影響台灣的投資者在泰國績效成長之因素

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(1)國立立臺灣師範大學管理理學院管理理研究所碩士論論文 Graduate Institute of Management College of Management National Taiwan Normal University Master Thesis. 影響台灣的投資者在泰國績效成長之因素 The Study of Determinant of Performance of Taiwanese Companies in Thailand. 路曉瑜 Sukumaporn Chooprasoot. 指導教授：康敏平博士 Advisor：Kang, Min-Ping Ph.D.. 中華民國 101 年年 7 月 July, 2015.

(2) ABSTRACT This study’s goal is to identify and analyze the factor affecting the growth rate of Taiwanese firms who invested in Thailand. The analysis will be based on the companies which Taiwanese people hold one or more people to invest in Thailand from 2008 to 2012. The data has been collected from Department of Business Development (DBD), Board of Investment of Thailand (BOI), and National Statistical Office (NOS) as well as relate literatures and information media. Subsequently, the study employed Multiple Regression Analysis method to test independent variables which influent the growth rate of Taiwan company investment in Thailand. The result show that factors affecting the growth rate of firms are (1) property, plant and equipment which indicate if the amount of investment increase would result as the average of growth rate (ROA) had decrease. (2) resource- seeking, which test reveal 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 3 factors are sub national factors which affecting the growth rate of Taiwan company investment in Thailand.. Keywords: Foreign Direct Investment (FDI), Growth Rate, Thailand, Taiwanese Firms. i.

(3) ACKNOWLEDGEMENT First and foremost, I am deeply grateful to my thesis advisor, Associate Professor Kang, MinPing. I have been truly blessed with her guidance, invaluable advice, knowledge and her patience throughout my study’s journey. Also, I would like to thank my thesis committee: Associate Professor Li, Peng-Yu, Associate Professor Liu, Yi-Yuan and Associate Professor ChaoChing Chang for their encouragement, insightful comments and questions. My heartfelt thanks to National Taiwan Normal University for giving me a chance and a great opportunity in Taiwan where I have learned not only technique, studied in the MBA program but also the meaning of life. Furthermore, I would like to express my gratitude to all teachers and officers in the Graduate Institute of Management, National Taiwan Normal University for their teachings and helpings. I owe my deepest gratitude to my family especially my mother who showed me her love, encouragement, support, and took care of me when I was in the hospital, and her patience in waiting for me to attain my master’s degree and return home. My father and sisters, who have always supported me as well. Without my family and mother’s encouragement, I would not be where I am today. My sincere gratitude also goes to my fellow friends: Nui Jantima, my best university friend who always taught me and gave me advice about the SPSS program, JubJib and Kay who always discussed with me about thesis problems. All my best friends in Thailand who always support, cheer me up and help me battle homesickness. Diana, Alex and Joe, my Canadian and American friends who helped me check my English grammar. Special thanks to Jay, who helped me explain how to find the inverse of matrix and gives me inspiration. To all my Thai senior and friends in Taiwan, Ping-Pong, Poom, Matoom, Pang, Ling, Gaggy and other local officers of Thailand Trade and Economic office in Taipei for their friendships. Lastly, thank you to all my Taiwan friends, Hom2usic Station group especially, Tina and LingChing sisters who took care of me like their family. Thanks goes to my foreign friends that I have met in Taiwan, who were a part of my wonderful, amazing experience, where lasting friendships were created and where I gained self-esteem. I am grateful to you all, thank you very much for everything in Taiwan and for the memorable experiences that will continue to influence my life.. ii.

(4) TABLE OF CONTENTS Page ABSTRACT. i. ACKNOWLEDGEMENT. ii. LIST OF TABLES. vi. LIST OF FIGUES. vii. Chapter 1 Introduction. 1. 1.1 Foreign Direct Investment in Thailand. 1. 1.2 Outward Foreign Direct Investment (OFDI) of Taiwan. 3. 1.3 Relation of Taiwan investment in Thailand. 3. 1.4 Agreement between Thailand and Taiwan. 4. 1.5 Objective of study. 5. 1.6 Scope of the research. 6. 1.7 Methodology of the research. 7. 1.8 Contribution of research. 7. Chapter 2 Theoretical Background. 8. 2.1 Foreign Direct Investment Theory. 8. 2.2 The OLI Framework. 8. 2.3 International Investment Theories. 9. 2.4 Factor as Drivers of Foreign Investment. 10. 2.5 Location Theory. 11. 2.6 Location of FDI in Thailand. 12. 2.6.1 The North. 13. 2.6.2 The Northeast. 14. 2.6.3 The Central Plain. 15. 2.6.4 The East. 15. 2.6.5 The West. 16. 2.6.6 The South. 17. 2.7 Resource Seeking: Product Categories. 21 iii.

(5) TABLE OF CONTENTS (Continued) Page 2.8 Labors Resource. 24. 2.9 Investment Zone. 27. 2.10 Investment Zone in Thailand. 28. 2.11 Industrial Estate Authority of Thailand Zone. 28. Chapter 3 Research Methodology. 30. 3.1 Data use in this study. 30. 3.2 Variable. 31. 3.3 Research Methodology. 31. 3.4 Data Analysis. 32. Chapter 4 Data Analysis and Finding. 34. 4.1 Measurement. 34. 4.1.1 Dependent Variable. 34. 4.1.2 Independent Variable. 35. 4.1.3 Control Variable. 35. 4.2 Data Analysis and Result. 35. Chapter 5 Conclusion and Recommendations. 42. 5.1 Conclusion. 42. 5.2 Contribution. 42. 5.3 Limitations. 43. 5.4 Discussion. 43. 5.5 Recommendations. 45. References. 47. Appendix. 52 iv.

(6) LIST OF TABLE. Page Table 2-1 Summary of resources in each region in Thailand. 18. Table 2-2 Code of Categories in Classified section in accordance with industry standards of Thailand in 2009. 22. Table 2-3 Minimum wage (daily wage) in 77’s provinces in Thailand. 25. Table 4-1 The growth rate of return on asset (ROA) from 2008-2012. 31. Table 4-2 Descriptive Statistic. 39. Table 4-3 Examine the factors which affect to the growth rate of Taiwanese firms. 41. v.

(7) LIST OF FIGURES Page Figure 1-1 Inward Foreign Direct Investment Stock in South East Asia Annual 2000-2012. 2. Figure 2-1 Minimum Wage per day in South East Asia (US dollar). 25. Figure 3-1 Relationship between dependent Variable and Independent Variable. 31. vi.

(8) 1. INTRODUCTION 1.1 Foreign Direct Investment in Thailand Foreign Direct Investment: FDI is considered essential for the developing countries (Boddewyn, 1985) because the levels of domestic savings are not enough to invest in the country. Therefore, a foreign direct investment (FDI) is required to support for domestic investment. Direct investment does not only appear in the form of money investment but also brings science and technology knowledge, and knowledge management (KM) and intellectual capital (IC) etc. At present, various countries have given priority to a foreign direct investment (FDI) and measures and policies have been issued to attract into their countries. In Thailand, foreign direct investment is regarded as a major factor in the economic development of Thailand because of a shortage of capital. Domestic capital accumulation is not sufficient to meet their needs of the low national income per capital (BOI, 2013). Most of the revenues were used for high marginal propensity (Investopedia, 2014) to consume. Thus, foreign direct investment can reduce the gap between domestic savings and capital requirements. In addition, the direct investment will happen with the transfer of technology and knowledge, to increase long-term competition, and to increase the employment rate. Furthermore, there are also other factors, in which contributes to. Thai. government’s. motivation in encouraging the FDI: (1). In outward foreign direct investment (OFDI) countries, (Hymer, 1976) the outward. investments are usually empowered to a positive current account balance, as these enterprises will send their income back to their origin, resulting in a deficit in the current account. The benefits of enterprises in this term are that they will be able to create more competitive advantage through sorting out the lower cost for their source of production. In the meantime, finding new knowledge in their location of investment will also be their additional advantage. Even though, the demand for labor will decrease, the drawbacks could be turned into benefits (OECD, 2002) if the domestic industries also support the core industries in their own countries or other locations. (2). Inward foreign direct investment (IFDI) countries, at the beginning of IFDI countries,. where they have been invested. Even if the enterprises return income to their origin (Hymer, 1976; Nachum, 2002) these locations will gain their advantages through competitiveness, profit support, technological and knowledge transfer, and job opportunities, etc. 1.

