Publication Code: Y89H
by Jeerasak Pongpisanupichit et al.
Foreign capital, defined broadly to include direct and portfolio investment as well as loans, has played an important role in the development of the Thai economy by filling the country's savings gap. However, there were major changes in the role and pattern of net foreign capital flows into Thailand during the 1980s. The net flow share in net capital formation declined substantially from an average of 37.7 percent during 1980-1982 to about 10 percent during 1986-1987, and then went up again to 24.8 percent in 1988. The significance of foreign loans, especially long-term loans, declined over the 1980s, having been replaced by direct and portfolio investment. The foreign loan share in the total net foreign capital inflows declined drastically from over 90 percent in 1980 to only 13.9 percent in 1987, and then went up again to 44.4 percent in 1988. Within each capital formation group, foreign involvement increased for direct and portfolio investment and declined for loans. Over the period 1980-1988, the share of foreign direct investment in total private investment rose from 3.6 percent to 9.6 percent and the share of foreign portfolio investment in all of the securities market trading volume went up from about 2 percent to 12.9 percent, while the share of foreign loans in total commercial credits declined from 43.1 percent to 13.7 percent.
December 1989