The wind changes direction, destining a new world FDI landscape.

The shifting winds in the global FDI landscape bring opportunities for Thai entrepreneurs in both trade and investment. The trend of major economic powers relocating their investment bases in various forms, particularly Friendshoring and Nearshoring, could increase Thailand's chances of becoming a new investment hub, attracting foreign investment as a prominent and strong economic partner in various industrial sectors.

Foreign Direct Investment (FDI) is an important engine and plays an increasingly important role in driving the global economy. Until now, it accounts for almost half of the global GDP (FDI Stock). Whether it is the change in the poles of economic superpowers, the occurrence of disruption in the business and technology circles. the emergence of new diseases, COVID-19, as well as global warming and natural disasters As a result, the FDI landscape has transformed the world from the past in many dimensions. Here are some interesting examples:

Reshoring Investment
Move the investment base back to the mother country

Over the years One of the major problems facing businesses around the world is Supply Chain Shock stumbling
of the supply chain in the production line Especially during COVID-19, the automotive industry has been heavily affected.
Global auto production fell about 15% in 2563 after some of the world's leading manufacturers, including South Korea's Hyundai and Japan's Nissan, had to temporarily close their auto production plants. This is because important parts cannot be imported from China. Supply Chain Shock is caused by many reasons, such as natural disasters, civil unrest. The epidemic has caused widespread damage to the companies involved.

Data from McKinsey Global Institution (MGI) estimates that every 10 years, Supply Chain Shock problems cause businesses to lose profits by an average of more than 40% per year. Or during COVID-19, more than 1 in 3 companies in the world have to face problems. Production is disrupted due to disrupted supply chains. Moreover, This situation is likely to occur more frequently, with MGI estimating that at least every two years there will be a supply chain shock that lasts 2-1 weeks, causing many companies to begin adjusting their business models from Globalization becomes Deglobalization Reduce supply chain links across the world to be within the same country or region.

Combined with international political conflicts that escalated into trade wars, resulting in protectionist measures that hindered international trade and investment, and the policies of major economic powers to stimulate their economies and create jobs by repatriating investment, these factors have given rise to a new investment landscape known as "reshoring," which involves the relocation or withdrawal of investment bases back to their home countries.

One of the countries with the most obvious reshoring is the United States after the unemployment rate in the country increased. Continuing to the trade war between the United States and China. In addition, during COVID-19, there was a shortage of semiconductors. and important raw materials in the production sector The government has therefore offered benefits to attract and encourage more companies to return to invest in the country, such as reducing corporate taxes from 35% to 21% or a support package of USD 5.3 billion. For companies that move their semiconductor production and research base back to the United States, for example.

American companies therefore began to gradually move more production bases back to the country, resulting in the reshoring of the United States accelerating exponentially. And it clearly helps increase employment. In 2565, the number of jobs from reshoring will reach more than 2, an increase of 25% from the previous year, as in Europe where many countries are reshoring more.

from the problem of delayed product delivery and production quality that is below standard The Eurofound survey found that 47% were reshoring from member states of the European Union (EU) themselves and 43% from Asian countries, especially China. For the countries that reshoring the most, United Kingdom, Italy and France respectively.

The industries that reshoring the most are manufacturing (86%), communications (5%), and finance and insurance (4%). Reshoring is likely to continue increasing around the world. A survey by BCI Global, a Dutch consulting company, reported that more than 60% of companies in the US, Europe and ASEAN have plans to reshoring within the next three years.

Beyond reshoring, there are other similar forms of investment relocation, such as " friendshoring," which involves shifting investments to partner countries to mitigate risks from international conflicts and trade and investment barriers, and " nearshoring," which involves relocating investments to neighboring or adjacent countries to reduce logistical risks that could disrupt the supply chain in the future.

Amidst the pressure of rising transportation costs, such as during COVID-19, freight rates (Freight Rates) average on 8 main routes in the world. Record highs exceeding US$1 per 40-foot container, as well as shipping delays due to the lockdown of several major cities and ports.

Reverse Merger & Acquisition Investment
New fish eats old fish.