(9) FDI in Thailand has grown steadily in volume from January to November 2013, with approximately 3.9 billion baht, accounting a rise in 13% YOY (SEC, 2014). In contrast, considering the number of Application, Approval, and Certificate Issuance (BOI, 2001) which is beforehand the actual investment, it is discovered that there was a dramatic recession (IMF, 2002) of approximately 17% in the fourth quarter, compared to the same period of the former years, which was likely to be the result of Thailand's political unrest. The political turmoil affected the investor’s confidence significantly that they postponed their investment plans. . Figure 1-1 Inward Foreign Direct Investment Stock in South East Asia, annual 2000-2012. Source: UNCTAD base on Inward foreign direct investment flow in South East Asia, annual 2000-2012 (http://unctadstat.unctad.org/TableViewer/chartView.aspx). According to the UNCTAD Inward Foreign Direct Investment, the Thailand was ranked 3rd in the list of FDI in East Asia, whereas Singapore ranked 1st and Indonesia 2nd. Nevertheless, Thailand is ranked as FDI’s second choice in ASEAN. Moreover, from the World Bank survey data; “the easiest places to do business”, Thailand was ranked 3rd in Asia and 17th in 2.

(10) the world out of 183 countries (World Bank, 2011). Hence, Thailand remains an attractive destination for FDI, as the country’s investment policies are mostly focused on free trade promotion and liberalization. The state also tries to specialize their technology, skill development, innovation, service sectors, and sustainable development. 1.2 Outward Foreign Direct Investment (OFDI) of Taiwan Since 1970-1980 the economic environment in Taiwan has changed drastically with severe labor shortage, lesser cost effective labor (Chang and Cheng, 1992), the rise of the NT dollar, and more liberal policy exports (Kymlicka and Opalski, 2002). Owing to the official figures, by the end of 1986 (AIT, 2008), Taiwan companies had invested $517 million abroad, of which $303 million or nearly three-fifths was invested in 1986 alone (Ministry of Economic Affairs, 1986). In order to find a way to solve the problems, Taiwan’s government should change and find new investing resources and location for Taiwanese firms. By relocating to invest in overseas (Investment commission, 2002), especially in countries where there are abundant of resources of raw material in manufacturing so as to reduce the cost of production cost and solve the problems stated above. Thus, in 1993-1994, President Lee Teng-Hui’s government released the “go south policy” (Lin, 2002) focusing on South east Asia, including Indonesia, Malaysia, Thailand, and the Philippines, in order to encourage Taiwan industries to go on and outsource the production(Ministry of Economic Affairs, 1994).. 1.3 Relation of Taiwan investment in Thailand As a condition for investment in Thailand, foreign enterprises must be registered and the annual report must be submitted to the Department of Business Development (DBD). Due to the DBD database in 2013, new Taiwanese firms were registered to invest their money in the amount of 543.72 million baht (BOT, 2013) approximately 181.24 million dollar, resulting in the rank of 11th in the list. Moreover, according to the Bank of Thailand (BOT) focusing on Foreign Direct Investment in Thailand shows that Taiwanese FDI in first half of 2013 invested 5.24 billion baht (approximately 1.75 billion dollars), an increase of increased 0.9% from the first half of 2012 with the value of 5.79 billion baht (BOT, 2013), approximately 1.75 billion dollars. Their direct 3.

(11) investment value is positioned at the 13th after Japan, China, Cayman Island, Germany, Hong Kong, Malaysia, Singapore, South Korea, Switzerland, Canada and the U.S. and England. On the other hand, according to business approved data from the Board of Investment Thailand (BOI) in 2013, the number indicates that Thailand’s economy still heavily depends on the inflow of FDI from 1st Japan, 2nd the U.S., 3rd European countries, and 7th Taiwan. Taiwanese companies have always played a significant role as important investors in Thailand; the investment value was around 3,709 million baht, which compared to previous years, the value of investment increased 2.1 times (BOI, 2013). Moreover, BOI business approved data stated that every week, a new factory was being opened by Taiwanese investors, which more than 1,400 projects are valued around 10 billion USD (BOT, 2013). The main industries of business which Taiwanese firms have invested in Thailand are categorized as electronics and electrical appliances, light industrial, paper and plastic, chemicals, which are mainly produced for export (BOI, 2013). Although the Taiwan economy indicated strong growth in 2011 (MOEA, 2013), unemployment rate had remained steady. (Buda, Khalid and Montgomery, 1999) Taiwan also had to go through a domestic economic recovery, which their plan for economy development (Robbins, 1968) included investment in Thailand as one of their choices (BOI, 2013). As a result, Taiwan had increased investments in 2011 accounting on an increase of applicant (BOI, 2013), approval and certificate issuance processes, especially in medium and large project that started to invest in Thailand. As a result, the research problem of this paper is to observe the growth rate of Taiwanese firms who decided to invest in Thailand by considering the influence factors, which are location, zone, product and others by analyzing the data from the Department of Business Development (DBD) and Board of Investment (BOI) so as to compare firms with different growth rates among the firms, which were approved by the BOI and general investment without any support from Thai government.. 1.4 Agreement between Thailand and Taiwan On December 3rd, 2012 the director of Thailand Trade and Economic Office and Mr. Henry Chen (Chen Ming Cheng), the director of Taipei Economic and cultural office in Thailand signed the Protocol to the Agreement between the Thailand Trade and Economic Office in Taipei andthe Taipei Economic and Trade Office in Thailand (BOI, 2013). The protocol was aimed to 4.

(12) implement the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Ministry of Foreign Affairs of The Kingdom of Thailand, 2012) in order to have an agreement to avoid double taxation. As a result, Thai and Taiwanese investors will receive the benefits from not having to pay redundant payment of income operating between Thailand and Taiwan (BOI, 2013). This agreement comes into effect on December 19th, 2012(Ministry of Foreign Affairs of The Kingdom of Thailand, 2012). The brief details of the agreement are as follows: (1) The Elimination of Double Taxation. Thai companies’ agreed to eliminate taxes that were paid in Taiwan, deducted from tax paid in Thailand as long as it does not exceed the amount of tax as computed before. On the other hand, Taiwanese companies’ agreed to eliminate taxes that was paid in Thailand (BOI, 2013), deducted from the tax paid in Taiwan as long as it does not exceed the amount of the tax as computed before. Both Thailand and Taiwan agreed to take Tax Sparing Credit, which shall be applicable five years from the entry into force. (2) Earning Retention. The process of cross boarder payment tax will be received from the recipients, which can be another enterprise, who do business through a permanent establishment abroad that pays income tax. (3) Taxation of International Shipping. The income from international air transportation shall be exempt from taxation. (4) Tax of Dividends Interest and Royalties. The restriction to collect the tax rate should not exceed the effective tax rate as required in the agreement. (5) Personal Taxation, Wages, Compensation from Employment (The Revenue Department, 2013). Personal service teachers, and researchers should still be entitled to tax but they should still have some exemption under the terms of agreement. Currently, there are more than 2,000 Taiwanese firms with 150,000 Taiwanese families in Thailand, who are expected to benefit from the tax privilege in this agreement which was intended to encourage more investment in Thailand from the Taiwanese.. 1.5 Objective of the study Even though, Taiwanese firms are not ranked as the first foreign direct investment in Thailand, Taiwanese firms has been investing in Thailand with a large amount of money and has 5.

(13) continued to conduct their business in Thailand (Chiu, 2010). Due Taiwanese investors see Thailand as gateway entry to third markets such as America and Europe. In terms of population, investing in Thailand or ASEAN can result in business opportunities for a minimum of 3.28 million people. While the location of Thailand is at the center of ASEAN where the border connects to Myanmar, Laos, Cambodia, and Malaysia, Thailand and is located in the south of the Khong River which is the emerging-market. This indicates the potential and significance of this country. Investors deem Thailand’s infrastructure as world-class. Furthermore, the “Go South Policy” of Taiwan still needs to decrease the risk of investing in South East Asia, Thailand also has a policy that encourages and supports FDI and free trade. Investors are accepted in skill labor and proper wages. However, the numbers from DBD and BOI present that there are determinant and factors like locations, product categories, minimum wage and others, which affect Taiwanese firms in making their decision. This paper’s goal is to analyze these factors in order to seek investment opportunities and examine the relationship between these factors and average growth of ROA. Therefore, in this research, the factors, which influence the Taiwanese firms for relocating and continuing their investment in Thailand, will be discovered.. 1.6 Scope of the research (1). Review the policies, regulations, procedures and incentives, which are offered by. Thailand to attract FDI. (2). Review and analyze the incentives so as to guarantee and protect the investment. promotion act of the Board of Investment (BOI) and Department of Business Development of the MOC. (3). Analyze and utilize the FDI theory and Location theory to identify the factors,. which have influences on the Taiwanese FDI in Thailand and strategic access to neighboring countries. Owing to the research result, suitable recommendations will be provided for the Thai government, policy makers, and stakeholders. These recommendations ought to be contributed to improve the investment strategy in Thailand for their policies toward Taiwan.. 6.

