Determinants and Consequences of Foreign Direct Investment (FDI) in Thailand

Posted: 18 Nov 2018

See all articles by Derrick Parker

Derrick Parker

London School of Economics & Political Science (LSE)

Date Written: September 20, 2018


The research analyzes the determinants and consequences of foreign direct investment (FDI) in Thailand, with particular emphasis on reviewing the Thai government’s FDI policies, and these policies’ effectiveness for enabling the country’s sustainable development. Past research has indicated that, despite developing countries’ various attempts to improve their economic growth and increase their standard of living via internationalization, many of these attempts have proven unsuccessful. In the case of Thailand, there is debate regarding how the government can influence and regulate FDI in a manner that is most beneficial to the country’s long-term growth and development.

It has long been recognized that Thailand’s economic policies are determined in a political environment that is driven mainly by individuals’ and groups’ personal interest. Thus, research on the political process of policy formation is essential to predict future policy directions. This research takes a more concentrated approach by examining the effects of FDI on Thailand’s economic growth in the context of the political economy. The main areas examined are: (i) whether FDI has had a positive effect on the Thai economy; (ii) in which sector FDI has been most productive; (iii) whether the Thai government has been successful in achieving improved economic growth through implementing its FDI policies; and (4) if not, which areas have reported failure, what possible alternative policies exist, and what the expectations are for Thailand’s future.

In assessing Thailand’s performance, the research seeks to uncover if contributions of FDI to gross domestic product and employment growth varies across sectors. Generally, it is assumed there is room for improvement in all sectors, which can be validated by assessing the structural weaknesses in Thailand’s financial system and determining if this has any impact on the country’s infrastructure, education and health. It is thought that these measures will improve human capital, increase absorptive capacity, and thereby enhance the overall spill over effects of FDI.

Keywords: Foreign Direct Investment, Emerging Economy, Political Environment, Economic Growth, Thailand, Economic Policies, Emerging Market, Government

JEL Classification: O11, O12, O29, O44, O53

Suggested Citation

Parker, Derrick, Determinants and Consequences of Foreign Direct Investment (FDI) in Thailand (September 20, 2018). Available at SSRN:

Derrick Parker (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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