According to this report, foreign direct investment has experienced moderate expansion worldwide. UNCTAD has predicted global foreign direct investment to be about 1.2 billion US dollars in 2010, increasing to 1.3-1.5 billion US dollars and 1.6-2 billion US dollars in 2011 and 2012 respectively, even with world investment still uncertain and at risk due to the fragile recovery of the world economy.
When it comes to the direction of investment, the developing countries attract half of global foreign direct investment and more importantly are also investors abroad, investing in one-fourth of the world’s countries. As we can see Africa now becomes a new destination for foreign direct investment or Latin American multinational companies have also become important world players, as well as Asia that is penetrating the direct investment in order to develop industry more in many industries and many countries.
Investment policy moves in either of two directions, between further investment liberalization and promotion on the one hand, and increased investment regulation in response to certain public policy objectives, on the other hand. Various global initiatives are also relevant, such as agricultural investment or the reform of the world’s financial system.
The challenge for many countries worldwide at this time is how to attract as much foreign direct investment as possible into the country. One possible suggestion to attract foreign direct investment is to penetrate the Key Niche Sector industries, for example those participating in the Low-Carbon Economy. UNCTAD has estimated that in 2009 foreign direct investment valued to as high as 90,000 million US dollars was targeted to lower carbon levels, especially in the three main business domains of renewable energy, recycling, and technology production based on low carbon usage. We can see that low-carbon business and the trans-national economy have high potential because the world is changing to embrace a low-carbon economy.
As for investments made to lower carbon emissions in Thailand, many large companies, in response to the public’s increased awareness of environmental issues, invest evidently in their organizations in order to achieve this goal, attempting to organize environmentally-friendly activities. Businesses are also pressured to be more responsible, while SMEs might not be so concerned about this issue due to their lack of understanding or awareness of how important the problem is.
The State tries to play an encouraging role in this issue by supporting investment in alternative energy business, and giving tax incentives to business invested in energy saving equipment. There is also support for investment and trade in carbon that uses the Clean Development Mechanism (CDM).
I consider State support for this issue to be insufficient compared to the quantity of greenhouse gas emissions released by Thailand; now ranked third for countries in South East Asia, and the 26th of 186 countries that are members of the United Nation Framework Convention on Climate Change (UNFCCC). If the situation continues like this, Thailand might face a future problem, particularly in international trade where developed countries bring environmental issues up as trade barriers. For example, the Border Carbon Adjustments (BCA) policy in which more restrictive countries, having cost disadvantages due to their more restrictive measures, will impose tax from import products of the countries that have less restrictive measures to lower carbon levels.
In my opinion, Thailand seriously needs to make a new start today, rather than being forced into it in the future because it will be too late when that day arrives. Thailand might lose competitiveness on the world market and also lose its export market share to other countries.
In my opinion, the government can support more investment to lower carbon emissions, being sure to:
1. Establish a clear vision on environmental issues
For example, the Swedish government declared its vision to develop Sweden by the year 2020 to be an ‘Oil-Free Economy’ (not that oil is no longer used there, but that the least reliance is place on oil). This is the first country in the world that has declared this challenging vision.
Thailand’s government must dare to declare a clear and challenging vision to restore the country, for example, by making it to be a Zero Waste Economy, the world leader in environmental technology, a Carbon-Free Society, or the Coolest Country in the world.
Having a clear vision and declaring to the people, to investors, and to the mass media will create awareness and clarity in terms of Thailand’s policy direction, thus giving them confidence in the country.
2. Identify a strategy to support clean investment
Nowadays, the government supports investment with no clear strategy, and the private sector steps forward on less government support. Therefore, the government should help to identify strategy, policy scope and how to implement the strategy effectively, targeting investors and supporting, as well as servicing them after their investments have been made. Apart from these measures, it is necessary to make connections of investment and other economic and social activities and to push international and domestic financial Institutions to support lower-carbon investment, especially through outward investment promotion, investment guarantees and credit risk guarantees.
3. Enable the transferring of clean technology
Nowadays Thailand is an importer of technology rather than a producer, and technology transfer as a result of foreign direct investment in Thailand is less. Thus, in the future, the government should identify policy that supports technology transfer, including clean technology. Connections should also be made between multinational companies and local entrepreneurs to get the most benefit from technology transfers. Moreover, the government should also develop the capability of local entrepreneurs to be valuable links in the chain at world level, strengthening them to absorb technology, support cooperation to build technology and share the knowledge of it between industries and entrepreneurs within the country.
4. Push international investment agreements forward toward decreased carbon emissions and climate change impacts
Nowadays, the government is open to opinion on free trade negotiation agreements between Thailand and the European Union and collects useful information for government decision-making on FTA agreements. At this point, I think that EU negotiations will be very useful for Thailand in term of environmental standards because the EU has higher standards and is more technologically advanced than Thailand.
Apart from FTA agreements between Thailand and the EU, trade agreements with other countries should also be identified with regard to investment that is environmentally friendly and builds understanding among countries, thus affirming these investment agreements as consistent with the country’s policy on climate change.
5. Harmonize disclosure on corporate greenhouse gas emissions
At this present time, for its report to UNFCC, Thailand has modified the country’s national data account of greenhouse gas release. However, where the data collection of the business sector perhaps matches only the concerns of its individual organizations, this data collection may not meet with government sector or worldwide standards.
Hence, the government sector should set its data collection standards according to world standards. Specifications should reveal the level of greenhouse gases released during company operations and activities, enforcing this through existing regulations that would, for example, see it regulated as an added condition for a company seeking stock exchange registration.
6. Establish a Low-carbon Technical Assistance Centre: L-TAC)
Investments to lower carbon emissions or carbon credit trading are very detailed, highly complex and difficult to understand. So the government sector should help to support the private sector and the general public by establishing a Low-carbon Technical Assistance Centre that engages many experts and organizations who can help with suggestions and support for implementing plans related to this issue, as well as plans to decrease the impacts of environmental change.
I believe that people everywhere will agree that environmental investment to lower carbon emissions and the impact of climate change is investment that will sustain our future economy. Apart from the temporary concerns of short-term economic growth, these are issues which both the government and the private sector should prioritize.
Dr Kriengsak Chareonwongsak
Senior Fellow, Harvard Kennedy School , Harvard University
kriengsak@kriengsak.com, kriengsak.com, drdancando.com
Senior Fellow, Harvard Kennedy School , Harvard University
kriengsak@kriengsak.com, kriengsak.com, drdancando.com
Good article
ReplyDeletethis data collection may not meet with government sector or worldwide standards.
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