CONTENTS

February 2013 Volume 23 No. 02

The consultative meeting between the Thailand Board of Investment (BOI) and the Joint Foreign Chamber of Commerce (JFCCT) was convened under the chairmanship of Industry Minister, H.E. Mr. Prasert Boonchaisuk, at the One Start One Stop Investment Center (OSOS) on January 23, 2013. This was the first such gathering since Mr. Prasert was appointed the Industry Minister and Mr. Udom Wongviwatchai as the BOI Secretary General.

The meeting began with welcoming remarks by the minister, who touched upon the preparations for the ASEAN Economic Community (AEC) in 2015. The government is not only planning to invest two trillion baht in infrastructure development, mainly to improve the country’s transport system, but also to enhance international cooperation and conduct free trade agreement negotiations with various nations and regions.

Minister Prasert also informed the meeting of the development plans for major industries in which Thailand has strength such as the automotive industry, food industry and biotechnology. For the automotive industry, the government anticipates to be one of the world’s top 10 auto producers. With the strength of

BOI Discusses Investment with JFCCT

PageBOI Discusses Investment with JFCCT 1

News Bites / BOI Net Applications 2Why Thailand? 4Index of Economic Freedom 2013 7BOI Investment Promotion Applications 8

Growing Opportunities for Thailand’s Retail Food Market 9

Company Spotlight:Mitsubishi Electric Thai Auto-Parts 10

Thailand Economy-At-A-Glance 12

Continued on P. 3

NEWS BITES BOI NET APPLICATIONS2010

(US$ = 31.68THB)2011

(US$ = 30.49THB)2012

(US$ = 31.08THB)Number of

projects Value Number of projects Value Number of

projects Value

Total Investment 1,524 13,014 1,990 20,800 2,584 47,586

Total Foreign Investment 866 7,451 1,059 12,999 1,584 20,849

By Sector

Agricultural Products 73 501 72 555 85 1,042

Minerals / Ceramics 18 834 40 886 34 514

Light Industries / Textiles 67 276 63 434 80 1,097

Automotive / Metal Processing 244 1,852 367 3,974 532 7,541

Electrical / Electronics 155 1,966 200 2,566 289 5,021

Chemicals / Paper 118 729 117 1,409 228 2,707

Services 191 1,293 200 3,174 336 2,926

By Economy

Japan 364 3,297 560 6,358 872 12,033

Europe 123 1,215 150 765 166 1,724

Taiwan 39 117 54 271 53 285

USA 42 231 31 252 53 795

Hong Kong 26 133 32 435 72 1,695

Singapore 66 362 55 815 134 871

By Zone

Zone 1 241 860 278 1,108 417 2,660

Zone 2 432 4,466 578 8,817 922 15,101

Zone 3 193 2,126 203 3,075 245 3,088

Unit: US$ MillionNote: Investment projects with foreign equity participation from more than one country are reported in the figures for both countries.

Government’s Huge Investment Plan on Infrastructure Development

The Government is planning to invest two trillion baht in infrastructure development, as part of its national strategy to move the country forward.

Prime Minister Yingluck Shinawatra has said that the huge infrastructure investment should not cause concern about a negative impact on public debt, since the Ministry of Finance was told to adhere to fiscal discipline to ensure that the country’s public debts would stand at not more than 50 percent of GDP. The Prime Minister said that Thailand now enjoyed fiscal stability and that its international reserves were also in a good position.

The Prime Minister bel ieves that the infrastructure investment plan would reduce costs, shorten transportation time, and reduce social, political, and economic disparity between low-income and high-income earners. Moreover, the plan would generate employment and attract tourist arrivals and investments. She added that infrastructure would lead to a better quality of life, as well, and that the Government deemed it necessary to ensure that all groups of people would receive equal rights and opportunities.

Among the investment projects are 10 electric train routes and double-track train service. In border provinces, there would be transportation networks linking with neighboring countries, which would promote tourism and facilitate business operation.

Four National Strategies to Be Used to Move Thailand Forward

The Government has announced four national strategies to be used by various government agencies to move the country forward.

Prime Minister Yingluck Shinawatra presented the national strategies to Cabinet members, senior officials, and provincial governors at a seminar, held on 22 January 2013 in Bangkok. In the first strategy, the Government will focus on capacity-building to enhance Thailand’s long-term competitiveness for sustainable growth.

The second strategy seeks to reduce social disparity between low-income and high-income earners and provide greater opportunities for the people, based on economic, social, and political equality.

The third strategy emphasizes the “green growth economy.” In this strategy, the Government will seek to promote quality of life and environmentally friendly growth.

The fourth strategy is for a balance of the previous three strategies by adopting His Majesty the King’s Sufficiency Economy.The Prime Minister said that efforts to restore confidence in Thailand had led to an increase in national tourism income to 1.4 trillion baht and tourist arrivals to 22 million in 2012.