(14) 1.7 Methodology of the Research The business establishment of Thailand, the most registered companies which was implemented through the DBD was registered in the category of “limited company”. Owing to the Department of Business Development (DBD) database, the registered Taiwanese company based in Thailand found that from 2008 to 2012 there were 2,040 companies, however, only 1,455 companies had sent their financial statements to the DBD. Moreover, the Board of Investment of Thailand (BOI) is the department where support, encourage investment by using tax incentives such as tax exemptions, tax deduction or import duties on machinery. According to the BOI database, 218 firms were registered to receive the support, which accounted for 14.98%. By examining the BOI’s figures, the researcher has analyzed the investment strategies that affect the companies’ growth rate. However, this research has selected only the companies that have full accounting report for 5 years consecutively without any part missing, for example, account receive, total asset etc. and each year, the company’s ROA must be positive. Thus, there are only 320 companies that meet these criteria. Hence, this research will be based on an exploratory research design. Implementing a qualitative approach, the research will utilize the collection of secondary source of the previous research including, news, journals, articles, and government announcements.. 1.8 Contribution of research 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.. 7.

(15) 2. THEORETICAL BACKGROUNDS. The foreign direct investment (FDI) in present economics in developing countries and emerging-market economies are necessary to increase the talent of economic competition to compete with others. The FDI is able to increase liquidity to Thailand’s financial market and other businesses that are facing financial problems; extending businesses will be required to hire more and transfer technology to the country in which it invest. Moreover, the result of the FDI investment can show the performance growth of its economy. Therefore, to understand the foreign direct investment, this section will study the FDI meaning, investment theories, factors as drivers of foreign investment and other supporting notions. Brief details are as follows:. 2.1 Foreign Direct Investment Theory The Foreign Direct Investment or FDI is an investment from a company or entity based in one country, manufacturing products or services for a company or entity based in another country. It can be an investment that provides ultimate benefits for businesses from economic and management activities to gain profits back to its home country. Since 1945, there have been many studies on Trading Volume of Foreign Investors, using the Theory of Multinational Corporation to describe FDI, such as H-O-S (Heckscher-Ohlin-Samuelson). It can be concluded that the countries with strong capital markets have two options to gain maximum advantage. The first is the capital-intensive production which requires large amounts of money and other financial resources to produce goods or services for other countries, and the second being is a direct investment on raw materials in another country, causing capital movement between countries and production of capital-intensive products in those countries.. 2.2 The OLI framework The OLI framework or eclectic paradigm (Ownership, Location, and Internalization) has also been studied to explain foreign direct investment. The framework was developed by John Dunning (1977) and is determined by three sets of configuration advantages as indicated below. (Dunning and Gray, 2003) 1.. Ownership-specific advantages (O) include technology, name recognition,. copyright, core competencies, patent and trademark, and production process. 8.

(16) 2.. Location-specific advantages (L) consider the FDI for manufacturing products. in the host country that can provide more profits than in the home country, which the higher profits mostly come from different tax rates, transportation costs, endowment funds, infrastructure factors and government regulations. 3.. Internalization-incentive advantages (I) are in knowledge-based assets of firms. or multinational corporations (MNC) to protect against or seek opportunities to exploit market failure. According to the OLI advantages, in this research, the authors focus only on Locationspecific advantages (L) which are regarded as important factors and can measure a firm’s profits or turnovers whether they are positive or negative. To investigate this, the three different factors, Location, minimum wage and Product categories are determined. These factors can influence transportation costs, raw material costs, government regulations etc., as well as investment decisions or expansions.. 2.3 International investment theories Thanasrithanyakun Alongkorn (2011) mentioned that in the year 1970, developed countries started the trend of foreign investment, but in the year 1985 to the present, developing countries including South Korea, Taiwan, Hong Kong, Singapore, China, Malaysia, Thailand, and India have been focusing on the trends of foreign investment called “Third World MNEs” that motivate in foreign investment. There are three forms for foreign investment motivation: 1. Resource-seeking is the form of investment in countries with abundant natural resources in order to make these raw materials and can be purchased at a minimum cost; an example is the THAI UNION FROZEN PRODUCTS PUBLIC COMPANY LIMITED (TUF), which is a Thai company investing in Papua New Guinea due to the need of seektuna, a natural resources under the raw materials category. 2. Market -seeking is a form of investment in countries with large markets or markets with high growth potential. It may have the intention of keeping the original market share or finding a new market. 3. Efficiency -seeking is a form investing in countries with the ability or aptitude in production to enhance the company's competitiveness; the THAI UNION FROZEN PRODUCTS PUBLIC COMPANY LIMITED (TUF) also invests in the United States 9.

(17) because the United States is a large market of canned tuna consumers. Therefore, the investment in the United States reduces the cost of shipping. 2.4Factors as drivers of foreign investment Hiratsuka (2006) states that foreign investment is gaining popularity, particularly investment in Asia. As a result, an investment in Asia makes increasingly successful Asian entrepreneurs in the world. In addition, factors as drivers of foreign investment indicate the following points: 1. Transportation costs analyzed by Gravity Framework, is the joint analysis between economy sizes, the distance of transportation before the production, and the transportation of finished goods. In addition, transportation costs still include barriers to trade and investment, language ability, flexibility in exchange and the cost of distribution in foreign countries.. Therefore, if foreign countries need to invest and. have some factors, it will drive the investment in order to take advantage of the low cost factor. 2. The impetus to foreign investment includes low wages, access convenience to the market and access to production factors, as well as the potential for research and development. 3. Efficiency of operations. 4. The network connection covered and included convenience production and transport of goods to neighboring countries. There must be an adequate supply for efficiency supply. 5. Inclusion of investment facilitation infrastructure, flexibility in financial services, the shipping system and medical care. Tongkheaw Santi (2010) analyzed factors as drivers of foreign investments in Singapore, Malaysia and Thailand to invest in Cambodia, Laos and Vietnam and found that factors as drivers of foreign investment included various government policies, domestic competition, a country's economic structure, and the limitation of the domestic market. Pull Factors are the promotion and support of the government, the market potential and abundance of production resources.. 10.

(18) Agarwal and Mitra (2010) mentioned that the policy of free trade is an extension to achieve higher economic growth, and the growth of technology and skill performances are the best supplement to export. On the contrary, trade barriers will affect the potential of the economy as a whole rather than a free trade policy from the government. Government policies to encourage exports are causing an economic growth rather than the import order such as India and Africa. However, South Korea and Taiwan have a policy that promotes exports but it is not a major factor in the export value increased. However, the policy that focuses on increased profitability with the rising cost of capital goods has factors that push to seek capital goods at a lower price through foreign investment. Factors as drivers of domestic investment focus on exports and contribute to induce foreign investment greater than the supply from foreign markets. For example, Japan is the country for export-oriented automobile industry developed into foreign investment. Corcus, G., Gatto, M.D., Mion G. &Ottaviano G.I.P (2012) states that free trade produces a variety of products on the market. Competitions are more intense and reduce the bargaining of entrepreneurs. The profit from the trade increases because the international trade in some types of industries set the Economic of Scale and chooses to keep profits with appropriate companies correctly.. 2.5 Location Theory The location theory (Johann-Heinruch von Thunen, 1783-1850) addresses the important questions of who produce what goods or services in which locations and why. (Susan Feinberg, 2011) Feinberg assumes that the entrepreneurs, companies or individual, observe their own benefits then select the location in order to maximize profits. The location can reduce the cost of utilities. Ghauri, Elg and Sinkovics, (2003) investigate the Foreign Direct Investment – Location Attractiveness for Retailing Firms in the European Union. This research found that the location decisions of Wal-Mart and Toys’R’Us in the UK and Germany were based on market potential and size. The governments did not offer any incentives for Wal-Mart because there were no new job opportunities or benefits seen from inward FDI. In addition, the governments are more interested in or show greater support for FDI manufacturing firms because it is believed that they will bring positive job opportunities. 11.

