Foreign investors wary of delay in Thai govt formation: FTI
More than six weeks after the May 14 general election, foreign businesses are raising concerns over the long delay in forming the next Thai coalition government.
According to the Federation of Thai Industries (FTI), foreign investors and the business sector are closely monitoring four political factors, namely:
1. The selection of the Speaker of the House of Representatives, for which both the Move Forward Party and the Pheu Thai Party intend to nominate a candidate thus causing complications in the government formation process.
2. The interpretation of whether Pita Limjaroenrat, Move Forward Party's leader, qualifies for the position of prime minister due to his shareholding in ITV. This matter has been referred to the Election Commission for consideration.
3. The uncertainties surrounding the vote for the Prime Minister, where the votes from the Senate members may not be sufficient for Pita to become the PM resulting in a more flexible vote for the top job.
4. Potential unrest from political rallies staged by both supporters and opponents of the Move Forward Party.
FTI president Kriengkrai Thiennukul notes that the private sector is concerned about these political factors as they affect the stability of government formation, which in turn impacts the stability of the country.
There is also incomprehension that a coalition government able to gather a total of 312 votes (or 3 out of 5 of the House of Representatives' seats), is unable to promptly form a coalition government. That number of votes would be enough to form a government in other countries.
While potential political gatherings of pro-government and pro-opposition groups may not directly impact tourism, they can have implications for investor confidence in Thailand. Even though investment decisions are typically made with a long-term perspective, political factors will inevitably come into play. The direct impact on foreign direct investment (FDI) can be divided into two parts:
1. Consideration of existing investments by companies already operating in Thailand. This group would consult closely with Thai business counterparts to assess the political situation and government formation, and report back to their parent companies abroad. While this group has had a production base in Thailand for a long time, they are concerned about the delay and have been inquiring about progress with Thai private sector representatives.
2. Consideration of investments by companies that have not yet invested in Thailand. This group consists of international companies that are being jointly courted by the Thai government and the private sector. They would study the investment feasibility in other Asean countries as alternative options.
In addition, if the government formation process unfolds over the next 3 months and delays and considerations indicate a lack of support for investment from the Thai government, companies may decide to invest in other countries.
Furthermore, the investor confidence affected by the delayed government formation can have a direct impact in 2023 and potentially beyond, particularly if political gatherings occur.
Furthermore, the delay in government formation also impacts public sector investments. The current government has been in caretaker mode since February 2023, and during this period, project approvals have been put on hold. Each ministry has had to postpone new projects until the new government comes in to approve them.
It is therefore essential that the political parties listen to the voices of the majority, Kriengkrai said, adding that everyone must prioritise the interests of the nation to prevent political turmoil and reduce the risk of an economic downturn.