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Thailand’s agro-industry and its raw materials, the plan to promote the Thai food industry as the “Kitchen of the World” is also a major government policy.

Responding to the minister’s remarks, Mr. Nandor G. Von der Luehe, chairman of JFCCT, expressed sincere thanks to the BOI and the Industry Ministry for the arrangement of this meeting. He and other foreign companies in Thailand appreciate BOI’s role in improving the investment climate; however, he felt there are some issues that the government should improve in order to enhance the country’s competitiveness such as more openness in the service sector, facilitation on visas and work permits, etc. Mr. Von der Luehe also remarked that the government should give more support to research and development act ivi t ies, which is essential to restructure the Thai economy into a knowledge-based economy.

The meeting then discussed a wide range of issues. Another topic which received a lot of attention was work permit issues. Ms. Duangjai Asawachintachit, BOI Deputy Secretary General, explained that the BOI has been working closely with the Department of Employment to find ways to facilitate foreign investors who enter Thailand for certain investment-related activities such as business meetings, seminars, and exhibition visits, etc. The Department of Employment’s representative also expressed understanding of the issue and informed that the Department of Employment would continue to work on solving the problem.

For the simplification of BOI documents, the introduction of the E-expert system for bringing in foreign experts, the Electronic machine tracking system for bringing in imported machinery, and the Electronic raw material tracking system for bringing in imported raw materials will significantly help reduce hard copy documents to be submitted to the BOI as well as processing time.

Among several issues discussed at this meeting, one of the highlights was the draft proposal of a 5-year investment promotion strategy (2013-2017), presented by Mr. Udom Wongviwatchai, BOI Secretary General. The goal of new policy is to promote investment that helps Thailand achieve its economic transformation and in order to accomplish that goal the BOI has proposed many changes in its policy focus.

Firstly, 10 sectors were identified for future promotion focus, including: (1) Basic infrastructure and logistics(2) Basic industry such as steel, petrochemicals, machinery(3) Medical device and scientific equipment(4) Alternative energy and environmental services(5) Services that support the industrial sector such as R&D,

HRD, engineering design, software, ROH, trade and investment support office etc.

(6) Advanced core technologies such as biotechnology, nanotechnology, advanced material technology, etc.

(7) Food and agricultural processing industry(8) Hospitality & Wellness(9) Automotive and other transport equipment(10) Electric and electrical appliances

In addition, the draft proposal features changes in investment promotion such as granting additional tax incentives based on the merits of projects apart from basic tax incentives based on type of activities, promotion of new regional industrial clusters, a more active role of the BOI as investment facilitator through non-tax incentives and one stop service to enhance the investment environment, and Thai overseas investment promotion, etc.

The BOI has organized seminars on new investment promotion policy in 5 cities, namely in Bangkok, Chonburi, Chiang Mai, Nakhon Ratchasima and Surat Thani, in order to inform the public of the draft proposed new investment promotion policy and to gather comments and suggestions from the public for further revision of the proposal before presenting it to the Board of Investment for consideration.

The BOI and the Ministry of Industry viewed the BOI-JFCCT consultative meeting as a platform for assuring investors of the government’s commitment to investment promotion, improvement of the investment environment, and to increasing Thailand’s competitiveness regionally and globally.

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Why Thailand?

Thailand has historically welcomed the world to its shores and over the past half century experienced a profound transformation that continues to this day. Often referred to as “The Land of Smiles”, Thailand possesses a dynamic economy, a rich history, a maturing political system, a splendid culture, an energetic society, and an amiable people. The country is committed to a path of economic liberalization and free markets that has served Thailand and investors well.

There are several reasons why foreign businesses take a close look at Thailand and consider investing long-term in the country. Here is an overview of those factors that make Thailand a premier destination for foreign capital investment.

The Kingdom of Thailand is a constitutional monarchy and this feature continues to function as the cornerstone of the country’s entire political system. Moreover, over the past twenty-five years Thailand has embarked upon a gradual transition that has

strengthened and developed its brand of Asian-style democracy.

P r i m e M i n i s t e r Y i n g l u c k Shinawatra has been head of government since a resounding victory in a general election that took place in July 2011 and several outside observers, such as Freedom House, viewed the past election to have been free and fair but also the results to have been tallied in a transparent manner.

The Kingdom of Thai land is recognized as a respected member of the international community and is a founding member of the Association of South-East Asian Nations (ASEAN). Successive g o v e r n m e n t s h a v e s h o w n commitment to free and fair trade

and Thailand seeks more integration and involvement at the global level.

The country is recognized by the World Bank as “one of the great development success stories”, ranked as an upper-middle income country. In fact, for the past several years the World Bank has ranked Thailand among the top-20 countries in the world for ease of doing business, 18th out of 185 economies in the 2013 ranking.

