Thailand: A Prime Destination for Doing Business in Southeast Asia

Ms. Ajarin Pattanapanchai Deputy Secretary General

Thailand Board of Investment

THAILAND is the world’s

• 17th largest manufacturer output

• 28rd largest exporter (US$225.4

billion in 2013)

• 2nd largest economy in ASEAN

(GDP US$385 billion in 2013)

Thailand’s Fast Facts

Thai population 67 million (2013)

Thailand’s GDP US$385 billion (2013)

US$5,647 per capita GDP

Thai GDP by sector

Agriculture: 12%

Industry: 45%

Services: 43%

Thai labor force 39.13 million(2013)

Thai exports US$225.4 billion (2013)

Thai imports US$219.0 billion (2013)

Source: NESDB as of Feb 17, 2014 and Pocket World in Figures 2014 Edition

2011 2012 2013 2014 (Jan-

May)

Motor cars, parts and accessories 16.98 22.91 24.40 9.91

Computer parts 17.06 19.06 17.76 7.30

Precious stones and jewelery 12.30 13.15 10.09 4.55

Refine fuels 10.09 12.88 12.73 4.29

Plastics resins 8.80 8.53 8.96 4.08

Chemical products 8.29 8.52 9.11 3.63

Rubber products 8.39 8.41 8.51 3.30

Machinery and parts 6.11 6.24 6.79 2.98

Rubber 12.70 8.75 8.23 2.93

Integrated circuits 7.91 6.69 7.21 2.81

Others 113.93 114.11 114.75 47.08

Total 222.58 229.24 228.53 92.86

Unit: US$ Billion

Top 10 Exports in 2011 – 2014 (Jan-May)

Source: www.moc.go.th as of June 27, 2014

WHY THAILAND

Highly Ranked

UNCTAD Ranks Thailand 8th as a top prospective host economy 2013-2015

World Bank Ranks Thailand among the easiest places to do Business in Asia and 18th in the World

“Over the past 6 years, Thailand has suffered

bouts of political unrest on top of the global

financial crisis and severe flooding. Nevertheless,

the economy maintains solid economic

fundamentals that support its resilience, with high

international reserves, relatively low inflation, a

moderate amount of government and external

debt, and a strong manufacturing base.”

Asian Development Bank Outlook 2014

213

128

106 105

74

55 51 4731

0

50

100

150

200

250

Prime Office Occupancy Costs US$/sq ft/annum

Source: Asia Pacific Office Market View, Q1, 2014 as of May 28, 2014

Wage Comparison 92.4

54.849.6

42.8

33.3

21.5 20.917 14.6

8.5 8 7.9 7.6

0

10

20

30

40

50

60

70

80

90

100

Tok

yo

Seou

l

Duba

i

Hon

g K

ong

Tai

pei

Kua

la lu

mpu

r

Shan

ghai

Beijing

Ban

gkok

Mum

bai

Man

ila

Jaka

rta

Delhi

Wa

ge L

ev

els

(U

S$

)

Gross

Net

4

Cities ranked according to gross value of index. New York = 100

Source: UBS/Prices & Earnings update September 2012

Construction Costs Description M2 Costs (THB) M2 Costs

(US$1=32THB)

Industrial Building

Standard Low Rise Factory 15,000-19,000 $469-$594

Electrical Power Systems 5,400 $189*

Office (Construction)

High Quality 28,000-33,000 $875 - $1031

Medium Quality 23,000-28,000 $719 - $875**

Notes:

*Includes transformer, Main DB and Sub DB for general factory & office electrics only. Excludes

production equipment/machinery power.

**Includes cost of communal air conditioning, general electrics and sanitary.

Source: Tractus-Asia Updated May 2014

Electricity rate in Thailand is competitive

(US$/KWH)

Source: JETRO 23rd Comparative Survey of Investment-Related Costs

Comparison in Major Cities and Regions in Asia and Oceania, as of May 2013

Water rate in Thailand is lower

than the regional average rate

(US$/M3)

Source: JETRO 23rd Comparative Survey of Investment-Related Costs

Comparison in Major Cities and Regions in Asia and Oceania, as of May 2013

Thailand’s corporate income tax is the 2nd

lowest in SE Asia

Source: Bank Of Thailand as of August 2012

Corporate Income Tax Rates

Top Destinations for

Expat Experience 2013

by HSBC

1.Thailand

Source: Expat Explorer Survey 2013, HSBC

Thailand offers Best Expat Experience

and a Low Cost of Living

Thailand has been chosen

as the best country in the

world for

Overall Expat Experience

& Overall Quality of Life

Infrastructure • 7 international airports In 2009, 53.9 million passengers, 1.1 million

tons of cargoes Suvarnabhumi Airport – Capacity: 45

million passengers and 3 million tons if cargo per year

• Over 70,000 km Highway Systems • 6 Deep Sea Ports & 2 International River Ports

