Thailand
Investment
Japan has moved more
factories
and more trade to Thailand than any other country in Asia, including
China.
They continue to invest strongly throughout the Kingdom and European
and
American companies are scrambling to keep up. Learn why Thailand
has
become the hottest location for investment in Asia outside China and is
even
exceeding China in most fields in the post-SARS era. See why
Thailand
is called the "Detroit of Asia" and has become a center for automobile
spare
parts and car manufacture. Also, see how Thailand's well
developed
structure of steel, aluminum, plastic, rubber and other manufacturers
can
become the suppliers for your operations. Finally hear about and
see
the attractive tax incentives, land ownership rights, rule of law and
positive
pro-business government policies that make Thailand the place to live,
work,
invest and trade.
Exclusive Articles comparing
investment
in Thailand, China and Vietnam:
The Dragon Versus the Elephant: When a Company Wants
to
Move a Factory to Asia (Click
here
to view the cost comparison table for Thailand and China.)
Vietnam -
Open
for Business? As investors looking for a
site
to locate their investment often look at Vietnam,
Thailand
and China
in making a decision, we have listed all three countries here with our
view
of each country’s relative strengths and weaknesses as a site to locate
a
factory or to start and open a new business (click
here
to view the table of comparison)
BUSINESS IN THAILAND
Information from Office of the
Board
of Investment
1. Visa:
Work permit (new), One year visa, Re-entry visa
2. Registration:
Company registration, Branch office, Alien business license, Factory
license
3. Accounting:
Tax returns and VAT, Translation, Review/draft contracts,
agreements
4. Office
achieved rents
5. Selected
Salaries - Position Monthly costs
6. Labor
Costs
Entry-level salaries, Minimum daily wage, Overtime regulations,
Severance
payment entitlements
7. Tax
Rates: Corporate income tax, Personal income tax, Tax on income
from
bank deposits, Value added tax, Excise tax rates, Structure of import
tariffs
9. Fuel
Costs and Air, Sea, Rail and Road Freight Costs
10. Air
Fares
11. Utility
Costs: Water rates , Electricity rates
12. Communication
Costs: Telephone facilities, Cellular mobile phone system,
International
voice leased circuit, Facsimile machines, Telex facilities,
International
and domestic, telephone rates, Internet rates
13. Costs
of Living in Bangkok: Apartment rentals, Health
insurance,
Miscellaneous
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Economic Prospects And
Investment
Opportunities in Thailand
Our Exclusive Interview with Secretary General of Thailand
Board
of Investment,
Mr. Sompong Wanapha
Thank you for taking the time
from
preparing for the many road shows and presentations encouraging
investment
in Thailand you are currently involved in, plus your preparations to
accompany
Prime Minister Taksin Shinawatra on his visit to Washington, DC, to
talk
to business-in-asia.com. I also thank you for your and the
Board
of Investment's support of the upcoming Investment seminar to be held
in
Portland, Oregon on Tuesday, July 15, 2003. Finally we appreciate
BOI's
kind invitation to the State of Oregon to participate in the APEC
Investment Mart in conjunction with the October 2003 Asia Pacific
Economic Cooperation
Summit in Bangkok, Thailand. The State of Oregon Office of
Economic
& Community Development Department (OECDD) has accepted your
invitation
and plans to lead a delegation of Oregon companies to attend and
participate
in this important upcoming event.
Question 1: This last year, economically was a
difficult
year for many parts of the world. How did Thailand do in terms of
economic
development in 2002 and what are your projections for economic growth
and
inflation in 2003?
Answer: Even though last year was
difficult
year for many countries, it was one of the best years for the Thai
economy,
both in terms of GDP growth and export growth. Our economic grew by an
impressive
rate of 5.2% with low inflation of 0.6%, and exports grew by 5.8%
despite
global economic uncertainty.
According to the Bank of Thailand, in 2003, the economy is expected to
grow
at 3.5 – 4.5%, while inflation is expected to remain low, at 1.7%. At
the
same time, exports remain strong and we expect higher export growth
than
last year.
Question 2: Which countries
are
Thailand’s major trading partners and has this ranking changed or
remained
fairly stable over the last ten years?
Answer: USA, Europe and Japan have been
Thailand’s
major trading partners over the last 10 years. These countries comprise
more
than half of all Thai exports.
Question 3:
Could
you tell us what comparative advantages Thailand offers a foreign
investor
looking for a site to relocate his manufacturing or other operations?