The Thai economy is dependent upon exports of goods and services which account for about 78% of its gross domestic product (GDP). Since recovering from the East Asian financial crisis of the late 1990s, GDP performance has averaged between 5 to 6% year-on-year. For 2012 Thailand’s GDP grew by 6.4%. The government responded to the global

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recession and the 2011 flood with a stimulus package estimated to have contributed an increase to the country’s GDP of 1.3% by spurring domestic consumption. The GDP per capita (PPP) of Thailand stands approximately at $8,700 (2012 est).

The diversified manufacturing sector in Thailand has greatly contributed to the country’s continued economic success . A range o f indus t r ies including computers and electronics, automotives and parts, processed food, plastic products, rubber products, gems and jewelry have catapulted the Thai economy to the top of global rankings.

Thailand’s industrial base also is boosted by the export of high technology components like hard disk drives, integrated circuits, vehicles and sophisticated electrical appliances. Foreign direct investment (FDI) inward stock amounted to about US$140 billion in 2011, according to the UNCTAD World Investment Report 2012. Further, UNCTAD has ranked Thailand 8th in the world as a prospective host economy for FDI. Moreover, the agricultural sector – crops, livestock, forestry, fisheries – is Thailand’s biggest employer. About 40% of the total Thai population is dependent upon agriculture. Indeed, Thailand is a major producer and exporter of cassava (#1 exporter), rubber (#1 exporter) sugar (#2 exporter), fishery exports (#3 exporter), rice and grains (#6 exporter), the 12th largest food exporting nation, and leading exporter of many other food products. It also leads the Asian region in exporting chicken meat and several other commodities.

In 1992, leaders of ASEAN governments approved a Thai proposal to establish the ASEAN Free Trade Area (AFTA), which aimed to reduce tariffs on most processed agricultural and industrial products traded among ASEAN countries. The scheduled tariff reductions have continued to be pushed forward; currently, over 90% of the tariffs on goods have been reduced to zero, and further reductions will be in place by the end of 2015 with the inauguration of the ASEAN Economic Community. Likewise, ASEAN has expanded its commercial relationships with Australia, New Zealand, China, South Korea, India and Japan in the form of free trade agreements. ASEAN, with a population of 550 million people, represents about 2.4% of the world’s GDP and this figure increases considerably when its FTA with China is factored in, thereby creating a market of nearly 2 billion people. Still, it must be pointed out that Thailand is the second largest economy within the regional grouping.

Beyond its links with ASEAN, it is worth recalling that Thailand, a country with a 96% literacy rate, is the world’s 31st largest economy and 24th by purchasing power, as well as being the 28th largest exporting country. Thailand also can boast claim to having the world’s 35th largest services output, 17th largest manufacturing output and the 11th largest in agricultural output. Moreover, the country ranks 38th in the World Economic Forum (WEF) Global Competitiveness Report 2012-2013.

Focusing on the importance and utility of economic linkages in today’s world, Thailand has signed a limited bilateral free trade

agreement with China and has a partial agreement with India. An FTA with Australia was implemented on 1 January 2005 then later with New Zealand on 1 January 2010. Similarly, Thailand completed FTA negotiations with Japan and the agreement was signed in 2007. It must be mentioned that the country at this time is working towards an FTA with the European Union.

With a population of around 67 million people, with one-third living in urban areas, Thailand offers an interesting marketplace. The capital city of Bangkok, but even more so the country’s secondary cities, such as Chiang Mai, Hat Yai, Khon Kean, Nakhon Ratchasima and Udon Thani, and smaller tertiary cities, boast thriving business communities and a vast consumer base. Plus, there exists a growing and increasingly affluent middle class that has intensified the demand for imported goods and services, thereby driving forward the process of trade liberalization and greater openness within the Thai economy.

Every year, thousands of Asian and Western expats move to Thailand. Some stay permanently, some stay for a few years, some for only a few months but most of them have good reasons why they decided to travel to Thailand. But what are their motivations? Why settle in Thailand? It appears that relocation to Thailand has become an appealing and viable alternative

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for many foreigners to explore, as the process of fast-track globalization facilitates the movement of people around the world. Some of the many other reasons for moving to this country include reasonably priced travel options; the friendliness and hospitality of the Thai people; and the country’s beautiful weather/climate.

Other “magnets” that have led to a boom in Thailand’s expat population (particularly of young professionals and families) are access to high-quality medical/health care; the existence of accredited international schools and/or programs; and the abundance of Western-style amenities. But these enticements are underpinned by the renowned Thai lifestyle that balances work with recreation, tradition with modernity, individualism with companionship. These social and cultural aspects are demonstrated openly during Thailand’s numerous festivals and public holidays, like Songkran and Loy Krathong.

In fact, the Kingdom of Thailand is rated 9th among the top 22 destinations for world’s best retirement destination in 2012,

according to the International Living website. It can be argued that the country is so much more than an exotic vacation spot. For many expats, the country is a tropical paradise found. Moreover, both the quality of life and the standard of living are good, and the cost of living is very affordable for expats – working professionals and retirees.