Capacity over 10 million TEUs Laem Chabang Sea Port – Capacity: 10.8

million TEUs, with additional 8 million TEUs expansion

e-Customs facilities • 4,346 km Rail links to Malaysia & Singapore • 60 Industrial Estates

(18)

High stability and

security of electricity

Supply from both

public and private

sources

Promote

participation of the

private sector in

power generation

EGAT 14,998 MW 48%

IPP 12,081 MW

38%

SPP 2,174 MW 7%

Import & Exchange 2,185MW 7%

Total Capacity 31,451 MW

Peak Demand 26,774 MW

Load Factor (Max) 83%

Load Factor (Avg.) 75%

Source: Energy Planning and Policy Office

Security of Energy Supply

2012

(19)

Efficient Logistics Network

Seaport - Land Transport – Airport

Laem Chabang

Seaport

Donmuang

International

Airport

Suvarnabhumi

International

Airport

Map Ta Put Deep Seaport

Bangkok

GMS Infrastructure Development

Source: NESDB as of Jan 20,2009

North-South Corridor North-Eastern Corridor East-West Corridor Southern Corridor Central Corridor Southern Coastal Corridor

Free Trade Agreement

Note: * Thailand, Malaysia, Indonesia, Philippines, Singapore and Brunei only.

ASEAN

•+570 million pop.

•US$1.3 trillion GDP (2007)

ASEAN+3

•+2 billion pop.

(1/3 world pop.)

•US$9trillion GDP

(16% of world GDP)

ASEAN+6

•3.3 billion pop.

(>50% world pop.)

•US$12.25 trillion GDP

Thai-Peru

Thai-Chile

ASEAN Economic Community(AEC) 2015

AEC A Single Market &

Production base

Source: Reaping the benefits of AEC & ,www.asean.org, as of December 2009

• Free flow of goods

• Free flow of services

• Free flow of investment

• Free flow of capital

• Free flow of skilled labor

Transform ASEAN into a

stable, prosperous and

highly competitive region

with equitable economic

development, and reduced

poverty and socio-economic

disparities

23

• Thailand has 8 intellectual property-related laws, all of which are consistent with international standards:

• Copyright Act of 1994

• Patent Act of 1979, as amended by the Patent Act (No.3) of 1999

• Trademark Act of 1991, as amended by the Trademark Act (No.2) of 2000)

• Act for the Protection of Layout-Designs of Integrated Circuits 2000

• Trade Secret Act of 2002

• Protection of Geographical Indication Act of 2003

• Plant Varieties Protection Act of 1999

• Traditional Medicine and Practice Act of 1999

IPR Framework

24

Investment Promotion Policy

BOI’s Liberal Investment Regime & Attractive Investment Incentives

Policy

100% foreign ownership

No local content requirements

No export requirements

No restriction on foreign currency

Tax

Import duty exemptions/ reductions

Corporate Income Tax/ Exemption up to 8 years

50% reduction of corporate income tax for up to 5 years

Double deduction on utility costs

Deductions for qualifying infrastructure costs

Non-Tax

Land ownership rights

Work permit & visa facilitation with in 3 hrs.

26 Overseas offices

Country desks

1-Stop for visas & work permits:

work permits in 3 hours

Interaction with other govt. agencies

on behalf of investors

Industrial Subcontracting Services

Global Sourcing program

(BUILD Unit)

Intensive information

ASEAN Supporting Industry Database

BOI SUPPORT

SERVICES

27

US Investment

U.S Investment Applications

Totals by Sector: 2005 – 2014 (Q1)

Sector Projects US$ Million

Agriculture 35 257

Minerals and Ceramics 4 57

Light Industry 42 64

Auto and Metal Processing 82 3,142

Electrical and Electronics 101 1,601

Petrochemicals, Chemicals 73 2,774

Services and Infrastructure 94 224

TOTAL 431 8,119

Source: BOI, as of Apr 10, 2014 Note: US$1=Bt32.66 in Q1, 2014

Success Stories of US Companies

Sectors of Opportunity

Target Industries

Agriculture and food processing

Automotive

Machinery

Aerospace

Target Industries

Biotechnology

Alternative energy

E&E

• Manufacture & repair aircraft parts and equipment

or onboard, or conversion of aircraft

• Machinery and equipment, mold & die, jig & fixture

• Medical devices

• Selected auto parts

• Selected electronics devices

• Software

• Renewable energy

• Biotechnology

• Food processing

• R&D

Priorities Activities with Max. Incentives:

