The Board of Investment will take on a new role in 2002, becoming an active service provider to investors rather than just a unit that offers investment promotional privileges.

Workers assemble Zafira passenger minivans as they roll down the line at GM's Rayong plant. The company says demand has already outstripped planned production of 60,000 units next year.

The new investment law, which transforms the BoI into a more aggressive unit, is in line with Thailand's commitments under the World Trade Organisation to reduce tax incentives, which are seen as distorting trade. It will take effect on Jan 1.

Under the existing promotion policy, investors receive different levels of privileges based on where they invest.

Investors would be allowed to enjoy the existing privileges, such as the highest privileges in zone three, followed by zone two and then zone one, with the lowest privileges.

Under the new policy, the value of privileges would not exceed a company's investment costs. It would allow the government to calculate fair costs for incentives offered to investors.

"I can say that in 2002 the BoI will adopt a new role in providing investment promotion. It will not only offer privileges to investors, but also provide services to them," said Chakramon Phasukvanich, the agency's secretary-general.

In addition to offering privileges and services to investors, the BoI would promote Thailand among foreign investors, and help strengthen local investors' competitiveness.

As a part of its new role, the BoI opened three web sites: www.investmentthailand.com for information on investment in provincial areas, www.b-intelligence.net for information on corporate executives, and www.i-expertnet.com, which offers information on expert advisers in Thailand.

The web sites would help strengthen Thailand, which was going through a transition to a knowledge-based economy from a resource-based economy, Mr Chakramon said.

He said the government also wanted the BoI to strengthen its marketing role in positioning Thailand in overseas markets. It will open two new representative offices overseas in 2002, and the number of offices will increase to 14 in the next four years.

The offices would also be given a larger role in persuading foreign investors to consider Thailand as a place to invest, as part of the BoI's "door-knocking" policy .

Under the marketing strategy, the BoI is required to study which industries should be promoted and developed. The government wants the BoI to pay attention to specialised industries instead of promoting general ones.

In keeping with the new approach, the BoI recently signed a co-operation deal with the UFJ Group, the fourth largest banking group in Japan, to jointly promote Japanese foreign direct investment into Thailand.

As part of the collaboration, UFJ has assigned a team of managers to implement the programme in major industrial cities such as Tokyo, Osaka and Nagoya, and to consolidate investment information at UFJ's head office in Tokyo for dissemination throughout its network.

At the same time, the BoI has agreed to hold seminars and lectures for UFJ marketing officers throughout Japan, to ensure that the bank's officers are well-versed in the opportunities Thailand offers Japanese investors and the incentives available.

The BoI may undergo further changes in the future. One proposal is that it be brought under the jurisdiction of the Industry Ministry under a longer-range bureaucratic reform plan.

The reforms are aimed at improving public sector management and the efficiency of state agencies, with those performing similar roles regrouped under one body.

The investment promotion agency has been under the Office of the Prime Minister for 35 years with the Prime Minister being the BoI chairman and the Industry Minister its vice- chairman.

The role of the BoI is also being re-evaluated to improve its capacity to respond to the changing global economy.

After the reorganisation, the BoI will focus more on providing "investment intelligence" by stepping up its marketing, developing industrial linkages and creating a better environment for investment.

Greater importance will be attached as well to developing industrial linkages to promote supporting industries.

In addition to staging more of its successful "vendors meet customers" programmes, with the BoI acting as a matchmaker, the agency will play a supporting role for assemblers and parts manufacturers, helping them to locate production bases.

Applications for investment projects in 2002 would be worth around 170 billion baht because of improved US economic growth in the last two quarters of the coming year, Mr Chakramon forecast.

The flow of investment into Thailand was steady in the first 10 months of 2001, but requests for promotional privileges in the three months to October jumped 44% compared with the same period in 2000.

The growth came mainly from agro-industries, service industries and infrastructure ventures.

Agro-industrial and farm products were among the few sectors experiencing higher production since the events of Sept 11. Demand was up for goods such as frozen chicken, canned tuna, rubber gloves and condoms.

According to the BoI, 832 projects worth 178.9 billion baht sought promotional privileges in the first 10 months of this year, compared with 1,142 projects worth 433.3 billion baht, in the same period last year.

Agro-industries topped the table with 163 projects worth 39.7 billion baht, compared with 179 projects worth 33 billion baht in the same period last year.

Japanese investors still hold the top investment ranking, with 265 applications this year, down from 301 in the same period last year. European investors were second with 97 applications, down from 163.

Mr Chakramon forecast total applications would be worth around 160 billion baht in 2001, compared with 335 billion baht a year earlier and down from an earlier target of 200 billion.

He said the slowdown was due to the downturn in the world economy, as well as confusion by investors over government policy.

He cited the new law, now likely to be amended, that capped foreign shareholding in telecommunications companies to a maximum of 25%, as well as lobbying in some quarters to restrict foreign investment in the local retail business.

However, in the last six months, the government had been working to clarify that Thailand remained open to foreign investors, he said.

Although overall exports fell by 4% in the first nine months of this year, exports of BoI-promoted industries fell only 1.3%, partly because of higher domestic demand in the third quarter.

By: Chatrudee Theparat