TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

percent of GDP in 2001considerably 2009 and,
at the same time, increased from 7.03 percent to
35.98 percent of Gross Fixed Capital Formation
(See Table 8). Interestingly, FDI increased up to
50.97 percent in 1996-2000. This helps explain
the possible effects of the Asian financial crisis
in 1997 on FDI inflow data. It was reported that
parent companies (MNEs) injected capital into
their subsidiaries in Thailand coping with Thai
Baht devaluation and serious liquidity problems
(www.bot.or.th).
In the 1990s, countries that contributed
greatly to Thailand’s economy via FDI, apart
from the United States and the European
Union, were Japan (one of the most advanced
internationalizing economies in the region) and
Asia’s newly industrialized countries (NICs) like
Singapore, Hong Kong, Republic of Korea and
Taiwan Province of China. This was caused by
the appreciation of their currencies after the
1985 Plaza Accord. In addition, their MNEs had
located their value-adding activities in developing
countries like Thailand where costs of operations
and resources had been low since the late 1970s.
Most Asian countries’ international investment
was made in countries less developed than their
own, typically with lower wage rates and less
sophisticated development (Lecraw 1992). After
the Asian financial crisis in 1997, there were the
recent surges in FDI inflows as shown by figures
for the 2000s. For instance, Japan’s FDI reached
US$4 303.07 million (more than seven times the
value in the 1990s), while Singapore’s FDI was
US$3 896.95 million (more than four times that
of the 1990s). Such influxes of FDI into Thailand
were reactions of these countries’ MNEs to take
advantage of economic opportunities in making
investments at cheaper costs (i.e. buying up
local firms in difficulty). Nevertheless, some were
forced by the situation to inject more money into
their own subsidiaries in difficult times.
Figure 2 exhibits FDI inflows of food
processing and agricultural sectors during
1970-2009. On average, FDI value of food
processing is substantially higher than that of
agricultural sectors, that is, US$111.29 and 8.17
million respectively (Table 1). Food processing
FDI rose significantly over the period, going from
US$4.045 million in the 1970s to US$329.954
Part 3: Policies for attracting FDI and impacts
on national economic development
FIGURE 2
FDI inflows into agricultural and food
processing sectors
FDI Inflow - Million US $
20 000
15 000
10 000
5 000
0
1970
1975 1980 1985 1990 1995 2000 2005
Food Processing Agriculture
2009p
Sources: Bank of Thailand and Thai National Economic and Social
Development Board
million in the 2000s. On the contrary, FDI of the
agricultural sector evidently flew into Thailand
in 1972, amounting to US$0.245 million. In
the 1980s, there was a big jump of agricultural
FDI, which increased by 4,389 percent over the
amount during the 1970s. This is consistent
with the movement of AgriFDI to GDP ratios
and AgriFDI share figures of the same period.
However, both AgriFDI to GDP ratio and AgriFDI
share of total FDI dropped continuously since
1990s onwards. This was caused by the perceived
high risk of investment and limited business
opportunities in comparison to other sectors
(Netayarak, 2008).
Furthermore, FDI inflow gaps between food
processing and the agricultural sector grew
larger over time in terms of values, FDI to GDP
ratio and FDI share. Both Figure 4 and Table 10
clearly illustrate this fact. Clearly, Thailand is
doing quite well in attracting FDI in the food
industry and will possibly achieve its goal as
a major world food exporter and producer
in the longer term. However, low FDI in the
agricultural sector is quite alarming since it is
an indicator of the attractiveness and openness
of the sector. Productivity and GDP growth of
Thailand’s agricultural sector could be enhanced
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THAILAND