Duty-free machinery and 8 years income tax exemption

32

Thailand: Automotive Hub of Asia

Thailand’s Automotive Industry Overview

Source: TAI

(2013 produced

2.46 mil.units

exports 1.13

mil.units to 150

countries)

World’s Automotive Production 2013

(Units of production) World’s Production: 87.24 Million (+3.6%)

Thailand : 2.53 Million (+4.3%)

#9 in Worlds’ Automotive Production

#1 in ASEAN for Automotive Production

Source: OICA as of Mars, 2014

Brand 2012 Add Capacity 2015

Toyota 700,000 200,000 900,000

Ford & Mazda 500,000 - 500,000

Mitsubishi 400,000 100,000 500,000

Isuzu 220,000 100,000 320,000

Honda 240,000 180,000 420,000

Nissan 220,000 150,000 370,000

Suzuki 135,000 - 135,000

GM 160,000 - 160,000

Others 80,000 - 80,000

TOTAL 2,675,000 730,000 3,405,000

Estimate Production Capacity

Forecasted by TAI

Company Sale Office Brand Capacity

(Unit)

Size

(Ton)

1 Hino Motors

Manufacturing (Thailand)

Hino Motors Sales

(Thailand)

Hino 20,024 15 - 50.5

2 Isuzu Motors (Thailand) Tri-Petch Isuzu Sales Isuzu 29,000 4.2 – 50.5

3 Thai-Swedish Assembly Volvo Group (Thailand) Volvo 4,500 > 10

UD Trucks 15,500 n.a.

4 Scania (Thailand) Scania Siam Scania 240 n.a.

5 Fuso Truck (Thailand) Fuso Truck (Thailand) Fuso 2,000 n.a.

Nissan Diesel

(Thailand)

UD Trucks n.a. n.a.

Foton Truck (Thailand) Foton n.a. n.a.

6 CIMC Vehicle (Thailand) CIMC Vehicle

(Thailand)

CIMC 6,450 (Trailer)

Total 77,714

Truck Manufacturers and Capacity in Thailand

Reference: Thailand Automotive Institute (April 2013)

44. Federal-Mogul 47. Michelin 50. GKN Driveline

52. Goodyear 56. Grupo Antolin 58. Bayer 59. TI Automotive 65. Draexlmaier 67. American Axle 73. Rieter Auto. 84. F-Tech 86. Hayes Lammerz 93. 3M

38

2. Denso 4. Aisin Seiki 13. Yazaki 15. Sumitomo 16. Toyota Boshoku 18. Calsonic Kansei 19. JTEKT 20. Hitachi 28. Toyoda Gosei 33. NTN 34. NSK 35. Mitsubishi 39. NHK Spring 40. Koito 41. TS Tech 43. Takata

46. Bridgestone

49. Tokai Rika

57. Showa

61. Mitsuba

66. Asahi Glass

72. Stanley

74. Akebono Brake

82. Sanden

84. F-Tech

92. Alpine

94. Pioneer

98. Omron

Japanese Global Suppliers

28/29 Companies 29/71 Companies

Other Global Suppliers 1. Robert Bosch 3. Continental 6. Faurecia 7. Johnson Control 8. ZF 11. TRW 12. Delphi 14. Lear 17. BASF 21. Valeo 22. Visteon 23. Autoliv 25. Mahle 27. Dana 31. BorgWarner 36. Teneco

Top 100 Global Suppliers Active in Thai Automotive Industry

Strength of Thai Automotive Industry

Thailand Aerospace Industry

Thailand Aerospace Industry

Asia overtook North America as the largest aviation

market in 2009 and will account for 30% of air traffic by

2014, while North America will slip to 23% of the total.

Full support from the government: Maximum tax

incentives from BOI

A capable and efficient skilled work force.

