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Turmoil in Thailand
Investors Steer Clear of Thailand

Ever since a coup brought a new repressive regime to power in 2014, Thailand’s future has been clouded by political uncertainty. Now it looks like the economy is facing some tough headwinds too. Nikkei Asian Review:

Foreign investment in Thailand plunged 78% on the year for the January-November period of 2015, an unwelcome development for a government trying to charge the economy with corporate tax incentives.

The total amount listed in direct investment applications fell to 93.8 billion baht ($2.62 billion). And the number of applications tumbled 37% to 513.

Japan maintained its lead in the amount invested, but its figure sank 81% to 28.3 billion baht. Funds from China tumbled 21% to 13.3 billion baht.

Like all Asian economies, Thailand has been hit hard by the China deceleration, but the collapse of foreign investment points toward something more. Like China’s, Thailand’s export-oriented growth model isn’t delivering the results it used to, and the regulatory environment makes diversification difficult. In fact, the investment drop was exaggerated a bit because of a surge at end of 2014 as investors sought to beat a deadline on certain regulatory changes. Thailand doesn’t have the resources—intellectual, political, and economic—to transition from its older economic model to a newer one. If even China, which has many more of those resources, is having a tough time, we can expect Thailand to struggle far more and for far longer.

All of these foreign investment cuts have important geopolitical consequences as well. If Japan continues to reduce its investments, that leaves America and its allies with even less leverage in Bangkok. Which exacerbates a problem we’ve been covering here for the past year: largely because the U.S. State Department has decided to loudly chastise Thailand for human rights abuses, the U.S. has far less influence in the country than it used to—and has left a void that Beijing is trying to fill. An unstable China-dependant Thailand in which the United States has little say? That would be a very concerning development for America’s interests in Asia.

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