5.1 Conclusion
This study showed the core factor that affect to the growth rate of Taiwan company investment in Thailand. This analysis is based on the companies where at least one Taiwanese citizen is an investor investing in Thailand from 2008 to 2012. The data was collected from the DBD, BOI and NOS as well as related literatures and information media. Subsequently, the study employed the Multiple Regression Analysis method to test independent variables that affect the growth rate of Taiwan company investments in Thailand. Meanwhile, in order to reduce complications due to multicollinearity among independent variables, we also determined control variables.
According to the study, among the 1446 companies comprised of Taiwanese shareholders, 320 companies provided complete operation results sufficient for use in this analysis. 231 companies had Taiwanese shareholders owning 0-49% of the whole shares. Moreover, the results show that factors affecting growth rate of firms are (1) property, plant and equipment, which indicate that if the amount of investment increases, it would result in the average of growth rate (ROA) decrease, (2) resource- seeking, which tests revealed negative results as the marketing- seeking firms are performing better than resource-seeking, and (3) the companies which has Taiwanese shareholders owning 100% increase would result in the increase of the average growth rate (ROA). Thus, these three factors are sub-national factors which affect the growth rate of Taiwan company investments in Thailand.
5.2 Contribution
The purpose of the research is to focus on influential factors that drive foreign interest to invest in Thailand. Briefly, these factors are basic factors that most investors consider and can intensify a company’s growth. Analysis of the Taiwanese information and the factor of business growth affected in this study can be employed as a guideline to other Taiwanese firms who are interested in investing in Thailand. This report provides a solid preparation framework for enterprises before entering the Thailand market.
43 5.3 Limitations
This research purchased the examination data from DBD that is worth over twenty thousand New Taiwan Dollars. The original set of data had more than 2,000 companies annually, but this study required the companies to have a turnover or financial statement of five years (2008 to 2012). Once we implemented this criterion, the data entries were reduce to 1446. Next, only the companies who showed the ROA growth and provided complete operation were selected, narrowing the data to 320 companies. We suppose the flood situation in year 2010 might have caused firms to fail to submit financial statements, annual accounts and reports to the DBD. Thus, the data cannot be used to its full potential in this study. Meanwhile, we have translated data from Thai language to English which required a significant amount of time to manage new data.
In addition, the independent variables in this examination are insufficient as the R-square should be greater than 50%.
5.4 Discussion
Thailand is situated in a strategic location, right in the middle of South East Asia, the gate to Indochina, and to the countries with dense populations, namely, China and India. Thailand is a member of (ASEAN) with the border next to four out of ten country members, and also has received privilege from AFTA (ASEAN Free Trade Agreement), which has a total population of more than 500 million people.
Consideration of the OLI paradigm show the factor that company can use it as an advantage factor, such as patent, the knowledge of productivity, ability in marketing or other management according to the consideration of countries with location advantage such as natural resources, low employment wage, tax privilege and large market to use for select characteristic and location for the investment. Lastly, a company should be encouraged to invest more for creating a strong network across the country, which is an internalization advantage, such as reducing the cost of trading, ability to control the production and manage in prevention of imitation. All the advantages mentioned will increase the profit of a company. This research found that the factor that supports the investment of Taiwan in Thailand is resource seeking to create production network and distribute company’s products. Furthermore, investors chose to establish a company in the central more than other region 257 firms in the Central, and in the East, as much as 51 firms from a total of 320 companies.
44
Consideration of the central region discovered that the central and east regions play an important role in the total economy of the country. It is the center of the country’s industrial area.
The province that stands out in industrializations is the group in the east region provinces (Chonburi, Rayong, Chanthaburi and Trat) which consists of 12 industrial estates in the central region and 22 industrial estates in the east region. Furthermore, the two regions are well equipped with infrastructure with almost an absolute irrigation system. The flat area of the river basin is suitable for important productivity of agriculture. Also, having a variety of geography such as forests, mountains, sea, islets and a border connecting with east Cambodia are also attractive traits. That is the reason of high efficiency in trading, tourism and investment with neighboring countries. That makes the economy of the central and east regions prosperous. Apart from this, both regions are main industries and the production place for Ready to Ready Meal of the country that grows with quality and durability. It is a foundation in education by research of human resources, central of trade, logistic and communication with neighbors, which affect the growth rate of the companies who invested in the area.