With its modern infrastructure, the government has committed to spend 2.2 trillion baht on transportation improvement projects, and another 350 billion baht on a national water management plan. This will ensure that the country is fully prepared to meet the connectivity needs of an ASEAN market, and of the nation’s growing position in the global supply chain.

Finally, another attractive feature is the Board of Investment. Operating under the Ministry of Industry, the BOI is an agency set-up by the Government of Thailand to provide incentives to foreign or local entrepreneurs that invest in a vast variety of economic sectors. Furthermore, the two main goals of the BOI are to decentralize Thailand’s industrial base and to attract special types of investment, also known as priority activities. Additionally, the BOI provides guidelines and investment information and services to its customers. It also is tasked to act as the marketing arm of the Government of Thailand to actively promote the country across the globe as one of the best investment locations in Asia. Yet, more importantly, the BOI manages the working privileges given to foreign experts and skilled workers as stipulated by the Investment Promotion Act of 1977. Indeed, the Board of Investment functions as an indispensable local partner in opening the country to foreign businesses as well as to individual investors, thereby contributing to the growth of Thailand’s economy.

Without doubt the Kingdom of Thailand is in a period of transition as the country advances its economic development to become more globally competitive, positions itself to take full advantage of the benefits of the forthcoming ASEAN Economic Community, and expands its emergent middle class. Thailand aims for sustainability and stability as well as progress and prosperity. It is a country endowed with bountiful human and natural resources along with a geographical setting that makes it immediately appealing to both foreign investors and businesses. Thailand lies at the heart of mainland Southeast Asia and over the years it has built an extensive and efficient infrastructure of roads, railways, airports,

seaports, and communication hubs that permit it to integrate more closely into the global market economy. Logistics, medical services, information technology, and research and development are the new horizons. Indeed, the leadership of the country aspires to become a knowledge-based economy that benefits from the creativity, innovation and skill of its work force, whether on the assembly line or in the office. As Thailand begins the shift away from low-cost, labor-intensive manufacturing to more value-added, technology-driven production, the Thai economy will move up the development ladder, thereby improving the quality of life and the standard of living of everyone in the country. The future promises many opportunities for investors in Thailand.

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The Heritage Foundation, together with the Wall Street Journal, has released its annual Index of Economic Freedom, which covers 185 countries and scores countries on 10 freedoms identified by the foundation: labor freedom, business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights and freedom from corruption. The Index measures ten components, using a scale from 0 to 100, where 100 represents the maximum freedom. “For analytical understanding and presentational clarity, the 10 economic freedoms are grouped into four broad categories or pillars of economic freedom:• Rule of Law (property rights, freedom from

corruption);• Limited government (fiscal freedom, government

spending);• Regulatory efficiency (business freedom, labor

freedom, monetary freedom); and• Open markets (trade freedom, investment

freedom, financial freedom).”

According to Ambassador Terry Miller, Director of the Center for International Trade and Economics (CITE) and Mark A. Kolokotrones Fellow in Economic Freedom at The Her i tage Foundat ion, “The foundations of economic freedom are weakening around the world...”

Thailand’s global rank now stands at 61. Within the Asia-Pacific region, which continues to hold the Index’s top 4 scores globally, Thailand is once again ranked 10th out of 41 countries; 3rd among ASEAN. The region also includes some of the lowest ranking countries, which gives it an average of 57.4 in comparison to a global average of 59.6.

The Heritage Foundation notes that “recent reforms have improved regulatory efficiency” and that “the financial system has undergone restructuring in recent years. Capital markets are relatively well developed and dynamic.” And yet, with a score of 64.1 there is room for improvement, which is something the government is open to and continues to address. Thailand continues to receive an overall 83.7 ranking for government spending, as well as 78.9 for fiscal freedom. The Index lists Thailand’s corporate income tax rate as being 23 percent, although this rate dropped to 20% beginning on January 1st of this year.

In several other areas as well Thailand achieved high marks, such as in business freedom, 73.2, labor freedom, 72.9, trade freedom, 75.2, and financial freedom, 70.0.

Thailand continues to work to improve its economic freedom, which has become especially important as the integration of global economies becomes more widespread. Thailand already has one of the most competitive corporate income tax rates in Asia; it has one of the regions better ranked economies for economic

freedom and continues to be highly ranked by other bodies such as UNCTAD and the World Bank. The improvements being made in the run-up to the formation of the ASEAN Economic Community should prove to be beneficial to the country’s future rankings and to investors today and well into the future.

Index of Economic Freedom 2013

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BOI Investment Promotion ApplicationsDespite the continuing headwinds being faced by many of the world’s major economies, the Thailand Board of Investment continues to move forward and attract investment at a rapid pace. A record high value of 1,479.1 billion baht in applications was received from January through December 2012. Even the numbers of projects applying, 2, 584, represents a new high. Of that amount, 648 billion was from foreign investor net applications, which accounted for 1,584 projects.