Given
the above factors, which types of business has Thailand been most
successful
in attracting? Could you give examples of factories that have recently
relocated or commenced operation and the size of investment and sectors
they represent?
Answer: There are several reasons
foreign
investors choose to relocate manufacturing operations to Thailand. One
of
the important factors in the selection of investment location is the
country’s
business environment. This is an area in which Thailand is especially
attractive
due to a proactive government and the nation’stable political and
social
environment. Other important factors in the investment decision
are
the opportunity to improve market access and business inputs.
With
a population of more than 60 million, Thailand provides investors with
access
to a growing domestic market, and low-cost domestic inputs make it
attractive
for companies to use a base in Thailand as a springboard into
South-East
Asia. In addition, the government’s policy to improve the quality
of
human capital will enhance the future competitiveness of industry in
Thailand.
There are many examples of automotive factories that have recently
relocated
or commenced operation in Thailand. Mitsubishi has already invested
US$500
to relocate its worldwide production base of one-ton pickup trucks from
Japan
to Thailand. Currently, two more companies, Toyota and Isuzu, are
in
the process of relocating their worldwide production bases for one-ton
pickup
trucks from Japan to Thailand.
Question 4: Are there
sectors
that the Board of Investment and your government is currently targeting
for
priority investment? If so, could you tell us what those sectors are
and
what incentives the government is offering to attract these investment
projects?
Answer: The Thailand Board of Investment
is
actively promoting the following five (5) target
industries:
- Agriculture and
agricultural
products, especially food processing and related products, rubber
products,
and biotechnology
- Fashion, particularly leather,
garments
and jewelry
- Automotive assembly and parts and
components
industries including the development of industry and supporting
industry
clusters to create a ‘Detroit of Asia’
- ICT and electronics industries,
with
a focus on high value added electronics and ICT software, hardware and
multimedia
- High value added services such as
call
centers, regional operating headquarters and high value added printing
and
packaging
In addition,
the
Revenue Department and the BOI have introduced a new incentive package
for
regional operating headquarters (ROH). Incentives offered include a
reduction
on corporate income tax rate to 10%, instead of the customary 30%, on
net
profits from income derived from qualifying services, royalties, and
interest
received from branches or associated enterprises for loans made from
other
sources and extended to the ROH’s branches or associated enterprises.
Moreover,
the business receives a tax exemption for dividends received from the
ROH’s
associated enterprises. These incentives continue for as long as the
business operates in accordance with the regulations. Furthermore, a
new category
for call centers has been approved for promotion by the BOI in 2003.
For the ICT and software sector in Thailand, there are significant
opportunities
for investors in web-services, CRM, ERP, data warehousing, data mining
and
education technology. Since the Thai government has emphasized the
development
of e-commerce, e-government, and e-education, the e-government
project
is expected to generate a market for hardware, software, and services.
The
government will focus also on developing an education network (ednet)
to
link educational institutions, enabling them to share information and
promote
remote learning. The project is expected to link as many as 10,000
schools
and 7,000 villages around the country. Furthermore, the
government
has established a software industry promotion agency (SIPA), to promote
the
software industry and facilitate visas and work permits for foreign
experts.
Question 5: China exceeded
the U.S. for the first
time in 2002 as the number one location for Foreign Investment (FDI) in
2002.
Most U.S. newspapers and magazines are reporting on China and plans by
U.S.
companies to relocate their manufacturing to there or to open offices
there.
Has this rush to China affected Thailand’s efforts to attract foreign
investment
and what plans is the government contemplating to help promote Thailand
as
a site to relocate manufacturing and to do business? Also, can Thailand
compete
with China and are there areas where Thailand clearly beats not only
China
but also other nations in the region as a site for investment?
Answer: Althogh many countries have been affected
by the FDI rush to China, applications for investment promotion
privileges
in Thailand increased significantly last year.
In 2002, the Board of Investment (BOI), launched its investment
strategy
and policy, which was designed to improve investment competitiveness.
The
Board of Investment (BOI) new investment policies are divided into 3
dimensions.
1.
Attracting investments based on quality rather than quantity,focusing
on
investments that will promote knowledge and skills building
2. Promoting cluster development
3. Providing customized incentive packages tailored
to
the needs of investors
The BOI also
has
plans to further improve its service delivery and ICT system, and will
be
working proactively with relevant government agencies to improve the
investment
climate, in order to facilitate investment in Thailand. In
addition,
the BOI has already established a new office in Shanghai, and is
expected
to establish additional offices in the target countries of USA and
Japan.
