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ABSTRACT
Inward foreign direct investment (FDI) is vital to the Thai economy, contributing more than 60% of GDP in 2019. However, the recent COVID-19 pandemic led to a worldwide economic downturn which impacted foreign investment by multinational enterprises (MNEs). In 2020, Thailand's net inward FDI turned negative, with investment increase less investment decline, while net inward FDI from some source countries remained positive. This study analyzed the influence of the COVID-19 pandemic on Thai inward FDI from 38 source countries using a logistic model and secondary data from 2020. The model estimated the probability that the net inward FDI from a source country was negative. Results indicate that a higher number of deaths from COVID-19 led to a higher probability of negative net inward FDI, while a higher GDP of the source country led to a lower probability of negative net inward FDI. The findings suggested that the Thai Government should support FDI from high GDP nations and create an action plan to mitigate the negative impacts of a future pandemic on FDI.
Keywords: COVID-19; Foreign direct investment; Epidemic; Thailand.
Received 26 March 2023 | Revised 22 August 2023 | Accepted 29 September 2023.
1. INTRODUCTION
Inward foreign direct investment (FDI) is crucially important for the Thai economy, with stocks of inward FDI in 2019 greater than 60% of GDP and net inward FDI remaining consistently positive (Figure 1). The COVID-19 pandemic had a global influence in numerous ways, including reducing FDI. Negative demand shocks delayed market-seeking investments by multinational enterprises (MNEs), with decreased profits in their foreign affiliates resulting in lower reinvested earnings (UNCTAD, 2020). The COVID-19 pandemic also led to a worldwide economic downturn, negatively impacting MNE foreign investment. In 2020, Thailand's net inward FDI turned negative, with investment increase less than investment decline during this period (Figure 1), falling from US$5,518.71 million in 2019 to -US$4,947.47 million in 2020. When broken down by industry, finance and insurance activities had the largest negative net FDI flow in 2020, with a net value of -US$6,774.80 million. In terms of source nations, the UK had the largest negative net FDI flow in 2020, totaling -US$9,590.94 million (Bank of Thailand, 2023). Nevertheless, net inward FDI from some source countries was still positive, especially Japan, the...