Source: Thailand Board of Investment's Investment Review Publication

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By Nadia Saccardo

In 2003, the outbound Foreign Direct Investment (FDI) or overseas investments of Chinese companies reached US$ 2.9 billion, bringing total overseas investment to US$ 33.2 billion by the year’s end. Subsequently, in 2004 China replaced Japan as the fifth largest overseas investor worldwide with overseas investments reaching US$ 3.6 billion, 80% of which was invested in Asia.

Capitalizing on this Chinese investment boom, Thailand’s Board of Investment (BOI) approved 20 new projects from China in 2004, valued at US$ 111 million. Major investment sectors were chemicals and paper, metal products and machinery and agriculture.

The BOI has identified China as a priority nation and has established a country desk at its Bangkok headquarters to serve the needs of potential Chinese investors. To develop additional investment ties, the BOI will lead 13 investment promotion missions to China during the current fiscal year.

Future Chinese investment in Thailand will further be aided by the China-ASEAN Free Trade Agreement (FTA), which was signed on December 2, 2004 and will take affect by 2010. It signifies the world’s largest FTA, covering 1.7 billion people with a combined gross domestic product of US $2 trillion. In 2003, two-way trade between China and ASEAN-member countries reached US$ 78.3 billion, a 43% increase over 2002, whereas China’s imports from ASEAN surged by 50% to reach US$ 47 billion last year.

Agro-industry, information and communication technologies, automotives, human resources development, and Mekong River development were identified as priority areas for immediate cooperation. Under the full FTA, scheduled to commence in 2010, exports from both sides are expected to grow by nearly 50%.

The FTA framework includes the ASEAN-China “Early Harvest Program” which came into effect on January 1, 2004, allowing unilateral reduction of customs duties by China on imports from ASEAN, in preparation for the FTA. Under the program, the two sides have cut tariffs on about 600 agricultural imports between 2% - 15%, and have agreed to scrap these tariffs in 2006.

Thailand has taken the lead among the ASEAN members in initiating this free trade accord as it has already phased-out all taxes on 188 fruits and vegetables with China. As a result, from January to June 2004, the Kingdom’s exports of fruits and vegetables to China increased more than 30% to reach US$ 210 million (8.4 billion baht), accounting for 64% of ASEAN’s total exports to China.