Policy and Foreign Direct Investment : Case Study of Thailand’s Automotive Industry

Abstract

Thailand’s automotive industry has derived over the past 50 years, perpetually supported by government investment, taxation, and the promotion of foreign direct investment. However, the economic crisis (Tom Yam Kung) caused the worst downturn in Thailand. After the crisis, Thailand set policies to strengthen the potential of the automotive industry and implemented measures to promote the manufacture and utilisation of domestic automotive parts, such as an increase in import tax on Complete Built-Up (CBU) and Complete Knock-Down (CKD) to support foreign investment in Thailand’s production base, such as exemption from corporate tax income and the import duty on machinery. Furthermore, the government determined an increasing requirement ratio for local content. Consequently, Thailand has the biggest production base in Southeast Asia; the first of its kind for pickup trucks in the world, and ranked twelfth for exports of automobile and automotive parts. Meanwhile, Thailand continues to develop its major goal to become a top ten exporter of the automotive industry in the world.