(19) However, the host countries have different rules to consider or promote the investment differently for each category.. It depends on the prospect or need for support from direct. investment countries. Thailand, for example, prefers to draw investors to invest in the agricultural industry because there are abundant agricultural resources. Moreover, the country requires new technologies in agricultural product transformation and new job opportunities for locals. For Foreign Direct Invest, if the company can manage the resource to be efficient and effective, it would be more profitable in the competition by considering the cost, price, production and different services. The company must use their environment stability by using the marketing mix to close competition (Elaine, 1993). This relates with the Resource-based View Theory (RBV) which states that resource and talent are important roles in the competition, so the factor of resource seeking is partly the reason why Taiwanese investors come to Thailand. There are four main points: first, access to neighboring countries for investment and export beyond the Thai entrepreneur, second, Organizations or government agencies can help or support the business sector which will be resulted in the ability to save cost or lower down the expenses. These are a significant strength, third, labor; Thai labor has a lower wage than others in Southeast Asia and there are good skill labor related with each other, which is another factor for investors in determining location.. 2.6 Location of FDI in Thailand According to the investment policy, Thailand focuses on stimulating trade expansion. The government encourages foreign investment that brings in skill development, technology and greater innovation. The World Bank data indicates that Thailand has been ranked 12th in the international survey for the most attractive countries for investment. Besides, the Thai government also focuses on promoting and persuading investors to invest in six key industrial sectors including agriculture and agro-industry, alternative energy, automotive, electronics and ICT, fashion and value-added services including entertainment, healthcare and tourism. The location of Thailand provides the country an opportunity to be a gateway into the heart of Asia which offers convenient connections to China, India and Southeast Asia and also to the Greater Mekong sub-region where markets are newly emerging. 12.

(20) Geographically, Thailand is divided into six regions; North, Northeast, Central Plain, East, West and South (Ministry of Defense, 2013). Among all regions, there are differences in basic resources, population, economic development, natural feature and social level. The brief details are as follows: 2.6.1 The North - Transportation: The northern parts of Thailand are mostly highlands, consisting of multiple mountain ranges, continuously extending to the Myanmar border. There are many rivers such as Ping, Wang, Yom, and Nan that flow into the Chao Phraya River in the Central Plain. In regards to the mainland logistics and transportation, the North relies mainly on Phahon yothin Road, which links the region to Bangkok and other water transportations. In addition, this main road also shares the route with the major road to the East of Thailand, Sukhumvit Road, which leads to the Laem Chabang Deep Sea Port and Map Ta Phut Industrial Port on the Gulf of Thailand. Furthermore, the North-South Economic Corridor (NSEC) is under construction under the GMS Railway Development Plan 2025. The routes will connect to China and Vietnam, such as Route 4, Bangkok-Kunming via Chiang Rai, Boten, and Mohan which are the cities in the Northern Thailand. There are three international airports and six domestic airports. Chiang Mai International Airport is the second largest airport in Thailand, followed by Suvarnabhumi Airport. Chiang Mai also has numerous routes, both domestic and international, to other countries in Asia, such as Yangon, Kunming, and Vientiane. Apart from the airports in Chiang Mai, the Chiang Rai Province also has two river ports, Chiang Saen and Chiang Khong Ports, which serve as waterway logistics and transportation to the neighboring countries via the Kong River. - Education: according to the National Statistical Office of Thailand (NSO, 2012), the population in northern of Thailand was approximately 12,270,672. Among this number, there were 431,959 educated individuals but around 126,176 who did not even pass primary school, which translate into 29.21%. There were 172,191 and 96,642 people who passed junior high school and high school respectively, equivalent to 39.86% and 22.37%. Lastly, 8.55% or 36,950 people received a bachelor’s degree or a higher level of education (Workforce Statistics Bureau, 2012). However, about 10,191,033 people or 83.05% of the population in northern fell within the workforce age (NSO, 2012). 13.

(21) - Market:. In 2012, the Gross Regional Product (GRP) of northern Thailand was. 1,065,326 million baht.. The production structure in the North was mainly in industrial,. agricultural and retail sectors, which were proportional to 19.6%, 19.3% and16.3% of the GRP respectively. The distribution of the production was better than other parts of the country which mostly relied on the industrial sector, reaching 38.6%. The key economic crops in this region are rice, sugarcane, corn, tobacco, soybean, vegetables and fruits and the industrial products are electronics, processed agricultural products, ceramics, sugar, cement and handicrafts. 2.6.2 The Northeast - Transportation: The northeastern region of Thailand borders with Laos and Cambodia. The characteristics of the region are high mountains and the soil in this area is highly acidic and saline. According to the GMS Railway Development Planning 2025, there is also the construction of the routes to the Lao PDR, Vietnam and Kunming (China) via Nakhon Ratchasrima and Nongkai. The region also has two international airports, eleven domestic airports and one river port. - Education: Most of the population in northeastern Thailand did not receive high education nor pass primary school. Approximately 5,613,244 or 30.41% of the population were older than 15 years old out of the whole the population of 18,457,776 (NSO, 2013). Whereas, 4,612,817 or 24.99% of the population passed primary school, 3,547,830 and 2,608,910 or 19.22% and 14.13% respectively passed junior high school and high school. Finally, 9.04% of the population, or 1,668,306, graduated from university in the northeastern region (NSO, 2012). - Market: In 2012, the Gross Regional Product (GRP) in the northeastern region was 1,281,302 million baht, equivalent to 10% of the Gross Domestic Product (GDP). The backbone of the economy in this region consisted of the agricultural sector, 23.3%, followed by industrial sector 23.3%, and education and wholesale/retail sectors were 20.4% and 10.5% of the GRP respectively. Rice, tapioca, sugarcane, corn, and rubber are the most important agricultural products of the region. Moreover, the industrial sector or factories in northeastern Thailand have been built to serve the agricultural sector, such as rice mills, sugar and tapioca flour factories, etc. Apart from the agriculture related factories, there were also beverages, paper, apparel, electronics and computer appliances manufacturers who are also playing a significant role in the GRP in this part of the country. 14.

(22) 2.6.3 The Central Plain - Transportation: In the Central Plain, there are mountain lines in the west bordering Myanmar and Thailand, and many important rivers are in this region, such as the Chao Phraya River (River of King), Ping, Wang, and etc. Bangkok, the capital city, is also located in this region.. It is the heart of the economy, investment and development of Thailand. The. headquarters of major commercial banks, financial and transportation enterprises are situated in Bangkok as well. There are two international airports, two domestic airports and one river port, Khlong Toei Port – the centuries-old maritime transport of goods. Moreover the provinces in the vicinity of Bangkok are the location of industrial estates. - Education: According to the NOS (2013), the central part of Thailand accounts for 10,712,100 of the population. From the whole, 36.65% or 3,926,331 of the population did not receive education or pass primary school. Nevertheless, 1,871,249 and 1,895,000, or 17.47% and 17.69%, of the population received junior high school and high school education respectively. Approximately 27.56% (2,952,601) of the population hold a bachelor’s degree or has achieved a higher level of education (NSO, 2013). - Market: The GRP of the Central Plain in 2012 was equal to 5,571,215 million baht. The industrial, agricultural, wholesale/retail, and service sectors share equivalent roles in the Central Plain’s economy. The significant industrial crops in this region are rice, durian, tangerine, and sugar cane. The location of Bangkok also provides convenient transportation, resulting in enormous investments in the industrial sector in the region. The central industrial sector. region’s. major. mostly relies on automotive, food and beverage, and electric and electronic. appliances.. 2.6.4 The East - Transportation: There are only seven provinces in the eastern region of Thailand, along with borders between the Gulf of Thailand and Cambodia. Pattaya city, the mass tourism destination is also located in this region. The area is very well served by land, sea land and air transportation (AMATA, 2008). It is also close to two international airports, Suvarnabhumi in SamutPrakan and U-Tapaoon on the eastern seaboard, which is the emerging economic region. Furthermore, there is one domestic airport and one sea port in this region. 15.