Moreover, the eastern region is located in Map Ta Phut Port, the industrial port that has high effectiveness ready to serve, public utility, and is situated in the area suitable for all types of industrialization. Nowadays, the Map Ta Phut port is the biggest port in Thailand that support the industrialization of industry estates and is capable of supporting the amount and, size of the ships, bulk of factories equipment and liquidity products, along with support of large size ships.
Therefore, Map Ta Phut port has the foundation of public utilities that gain the advantage of productivity and create the effectiveness in country exportation. Map Ta Phut port is comparable to a "golden gate" of Thai industries to the global market. Map Ta Phut port offers total service solutions that focus on equal opportunities for all clients as per the global standard.
Transportation
The location of Thailand is more advantageous than other members of South East Asia because Thailand is at the center of South East Asia, acting as the connection point between surrounding countries and connects them to India and China, who show a high economic growth rate. There is the East-West Economic Corridor-EWEC from Myawaddy City to Da Nang City, connecting Myanmar, Thailand, Laos and Vietnam: North-South Economic Corridor-NSEC from
45
Kunming City to Singapore, connecting China, Thailand, Laos, Malaysia and Singapore. South Economic Corridor-SEC from Trat/Kaw Thaung to Ho Chi Minh City, connecting Vietnam, Cambodia, Thailand, Malaysia and Singapore and by Rail Transportation that has the route from Kunming to Singapore (Singapore-Kunming Rail Link –SKRL), connecting China, Laos,
Cambodia, Myanmar, Thailand, Malaysia and Singapore by Thailand’s water transportation:
there is Map Ta Phut Port and Laem Chabang Port in a developing project of east coast that connects goods and transportation in the Indochina Region to South East Asian countries and East Asian countries. For Andaman Port, there is a building plan for Pak Bara Port (Satun) that is the land bridge connecting with Port Songkhla under the Developing South Coast Project. In the current situation, there is still resistance from the community for air transportation from Bangkok to other capital cities of South East Asian countries against flights not surpassing three hours on average.
Skilled Labor
Thailand has a large group of labors that acts as an advantage in terms of quality, quantity and effectively. Employees can be trained, are adaptable and are able to complete assigned tasks with a friendly attitude and a smile, which are common traditional traits among most Thai people.
At the present time, Thailand has approximately 39 million people in the labor industry.
5.5 Recommendations
The overall investment from the private sector including overseas investments indicates a slowing trend since the big flood disaster in year 2010. Investment in repairing damaged factories and machines from the flood situation contributed to the high investment figure in the second and third quarters. However, after the repair period, investment in the private sector gradually decreased and the investment trend to enter in the service sector rather than the industrial production sector emerged. In many cases, huge investments were made to purchase stocks of existing businesses such as buying stock of commercial banks in Thailand rather (than creating new industrial productions).
Focusing closely on industrial production, direct overseas investment in Thailand in the most recent five years is different from next the 5-10 years in large industries such as automotive and, electronic and electrical appliances. But investment in industrial production increased over
46
the last five years, scattered in support industries such as chemical, machinery and paper (support industries for producing raw material for other industries). This result in difficulty in predicting which industries will drive the production sector in the future and supporting industries cannot raise the competitive capacity of Thai products and the Thai economy to jump like main industries.
Overseas investors still have confidence in the Thai economy like Taiwanese investors do.
FDI flows into Thailand steadily, coming to a slow at the beginning of 2014 due to Thailand’s political unrest, but after Thailand regained stability, confidence in public investment accelerated in approval of projects that requested for investment privilege in the ending of year 2014. New investors request for privilege before changing strategies of new BOI investments.
