Development of inward foreign direct investments in thailand: Determinants, effects and implications

Abstract

Foreign direct investment (FDI) has played an important role in Thailand’s economic growth and development. Since 1988-1990, Thailand has been a major destination for FDI. The aim of this study is to investigate the main determinants of Thailand’s inward foreign direct investment (IFDI) and apply a panel data model to identify which determinants have significantly affected Thailand’s inward FDI. We consider FDI inflows into Thailand in relation to its five most impacting partner countries throughout the periods 1997-2014. Our empirical results have shown that market size, Thailand’s openness, geographical distance, bilateral trade agreements and R&D intensity have positive and statistically significant effects on Thailand’s inward FDI. On the other hand, exchange rate, global financial crisis and relative wages have a negative effect, while Asian financial crisis and Thailand’s political risk are insignificant effect on Thailand’s IFDI. We hope that our empirical results may provide investors and policymakers with guidance for making appropriate investment decisions.