Private Investment: Trends and Determinants in Thailand

SummaryThis paper examines patterns and determinants of private investment in an attempt to understand why levels of private investment in South East Asia have not yet fully recovered, using Thailand as a case study. The private investment equation is estimated during the period 1960–2005. We find that it was capital fund shortages rather than existing spare capacity that hindered short-run investment recovery. While the health of the financial institutions must be kept in check, policy attention should be geared more toward credit availability to ensure that prudent investors can access credit adequately and accelerate investment recovery. In the long run, policy emphasis should be on promoting a conducive investment climate.