By Daniel Bases
Thailand's political turmoil over the last six months has caused a backlog of roughly 200 foreign investment projects awaiting government approval, the equivalent of about $12.3 billion, a senior government official said on Wednesday.
Ajarin Pattanapanchai, deputy secretary general of the Thailand Board of Investment, expects the projects, each exceeding 200 million baht ($6.17 million) in value, will be cleared by August.
"It is around 400 billion baht ($12.3 billion) ... It will take about two to three months to clear it," Ajarin told Reuters in an interview while in New York to speak with U.S. investors.
Thailand has been without a proper government since December. As a consequence, the BOI board, which approves major investment applications, was not reappointed until last month. Its two-year term expired in October 2013.
Protesters took to the streets of the capital Bangkok in November, accusing the government of Prime Minister Yingluck Shinawatra of corruption and nepotism.
Yingluck, the younger sister of ousted former premier Thaksin Shinawatra, was herself removed by a court ruling May 7, but her caretaker government remains in place.
On Tuesday, Thailand's army declared martial law in a move to restore order and investor confidence. Nearly 30 have died in sporadic bouts of violence and troops now patrol the streets.
Thailand's economy shrank 2.1 percent in the first quarter from the prior three-month period, with exports remaining weak and domestic activity battered by the months of protests.
"Government spending is the problem. The private side of the Thai economy is operating as normal," Ajarin said, blaming much of the contraction on a slide in government spending given its caretaker status.
The state planning agency NESDB said public sector investment fell 19.3 percent in the first quarter from a year before and private investment fell 7.3 percent.
Foreign direct investment, as measured by the value of BOI applications, declined in the January-April period to just under 220 million baht from 224 million baht in the same period a year ago, Ajarin said.
"In my opinion it (politics) should not impact FDI more than 10 percent," she said. The comparison year-on-year will be difficult to make because December 2013 saw the end of a multi-year sustainable investment promotion policy that drew several hundred projects applications in the final weeks of the year.
Applications under 200 million baht are being processed, Ajarin said.
Despite the turmoil, Thai stocks are up 8 percent year-to-date after sinking 6.7 percent in 2013. However, one measure of foreign investor sentiment has dropped. Assets under management in the U.S.-based iShares Thailand Equity exchange traded fund fell to $545 million in April from over $1 billion in the same period a year ago, according to Lipper.
Ajarin said the biggest opportunities for foreign investors include automotive manufacturing, which accounts for 11 percent of GDP and is the biggest in Southeast Asia. However domestic car sales are falling and 30,000 jobs have been cut this year. In addition, she sees food processing and aerospace engineering, given its ability to produce precision tools, as other areas ripe for investment.
