Thailand's Outward Foreign Direct Investment: The Case of the Garment Industry

Outward foreign direct investment (OFDI) of Thai garment industry and the differences between firms with and without OFDI are explored by interview and survey during June and December 2008. Efficiency seeking is the most important OFDI motive, while labour shortage and general cost pressure are the most important push factors. Incentives, capacity building, and market intelligence are home government measures that firms are looking for. Firms with OFDI have higher levels of management proficiency than firms without OFDI due to their larger size and being more ready in terms of market to serve and production technology. Most activities of OFDI are production based. Low labour costs and cultural proximity are among the most important criteria in investment location selection. Generally, the reasons for OFDI in garment industry from Thailand to be minimal can be both internal and external factors. For internal factors, it is shown that firms with no OFDI are far behind those with OFDI in terms of management proficiency, capital resources (size), and firm readiness. It is thus suggested that Thai garment firms need to upgrade their factors of production and focus more on management skills if they want to expand internationally. Regarding external factors, home government policies that incentivize firms pursuing OFDI are still lacking. It is therefore suggested that the Thai (home) government not only develop policies that help push OFDI in the short run but also need to improve the location (L) advantages which in turn will help indigenous firms to upgrade their ownership (O) specific competitive advantages in the long run.