Thus, this study investigated factors affecting the growth rate of Taiwanese firms who have investments in Thailand. The study showed the core factor that affected the growth rate of firms including (1) property, plant and equipment which indicate if the amount of investment increase would result as the average of growth rate (ROA) decreases: (2) resource- seeking, which tests revealed negative result as the marketing seeking firms are performing better than resource-seeking: and (3) the companies which has Taiwanese shareholders owned 100%
increase would result as average of growth rate (ROA) will also increase. Thus, these three factors are sub national factors affecting the growth rate of Taiwan company investments in Thailand.
47 REFERENCE English
1. Balamurali, N., & Bogahawatte, C. (2004). Foreign Direct Investment and Economic Growth in Sri Lanka. Sri Lanka Journal of Agricultural Economics, 6(1), 37-50.
2. Bende-Nabende, A., J, Ford., & J, Slater. (2001). FDI, Regional Economic Integration and Endogenous Growth: Some Evidence from Southeast Asia. Pacific Economic Review, 6(3), 383–399.
3. Bockem, S., & Tuschke, A. (nd). A tale of Two Theories: Foreign Direct Investment Decisions from the Perspectives of Economic and Institutional Theory. Retrieved from http://ideas.repec.org/a/sbr/abstra/v62y2010i3p260-290.html
4. Boddewyn, J. J. (1985). Theories of Foreign Direct Investment and Divestment: A Classificatory Note. Management International Review, 25(1), 57-65.
5. BOI foreign Indirect Investment. (2010). International Business Surveys Giving High Marks to Thailand TIR,. Retrieved from
http://www.boi.go.th/tir/issue_content.php?issueid=76;page=161
6. Borensztein, E., Gregorio, J.de., & Lee, J. (1998). How Does Foreign Direct Investment Affect Economic Growth?. Journal of International Economics, 45(1), 115-135.
7. Brems, H. (1970). A Growth Model of International Direct Investment. The American Economic Review 60 (3), 320-331.
8. Brooks C.H., & Yehuda ,B. (2008). Survey response rate levels and trends in organizational research. Journal of Human Relations, 61(8), 1139-1160. doi:
10.1177/0018726708094863.
9. Buda John., Khalid, N. M., & William, A. Montgomery. (1999). Multi-Country Evaluation of Trade Imbalances: Taiwan. The Elliott School of International Affairs, The George Washington University. Retrieved from
http://internationalecon.com/tradeimbalance/taiwan.html
10. Chang, Ching-huei., & Peter W. H. Cheng. (1992). Tax Policy and Foreign Direct Investment in Taiwan. Retrieved from http://www.nber.org/chapters/c8522.
11. Corcos, G., Del Gatto, M., Mion, G., & Ottaviano, GIP. (2012). Productivity and Firm Selection. Quantifying the New Gains from Trade. Economic Journal. Royal Economic Society, 70(255), 878-1179.
48
12. Dunning, J.H. (1977). Trade, location and economic activity and the multinational enterprise: a search for an eclectic approach In Ohlin. B., P. Hesselborn, & P.Wijkman, editors, The International Allocation of Economic Activity. London: MacMillan.
13. Dunning, J. H. & Narula (1980). Foreign Direct Investment and Governments. London and New York : Routledge.
14. Dunning, J.H. (1993). Multinational Enterprises and the Global Economy. Wokingham:
Addision-Wesley.
15. Dunning, J. H., & Gray, H. P. (2003). Extending the Eclectic Paradigm in International BusinessEssays in Honor of John Dunning, Cheltenham. Northampton, MA UK: Edward Elgar.
16. Eiselt, H. A., Vladimir Marianov. (2011). Foundations of Location Analysis: Theory Johann Heinrich von Thünen (1783–1850). Spring street, NY: Springer Science+Business Media.
17. Grosse, R. and Trevino, L. J. (1996). Foreign Direct Investment in the United States: An Analysis by Country of Origin. Journal of International Business Studies, 27(1), 139.
18. Harding, Torfinn., & Beata Javorcik. (2013). Investment promotion and FDI inflows:
Quality matters. CESifo Economic Studies, 59(2), 337.
19. Helpman, E. (1984). A Simple Theory of International Trade with Multinational Corporations Journal of Political Economy, 92(3), 451–471.