The EIU’s Asian Business environment ranking released in April 2002
shows
that Thailand business environment improved to 8th position from #9 in
2001.
Thailand also ranks 3rd in Asia as an investment destination, and is
the
4th freest economy in Asia. These rankings are the result of
significant
advantages for foreign investors in Thailand, including a strong
business
environment, socio-economic stability and developed international
regulatory
systems. In particular, the issue of intellectual property rights
compares
favorably with copyrights is very favorable compared with China and
other
countries in the region.
In addition, Thai workers are highly skilled and have a strong
knowledge
base. The cost of labor in Thailand may not be the cheapest in the
region,
however it still provides advantages when compared to developed
neighbors.
By concentrating on knowledge-based investment, the Thai government
intends
to position the country as an attractive site for value-added
manufacturing.
Question 6: Recently there
has
been much in the international press about Sudden Acute Respiratory
Syndrome
(SARS), which first started in Guangdong province and then spread to
Hong
Kong, Hanoi and Singapore. Has the fear of SARS infected investment in
Thailand
and are you seeing less investors willing to visit? Also, do you see
this
as a short term or long term issue for Asia?
Answer: Of course, the outbreak of
Sudden
Acute Respiratory Syndrome (SARS) may have some impact on Thailand, as
it
does on all of Asia, especially in the tourism sectors and some export.
However,
BOI views SARS as a short-term issue for Asia and less so to Thailand
as
Thailand has been a transmission-free zone for SARS. In terms of site
selection
and exploration of alternative investment locations, investors are able
to
perform these tasks from the home office, are able to communicate
electronically,
and can make investment decisions through the use of technology. If
investors
are keen to invest in Thailand, they can easily visit the BOI website
at www.boi.go.th, where they can
obtain information on investment environment in Thailand or make
inquiries
by sending e-mail to head@boi.go.th.
Furthermore, The Thai government places a strong emphasis on preventing
SARS
from spreading to Thailand and promoting proactive government
regulations
that, in return, has provided tremendous confidence to both Thai
citizens
and the foreign community.
Question 7: Thailand has
one
of the most successful tourism industries in the World. Is Thailand’s
tourism
sector now saturated with investment and does the Thai government and
the
BOI still welcome investment in tourism?
Answer: The Thailand Board of Investment
promotes
a number of activities in the tourism sector that cover many aspects of
tourism
activities such as tourism promoted services like ocean marina
services,
amusement parks, cultural center, aquariums, cable cars, to
support
tourism activities like convention halls, hotels, international
exhibition
centers. The highlight activity is retirement homes and care centers as
well
as a dedicated health center. For more information and a list of
activities
promoted under the tourism sector, please contact www.boi.go.th. In addition, for the
government,
the most significant area of tourism that could be explored is the
long-stay
project, which shows great potential, and Thailand, with its relatively
low
cost of living, rich culture and high quality services is well situated
to
develop this market. Also visit www.tourismthailand.org
for
information on long-stay tourism.
Question 8: The importance
of
education in terms of turning out qualified engineers, technicians,
middle
managers and even production workers has become a key concern of many
international
companies in seeking a site for investment. How seriously does the
current
Thai government focus on improving education and what does Thailand
offer
in term of providing a well education workforce and society?
Answer: The government of Thailand has
very
much emphasized the importance of education, as human capital is a
priority
for country competitiveness. In our educational institutes, there are
significant
attempts to improve the quality of the curriculum in order to serve
specific
needs from different industries, as well as to enhance management
skills
and knowledge. Also, educational institutes are becoming more
competitive
in terms of establishing new areas of study, such as biotechnology,
chemical
engineering and diversified industry design for manufacturing.
For vocational training institutes, the curriculum has also improved to
support
more training at industrial sites, while additional skills, such as
English
language, business management, and communication skills, have already
been
encouraged in order to upgrade the Thai workforce to an international
standard.
In additional to this, there are several corporate institutes that
provide
special training to industry, such as the Thai Automotive Institute,
The
Electrical and Electronic Institute, Thai-German Institute, which
assist
technicians from factories or business to upgrade communication and
leadership skills and technical skills
The Thailand Board of Investment is also working to develop human
capital
and in order to improve matchmaking between industrial demand and
workforce
supply. In fact, the BOI continuously works with industry to train the
university
and vocational students to help develop practical experience to use in
real
life work situations in order to develop a skilled work force.
