Still Big in Bangkok? An Empirical Analysis of the Regional Distribution of Foreign Direct Investment in Thailand

This paper analyses regional Foreign Direct Investment (FDI) in Thailand. Its determinants are identified using a unique assembled panel dataset comprising all 76 Thai provinces during the period 1985–2005. The work is premised on the view that foreign investors consider various determinants of location choices in each province (including labour costs, Gross Provincial Products (GPP) per head, areas of industrial estates, communication and transportation issues, population characteristics, educational attainment, population density and distance from the centre of town to the main ports of Thailand) as well as government incentives, before deciding to undertake FDI in a given region. Our econometric model estimates suggest that government regional policy, and the effect of zoning in particular, however, has a significant and positive effect on regional FDI, drawing FDI to those zones where the greatest incentives are on offer. The other possible determinants of FDI amongst regions are largely shown to be insignificant.