20. Helpman, E. (2006). Trade, FDI, and the Organization of Firms. Journal of Economic Literature, 44(5), 589–630.
21. Hiratsuka, D. (Eds.). (2006). Vertical Intra-Regional Production Networks in East Asia:
A Case Study of the Hard Disc Drive Industry. In East Asia’s De Factor Economic integration. London: Palgrave Macmillan.
22. Hoenenand, A. K., & Hansen, M. W. (2009), Oligopolistic competition and foreign direct investment: (Re-) Integrating the strategic management perspective in the theory of multinational corporations (CBDS No. ISBN 978-87-92111-10-4).
Frederiksberg, Denmark. Copenhagen Business School.
23. Hymer, S. (1976). The international Operation of Nations Firms: A Study of Foreign Direct Investment.(Unpublished Doctoral dissertation). Cambridge, ML press.
49
24. Investopedia, LLC. (2015).Marginal Propensity To Invest. Retrieved from http://www.investopedia.com/terms/m/marginal-propensity-invest.asp
25. Lin, Jih-Wen. ( 2008). Transition through Transaction: Taiwan’s Constitutional Reforms in the Lee Teng-hui Era. in Dafydd Fell, ed. The Politics of Modern Taiwan:
Critical Issues in Modern Politics.
26. Lin, miao-jung. (2002, August 28). NSC Official Claims ‘Go South Policy’ Would help Security. Taipei times, pp.3.
27. Lin, P., & Saggi, K. (2010). FDI in a Two-Tier Oligopoly: Coordination, Vertical Integration, and Welfare. Journal of International Economic Review, 52(4), 1271-1290.
28. Ministry of Economic Affairs (MoEA) Taiwan. (1997). The Investigation Report on the Outward Investment by Manufacturing Industry (in Chinese).Taipei: Ministry of
Economic Affairs.
29. Morgan, R. E, and C. S. Katsikeas, (1997). Theories of International Trade, Foreign Direct Investment and Firm Internalization: A Critique (ISBN No. 0021-1747) Cardiff Business School. University of Wales, UK: MCB University Press.
30. Murray Scot Tanner. (2006). Chinese Economic Coercion against Taiwan: A Tricky Weapon to Use. The Republic of China. Retrieved from
http://www.ey.gov.tw/en/cp.aspx?n=3631FF42F7C43544
31. Nachum L. (2002). International business in a world of increasing returns. Management International Review Forthcoming, 2003(4), 439-441.
32. Pant, M. (1995), Foreign Direct Investment in India: The issues involved. New Delhi:
Lancers Book.
33. Pervez, N., Ghauri, Ulf Elg., & Rudolf, R . Sinkovics. (Eds). (2004) Foreign Direct Investment: Location Attractiveness for Retailing Firms in the European Union, In:
European Union and the Race for Foreign Direct Investment in Europe (pp. 407-428).
Oxford: Pergamon.
34. Peter, Brimble., Hataichanok Techaratanawiroj., & Atchaka Sibunruang. (2002). Foreign Direct Investment: Performance and Attraction The Case of Thailand Paper present at the The Brooker Group plc and Atchaka Sibunruang of the Thailand Board of Investment Retrieved from
https://www.imf.org/external/pubs/ft/seminar/2002/fdi/eng/pdf/brimble.pdf
50
35. Sethi, D., Guisinger, S. E., Phelan, S. E., & Berg, D. M. (2003). Trends in Foreign Direct Investment Flows: A Theoretical and Empirical Analysis. Journal of International
Business Studies, 34(4), 315-326.
36. Shelley Rigger. (2011). Why Taiwan Matters -Small Island, Global Powerhouse. Lanham, MD: Rowman & Littlefield.
37. Shin, Yi Peng. (1998). Economic Relations between Taiwan and Southeast Asia: A Review of Taiwan’s “Go South” Policy,” Wis. Int’l L.J. 16, pp. 641.
38. Talamo, G. M. C. (2007). Institution, FDI and the Gravity Mode. (Unpubliced doctoral dissertation). Università di Palermo, Italy.