Finally, the Ministry of Labor has established training centers
throughout
the country to improve the general quality of labor in Thailand and to
develop
skills with new tools and machinery.
Question 9: South of
Bangkok
and very close to Rayong which is now a site of many factories, off
shore
natural gas and on-shore petroleum facilities is the former U-Taphao
Air
Base which was used by the U.S. Military during the Vietnam War and is
said
to have the longest runway anywhere in Southeast Asia. Over the years
there
have been plans to redevelop the Airbase as a regional air freight hub
or
for a more commercial purpose. Are any of these plans still active and
what
are the plans to take better advantages of this facility?
Answer: The U-taphao Air Base development
plan
is now being revised by NESDB (National Economic and Social Development
Board).
The concept has changed from serving as part of the Global Transpark
(GTP)
network to Aerotropolis, which will serve as an industrial
transportation
complex, i.e. heavy aircraft maintenance, in cooperation with
Suvarnabhumi
Airport (New Bangkok International Airport).
Question 10: Thailand is a
member
of ASEAN which has plans for a Free Trade Area (AFTA). When will AFTA
take
affect and how important is intra-ASEAN trade to the country and to the
region?
Answer: The progressive implementation of
AFTA,
which began in 2002 for the original ASEAN members, and the ongoing
implementation
of ASEAN Investment Area (AIA), staring in 2003, increased intra-ASEAN
trade
and investment. In addition, recent FDI statistics show
that
intra-ASEAN investment to Thailand and to the ASEAN region has become
increasingly
important.
Intra-ASEAN trade in 2001-2002 continued the trend of recent
years.
In 2000, the value of intra-ASEAN trade increased by 21.34 percent,
from
74,935.6 million dollar in 1999 to 95,267 million dollar in the same
period
in 2000. Thailand's imports from ASEAN increased slightly
(4.1
percent) from US$ 61,795.2 million in 2001 to US$ 64,313.5 million in
2002,
while exports to ASEAN increased by 5.7 percent from US$ 65,183.2
million
in 2001 to US$ 68,902.9 million in 2002.
Question 11: I have seen reports that
last
year ASEAN and China agreed to institute a Free Trade Area (ASEAN-China
FTA)
within ten years. How realistic do you see these plans and if they do
take
place will they enhance or hurt Thailand as a site for investment.
Answer: The ASEAN and Chinese leaders have
already
signed the Framework Agreement on ASEAN-China Economic Cooperation
during
the 8th ASEAN Summit in Phnom Penh, Cambodia in November, 2002. This
agreement
will lead to the establishment of the free-trade area by 2010. Both
sides
have organized regularly scheduled meetings, and the schedule is
proceeding
as planned.
As part of this agreement, ASEAN and China will coordinate, facilitate
and
promote investment between the two parties. This agreement will
therefore
help enhance the FDI flow from China, and will lead to the expansion of
Thai
investment in China. FDI from China to Thailand has been increasing
gradually
in recent years, as China encourages investment abroad with Thailand
considered
one of the best locations.
Question 12: The Board of
Investment
has a very excellent website, which has lots of information on Thailand
as
a site for foreign Investment. Beyond this, if a foreign investor would
like
to learn more about Thailand as a site for investment, what other
sources
of information are available to potential investors interested in
Thailand?
Also, are there plans to bring information about Thailand as a site for
investment
to Europe, the U.S. and other parts of Asia over the next year?
Answer: The BOI website, www.boi.go.th has twice been ranked
the
#5 Investment Promotion Agency website in the world by Corporate
Location
Magazine.
If investors would like to learn more about Thailand as a site
for
investment, the BOI would like to recommend other useful websites such
as www.customs.go.th, www.revenue.go.th, www.thairegistration.com, www.industry.go.th and www.oie.go.th. These websites
provide
information about investing in Thailand, how to do business in
Thailand,
and how to register a new company in Thailand. In addition, if
investors
would like to search for part and components within ASEAN, they can
visit
the website www.asid.org.
In addition, the BOI last year established target regions for
attracting
investment from the three main focused areas—North America, Asia and
the
Pacific, and Europe. Hence, early this year, the BOI has committed
several
road shows to several countries in those key market areas in order to
build
recognition towards the BOI, with the regard to Thailand as a potential
location
for investment.
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