Japanese companies remain the largest investors in Thailand, accounting for about 374 billion baht of the total value of applications received. This year, Hong Kong has moved into second place with a net application value of 52.7 billion. For the first time in several years, Singapore has been replaced in the 3rd rank by Netherlands, with 36 billion baht value for 44 applications; Singapore applications totaling 27 billion baht, albeit for 134 applications.

There have been several reasons cited over the past months for the increase in net applications received at BOI, which even by the end of the 3rd quarter last year were approaching 1 trillion baht. Certainly the ongoing economic difficulties faced in both Europe and the United States have contributed to the surge. Also is the fact that in a short time the ASEAN Economic Community will form, and Thailand is well prepared for investors to take full advantage by locating manufacturing facilities in the country.

The majority of the value, or 612.5 billion baht, was for 791 project application under the services and infrastructure sector. Of that amount, 393 billion baht was for 311 projects in public utilities and basic services; 2 billion for 80 international procurement office projects and 1.6 billion baht for 98 projects related to trade and investment support offices, to name a few.

This sector should continue to do well as the government has already adopted a transportation plan that aims to implement 55 projects worth Bt2.2 trillion by 2020. It is anticipated that this will lower the country’s logistics costs by 15%. In addition, the government continues to move forward with its national water management program, valued at 350 billion baht.

Second in terms of value, or 255.5 billion baht, was derived from 611 applications in the metal processing sector, which includes the automotive industry. According to the Thai Automotive Institute, 2,453,717 vehicles were produced in Thailand last year, setting yet another record with 123% year on year growth. This was a significant milestone in that Thailand has surpassed the goal of producing 2 million vehicles on 7 years after reaching the 1 million vehicle mark.

Chemicals, Plastics and Paper industries received the third highest value for project applications received. A staggering 244.8 billion baht value for 327 projects was received for the manufacture of plastics or plastic coated products.

Rounding out the field there was a value of 167.6 billion baht for 347 projects in the electronics & paper industries;

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94.8 billion baht for 331 projects in agro-industries; 58.9 billion baht for 75 projects in minerals and ceramics; and 45 billion baht for 102 projects in light industries.

Looking ahead, the Board of Investment will be actively promoting green industries, in line with the government’s national strategy to maintain competitiveness, as well as those industries that adopt modern technology into their production process. The outlook for 2013 remains good for the BOI, which this year expects to see a more normal pattern of investment applications submitted, around 600 billion baht.

With a lowered corporate income tax rate of 20% and good and improving infrastructure, Thailand continues to offer investors among the best of investment locations in Asia.

The Foreign Agriculture Service of the United States Department of Agriculture released a report last month on the retail foods sector in Thailand, indicating that “Thailand boasts one of the most attractive food and drink markets in the Asia Pacific Region…food and beverage expenditures expected to grow by about 26 percent by 2015.”

The report notes that Thailand’s retail food sector has been among the fastest growing in the world over the past ten years, with the growth of modern retail food stores that “utilize standardized management systems, point of sale displays, state of the art technology, and are situated in densely populated and more affluent areas.”

The report also indicates the expansion of retail food operators into online shopping and the use of social networks, which is facilitated by the greater access achieved through mobile devices and reliable online-payment service providers.

While BOI does not promote retail food outlets, the growth of this industry does highlight the opportunity that exists in the manufacture of food and beverages. The manufacture or preservation of ready-to-eat or semi-ready-to-eat food is classified as a priority activity of special importance and benefits to the country, which means attractive incentives from BOI for those who qualify.

Growing Opportunities for Thailand’s Retail Food Market

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COMPANY SPOTLIGHT

Mitsubishi Electric Thai Auto-Parts

During an interview with Thailand Investment Review, Akitoshi Kamada, President of Mitsubishi Electric Thai Auto-Parts Company, outlined some key aspects of the corporation and highlighted some important issues and trends that the enterprise has been observing over the past year. As Mr. Kamada pointed out, due to fast-track globalization business strategies must be flexible and reviewed constantly in order for company executives to respond quickly and effectively to both opportunities and threats. The interview took place on the premises of the META factory at the Siam Eastern Industrial Park.

Over a cup of Japanese green tea, a number of questions were posed to Mr. Kamada, ranging from the basics – the identification of the company’s chief products – to the strategic – the future impact of the ASEAN Economic Community upon the business operations of Mitsubishi Electric Thai Auto-Parts. His replies were insightful not only about the primary functions of META (regarding production, supply and distribution), but also about the company’s overall place in the global network of both the Mitsubishi Electric and the parent corporation, Mitsubishi. Additionally, he spoke about the current challenges META confronts locally as well as globally and the attractions of living as a Japanese expat in Thailand.

