Impacts of Foreign Direct Investment on Economic Development: The Case of Thailand

The FDI towards economic development is widely debatable.With the insufficiencies of research related to Thailand, this study aims to investigate the effects of Foreign Direct Investment (FDI) on economic development, which refers to reducing and eliminating income poverty, and income inequality within a growing economy, and creating structural change during the period 1991-2020.A Seemingly Unrelated Regression (SUR) analysis was used to investigate the effects of FDI on economic development.The empirical results indicated that FDI has a significantly positive impact on economic growth because FDI can contribute to the diversification of the economy, the provision of technology and knowledge, the development of the host country's skills base, a boost of productivity, and the establishment of linkages with local firms.While FDI has a significant negative impact on poverty and income inequality.However, FDI has no significant effect on structural change.From the overall results, it can be concluded that FDI leads to economic growth but does not improve economic development in Thailand.FDI alone cannot help the economic development.There are other factors to promote economic growth: capital investment, trade openness and human capital.However, labor force and inflation enable the slow economic growth.Capital accumulation is an alternative channel to reduce income poverty, but the labor force stimulates income poverty.Labor force and trade openness help support income inequality.In addition, capital investment, labor force, and human capital urge economic structure to industry and service sectors.Finally, the results also suggest that Thailand need to persevere to FDI attracting strategy because there is a threshold that FDI helps in stimulating the economy and reduce poverty and inequality in the economy.