Many universities provide aerospace engineering degree

Civil Aviation Training Center provide training for high skill

personnel of aircraft maintenance and repair services

Other support industries are widely available: stainless

steel and aluminum fabrication, fiberglass and polymer

supply

40

Major Companies in Thailand For parts manufacturing & MRO

• Thailand is the 13th Export Rank in the World

• Thailand is the world’s largest producer of HDDs,

# 2 for Air conditioner

• A leading country in the manufacture of Integrated

Circuits and White Goods

• Strong supporting industries for electrical appliances

Compressors, motors, plastic and metal parts

Source:*E&E Intelligence Unit, as of Mar 10

Electronics & Electrical Industry

Major Industrial Sector of Thailand

Thailand’s E&E Exports 2012

19,387

6,9833,450

2,2791,987

1,4621,2331,1661,025

981924894893

780607

0 5,000 10,000 15,000 20,000 25,000

PCB

Washing Machine

Motor

Wire & Cable

Part of Telephone

Compressor

Power Supply

Colour TV

Teleprinter & Telephone

Refrigerator

Circuit Breaker

Radio Broadcast Product

Air Conditioner

IC

Computer & HDD

US$

Million

Source : MOC

Alternative Energy in Thailand

Solar Biogas Wind Biomass

Garbage Water Bio Diesel Ethanol

National Policy to Promote Alternative Energy

Target : To increase share to 25% by 2022

Incentives for Software Development

Animation Cartoons and characters Computer-generated

imagery Web-based applications Interactive applications Games

Wireless location based service content

Visual effects

Multimedia video conferencing applications

E-learning content via broadband & multimedia & computer-aided instruction

1. Enterprise Software (transaction processing, business solutions)

2. Embedded Software (mobile phones, microchips)

3. Digital content, including:

Software Content

• Thailand continues to industrialize, but is dependent on foreign industrial machinery for immediate future.

• High demand for:

• Metal forming

• Food and farm machinery

• Alternative energy/energy conservation machinery

• Textile machinery

• Automotive machinery

• Mould & Die

Opportunities in Machinery

Machinery and Parts:

Imports and Exports, 2004 – 2013 (Jan-Jul)

0

100

200

300

400

500

600

700

800

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(Jan-

Jul)

Import 386 441 434 426 496 432 529 605 794 397

Export 143 179 201 288 303 274 364 383 414 240

Bt Billion

Source: Ministry of Commerce, Sept 2, 2013

Exchange rate = 32 Bt/ 1USD

Import of Machinery& Equipment in Thailand

866.2

1,124.4

576.7

1,072.6

1,211.3

653.5

743.7

669.8 652.7

780.7

1,054.2

865.7

966.8965.4

0

200

400

600

800

1,000

1,200

1,400

2007 2008 2009 2010 2011 2012 2013 (Jan-

Jul)

Boiler, Nuclear plant, etc. (HS Code 84) Electrical machine (HS Code 85)

Billion Baht

Source: Ministry of Commerce, Sept 2, 2013

Benefit

- In 1st fiscal year, have one operating company in another country; a second within 3rd year; a third within 5th year

- Have annual expenses in Thailand of Bt15 million, or have invested at least Bt30 million in Thailand

- By end of 3rd year, 75% of ROH personnel to be qualified staff, and 5 persons earning at least Bt2.5 million annual salary and benefits per person

- All companies must be real operating companies with a physical presence and staff

For portion of income from OVERSEAS OPERATIONS

0% CORPORATE

INCOME TAX

for 15 years

Key Conditions

Benefit

For portion of income from LOCAL OPERATIONS

10% CORPORATE

INCOME TAX

for 15 years

Regional Operating Headquarters

Benefit

In addition to conditions

for income from

overseas and local

operations:

- Income generated from

services to overseas

companies must be at

least 50% of total

revenues

For income of EXPATRIATE EMPLOYEES

15% PERSONAL

INCOME TAX

for 8 years

Key Conditions

(52)

Support for US Investors BOI Office New York

61 Broadway, Suite 2810,

New York NY 10008 USA

Tel: (212) 422 9009

Fax: (212) 422 9119

E-mail: boiny@aol.com

nyc@boi.go.th

BOI Office Los Angeles

611 North Larchmont Blv.

3rd Floor

Los Angeles, CA 90004 USA

Tel: (323) 960 1199

Fax: (323) 960 1190

Email: boila@sbcglobal.net

U.S. Desk @ BOI Headquarters

555 Vibhavadi-Rangsit Rd.

Chatuchak, Bangkok 10900 Thailand

Tel: (66 2) 537-8111 Fax: (66 2) 537-8098

E-mail: head@boi.go.th

Thank you