TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

Germany, Switzerland, United Kingdom) and
developing countries (i.e. China, NICs, Indonesia).
To date, Germany, China and Switzerland are
among the most active countries engaging in the
negotiation and development of BITs as shown by
the numbers of signed BITs with these countries
(www.unctad.org/iia). The Thai Government
realizes the importance of FDI in economic
development resulting in a rapid expansion of
BITs and a change of policy towards a greater
degree of investment liberalization after the Asian
financial crisis in 1997.
Although Thailand is one of the most
attractive FDI destinations, it has to compete
with other countries in the same region and
elsewhere for foreign capital. In particular,
competition among developing countries is
very stiff. Recent political unrest heightened
concern about Thailand’s competitiveness and
its sound macroenvironment. Foreign firms may
have to think more than twice before making
the decision to invest, by taking divers variables
into account, for example, market size, culture,
legal systems, and political risks. Reduced level of
political stability greatly affects uncertainty levels.
These firms have to monitor possible changes in
rules and regulations, particularly with regard to
ownership, expropriation and profit remittance.
The establishment of Thailand’s bilateral
investment treaties help to build up confidence
on the part of foreign investors, and reduce
both political and commercial risks by providing
protection for foreign investors against
expropriation or nationalization. For instance, the
BIT between the Russian Federation and Thailand
clearly stated that investments of investors from
countries party to the agreement shall not be
nationalized, nor will ownership be transferred
to the state (with some exceptions, such as
public welfare protection requiring government
intervention). In addition, several BITs between
Thailand and partner countries include the
provision of “prompt, effective and adequate”
compensation in cases where expropriation
occurs. This is in line with Thailand’s Investment
Promotion Act B.E. 2520 (1977) stating that
the Thai Government will not transfer business
ownership of promoted investors to the state.
This reflects a high standard of Thai law in this
Part 3: Policies for attracting FDI and impacts
on national economic development
aspect, although the Investment Promotion Act
B.E. 2520 (1977) only provides safeguards for
investors whose projects received approval from
Thailand’s Office of the Board of Investment.
In addition, these BITs grant foreign firms
national treatment. In effect, foreign investors
from different countries investing in Thailand will
be treated equally without any discrimination or
special preference toward any particular country.
Foreign investors can sue the state when they
receive reputedly unfair treatment. BITs also
exempt foreign investors from minority ownership
restrictions and, as a result, encourage firms to
make direct investments. Foreign investors may
find it faster and easier to utilize the benefits of
BITs since they do not need approval from the BOI
and can bypass all administration time and costs
involved in the approval process. However, they
still need to apply for industrial and commercial
licenses as required by Thai rules and regulations
during their establishment processes.
With regard to transfer of funds, many
BITs between Thailand and partner countries
guarantee “freedom of transfer” subject to
domestic exchange regulations and practices
which comply with international standards, such
as that of the International Monetary Fund (IMF).
However, most BITs do not include provisions
for balance of payment safeguards, prudential
measures and stability articles. Nuannim and
Kaewpornsawan (2010) argued that Thailand
should include these provisions in BITs to
allow the state to implement emergency and
appropriate measures to maintain financial system
stability and to prevent any damages to the
balance of payments as well as public interest as
a whole. These are deemed sensible, especially
when financial crises occur, because some
negative aspects of free transfer and openness
may be more vulnerable to external shocks.
There were many external shocks, e.g.
increases in oil prices and the financial crisis,
during the past two decades. An analysis of
the Thai Government’s response to external
shocks in the short run helps us to understand
the importance and role of economic policy on
growth. After the financial crisis emerging in
the Southeast Asian region, Thailand dealt with
this problem by following the IMF rescue plan
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