BANGKOK (REUTERS) - Thailand's cabinet on Tuesday approved a plan to double tax breaks for private investors this year to boost sluggish investment.
The government is seeking to arrest a long and slow decline in Thailand's share of regional foreign investment over more than a decade of political turmoil, during which competitors such as Vietnam have become increasingly attractive for investors.
Under the plan, investors will be able to double their tax deductions if they start a project or begin construction this year and new projects will not need to be completed within a year to qualify.
"This new law will offer flexibility for them until next year," Finance Minister Apisak Tantivorawong told reporters.
The junta that seized power two years ago in a May 2014 coup has focused on driving public infrastructure investment and wants private investment to boost economic activity.
But Thailand has seen two coups and several governments in the past decade and political divisions are deep. That has led to caution among both foreign and domestic investors.
"Political uncertainty has led to a slowdown in foreign direct investment (FDI) and is weighing on competitiveness," Christian de Guzman, of credit rating agency Moody's, told reporters last week.
In 2004, Thailand attracted about 40 per cent of all the FDI into ASEAN outside of Singapore, he said. A decade later, it attracted about 20 per cent, he said.
Investors see a market struggling to grow, he said.
Consumption and exports have been persistently weak and Thai citizens are deeper in the red than most in Asia, with record household debt at 81.5 percent of the gross domestic product.
The cabinet on Tuesday also approved measures worth 2.97 billion baht (S$115.5 million) to help farmers stimulate the rural economy that is struggling with high debt.
The finance ministry on Monday reiterated its stance that the economy will likely improve in the second and third quarters compared with the first quarter, driven mostly by public investment.
The ministry predicts 3.3 per cent economic growth this year, slightly higher than the central bank's forecast of 3.1 per cent.