Mr. Kamada has worked for the Mitsubishi Electric Group for 27 years. First assigned to work at Mitsubishi Electric Thai Auto-Parts in 2010, he held the posting of company vice president. But in October 2011, during the height of the flood crisis in Thailand, Mr. Kamada was promoted to be company president. He is a native of Sanda, a mid-sized city in Hyogo prefecture, Japan, but has an international outlook due to his numerous business travels.

Established in 1921, the Mitsubishi Electric Group is a global leader in the manufacture and sales of electric and electronic equipment used in Energy and Electric Systems, Industrial Automation, Information and Communication Systems, Electronic Devices, and Home Appliances. Headquartered in Tokyo, Japan, the company has offices and facilities around the world, with a high profile presence in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. Since its inception, the Mitsubishi Electric Group seeks to improve consistently its technologies and services by emphasizing the creative and inventive aspect of its business. By doing so, the company enhances the quality of life across the globe.

Automotive equipment technology by Mitsubishi Electric is a driving force behind vehicles made by the world’s major automobile manufacturers. The company has a significant global market share in alternators, ignition coils and electric power steering. It also produces numerous on-board electronic components and safety systems like anti-theft, chassis control, radar and air bag control. Environment-critical components, too, such as for hybrid electric and fuel cell-powered vehicles, are manufactured and supplied to leading carmakers throughout the world. Furthermore, Mitsubishi Electric is on the cutting-edge with satellite-based telematics technologies, creating a new dimension of in-car conveniences, such as pinpoint navigation, automatic toll collection, intelligent emergency services and entertainment. Indeed, the company helps to drive the evolution of the automobile ever forward.

Mitsubishi Electric has been operating in Thailand for decades and oversees several in-country subsidiaries. One of them is the Mitsubishi Electric Thai Auto-Parts Company (META), which has an extensive facility at the Siam Eastern Industrial Park (SEP) located in Rayong province. Siam Steel Group founded this manufacturing estate in 1992 to promote and develop the Eastern Seaboard as the core of Thailand’s export-oriented economy. The SEP is an area under the Board of Investment’s (BOI) Zone 3, thereby receiving the highest range of privileges from the Government of Thailand. It is also close to Bangkok and other resource centers including the seaport at Laem Chabang and Suvarnabhumi International Airport. Moreover, the SEP is abundant with natural sources of water, while also having a central waste water treatment facility and all the necessary infrastructure for industrial operations.

InterviewMr. Akitoshi Kamada,President, Mitsubishi Electric Thai Auto-Parts Company Limited

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To begin, Mr. Kamada explained that META manufactures exclusively components for automobiles and motorcycles. For instance, the company produces alternators, starters, electric power steering (EPS) motors and electronic control units (ECUs), Gardener Denver vacuum pumps (GDVPs), car audios and exhaust gas recirculation (EGR) and solenoid (SOL) valves. These parts are made not only for Mitsubishi Motors but also for other Japanese automotive manufacturers such as Nissan. Mr. Kamada also stated that META inaugurated its operations at the SEP on the 1st of October 1997 in the midst of the 1997-1998 East Asian Financial Crisis and Thailand’s attendant economic meltdown.

Currently, META has five plants in Thailand but only a single plant (at the SEP) dedicated to the manufacture of automotive parts. META’s Rayong facility employees 2,800 staff.

When queried, if Mitsubishi Electric Thai Auto-Parts has any future growth plans in Thailand, Mr. Kamada was quick to respond in the affirmative. He pointed out that META is considering the opening of new plants in certain parts of Thailand and creating a more integrated and efficient supply chain, at both the local and regional levels. The reason stems from the fact that there exists greater competition globally and there is more demand from customers, particularly auto producers that are increasing their manufacturing capacity. Furthermore, Mr. Kamada declared that META has an edge over its competitors in the industry due to the company’s long-term presence in Thailand, its far-reaching supply chain (internal as well as external), its experienced executives and managers who are knowledgeable of the Thai automotive market, and a real sense of teamwork shared by all META staff.

Later Mr. Kamada was asked: How important are the incentives offered by the Board of Investment to Mitsubishi Electric Thai Auto-Parts when making business decisions? Moreover, is the Board of Investment helpful in promoting the industry’s development? He proclaimed without hesitation that when compared to other countries in the Asia-Pacific region the BOI system is first-rate with plenty of incentives on offer and exhibits attentive cooperation in facilitating both investment and expansion. Mr. Kamada also asserted that the BOI does assist the auto sector in Thailand significantly and BOI’s proactive approach has benefitted all enterprises associated with the industry. He continued by stating that future changes are in store for the Thai automotive sector and that they will be experienced by the industry sometime in the middle of 2013.

