Thailand’s finance minister on Thursday (18 August) brushed off concerns about plunging foreign investment under junta rule, saying “there is light ahead” now that voters have approved a military-crafted constitution.
Generals seized power in 2014 vowing to end years of political instability and kickstart the lacklustre economy.
Instead, the EU put on ice negotiations for a Free Trade Agreement, pushing ahead with Vietnam and Singapore instead, and Thailand’s key seafood export sector has been under threat of an import ban to the EU, due to illegal fishing and labour abuses.
The junta have largely succeeded in bringing calm to the politically turbulent nation – but only by stamping out dissent and banning political rallies.
The economy remains the junta’s weak point.
EXCLUSIVE / Thailand has hit back in its dispute with Brussels over the shelved free trade agreement with the EU, arguing that it hurts European businesses, not just the military junta in Bangkok.
High household debt, weakening exports and low consumer confidence have cramped growth for the last few years in what was Southeast Asia’s flagship economy.
Foreign investment has fallen off a cliff since the military takeover.
The latest figures from Thailand’s Board of Investment (BOI) show no let up in that fall.
Approved foreign investment applications plunged in the first half of 2016 compared to the same period last year.
Investment from Japan, Thailand’s largest overseas investor, dropped from $2.7 billion to $810m.
North American investment plunged tenfold, from $660 million to $67 million while the European Union fell from $1 billion to $260 million.
Less pronounced falls were seen across South East Asia.
China was one of the few countries to increase its approved investment footprint over the same period, from $159 million in the first half of 2015 to $723 million so far this year.
As the Royal Thai Army plotted its coup against the democratically-elected government in May 2014, Thailand was the second largest economy in ASEAN, and stood on the brink of signing a landmark Free Trade Agreement with the EU.
At a briefing with reporters on Thursday, Finance Minister Somkid Jatusripitak said he was unphased by the drop.
“I think we shouldn’t look back at the past, there is light ahead,” he said.
He added that political uncertainties were reduced following this month’s charter referendum, with elections scheduled for the end of 2017.
“The climate for investment is now better, both for locals and foreigners,” he said.
“Domestically, since the referendum has passed, the political uncertainties are decreasing in a good way.”
Thais approved a new constitution — the country’s 20th — by a comfortable majority although turnout was 59 percent and independent campaigning was banned.
The military says the document will bring stability and root out corruption among civilian politicians.
Critics say it entrenches the military’s hold over civilian politics.
Political turbulence is only partially behind Thailand’s foreign investment fall.
The country is rapidly ageing and it faces increased competition from neighbours like Vietnam and Cambodia, countries with large young populations, increasing education standards and lower wages.
The BOI said Thursday it was aiming to attract $15.9 billion in total foreign investment this year.
The two bright spots on Thailand’s economy have remained tourism and ramped up government spending on major infrastructure projects.
Both have propped up growth for now. The economy expanded 3.5 percent in the three months to June, slightly higher than expected.
But the World Bank estimates Thailand’s economy will grow by only 2.5 percent this year, a low figure compared to most Southeast Asia neighbours.