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1
Thailand Investment Guide
July 2017
World Business Advisory Center
World Business Division
2
Country & Economic Overview
Key Industries & Opportunities
Doing Business in Thailand
KASIKORNBANK’s Support
Table of Content
3
THAILAND
Bangkok
Why Thailand?
Thailand, the Gateway to ASEAN
2 Attractive Investment Policy for target industries, the new growth engines
3 Eastern Economic Corridor: the next major economic zone of ASEAN
4 Liberal trade & investment regime
5 Potential regional trading and high value manufacturing hub
1 Logistic Hub of ASEAN
4
Country & Economic Overview
Key Industries & Opportunities
Doing Business in Thailand
KASIKORNBANK’s Support
Table of Content
5
Bangkok
Country Overview
Country Name: Kingdom of Thailand
Area: 513,115 sq.km.
Population: 65.9 million (2016)
Form of Government: A parliamentary democracy with the King as head of state
Currency: Thai Baht (THB)
GDP (Current Price): USD 410.3 billion (2016)
GDP per capita: USD 6,032 (2016)
1990
Timeline and Milestone:
Data Source: DOPA,NESDB,World Bank, IMF
1990: Financial liberalization policy
1995: Entry into WTO
1997-98: Tom Yum Kung crisis
2015
2015: Starting of ASEAN Economic Community (AEC)
2020
2020: Enhance competitiveness to overcome the “middle income trap” with sustainable growth
1967: Bangkok Declaration signed, Starting of ASEAN community
the second largest economy
in ASEAN
6
agriculture 8%
industry 36% services
56%
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2010
2011
2012
2013
2014
2015
20
16
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USD
th
ou
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Economic Overview
GDP composition, as of 2016
USD 410 billion
Middle class 53% of population
GDP per capita, 2010 - 2020f
Data Source: NESDB, IMF
Service sector mainly tourism and
wholesale & retails
Industry mainly automobile, electrical & electronics
GDP
GDP per capita reach USD 7,000 by 2020
Driven by service sector, Thailand is an upper middle income economy with growing middle class.
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Foreign Direct Investment
Thailand’s FDI has been driven by Japan for decades, which strategically invested in manufacturing, especially auto
industry. China is caching up to become a major investor in Thailand, aligned with their One Belt One Road strategy.
Foreign Investment Project Approved by Thailand Board of Investment (BOI) during 2014-2016
Top investors
2011-2016
Japan USD 34.5 billion 1
Singapore USD 4.1 billion 3
USA USD 4.1 billion 4
USD 116 billion Foreign investment project approved by BOI during 2011- 2016
China USD 4.3 billion 2
Source: Thailand Board of Investment (BOI)
14 14
10
2014 2015 2016
USD Billion
8
Thailand Trade Overview
Thailand has been enjoying trade surplus in past two years. ASEAN is the main trading partner with Thailand, followed by China, US and Japan.
Key Import products & Its % of total export
Import products
Data Source: Trademap, Ministry of Commerce
Electrical and Electronic parts and
products
Mineral fuels, oils 13%
Iron and Steel 5%
33%
Export products
Key Export products & Its % of total export
6%
Electrical and Electronic parts and products 31%
Vehicle and Parts 12%
Thailand is the second largest hard
disk drive exporter globally and the main vehicle exporter of this region
Trade Flows and Balance, 2010-2016
Top trade partners by trade value 1. ASEAN 2. China 3. USA 4. Japan
Thailand imports foreign electrical &
electronic parts in manufacturing
for its export.
-100
-
100
200
300
2010 2011 2012 2013 2014 2015 2016
bill
ion
USD
Export Import Trade Balance
Rubber
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Thailand Border-Trade Overview
Data Source: KResearch, Department of Foreign Trade Thailand
1
2
3
4
Major official border customs
Myanmar Import Product • Alcohol and non-Alcohol beverage • Sugar • Garment and textile
Myanmar Export Product • Natural gas • Livestock/ aquatic • Wood and related products
Malaysia Import Product • Rubber and related products • Computer • Processed wood
Malaysia Export Product • Audio device • Computer and parts • Magnetic head, main components
for hard disk drive
Laos Import Product • Petrol • Vehicles • Iron, steel
Laos Export Product • Electricity • Mineral; copper • transmitters; television, telephone
Cambodia Import Product • Non-alcohol beverage • Vehicles and parts • Motorcycle and parts
Cambodia Export Product • Vegetable and garments • transmitters; television, telephone • Insulated wire/cable
Trade volume with Thailand as of 2016
Expand consumer goods and fuel to CLM market.
