Thailand still attractive for investment: pwc

Asian countries including Thailand remain attractive to foreign investors, according to the PricewaterhouseCoopers (PwC) EM20 Index.

The index shows that BRIC countries - Brazil, Russia, India and China - continue to offer interesting opportunities for investment.

However, the results of PwC's innovative country risk-and-reward model also indicate a range of other locations that can offer attractive alternatives, especially in Southeast Europe.

For manufacturing companies seeking to invest in emerging markets, low production costs are essential, but other factors then come into play, including a country's risk premium, distance from key export markets and local taxes.

Among the Asian countries in the EM20 Index, India tops the manufacturing index, followed by Vietnam, Thailand, Malaysia and China.

Thailand, rated the sixth most attractive emerging market for investment in manufacturing last year, has fallen to 11th place this year. Thailand was ranked 15th in the top 20 countries for service industries.

Prasan Chuaphanich, executive chairman of PricewaterhouseCoopers Mekong, covering Thailand, Vietnam, Cambodia and Laos, said: "It is encouraging that Thailand ranks in the top 20 for both manufacturing and service.

"This is a reflection of its attractiveness, which is mainly due to a reasonable cost structure, stable economic environment, skilled workforce, manageable regulatory system, attractive investment incentives and changes to the Foreign Business Act.

"These are the reasons for companies to consider investing in Thailand. However, political stability has emerged as a factor with a major impact."

Although countries like Vietnam and Cambodia have relatively small economies, their low-cost bases can offer higher margins to manufacturers.

Despite China being an attractive investment location, it may be surprising to many that it is not one of the top 10 destinations for manufacturing investment. Its 14th place may even seem counter-intuitive, given the high prominence of China as a recipient of manufacturing-based foreign direct investment. It is worth noting, however, that as the incomes of Chinese workers rise, they will become more attractive consumers for service providers such as retailers and hoteliers.

"The main reason why China trails countries such as India and Vietnam is that the EM20 risk-reward index is a ratio measure which does not take into account the absolute size of a country's market," said Ian Coleman, UK head of emerging markets for PwC.

"If a company was looking to develop a very large manufacturing facility, the labour capacity and physical infrastructure required would arguably rule out some of the countries at the top of the manufacturing index and increase China's relative attractiveness."