The Problem of the Kingdom's political vacuum must be solved by the middle of next year or foreign investment might shift to more politically stable countries, like Vietnam, warned the foreign chambers of commerce in Thailand.

Foreign investors have been concerned about the political conflicts that led to the stagnation of the mega-project investments and free-trade agreements, but the chambers hope the October 15 election will help end the vacuum and draw them back.

Speaking at a joint press conference yesterday, Board of Trade chairman Pramon Sutivong said: "Now they are worried about two main things - the qualifications of the election commissioners and the dissolution of political parties - as they have direct weight on the upcoming election. If this election goes smoothly, it would be a positive influence in restoring confidence."

Joining the event were representatives from a number of foreign chambers of commerce, who urged the government to settle key issues - especially mega-projects and free-trade agreements - within two months or else investment prospects will be downgraded in Thailand, which has so far been ranked as one of the top investment destinations.

"The setting of the election for October 15 should be a signal to foreign investors to go ahead with their investment decisions, after having to delay them for more than nine months," said Peter John Van Haren, chairman of the Joint Foreign Chambers of Commerce in Thailand.

He said the existence of the caretaker government for such a long time has reduced foreign investors' confidence.

"Foreign investors have delayed investment in Thailand," he said, saying that the political problems have halted not only the country's free-trade talks but also mega-projects investment.

He said the problem had brought uncertainty towards the Thai economy and the government's policy to facilitate foreign investment.

He also suggested the government set up a central agency to facilitate such investment. Foreign investors are often confused by which organisations are directly in charge of investment promotion.

"There are many government agencies responsible for investment promotion, such as the Board of Investment of Thailand, the Commerce Ministry and the Thai Trade Representatives office," he said.

Tetsuji Banno, president of the Japanese Chamber of Commerce in Bangkok, said Japanese investors do not want to wait for Thailand to settle its political disorders any longer than the middle of next year.

"Although Thailand is the first priority in terms of investment potential among Japan investors, the political problems have reduced their confidence," he said. "If the problem has  not been cleared in one year, Thailand may lose its position as the number one country targeted by Japanese investors

to competitors."

Japanese investors are now considering Vietnam, China, Malaysia and Indonesia as alternatives, he said, and 75 per cent of them have said they will watch the situation Thailand before deciding on new investments or the expansion of existing businesses.

Banno said investors hope that the political problems will not be prolonged. He pointed out that not all investors were prepared or able to wait for a recovery and some had already shifted their investments to other countries.

Deepak Mittal, president of the India-Thailand Chamber of Commerce, said Indian investors had also suggested that Thailand's political situation should be cleared up as soon as possible to increase the confidence of investors and traders.

The lack of skilled labour in Thailand is also a major concern for investors. He suggested the country increase spending on research and development to find solutions to these problems soon.

Mittal said that Thailand may lose out in terms of competitiveness to countries such as Vietnam and Malaysia. Not only will political stability draw more investors but also the two countries have more skilled, and cheaper labour than Thailand.

Other major concerns are the unstable exchange rate, rising manufacturing costs from skyrocketing oil prices, and increases to the interest rate and inflation.

Japanese investors have reportedly been putting money into other countries instead of Thailand, due to the political uncertainties which led to the House dissolution in February. The election date was set last Friday, which led to a sharp jump in the Stock Exchange of Thailand Index, reflecting higher confidence among investors.

Board of Investment secretary-general Satit Chanchaokul also believes that foreign investment should be drawn back after the setting of the election date, particularly among new small and medium-sized businessmen who are not yet familiar with the investment environment in Thailand.

Petchanet Pratruangkrai

The Nation