Another FDI landscape that is starting to become clearer. In addition to investing in Greenfield or new investments, there is Merger & Acquisition (M&A) or buying businesses abroad. It is one of the shortcuts to expanding business, expanding markets, and transferring technology (Technology Transfer). This type of investment has grown rapidly. Reflecting from 2565, Cross Border M&A (International Acquisition Investment) has more than doubled compared to 2 years ago, while the average money per project was 10 million USD, up from 171.5 USD in 121.5. 2555

Furthermore, it is an important observation that M&A activities are reversing the trend from the past, where companies from major markets typically acquired businesses in emerging markets. Recently, however, there have been signs of a shift, with emerging market companies increasingly acquiring businesses in major markets. This trend is occurring following the sustained economic slowdown in these major markets, where GDP growth over the past decade for the G7 countries has averaged only 1.5% per year, contrasting sharply with the high growth rate of 5.8% in emerging Asian markets.

Many large companies in emerging markets have turned to M&A strategies to gain access to new technologies. or rapidly expand its business base, such as a large Asian technology leader acquiring a famous European game company. Middle Eastern telecommunications company acquires major European mobile network operator and a large South Asian company buying a leading European battery manufacturer, for example.

Moreover, Another driving force that makes M&A more likely to grow is Many companies have turned to adjusting their business models. (Transformation) Market diversification/Portfolio including diversifying business lines across industries (Cross-industry) Because after the COVID-19 crisis, many businesses faced disruption, causing them to have to look for more investment in new businesses. Not only to diversify business risks from being too concentrated in any one industry. But it also increases business opportunities to grow more quickly.

Renewable Energy & Sustainable Investment
Investing for a sustainable world

Amidst the increasingly severe problem of climate change, all sectors are realizing and prioritizing the development of environmentally friendly economies and sustainable growth. At the 26th United Nations Climate Change Conference (COP26), the world set a target of achieving net-zero greenhouse gas emissions by 2593, clearly indicating a global shift towards Green FDI.

This is reflected in the rapid growth of investment projects related to green businesses, particularly investments in renewable energy. In 2022, six of the top 10 FDI projects by value were renewable energy projects. Furthermore, projects related to transforming or developing businesses towards sustainability are also showing high growth potential.

Allied Market Research estimates that during 2565-2572, the business market related to sustainable business management, such as waste management. Adjusting the electrical system to save energy Adjusting production systems to reduce emissions, for example, will grow as high as an average of 21% per year, while IHS Markit expects that by 2593 there will be USD 3.5 trillion in the global economy. (close to India's current GDP) from investment to drive towards Net-zero Emission. In addition, measures for sustainable business operations in many countries are becoming stricter. Therefore, from now on, FDI projects in every business must take into account and give importance to environmental, social and transparency impacts. (Environmental, Social and Governance) seriously

The winds that are changing the direction of the world FDI landscape are bringing opportunities to Thai entrepreneurs in both trade and investment. The trend of moving investment bases of economic powerhouses in various forms, especially Friendshoring and Nearshoring, may increase the opportunity for Thailand to become a new investment base under attracting foreign investment as a strong economic partner. Outstanding and strong in the industrial sector

Meanwhile, reshoring will expand Thailand's trade opportunities. Especially various industrial parts groups Thailand is an important production base and many countries depend on it. As for M&A, it is another important tool that leads Thai businesses to expand their wings overseas. This will help increase the value of Thai direct investment abroad (Thailand Direct Investment: TDI) to grow again. After a continuous slowdown in the past 5 years

Moreover, Thai entrepreneurs investing abroad can use the opportunity from the Renewable Energy & Sustainable Investment trend to penetrate high-growing green businesses. Not only does it help reduce carbon emissions. But surplus carbon credits can also be sold and help drive the overall growth of the global carbon credit market. At the same time, developing a green ecosystem throughout the country's supply chain will be a magnet for attracting Green FDI from around the world, which helps. Push the country towards Net-zero Emission as planned.

It can be seen that the wind direction changed this time. This is an important driving force for the Thai investment sector to have the opportunity to return as one of the main engines driving the Thai economy to grow steadily and strongly again.