(23) - Education: The population of eastern Thailand totals 4,574,877, according to the NOS (2013). Statistically, 3,686,725 (80.59%) fell within the workforce age or, in other words, who were older than 15 years old. From the total population, 21.07% or 776,772 habitants had not been to or passed primary school, while 15.29% or 563,742 completed their sixth grade. Nonetheless, 523,573 and 401,727 people or 14.20% and 10.9% of the population, in eastern region achieved their educational goals in junior high school and high school respectively. From the whole population, 417,345 or 11.32% completed an undergraduate degree or achieved a higher level of education. - Market: The population in this region are likely making their living on agricultural products (e.g., rambutan, sugar cane, tapioca, and pineapple). Apart from these industrial crops, fishery also plays a significant role in the region’s economy. Chantaburi province is also wellknown for its gemstone manufacturing. Most of the gemstones were imported and go through manufacturing process there. Furthermore, Map Ta Phut Deep-Sea Port is a crucial player for the main development in this region, especially to oil, gas, and petrochemical sectors of the country. There are also oil refineries and industrial estates for exporting petrochemical and plastic products. Last but not least, eastern Thailand is also one of the top tourist destinations in Thailand and is known for its beautiful beaches.. 2.6.5 The West - Transportation: The western region of Thailand lies long a mountainous border between Thailand and Myanmar and also to the South. The region is connected to port Dawei and the Industrial Estate in Myanmar and this route can be linked to India, the Middle East, Europe, Africa, Cambodia, China (Kunming), Laos and Vietnam. In the region, there are three domestic airports. - Education: According to the NOS (2013), 5,327,126 of citizens resided in the west. From this number, 4,402,588 or 82.64% of the population were older than 15 years old and were counted as workforce. 797,756 or 18.21% of the locals did not pass primary school, while 814,086 or 18.49% passed but did not continue to obtain higher education. On the other hand, 541,698, or 12.30% of the population passed junior high school and 418,284 or 9.5% passed high school. Additionally, 488,287 or 11.09% pursued a bachelor’s degree or higher. 16.

(24) - Market:. In 2012, the gross regional product of this region was 972,159 million baht.. The industrial crops were rice, sugar cane, tapioca, rubber, coconut, and corn. Fisheries and livestock also provided significant income for the region. In addition, mining had also offered great income for the community. Mining products in this region were tin, tungsten, and wolfram. Apart from industrial products, the western Thailand also accumulated gains from processed food, especially from agricultural products and livestock. It is pertinent to mention that the western region also stands as the main power plants of the country.. 2.6. The South - Transportation: The southern part of Thailand is located on the Malay Peninsula (Ministry of Defense, 2013) bordering Malaysia. The road system is quite efficiently organized, being built from the north to the south of the region. The longest railroad in Thailand is also here, ending at Sungai Ko-Lok station, which is connected to Malaysia western line at PadungBesah. In regards to sea logistics and transportation, the southern ports are utilized to deliver goods to other countries in Asia. For example, Ports Phuket, Ranong, and Kantang are used to export goods to South Asia, and Suratthani, Songkhla, and Patthani deliver goods to neighboring countries in Indochina and East Asia. The west side of the region is the Andaman Sea coastline and the east is the gulf of the Thailand coast. There are four international airports, eight domestic airports and one sea port in this region. The southern area is also the located of Oil - based industry, which is Thailand’s major natural resource. - Education: According to NSO (2013), approximately 9,131,425 people live in the south. Among them, 749,600 or 30.41% were older than 15 years old. While 1,279,000 or 14% of the population did not pass primary school, 1,321,600 or 17.62% passed and 919,400 and 846,900 or 12.25% and 11.29% of the population passed junior high school and high school, respectively. Finally, 13.16% of the population or 983,600 individuals graduated from university (NSO, 2013). - Market: The economy of the south accounts for 9.2% of the whole country. The GRP was 1,122,307 million baht in 2012. The significant sectors were agricultural, manufacturing, and wholesale/retail sectors. The most important agricultural products for this area are rubber, palm vegetable oil, and farmed shrimp. Hence, the manufacturing sector in the region is based on its agricultural products, such as latex products, vegetable oil related products, and processed seafood. 17.

(25) Moreover, the hospitality and tourism sector also granted income to the region totaling 307,239 million baht in 2011. Table 2-1: summary of resources in each region Logistics Education 1. Boarder with Myanmar. 1. Population:12,270,672. 2. Many rivers that flow into 2. 29.21% did not even the river in the Central Plain Road which links to Bangkok and other water transportations and leads to the Laem Chabang North. pass primary school 3. 39.86% passed junior high school 4. 22.37% passed high school 5. 83.05%of the. Deep Sea Port and Map. population in the north. Ta Phut Industrial Port on. were in the age of. the Gulf of Thailand. workforce. Market 1. GRP was 1,065,326 million baht 2. Mainly in industrial, agricultural and retail sectors 3. The key economic crops are rice, sugarcane, corn, tobacco, soybean, vegetables and fruits 4. The industrial products are electronics,. 4. North-South Economic. processed agricultural. Corridor (NSEC). products, ceramics,. 5. Three international. sugar, cement and. airports and six domestic. handicrafts. and. airports. electronic appliances. 6. Two river ports via the Kong River. 18.

(26) 1. Borders Laos and Cambodia 2. Highly acidic and saline 3. GMS Railway. Northeast. 1. 30.41% did not receive 1. GRP was 1,281,302 good education nor pass primary school 2. 24.99% of the. Development Planning. population passed. 2025 routes to the Lao. primary school. PDR, Vietnam and Kunming (China) 4. Two international airport eleven domestic airports 5. One river port. 3. 19.22% passed junior high school 4. 14.13% passed high school 5. Only 9.04% graduated from universities. million baht 2. Agricultural sector represents 23.3% 3. Rice, tapioca, sugarcane, corn, and rubber are the most important agricultural products of the region 4. Also beverages, paper, apparel, electronics and computer appliances manufacturers. 1. Mountains line the west bordering Myanmar 2. Many important rivers. population. 1. GRP was 5,571,215 million baht. 2. 36.65% did not receive 2. The industrial,. 3. Bangkok is the capital. education or pass. agricultural,. 4. Two international. primary school. wholesale/retail, and. airports, 2 domestic airport and 1 river port Central. 1. Has 10,712,100 of the. 5. Provinces in the vicinity of Bangkok are the location of industrial estate. 3. 17.47% entered junior high school 4. 17.69% entered high school 5. 27.56% obtained a bachelor’s degree or higher. service sectors share equivalent roles 3. Significant industrial crops are rice, durian, tangerine, and sugar cane 4. Major industrial sector mostly relies on automotive, food and beverage, and electric. 19.

(27) 1. Along with the borders between the Gulf of Thailand and Cambodia 2. Pattaya city: mass. 1. 2. 3. 4. 5. 6.. 15.29% completed. airports,. sixth grade. Suvarnabhumi and U-. 14.20% passed junior. Tapaoon, one. high school. domestic airport and. 10.9% passed high. one sea port. school and 11.32%. 4. Map Ta Phut DeepSea Port is a crucial player for main development 1.. Population totaled 5,327,1262. tapioca, and pineapple) 2. Industrial crops and fishery also play a significant roles 3. Well-known for gemstone manufacturing 4. Oil, gas, and petrochemical sector. 82.64% of the. 3.. 18.21% of the locals. Middle East, Europe,. China. did not pass primary. 3. Three Domestic 4.. 1. GRP was 972,159 million baht.. 2. The industrial crops were rice, sugar cane, population were older tapioca, rubber, than 15 years old and coconut, and corn 3. Fisheries and livestock were counted as also provided significant workforce. 2.. linked to India, the. airports. rambutan, sugar cane,. or higher. and this route can be. Africa, Cambodia,. products (e.g.,. undergraduate degrees. Estate in Myanmar. Western. 1. Relies on agricultural. completed an. 2. Connected to Port Dawei and Industrial. 21.07% had not been. school. 3. Near two international. 1. Borders Myanmar. age of workforce. to or passed primary. tourism destination. Eastern. Population totaled 4,574,877 80.59% were in the. income 4. Mining products were. school. tin, tungsten, and. 12.30% of the. wolfram. population passed the 5. Earned a lot from processed food junior high school 5.. 9.5% passed high school 20. 6. Main power plants of the country..