39. UNCTAD Statistics index. (2013). Inward foreign direct investment flow in South East Asia, annual 2000-2012. Retrieved from
http://unctadstat.unctad.org/TableViewer/chartView.aspX
40. UNCTAD, (2012). Towards A New Generation of Investment Policies (UNCTAD/WIR/2012): World Investment Report 2012. Retrieved from
http://unctad.org/en/pages/DIAE/World%20Investment%20Report/WIR-Series.aspx 41. Wen, Chen Kuo. (1997). The Review and Future Prospect of Taiwan’s Outward
Investment. Economic Outlook, 54(11), 57-59.
42. Wilhelms, S. K. S. (1998). Foreign Direct Investment And Its Determinants In Emerging Economies. Paper presented at United States Agency for International Development Bureau for Africa Office of Sustainable Development Washington, D.C. Retrieved from http://pdf.usaid.gov/pdf_docs/PNACF325.pdf
43. World Data Bank World B. (2013). Foreign Direct Investment. Retrieved from http://databank.worldbank.org/data/views/reports/tableview.aspx
Thai
44. Akkesuwan, Patcharaporn. ( 2005). Foreign Direct Investment and Economic Growth.
(Unpublished master’s thesis). Faculty of Economics, Chaingmai University.
45. Boonlua, Sutana. (2001). A Comparative analysis of the US and Japan FDI in Thailand.
Journal of Academy of business and Ecoomics, 11(3), 272-484.
46. Chitchuay, Apirat, (2011). The Factors Determinant Foreign Direct Investment in Thailand. (Unpublished Master's thesis). Depart of Economics, Kasetsart University.
51
47. Eiamrahong, Amornchai. (2007). Factors affecting Foreign Direct Investment in Malaysia, the Philippines and Thailand. (Unpublished Master’s Thesis). Faculty of Economics, Chaingmai University.
48. Jit, Apirat. (2001). The Factors Influencing Foreign Direct Investment in Thailand.
(Unpublished Master’s Thesis). Faculty of Economic., Kasetsart University.
49. Kohpaiboon, A, (2003). Foreign Trade Regimes and the FDI-Growth Nexus: A Case Study of Thailand. The Journal of Development Studies, 40(2), 55-69.
50. Office of the Securities and Exchange Commission. (2014). Building Bridges annual 2014.
Retrieved from
http://www.sec.or.th/TH/Documents/Information/annual_reports/ann2557.pdf
51. Phomdontree, Laddawan. (2007). The relationship foreign direct investment and macro-economic variables in Thailand. (Unpublished Master’s Thesis). Faculty of Economics, Ramkhamhaeng University.
52. Tanasritanyakul, Alongkorn. (2011). Foreign direct investment. Retrieved from http://www.econ.tu.ac.th/doc/news/409/econtu_40_alongkorn.pdf
52 Appendix
53
54 The Average of ROA during 2008-2010
Company
55
32 1.027 96 10.950 160 2.311 224 21.780 288 13.938
33 2.903 97 1.107 161 4.778 225 10.127 289 16.051
34 3.947 98 0.854 162 4.654 226 4.845 290 2.276
35 7.642 99 7.775 163 17.159 227 1.483 291 2.945
36 10.993 100 0.717 164 5.313 228 9.601 292 6.366
37 4.810 101 0.524 165 5.141 229 0.899 293 6.757
38 4.388 102 4.479 166 12.795 230 4.600 294 2.688
39 4.615 103 7.235 167 8.211 231 2.204 295 7.929
40 12.085 104 7.372 168 14.132 232 4.320 296 1.429
41 6.585 105 1.141 169 3.992 233 6.943 297 4.013
42 1.277 106 3.596 170 7.377 234 7.779 298 0.203
43 7.906 107 20.045 171 22.899 235 1.375 299 1.183
44 3.690 108 2.739 172 2.089 236 2.547 300 0.992
45 4.825 109 1.610 173 6.026 237 5.848 301 0.584
46 1.657 110 1.506 174 4.609 238 7.782 302 15.352
47 5.292 111 16.002 175 0.949 239 1.742 303 2.258
48 0.952 112 15.976 176 1.602 240 2.307 304 5.490
49 4.168 113 1.735 177 5.534 241 13.210 305 3.952
