Foreign direct investment and its impact on the Thai economy : the role of financial development - Case Study Example

Module Case Study The has written an excellent, critically and empirically sound paper that shows why and how financial systems and their efficiency influence the effectiveness of FDI. However, some more information would make the article impeccable and critical enough to pass the stringent measures often used to evaluate financial analysis articles. The author should have included a discussion on the core objectives of financial reforms. More credits to private SMEs (small and medium enterprises) are a sign of effective financial intermediation (Rajan 65).

On the other hand, more credit to ineffective SOEs (state-owned enterprises) indicates bad financial intermediation. The objective of reform narrows down to addressing the enormous challenge of credit misallocation. Distribution of loans in Thailand is not as commercially focused as it should be and is also far from efficient. This requires major changes in the lending behavior of financial institutions so as to make FDI more effective. The lending behavior of financial institutions in Thailand is a multifaceted complicated challenge that requires more attention than it is currently given (Rajan 78).

Although the article is not meant to highlight this issue, reviews of the financial system in Thailand show that government intervention and protection still exists in most Thai banks as well as in government enterprises. Unbeknownst to most scholars – like the author – this fact has a massive impact on the effective utilization of FDI and is closely connected to the efficiency of financial systems. Therefore, as the author discusses how financial systems affect the effectiveness of FDI, it is important to highlight affiliate factors that are related to both variables.

Work CitedRajan, Ramkishen S. Emerging Asia: Essays on Crises, Capital Flows, FDI, and Exchange Rates. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan, 2011. Print.