand help Thai companies?
The example of these companies encourages Thai companies to develop export markets.
FDI occurs for three reasons: 1. to sell to the domestic market without incurring tariffs, and 2. export to the region, manufacturing at reasonable cost for the region and reducing transport costs (for example, the Thai automobile industry exports to other countries in Southeast Asia), 3. export to the West, fo instance Dyson, a well-known manufacturer of vacuum cleaners in the UK moved their manufacturing operations to Malaysia.
("At the same time, multinationals played a key role in encouraging local companies to reach out to the export markets, he said.")
8. What are some examples of Thai industries that have expanded and grown with FDI?
The canned pineapple and tuna industries. These are "two sectors that have grown considerably in recent decades as local companies have learned to expand abroad."
9. Which has grown faster: FDI or foreign trade?
FDI.
10. What sectors of the Thai economy have export potential?
a. Automobile parts
b. Electronic parts