Indeed, according to Mr. Kamada, the Board of Investment is one reason why Mitsubishi Electric Thai Auto-Parts considers Thailand to be a good operating base, regionally as well as globally, for it serves as a reliable partner. Other reasons include the country’s central geographic location on mainland Southeast Asia, the widespread availability of good infrastructure throughout Thailand, the existence of supporting industries necessary for growth, a healthy export-driven economy, and favorable Government policies/regulations.

When the discussion turned to the topic of Thai workers, Mr. Kamada provided some observations that were noteworthy. He started by saying that certain social-cultural characteristics of the Thai people are a crucial motive for Japanese companies to establish themselves in Thailand. Mr. Kamada highlights that the Thai staff at Mitsubishi Electric Thai Auto-Parts have proven to be adaptable, flexible, and team-oriented.

Yet, he commented that there is a shortage of skilled labor in Thailand. In fact, there is an industry-wide need for more workers who possess certain language and technical capabilities. The exigencies of globalization make it an imperative for auto manufacturers to put together a labor force that can compete on an international level and that can contribute to the development of the company. As an example, Mr. Kamada points out that Japanese and English are the two principal languages used by META. Even though Thai may be used for conversational purposes on the factory floor or in the warehouse, it does not replace the importance of either Japanese or English.

Mr. Kamada did mention that Mitsubishi Electric Thai Auto-Parts does send approximately 100 of its Thai staff to Japan to receive product and assembly training per year. This instruction ranges from a minimum of a few days to a maximum of three months. Still, the training courses rely on Japanese to Thai translation.

Likewise, there is another area for improvement. The company does not conduct any of its research and development in Thailand presently, but this deficiency is to be addressed soon, according to Mr. Kamada. However, Nissan and Honda do have their own R&D centers in Thailand, and this is a trend that META cannot afford to be left behind.

The final question put to Mr. Kamada was, what opportunities will the ASEAN Economic Community (AEC) present to the Thailand operations of Mitsubishi Electric Thai Auto-Parts? He immediately replied that the creation of a large Southeast Asian consumer market and the potential to establish new production bases as well as to expand existing supply chains will result from the launching of the AEC. Larger economies of scale for businesses and industries will emerge in the wake of the AEC, thereby increasing corporate productivity while reducing production costs, leading to a more competitive pricing of goods and services. Additionally, increased economic integration will strengthen business networks across ASEAN, opening the way to more growth and prosperity. Yet, perhaps more importantly, there will be greater uniformity regarding the flow of cross-border trade and investment throughout the ASEAN region and this feature will benefit a company like Mitsubishi Electric Thai Auto-Parts. Still, as Mr. Kamada pointed out, intra-industry competition will be heightened considerably.

Other issues discussed during the interview were META’s adjustment to the Bt300 minimum daily wage, the benefits to META of the Japan-Thailand Economic Partnership Agreement (signed in 2007), the recent appreciation of the baht and its effect upon META’s business activities, and the appeal of expat life for Japanese in Thailand.

In general, Mr. Kamada communicated a positive viewpoint regarding not only the business climate in Thailand but also the country’s economic development. He is confident in the ability of Mitsubishi Electric Thai Auto-Parts to meet challenges found within the automotive industry in Thailand as well as to deal with the pressures of an ever-changing and demanding global consumer market. Furthermore, Mr. Kamada believes that the ongoing partnership META has with the Board of Investment of Thailand will be a key reason for the company’s continuing success.

February 2013

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THAILAND ECONOMY-AT-A-GLANCE

Source: Stock Exchange of Thailand

Source: Bank of Thailand

SET Monthly Closing Values

International Reserves / Short-term Debt (%)

Exchange Rate Trends

Industrial Capacity Utilization (%)

Head Office, Office of the Board of Investment 555 Vibhavadi-Rangsit Road, Chatuchak, Bangkok 10900, ThailandTel: +66 (0) 2553 8111 Fax: +66 (0) 2553 8222 Website: www.boi.go.th E-mail: head@boi.go.thBEIJINGThailand Board of Investment, Beijing Office Royal Thai Embassy No.40 Guang Hua Road, Beijing, 100600, P.R.China Tel: (86-10) 6532-4510 Fax: (86-10) 6532-1620 E-mail: beijing@boi.go.th

FRANKFURTThailand Board of Investment, Frankfurt OfficeBethmannstr. 58, 5.OG60311 Frankfurt am Main Federal Republic of Germany Tel: (49 69) 92 91 230Fax: (49 69) 92 91 2320E-mail: fra@boi.go.th

GUANGZHOUThailand Board of Investment, Guangzhou Office Investment Promotion Section, Royal Thai Consulate-General, Guangzhou, Room 1216-1218, Garden Tower, 368 Huanshi Dong Road, Guangzhou, 510064 P.R.C. Tel: (86-20) 833-38999 Ext: 1216 to 18 (86-20) 838-77770Fax: (86-20) 838-72700 E-mail: guangzhou@boi.go.th