(28) 6.. 11.09% obtained a bachelor’s degree or higher. 1. Borders Malaysia 2. Longest railroad in. 1. 9,131,425 people in the South. Thailand connected to 2. 14% of the population. million baht 2. The most important. Malaysian’s western. did not pass primary. agricultural products are. line at PadungBesah. school. rubber, palm vegetable. 3. Southern ports are utilized to deliver South. 1. GRP was 1,122,307. goods to other countries in Asia 4. Four international airports, eight domestic. 3. 12.25% passed junior high school 4. 11.29% passed high school 5. 13.16% graduated from university. airports and one sea. oil, and farmed shrimp 3. Agricultural products, such as latex products, vegetable oil related products, and processed seafood 4. The hospitality and tourism sector also. port 5. the oil - based industry. granted an income of. is the major natural. 307,239 million baht. resource of Thailand. 2.7 Resource seeking: Product categories According to the Department of Business Development’s (DBD) database of registered, the Thailand Standard Industrial Classification: TSIC 2009 (DBD, 2009) divided product categories into 21 major divisions. Moreover, product categories will be used as resource seeking determinant by considering product categories that use local content in order to save cost and is able to use this topic in order to find market for the product both domestic and in neighboring countries . The value of product categories which fall in the criteria is set as 1, whereas, those that do not fall into the criteria, the value is set as 0. 21.

(29) Table 2-2 Code of categories in classified section in accordance with industry standards of Thailand in 2009 No.. code. 1. A. 2. B. 3. C. 4. D. Major Division. Sub. Major. Sub. Categories. Division. Categories. Categories. 01 - 03. 011 - 032. 0111 - 0322. Mining and quarrying. 05 – 09. 051 - 099. 0510 - 0990. Production. 10 - 33. 101 - 332. 1011 - 3320. 35. 351 - 353. 3510 - 3530. 36 - 39. 360 - 390. 3600 - 3900. 41 - 43. 410 - 439. 4100 - 4390. 45 - 47. 451 - 479. 4510 - 4799. 49 - 53. 491 - 532. 4911 - 5320. 55 – 56. 551 - 563. 5510 - 5630. 58 - 63. 581 - 639. 5811 - 6399. 64 - 66. 641 - 663. 6411 - 6630. Agriculture, forestry and fisheries.. Electricity, gas, steam and air conditioning system. Water supply and waste. 5. E. water management, as well as related activities.. 6. F. Construction. Wholesale and retail of 7. G. automotive and motorcycle repair. 8. H. 9. I. 10. J. 11. K. Transportation and storage Accommodation and food services Information and communication. Financial and insurance activities. 22. Activities 01111 03229 05100 09900 10111 33200 35101 35302 36001 39000 41001 43909. 45101 47999 49110 53200 55101 56304 58111 63990. 64110 66302. Resource seeking 1. 0. 1. 0. 0. 0. 1. 1. 0. 0. 0.

(30) 12. L. 13. M. 14. N. Activities on the property Professional scientific and academic activities Administrative activities and support services. 68. 681 - 682. 6810 - 6820. 69 - 75. 691 - 750. 6910 - 7500. 77 - 82. 771 - 829. 7710 - 8299. 84. 841 - 843. 8411 - 8430. 85. 851 - 856. 8510 - 8560. 86 – 88. 861 - 889. 8610 - 8890. 90 – 93. 900 - 932. 9000 - 9329. 94 – 96. 941 - 963. 9411 - 9630. 97 – 98. 970 - 982. 9700 - 9820. Public administration, 15. O. defence and compulsory social security. 16. P. 17. Q. 18. R. 19. S. Education Health and social work activities Arts, entertainment and recreation Other service activities. 36001 39000 41001 43909 45101 47999 49110 53200 85101 85602 86101 88909 90001 93299 94110 96309. 0. 0. 0. 0. 0. 0. 0. 0. Employment activity in 20. T. the household, production activities, and services to. 97000 98200. 0. individual households Activities of international 21. U. organizations and party. 99. 990. members (Source:www.dbd.go.th/ewt_dl_link.php?nid=6869). 23. 9900. 99001 99009. 0.

(31) Furthermore, the Board of Investment (BOI, 2012) also divided product categories into seven major division categories as follows: (1). Agricultural Products are products from farmers, whether they are from patties,. plantations, or farms. To invest or trade within this category, documents and processes are needed in order to fulfill the requirement and retain the standards. The details of the 21 requirements are listed in the index. (2). Minerals, ceramics, and metals are mainly located in Map Ta Phut and Bo Win. Industrial Estates. The investment in this category has always been considered as Thailand’s main economic drive. There are 19 groups in this product category, as listed in the index. (3). Light Industries/Textiles consists of 16 sub-categories, as listed in the index.. (4). Metal Products, Machinery and Transport Equipment consists of 20 sub-. products as stated in the index. (5). Electric and Electronic Products play a significant role in Thailand’s economy,. in terms of manufacturing, exportation, and employment. The growth of this sector allows Thailand to switch from an agricultural -based country into a manufacturing -based country. (6). Chemicals and Paper includes 16 sub-categories as listed in the index.. (7). Services and Public Utilities have rapidly grown in the last three years. This. sector accounts for 52% of the whole GDP. Services and public utilities are comprised of 28 subgroups, as illustrated in the index. In this section, classified new products have been categorized in order to indicate the categories which Taiwanese investors prefer to invest in with mention of the product ranges and growth tendency. The researcher borrowed information from DBD and BOI to manage product groups divided into ten product categories.. 2.8 The Labors Resource According to the National Statistical Office of Thailand, Thailand’s minimum wage per day remain lower than that of Singapore – 58.4 US dollars and Malaysia – 9.81 US dollars but is the same as the minimum wage in the Philippines – 9.72 US dollars (Business in Asia, 2013).. 24.

(32) Figure 2-1 Minimum wage per day in South East Asia’s country (US DOLLAR) Source: business in Asia 2012 (http://www.businessinasia.com/asia/minimum_wage/Minimum_wages_in_Asia/minimum_wage_in_asia.html). Thai labor has a lower wage than other in South East Asia, and there are good labor skills that contribute as factor of choosing the location for investment. In this research, a comparison is made between Thailand’s 77 provinces of daily wage in 2008 and the five years’ average (2008 to 2012). Table 2-3: Minimum Wage (daily wage) in 77’s provinces in Thailand region. North. province. Minimum Wage 77’s provinces 2008. 2009. 2010. 2011. 2012. Average. Chiangrai. 166. 166. 166. 166. 232. 179.20. Chiangmai. 180. 180. 180. 180. 251. 194.20. Nan. 161. 161. 161. 161. 225. 173.80. Prayao. 159. 159. 159. 159. 222. 171.60. phrae. 163. 163. 163. 163. 227. 175.80. Mae Hong Son. 163. 163. 163. 163. 227. 175.80. Lampang. 165. 165. 165. 165. 230. 178.00. Lamphun. 169. 169. 169. 169. 236. 182.40. Uttaradit. 163. 163. 163. 163. 227. 175.80. 25. Region Average. 178.51.

(33) North East. Central. Kalasin Khon Kaen Chaiyaphum Nakhon Phanom Nakhon Ratchasima Bueng Kan Buri Ram Maha Sarakham Mukdahan Yasothon. 167 167 165 164 183 169 166 163 165 166. 167 167 165 164 183 169 166 163 165 166. 167 167 165 164 183 169 166 163 165 166. 167 167 165 164 183 169 166 163 165 166. 233 233 230 229 255 236 232 227 230 232. 180.20 180.20 178.00 177.00 197.40 182.40 179.20 175.80 178.00 179.20. Roi Et Loei Sakon Nakhon Surin Si Sa Ket Nong Khai Nong Bua Lam Phu Udon Thani Ubon Ratchathani Amnat Charoen (Bangkok) Krung Thep Maha Nakhon Kamphaeng Phet Chai Nat Nakhon Nayok Nakhon Pathom Nakhon Sawan Nonthaburi Pathum Thani Phra Nakhon Si Ayutthaya Phichit Phitsanulok Phetchabun Lop Buri Samut Prakan Samut Sakhon Samut Songkhram Sing Buri Sukhothai. 166 173 166 162 160 169 165 171 171 163. 166 173 166 162 160 169 165 171 171 163. 166 173 166 162 160 169 165 171 171 163. 166 173 166 162 160 169 165 171 171 163. 232 241 232 226 223 236 230 239 239 227. 179.20 186.60 179.20 174.80 172.60 182.40 178.00 184.60 184.60 175.80. 215. 215. 215. 215. 300. 232.00. 168 167 170 215 166 215 215 190 163 163 166 182 215 215 172 176 165. 168 167 170 215 166 215 215 190 163 163 166 182 215 215 172 176 165. 168 167 170 215 166 215 215 190 163 163 166 182 215 215 172 176 165. 168 167 170 215 166 215 215 190 163 163 166 182 215 215 172 176 165. 234 233 237 300 232 300 300 265 227 227 232 254 300 300 240 246 230. 181.20 180.20 183.40 232.00 179.20 232.00 232.00 205.00 175.80 175.80 179.20 196.40 232.00 232.00 185.60 190.00 178.00. 26. 180.26. 198.15.