50 1.002 114 5.289 178 6.028 242 25.856 306 0.770
51 2.538 115 16.761 179 7.041 243 3.070 307 4.855
52 1.606 116 0.727 180 1.201 244 4.614 308 2.844
53 2.665 117 13.233 181 1.420 245 1.507 309 4.019
54 2.228 118 2.737 182 1.629 246 2.619 310 0.402
55 18.604 119 1.121 183 8.188 247 28.610 311 6.452
56 2.532 120 9.655 184 1.772 248 0.317 312 4.626
57 4.153 121 10.886 185 0.118 249 1.309 313 6.225
58 14.927 122 3.573 186 1.853 250 2.686 314 2.839
59 5.664 123 18.220 187 4.106 251 7.155 315 7.541
60 2.040 124 7.792 188 24.347 252 1.881 316 7.065
61 4.661 125 3.059 189 4.915 253 1.560 317 6.757
62 1.221 126 11.917 190 3.058 254 6.238 318 2.475
63 1.569 127 3.662 191 4.149 255 1.786 319 16.572
64 7.465 128 4.326 192 0.465 256 4.077 320 12.246
56 Growth of Return on Asset Calculation Method
Use of Return on Assets (ROA) analysis in each year of the company's growth rate and how the company has introduced a property to gain profit by using the regression analysis.
As given ROAt=
Therefore, ROA2009-ROA2008 = As givenROA2008 = initial value Therefore,
grROA2009 = ROA2009-ROA2008 (1.1) grROA2010 = ROA2010-ROA2009 (1.2) grROA2011= ROA2011-ROA2010 (1.3) grROA2012 = ROA2012-ROA2011 (1.4)
If ± indicated later By requiring
ROA = Return on Assets gr = growth rate t = year calculate
An analysis of relationship in each independent variable
(1)An analysis of the relationship between product categories that affected the decision on location selection will use the regression analysis as below:
grROAt
Therefore,
grROAt (2.1)
grROAt (2.2)
57
grROAt (2.3)
grROAt (2.4)
grROAt (2.5)
grROAt (2.6)
≈
grROAt (2.10)
By requiring
= product categories, which have 10 categories ( ) ROA = Return on Assets
gr = growth rate
t = year calculate
= The North
= The Northeast
= The Central
= The Western
= The Eastern
= The South
(2) An analysis of the relationship between minimum wage that affected the decision on locates selection will use the regression analysis as follows:
grROAt
Therefore,
grROAt (1)
≈
58
grROAt (2)
grROAt (3)
grROAt (4)
grROAt (5)
grROAt (6)
≈
grROAt (77)
= location (region), which has six regions ( ≈ )
= minimum wage in each province (cities), totaling 77 provinces ROA = Return on Assets
gr = growth rate
t = year calculate
(3)An analysis of the relationship between product categories that affected the decision on the selection of minimum wage will use the regression analysis as follow:
grROAt Therefore,
grROAt (1)
≈
59
grROAt (2)
grROAt (3)
grROAt (4)
grROAt (5)
grROAt (6)
≈
grROAt (2) (10)
By requiring
= product categories, which has 10 categories ( )
= minimum wage in each province (city), totaling 77 provinces ROA = Return on Assets
gr = growth rate
t = year calculate
The Comparison
303 out of 320 Taiwanese companies that have invested in Thailand referred that Thailand has resource seeking better than cost seeking. 257 companies which have mainly invested in the central of Thailand who claim that they do not focus on cost seeking. The 51 companies who have mainly invested in the east of Thailand claimed the same reason. The last
303 out of 320 Taiwanese companies that have invested in Thailand referred that Thailand has resource seeking better than cost seeking. 257 companies which have mainly invested in the central of Thailand who claim that they do not focus on cost seeking. The 51 companies who have mainly invested in the east of Thailand claimed the same reason. The last