Thailand Law Journal 2010 Spring Issue 1 Volume 13

3.3 International Diversification
Thereare many reasons why normally risk-averse entrepreneurs may engage in FDI in order to reduce the risks, or their perceptions of the risks, involved in their business activities the risks may be political or economic in origin (Wall, 1997, p. 16). Thailand has proved to be a favorite's place of Chinese investors as it ranked as the top investment destination in ASEAN and number five worldwide (UNCTAD, 2003). Since signing a free-trade agreement with China in 2001, economic activities in northern Thailand in particular have increased dramatically. Chiang Rai has been the focus of both the Thai government and Chinese investors (Khamtita, 2003). The location of Thailand has a comparative advantage over other ASEAN nations in being a logistical route from South China. The route attracts China to invest in Thailand and enlarge the economies of the two countries.

Moreover, the country's geographic location could be an advantage once road and river transport linking China and the Mekong sub-region have been improved. A special economic zone in Chiang Rai province has been set up recently to attract Chinese investors. The Chiangsaen-Kunming Industrial Estate, a Thai-Chinese joint venture, has thus been formed as a hi-technic industrial zone to be located there. It was reported that the estate has already attracted many investors from China in five aspects namely, agriculture, communication, human resource, investment and Makong development. And Chiang Rai is a strategic province in the northern part of Thailand as the "gateway" to Indo-China, South Asia, and ASEAN.

Chinese companies have shown their interests in making an investment in Thailand in regard to agriculture, electronics and electrical appliances, chemical and paper ceramic, as well as Light Industries & Textiles and textile. Accordingly, BOI has played a role in approving investment from foreign countries and to setup the Chinese Desk in 2003 to support the Chinese companies for trade and investment between the two countries. And in 2004, the Board of Investment of Thailand signed a memorandum of understanding on investment cooperations with branches of the Chinese Council for the Promotion of International Trade in Beijing, Yunnan, Shanghai, Sichuan and Jiangsu. The memorandums are meant to create a network of investment cooperation between Thai investors in China and Chinese investors in Thailand as well as setting target industries with high potential for the investors. Thailand wants to attract Chinese investment for its rubber, automobiles and electronics industries (BOI, 2004).

The Chinese government's strategic interest in CAFTA is seen as a bone for the southern Chinese province of Yunnan. This province during the economic development of China has found itself very far from Beijing both geographically and politically. Yunnan has been given the opportunity to become the Chinese gateway to ASEAN and expect to profit substantially in the coming upsurge in bilateral trade and investment. China has already announced that it has set a target to triple the bilateral trade by 2010 (BOI, 2004).

The international diversification has also been characterized by intents to dodge trade barrier trade and quotas to local and third country markets. This trend existed before China joined the WTO but has also continued after that. In recent years there have been inflows of this kind of investment in manufacturing processing in Thailand, especially in garment processing and other textile related investment for sales in the third countries (Kvisgaard, 2005, p. 34).

At the beginning of the new millennium when ASEAN made of first moves to create a FTA, China saw this as an opportunity and the choice fell on Thailand as a convenient trade and production hub inside ASEAN.

4. The Chinese Companies in Thailand
Most of the investment made by Chinese companies in Thailand has been dealt by state enterprises and officials in ministries of the government, cities or special economic zones. Afterwards, Chinese government reformed the enterprise, by giving consent to private sector to get involved in implementation in the forms of private enterprises. Although the implementation is carried out by private enterprises, the central and local governments, and sometimes local communities have held a large number of shares in
the enterprises. Chinese investment by state enterprises includes the following companies: China Worldbe&t Group, Thai-China Flavours and Fragrances Industry' Co., Ltd., Tong Ren T2,ng, China State Construction Engineering. Moreover, it should be noted that after the 1997 economic crisis in Thailand, some private enterprises like Huawei and Haier did go out (table 3).

Table 3 Chinese companies in Thailand




China Worldbest  Group

State-owned enterprise

Fibers, Citric Acid, Fiber
Residue, Printing&
Fishing Textile

Thai-China Flavours and Fragrances Industry Co. Ltd.

State-owned enterprise

Flavours and Fragrances

Tong Ren Tang

State-owned enterprise


China State Construction Engineering

State-owned enterprise



Publicly Listed Company

IT Service Trade

Haier Group

Publicly Listed Company


Source: BOI, (2006), China-Thai Enterprises Association (2002), and Chinese Embassy in Thailand (2003).

4.1 China Worldbest Group
China Worldbest Group: The biggest-ever Chinese investment project in Thailand, in Rojana Industrial Park of Rayong Province, 222 kilometers southeast of Bangkok in 2001. China Worldbest Group firm deals to invest in three large-scale project worth US$ 175 million (or 7,883.7 million baht), Thai labour 2,016 and foreign labour 218 (, 2007). Yan Ting-ai, Chinese ambassador to Thailand, told @'the project signaled that the China-Thailand economic cooperation entered a new era. The signing ceremony of the project between China Worldbest Group and Thailand's Rojana Industrial Company on 28 August 2001 in Beijing was also witnessed by Chinese Premier Zhu Rongji and visiting Thai Prime Minister Thaksin Shinawatra." And Zhou Yucheng, president of the China Worldbest Group, said the first phase of the China Worldbest Group project would include the construction of a spinning factory, a textile printing factory and a citric acid lab. Zhou said his group would invest more in Thailand in the future and make the country its production hub in Southeast Asia ( File://G:\China company\Biggest-ever Chinese Investment Project in Thailand Breaks..., 2007).

4.2 Thai-China Flavours and Fragrances Industry Co., Ltd. (TCFF)
TCFF's factory was built on 17 acres in Lad Bua Luang District of Ayuthaya, in 1989. Sathaporn Kietthanakorn stated during an interview, cthe company investment, with the value of 70 million baht. There are separate dedicated factory for: essential oil distillation solvent extraction chemical synthesis spray drying flavour compounding research and development^. TCFF is a joint venture between Thailand and China to manufacture fragrances, flavours, essential oils and extracts for the cosmetic, food and pharmaceutical industries. TCFF is the first company in Thailand to produce natural essential oils and is even today one of only a few companies worldwide that control the whole process of production from the collecting of raw plant materials, distilling essential oils and creating and producing finished fragrance and flavour compounds that go into thousands of consumer, households and industrial products worldwide (File://G:\China company\TCFFl_files\l_his.htm, 2007).

With experienced professional staff and dedicated equipment and technology, TCFF is equipped to extract these valuable essential oils from plants sources such as roots, stems, leaves, flowers fruits and gums. TCFF has facilities for solvent extraction, distillation and manufacture of aroma chemicals. Researchers in an effort to produce purer and more concentrated forms of natural and novel productshave developed techniques of capturing these. These materials maybe simply single natural chemical isolates used as they are or may be further reacted to produce more novel notes for use in modernI perfume or flavour creations. Using aroma chemicals means that their purity and quality can be accurately controlled and used to produce characteristic effects in fragrances and flavours. They are therefore especially valuable to the creative perfumer or flavourist.

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