(34) East. West. South. Suphan Buri Saraburi Ang Thong Uthai Thani Chanthaburi Chachoengsao Chon Buri Trat Prachin Buri Rayong. 167 193 174 168 179 193 196 169 183 189. 167 193 174 168 179 193 196 169 183 189. 167 193 174 168 179 193 196 169 183 189. 167 193 174 168 179 193 196 169 183 189. 233 269 243 234 250 269 273 236 255 264. 180.20 208.20 187.80 181.20 193.20 208.20 211.40 182.40 197.40 204.00. Sa Kaeo. 173. 173. 173. 173. 241. 186.60. Kanchanaburi Tak Prachuap Khiri Khan Phetchaburi Ratchaburi Krabi Chumphon Trang Nakhon Si Thammarat Narathiwat Pattani Phangnga Phatthalung Phuket Ranong Satun Songkhla Surat Thani Yala. 181 162 172 179 180 184 173 175 174 171 170 186 173 221 185 173 176 172 172. 181 162 172 179 180 184 173 175 174 171 170 186 173 221 185 173 176 172 172. 181 162 172 179 180 184 173 175 174 171 170 186 173 221 185 173 176 172 172. 181 162 172 179 180 184 173 175 174 171 170 186 173 221 185 173 176 172 172. 252 226 240 250 251 257 241 244 243 239 237 259 241 300 258 241 246 240 240. 195.20 174.80 185.60 193.20 194.20 198.60 186.60 188.80 187.80 184.60 183.40 200.60 186.60 236.80 199.60 186.60 190.00 185.60 185.60. 197.60. 188.60. 192.94. 2.9 Investment Zone Developing countries’ region or zone is another factor investors take into consideration when deciding which country to invest. Originally, there exists both a policy and an infrastructure rationale (The World Bank Group, 2008). Furthermore, zone can indicate type of business, such as export processing zones, free trade zones, single factory EPZ, free port and specialized zones. 27.

(35) For investment in Thailand, FDI firms can register for the set location with the Industrial Estate Authority of Thailand (IEAT)’s area or other area which is not under IEAT’. Industrial Estate was the base of manufacturing that encourages the capacity for competitiveness of the enterprises. Therefore, the Industrial Estate provides the complete set of infrastructure, facilities, management system, including benefits that are useful for both export and import businesses. 2.10 Investment Zone in Thailand The advantages of regulating the Act of Industrial Estate in Thailand depend on the area of the enterprise situated. The rules and benefits will apply only to the factories in the estate. The investment zone in Thailand can be divided into three main zones as follows: (1) Non-profit Zone Enterprises or factories in the non-profit zone will have access to materials, supplies, resources, utilities, commodities, capital, and target customers but will not gain the benefits in tax exemption or other privileges in the procedures through the relevant organizations. Enterprises in the non-profit zone are likely to be companies or regional operating headquarters (ROH). These companies do not have any factories nor import any machinery for their factories in Thailand. (2) General Industrial Zone Enterprises, industries, or services in the general industrial zone will obtain the benefits of bringing in foreign craftsmen or their spouses and children into Thailand. Moreover, these enterprises are also able to export foreign currency to other places. (3) Free Trade Zone or I-EA-T Free Zone This zone is restricted to enterprises that enable advantages for the state’s security, ecology, or other fields necessary according to the board. Merchandise imported by these companies will receive tax exemption and other fees according to the regulations.. 2.11 Industrial Estate Authority of Thailand Zone (IEAT) is classified into two zones: General Industrial Zone (GIZ) and I-EA-T free trade. Investors in these two zones will get opportunities and benefit choices as follows: 28.

(36) - Non-Tax Privileges: General Industrial Zone and I-EA-T Free (IEAT, Act (No.4) B.E. 2550 [2007]) 1)The right to own land in an industrial estate 2)The right to bring in foreign skilled workers, with visa and work permit facilitation 3)The right to bring in foreign skilled workers’ spouses and dependents, with visa facilitation 4)The right to remit money abroad 5)The right to receive additional privileges from Thailand’s Board of Investment (BOI) when applying for investment promotion. - Tax Privileges: I-EA-T Free Zone (IEAT, Act (No.4) B.E. 2550 [2007]) 1)The right to receive non-tax privileges, similar to investment in the GIZ 2)The right to receive additional tax privileges 3)The right to receive exemptions of import duty; value-added tax (VAT); as well as excise tax on machinery, equipment, raw materials and supplies used in production 4)The right to receive exemptions of export duty; value-added tax (VAT); as well as excise tax on imported materials for use in production or for commercial operation 5)The right to receive exemptions of export duty; value-added tax (VAT); as well as excise tax on raw materials, products and by-products. 29.

(37) 3. RESEARCH METHODOLOGY The study of Determinant of Performance of Taiwanese Companies in Thailand. The research objective is to analyze factors in order to seek investment opportunities and to examine the relationship between these factors and growth rate. Therefore, in this research, the factors which influence Taiwanese firms for relocating and continuing their investment in Thailand will be discovered. This research was based on the exploratory research design.. 3.1 The data used in this study The Department of Business Development (DBD) database is able to provide data on basic companies’ details for free from the DBD website. The information exhibits company establishment category, product category which was grouped into A-Q and each company’s accounting result such as agriculture, fishers, mining, manufacturing etc., was show annual report, finance statement in each companies etc., however, obtain complete in-depth data a purchase must be made from the DBD head office at the price of one baht (0.03 US Dollar) per data item. The Board of Investment of Thailand’s (BOI) database is available for usage from the BOI website, which has been legally registered and has been supported by BOI. The database reports basic companies’ detail with annual updates on new registered and expansive projects. Nevertheless, the BOI database could not explore in-depth data such as annual report and financial statements in each company. Furthermore, National Statistical Office’s (NOS) databases are minimum wage, geography, transportation and logistics, Education information However, when compare the data of 320 companies from DBD’s investment data with the investment promotion application of each company from the BOI during 2008-2012, it was found that none of these companies have applied for investment promotion from the BOI during such time. Besides, the data of the BOI in regard of investment promotion application was divided according to the shareholder’s nationality of each company (according to the law of the alien company registration in Thailand). For example, American Taiwan Bio Pharm Co., Ltd., whose shareholders are Taiwanese and American investors but the quantity of American shareholders are 15 while Taiwanese shareholder is just only 1, therefore, this company was categorized as American nationality. It is assumable that this could be one of the reasons that we did not find the researched companies in BOI data. 30.

(38) In terms of a qualitative approach, secondary data was collected through the Department of Business Development (DBD) to analyze possible factors that influenced the investment decisions. Furthermore, there was also data collection from the Board of Investment, Thailand (BOI) to support data from DBD, previous related research, online news, journals, articles and government announcements.. 3.2 Variables. Product categories X1. Growth rate investment in 5 years (2008-2012) Y. Location (Region) X2. Minimu m wage X3 Figure 3-1 relationship between dependent and independent variable 3.3 Research Methodology. 1. Data analysis and proof of all three hypotheses by studying and analyzing the data of Taiwan direct investment in Thailand from the data of the Department of Business Development (DBD) and using the data on investments from the Board of Investment, Thailand (BOI)to support the data of DBD and previous related research material such as online news, journals, articles and government announcements found in the database of registered Taiwanese companies in Thailand with 2,040 companies all together (with Taiwanese shareholder from 1 person or more). During the years of 2008 to 2012, only 1,455 companies submitted their financial statement to DBD. Moreover, only 218 31.

