Despite being more costly, it seems paradoxical that branded products of the multinationals still have a relatively large market share (about 35 per cent). The ability of foreign affiliates to maintain prices of certain drugs at levels higher than those of local companies may partly be explained by the fact that the consumers are generally ignorant of price differences due to the strong persuasion of the pharmacist or drug seller. It can also stem from the fact that consumers influenced by heavy promotion or the drug seller, often tie quality of drugs with prices. It is found that in Thailand the consuming public always believes that drugs with high prices are different from and superior in quality to cheaper products.⁵²

While exclusion of patents on pharmaceutical products is now less feasible due to TRIPS obligations, it is suggested that a country seeking to improve access to medicines should adopt a policy of strict control on prices. Direct and indirect price controls by the state will inhibit the overpricing of drugs by firms.

Under the National Drug Policy, the Thai Government indirectly controls prices of medicines to be sold to public hospitals by requiring public hospitals to purchase drugs on the essential drug list from GPO. However, no such intervention exists in the private market. Where the role of the government in controlling drug prices is minimal, it is strongly argued that unnecessary over-pricing of products by private and foreign firms helps in giving a distorted picture of pharmaceutical prices thus casting unnecessary expenditure on the ordinary consumers in Thailand.

Patents and foreign direct investment

ForeignTNCsarewidely regarded as major driving forces behind the rapid development of many business sectors in Thailand. To fulfil their industrial development plan, the government has recognised the importance of foreign investment by establishing, in 1966, the Board of Investment (BOI). The board is envisaged as a centre for planning, and drawing up of policy guidelines in relation to foreign investment. It also helps in the attraction of FDI by direct promotion; providing foreign investors with assistance and promotional privileges in establishing business in Thailand.⁵³

One of the main purposes for the enactment of the Thai patent law (and the consequent amendment of the Act)was to offer protection to pharmaceuticals and therefore to create a favourable climate for foreign investment.⁵⁴ It is expected that strong patent protection that guarantees satisfactory returns on investment plus other privileges provided by the BOI will encourage TNCs to establish manufacturing activities in Thailand.

In an attempt to attract the interests of multinationals, it is necessary for each country to establish a suitable "investment climate". Nevertheless, this climate cannot be created solely by the mere promulgation of investment promotion policy and various incentives. The creation of such a climate needs to be matched with the availability of several interrelated factors, including economic, political and legal conditions in the host country.⁵⁵ Anderfelt points out that, among the three factors, economic and political conditions within the host country are more influential on the investor's decision to invest in a particular country than the legal conditions.⁵⁶ He further observes that:

"... only in cases in which neither economic nor political conditions pose any significant non-business risks for the venture would the legal conditions be of primary importance."⁵⁷

In other words, politico-economic factors, such as local market size, low-waged labour force, available raw materials, advantages for export-oriented production, and political stability, are far more important than legal frameworks such as patent legislation. There is a range of evidence suggesting that the availability of patent protection alone does not guarantee the inflow of FDI. According to Bangs, the majority of the firms in his survey felt that industrial property protection was not a decisive factor in their decision to undertake foreign investment.⁵⁸ This view is shared by prominent science and technology expert, Carlos Correa, who contends that there are several factors affecting the relationship between FDI and IP protection. Those factors include the type of IP rights, purpose of the investment, and the degree of industrial and technological development of the country in question.⁵⁹

Thailand's experiences have demonstrated that economic and political conditions in the country are significant factors in inducing foreign investments. Statistics reveal that the level of foreign investment increased significantly during the late 1980s. The growth was spurred by both external and internal factors, such as favourable global economic conditions including low oil prices; the Thai Government's foreign exchange policy maintaining the value of the baht at an appropriate level; and policies stimulating trade with neighbouring countries (i.e. Vietnam, Cambodia, Laos and Myanmar). Due to its geographical location, this regional trade has led Thailand to become a manufacturing base for many companies intending to market their products in Indo-china.⁶⁰

After considerable success in the inducement of foreign investment in the late 1980s, the flow of FDI declined in the 1990s. The drop in FDI was attributed to several factors, including the Gulf War in the early 1990s, the Asian financial crisis and economic recession between 1997 and 2000. The sharp decline in FDI was also attributed to Thailand's domestic situation, which saw a military coup in February 1991; a saturation of investment in some manufacturing sectors; high land prices; infrastructure inadequacies and shortages in skilled personnel. From 2003 to 2005, the amount of FDI in Thailand increased again after its economy had recovered from the economic crisis (Figure 1).

This reveals that growth and decline in FDI in Thailand depend on a number of positive and negative conditions.⁶¹ There is no conclusive evidence to suggest that the level of patent protection is the major determinative factor encouraging foreign

Footnotes

52. Rattanarojsakul, cited above fn.41, p.130.

53. C. Panupong, "MNCs and the Role of the Thai government" in Chaiseri and Hongladarom (eds), cited above fn.50, p.6.

54. The arguments in favour of the patent system in this respect are found in A. Sell and M. Mundkowski, "Patent Protection and Economic Development--Some Results of an Empirical Analysis in the Pharmaceutical Industry in Latin America" (1979) 10 I.I.C. 566; N. Mangalo, "Patent Protection and Technology Transfer in the North-South Conflict" (1978) 9 IIC 109. It is even argued that weak patent protection will push foreign investments out of the country. See J. Behrman and A. Deolakikar, "Of the Fittest?, Duration of Survival of Manufacturing Establishments in a Developing Country", Journal of Industrial Economics, Vol.38, 1989, p.215.

55. U. Anderfelt, International Patent-legislation and Developing Countries (Martinus Nijhoff, The Hague, 1971), pp.139-141.

56. ibid., p.140.

57. ibid. See also K.E. Maskus, "Encouraging International Technology Transfer", UNCTAD-ICTAD Project on IPRs and Sustainable Development, Issue Paper No.7, 2004, pp.18-20.

58. R.B. Bangs, "Use of Industrial Property in Foreign Countries: A Further Report", IDEA--The Journal of Law and Technology, Vol.13, 1969-70, p.557.

59. C.M. Correa, "Intellectual Property Rights and Foreign Direct Investment", International Journal of Technology Management, Vol.10, 1995, pp.173-199.

60. "Economic Review, Spins Ahead despite Hurdles", Bangkok Post, December 30, 1989, p.18.

61. See K.E. Maskus, Intellectual Property Rights in the Global Economy (Institute for International Economics, Washington DC, 2000), pp.199-232.