LOS ANGELES Thailand Board of Investment, Los Angeles Office Royal Thai Consulate-General 611 North Larchmont Boulevard, 3rd Floor, Los Angeles, CA 90004 USA Tel: (1-323) 960 1199Fax: (1-323) 960 1190E-mail: boila@boi.go.th

NEW YORKThailand Board of Investment, New York Office 61 Broadway, Suite 2810 New York, NY 10006 U.S.A.Tel: (1-212) 422 9009Fax: (1-212) 422 9119E-mail: nyc@boi.go.th

OSAKAThailand Board of Investment, Osaka Office Royal Thai Consulate-General, Osaka, Bangkok Bank Bldg. 7th Floor , 1-9-16 Kyutaro-Machi, Chuo-Ku, Osaka 541-0056 Japan Tel: (81-6) 6271-1395 Fax: (81-6) 6271-1394E-mail: osaka@boi.go.th

PARISThailand Board of Investment, Paris Office Ambassade Royale de Thailande, 8, Rue Greuze75116 Paris, FranceTel: (33 1) 5690 2600 (33 1) 5690 2601Fax: (33 1) 5690 2602E-mail: par@boi.go.th

SEOULThailand Board of Investment, Seoul Office #1804, 18th Floor, Coryo Daeyungak Tower, 25-5, Chungmuro 1-ga, Jung-gu, Seoul, 100-706, Korea Tel: (822) 319-9998 Fax: (822) 319-9997E-mail: seoul@boi.go.th

SHANGHAIThailand Board of Investment, Shanghai OfficeRoyal Thai Consulate-General15 F., Crystal Century Tower, 567 Weihai Road, Shanghai, 200041, P.R.China Tel: (86-21) 6288-9728, (86-21) 6288-9729 Fax: (86-21) 6288-9730E-mail: shanghai@boi.go.th

STOCKHOLMThailand Board of Investment, Stockholm OfficeStureplan 4C 4th Floor 114 35 Stockholm, Sweden Tel: +46 (0)8 463 1158 +46 (0)8 463 1172 +46 (0)8 463 1174 to 75 Fax: +46 (0)8 463 1160 E-mail: stockholm@boi.go.th

SYDNEYThailand Board of Investment, Sydney Office Suite 101, Level 1, 234 George Street, NSW 2000, Australia Tel: (+61) 2 9252 4884 Fax: (+61) 2 9252 2883 E-mail: sydney@boi.go.th

TAIPEIThailand Board of Investment, Taipei Office Taipei World Trade Center 3rd Floor, Room 3E39-40, No.5, Xin-Yi Road, Sec.5Taipei 110, Taiwan, R.O.C. Tel: (886) 2-23456663Fax: (886) 2-23459223 E-mail: taipei@boi.go.th

TOKYOThailand Board of Investment, Tokyo Office Royal Thai Embassy8th Fl., Fukuda Building West,2-11-3 Akasaka, Minato-ku, Tokyo 107-0052 JapanTel: (81 3) 3582 1806Fax: (81 3) 3589 5176E-mail: tyo@boi.go.th

Facts about ThailandPopulation (2010) 66 millionASEAN Population 600 millionLiteracy Rate 96%Minimum Wage 300 Baht/day

GDP (2012) US$ 365 billionGDP per Capita (2012) US$5,382GDP Growth (2012) 6.4%GDP Growth (2013, projected) 4.5-5.5%Export Growth (2012) 3.2%Export Growth (2013, projected) 11%

Trade Balance (2012) US$ 8.3 billionCurrent Account Balance (2012) US$ 2.7 billionInternational Reserves (2012) US$ 181.61 billionCapacity Utilization (2012) 65.23%Manufacturing Production Index (2012) 177.20Core Inflation (2013, projected) 1.7Headline Inflation (2013, projected) 2.8Consumer Price Index (Dec 2012) 116.86 (2007=100)

Corporate Income Tax 10-20%Withholding Tax 10-15%Value Added Tax 7%

January Average Exchange RatesUS$1 = 30.07 baht€1 = 39.94 baht£1 = 48.03 baht100 ¥ = 33.81 bahtCNY1 = 4.84 baht

Top 10 Exports 2012

Product Share Value (US$ bn)

1 Motor cars, parts and accessories 9.98 22.912 Automatic data processing machines

and parts thereof8.30 19.06

3 Precious stones and jewellery 5.73 13.154 Refine fuels 5.62 12.905 Rubber 3.81 8.756 Polymers of ethylene, propylene, etc

in primary forms3.72 8.53

7 Chemical products 3.71 8.528 Rubber products 3.66 8.419 Iron and steel and their products 3.07 7.05

10 Electronic integrated circuits 2.91 6.69Total 229.52

Source: Ministry of Commerce

Source: Bank of Thailand

Source: Bank of Thailand BOI

BOI Fair 2011

February 2013

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