(39) companies registered to receive support from the Board of Investment, Thailand (BOI), equivalent to 14.98%, were eligible to be used to analyze the factors, as defined in accordance with the direct investment of Taiwan investors in Thailand. By using location base, product categories and minimum wage to study the relationship between factors and the probability of selecting relocate business in Thailand.. 2. Study on the rates of Return on Asset (ROA) during the years 2008 to 2012 of Taiwanese companies who invested in Thailand. A division into ten business categories indicates the turnover and trends in ongoing investments. A chart format is used for visual and to compare ROA growth rate in each product category.. 3.4 Data Analysis The data analysis will be based on Taiwanese companies that invested in Thailand (with Taiwanese shareholder from 1 person or more) during 2008-2012. The analysis method is as follows; 1.. 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 2.. =. = initial value. An analysis of the relationship of a given factor and its independent and. dependent variables. Independent variables consist of product categories, location (region) and minimum wage. Variables are classified in accordance with industry standards of Thailand in 2009 and use the criteria of International Standard Industrial Classification or ISIC Rev.4. Due to product categories’ resemblance and ability to combine, classification is made with similar industries in the same group and divided into ten major categories in six locations and minimum wages in 77 provinces. 32.

(40) (2.1) An analysis of the relationship between product categories that affected the decision on locate selection will use the regression analysis lie below:. grROAt. (2) An analysis of the relationship between minimum wage that affected the decision on locate selection will use the regression analysis as follows:. grROAt. (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. 33.

(41) 4. DATA ANALYSIS AND FINDING The study in factors affecting the growth rate of Taiwan company investments in Thailand has been conducted by using secondary information from the years 2008 to 2012. The information used was collected from various sources such as the Department of Business Development (DBD), the Board of Investment of Thailand (BOI), and the National Statistical Office (NOS) as well as related literature and information media. For instance, we collected companies’ financial statements during 2008 to 2012, Thailand Company Setup and Business Registration, product categories information, Taiwanese shareholders information. Then we collected the policies, incentive, application procedures, programs and investment zones information from the Board of Investment of Thailand (BOI), which was then compared with DBD’s information. Meanwhile, data on minimum wage, geography, transportation and logistics and education was collected from the NOS. The study employed the Multiple Regression Analysis method to test independent variables which influenced the growth rate of Taiwan company investments in Thailand. From the study from the 1446 companies that comprised of Taiwanese shareholders in 2008 to 2012, it was found that there were 320 companies that provided a complete operation result that could be sufficiently used for analysis. It has been found that there were 231 companies which Taiwanese shareholders owned 0-49% of whole shares (according to Thai code of laws, this kind of company is regarded as Thai citizen company legible to have foreign shareholders not exceeding 49% for any type of business), expressed as 72% between the range of 50-99% of whole shares held by Taiwanese (regarded as foreign companies which must request for permission from the Foreign Business Act), 58 companies (18%) among which of 30 companies (9%) whose entire percentage of shares belonged to Taiwanese. .. 4.1 Measurement 4.1.1 Dependent Variable This research, involves the examination of the factors that affect the growth rate of Taiwanese firms. By define the dependent variable is average of return on asset (ROA) during the years 2008 to 2010. For investment, return of asset (ROA) is regarded as a reflection or shows how well companies are using its asset to generate profit. 34.

(42) 4.1.2 Independent Variable In this research, independent variables include (1) Resource seeking,. by considering. product categories which enables to identify markets or to expand to neighboring countries. By specifying indicator variables is 1 in product categories such as agricultural products, light industrial, textiles, metal product, etc. and indicator variables 0 in product categories such as service and public utilities, accommodation and food, education, etc., (2) Minimum daily wage by province, using the five year average (2008 to 2012) of daily wage and (3) The division of six regions: North, North East, Central, East, West and South. All three factors were set by researchers as the factors that impact the growth rate of Taiwan companies who invested in Thailand.. 4.1.3 Control Variable Due to the variable that set the minimum daily wage by province and region (Northern, North Eastern, Central, Eastern, Western and Southern), it was not appropriate for usage to test and estimate variables. Therefore, researchers set the control variables to assist in tests, namely (1) companies established for more than 16 years, by specifying an indicator variables as 1, and established from 0 to 15 years as 0. Moreover, according to the Thai code of laws, firms in Thailand are required to report or update the firm’s information such as financial statements, statement of shareholders' equity, Annual report, income statement, cash flow statement, etc. Thus, another control of this study includes (2) the value of property, plant and equipment of each company in 2008; (3) value of Account Receivable of each company in 2008; (4) companies that had 100% Taiwanese shareholders; and (5) companies that had shareholders who were Taiwanese and an-other nationality.. 4.2 Data Analysis and result The analysis will be based on the companies which Taiwanese people have one or more people investing in Thailand from2008 to 2012 with the following analytical methods: 1. Use of Return on Assets (ROA) analysis in each year of the company's growth rate and how the company introduced a property to gain profit by using with the regression analysis.. 35.

(43) As given ROAt=. Therefore, ROA2009-ROA2008 As givenROA2008. =. = initial value. Therefore, grROA2009 = ROA2009-ROA2008, as (14.74) = 7.25- 21.99 Table 4-1 uses ROA of the year 2008 as a foundation for growth rate calculation for companies that had Taiwanese involved as investors or partners. Calculation found that if the growth rate was positive (+), that indicated that the company had growth of ROA increased from previous year. For example, company No.2 had ROA in 2008 at 11.77 and 14.92 in 2009, which means that the company that it had an ROA growth increase of 3.15 as it had constant return on assets and continued in the following year (using the current assets to “generate profit” of 14.92 in 2009 and profit increase of 3.15 from the previous year). In contrast, if the growth was negative (-) this means that the company had a decrease in ROA growth rate from the previous year; for example, company No.1 had the ROA value in 2008 at 21.99 and 7.25 in 2009, which made the company ROA growth value decrease at -14.74. That company had a positive ROA, but the ROA growth rate decreased from the previous year. (using current assets to “generate profit” of 7.25 in 2009 and decrease in profit of previous year at 14.74).. Table 4-1: The growth rate of return on asset (ROA) from 2008 to 2012 company. ROA. grROA grROA. grROA. grROA. Equation. No.. 2008. 2009. 2010. 2011. 2012. No.. 1. 21.99. (14.74). 12.29. (5.68). (3.27). (1.1). 2. 11.77. 3.15. 0.73. (3.49). (3.33). (1.2). 3. 5.13. 11.87. 1.77. (2.80). (0.29). (1.3). 4. 7.01. (0.62). 0.65. 1.38. 8.31. (1.4). 5. 28.69. 1.24. (4.66). (9.09). (1.55). (1.5). 6. 3.36. (1.54). 2.81. (3.02). 0.18. (1.6). 36.

(44) 7. 3.34. 0.44. 3.17. 0.15. 0.32. (1.7). 8. 0.41. 1.20. 2.24. (2.93). 1.31. (1.8). 9. 0.14. 3.56. (0.98). 1.60. (0.33). (1.9). 10. 0.944. (0.796). 0.510. (0.221). 0.278. (1.10). 11. 3.190. (0.956). 1.210. (2.122). 1.289. (1.11). 12. 2.324. 1.310. (0.848). (1.347). 5.437. (1.12). 13. 0.213. 0.064. 0.033. (0.001). 0.026. (1.13). 14. 1.114. 0.046. (0.402). 0.267. (0.187). (1.14). 15. 2.678. (0.412). (0.296). 0.293. 1.263. (1.15). 15.439 (2.973). (3.634). 4.537. (1.829). (1.320). 320. Moreover, in this case the value of Variable Y is the three-year average ROA which is calculated from the sum of ROA since years 2008 to 2010 (a company who showed growth rate in three years), divided by the number of years, with the result being:. (All the result can be viewed from the appendix). Table 4-2 presents the Pearson correlation coefficients. The result found that the Central region is positively correlated and significant (β=0.880, p<0.05) with a minimum wage per province (Wage P), suggesting that the minimum wage in Central is more than other regions. Property, plant and equipment of each company in 2008 (log property 2008) is positively. 37.