Supply raw material and serving as regional supply chain hub.
Border trade is an effective means for Thailand to integrate with regional market:
Thailand-Myanmar Trade Volume USD 5.3 billion Major Customs: Mae Sot/Myawaddy
Thailand-Malaysia Trade Volume USD 14.3 billion Major Customs: Songkhla/Kuala Perlis
Thailand-Laos Trade Volume USD 5.8 billion Major Customs: Nong Khai/Vientiane
Thailand-Cambodia Trade Volume USD 3.5 billion Major Customs: Aranyaprathet/Poi Pet
Total value of boarder trade
in 2016 = USD29 billion
10
Infrastructure Overview
Already well-established infrastructure, Thailand continues to push forward infrastructure development projects, especially in the railway sector, to enhance regional connection in AEC region.
Road is the main transportation route. Thailand has well established road network in both urban and rural area with GMS connectivity. Hence, Thailand has high potential to be regional logistic hub.
Road There are 8 international deep seaports and 3 major river ports in Thailand. The highest capacity sea-seaport, Lam Chabang, can handle 6.9 million TEU/yr. While, inland port, Bangkok Port, has capacity of 1.5 million TEU/yr.
Water Transport Aviation Thailand has 6 main international airports, located in Bangkok, Samut Prakan, Chiang Mai, Chiang Rai, Phuket and Songkhla province.
Railway Thailand has railway lines, covering 47 provinces with a total distance of 4,043 km., about 93% of which is single-track.
Data Source: KResearch, BOI
11
Road Network: GMS Economic Corridors
Road transport is the primary means of passenger and freight transport which can carries around 86% of freight traffic.
Road Myanmar(MawLaMyine)-Thailand(East-Western)-Laos (Savannakhet)-Vietnam (Da Nang)
East West Economic Corridor (Dark brown)
1
China (Kunming) – Northern Laos/Myanmar – Thailand (North-Sourthern) - Malaysia
North-South Economic Corridor (Red)
2
China (Southern) – Laos (Northern) – Thailand (Bangkok)/(Eastern) – Cambodia
Central Corridor (Green)
3
China (Nanning) – Vietnam(Northern) – Laos (Northern) – Thailand (Bangkok/Laem Chabang)
North-eastern Corridor (Light brown) 4
GMS Transport Sector Strategy (2006 – 2015) facilitates grater connectivity.
Thailand is located in the center of every route in the GMS road network; The nation has an advantage to be the hub of the region inland freight transport.
Data Source: WB_Advisory, BOI
Myanmar (Dawei) –Thailand (Bangkok/Laem Chabang) – Cambodia (Phnom Penh) – Vietnam (Ho Chi Min City)
Southern Corridor (Lower Dark Brown) 5
12
Total air cargo: 1.3 Million tons
Rank (In ASEAN): 2
Rank (Global): 20
Additional service: One stop service basis such as Trading, Partial Import Clearance, and so on
New Aviation Development Plan
Suvarnabhumi : Begin the phase two extension project which will uplift passenger handling from 50 million passenger per year to 60 million. It is expected to complete by 2019
Aviation
Thailand international airport
Suvarnabhumi, Samut Prakarn
Don Mueang, Bangkok
Mae Fah Luang, Chiang Rai
Chiang Mai
Phuket
Hat Yai, Songkhla
Data Source: Airport council international, Airport of Thailand
Passenger Capacity 2016
Air cargo service information 2016:
Don Mueang: Approved a new budget for enhancing annual capacity to handle 40 million passengers and serve 40-50 flights/hr. It’s expected to finish in 2022
Phuket:
The new phase opened in 2016. It could be handle 18 million passenger/ year.
Thailand is the second largest air cargo service provider in ASEAN, after Singapore.
- 10 20 30 40 50 60
Suvarnabhumi
Don Mueang
Phuket
Chiang Mai
Hat Yai
Chiang Rai
million passenger
13
Water transportation
Data Source: BOI,Transportation Institute Chulalongkorn University, Chaophaya Terminal International
With a coastline of 3,219 km, Thailand is located between Bay of Bengal and South China Sea, with high potential to be regional port center. Chiang Sean
Bangkok
Leam Chabang
Map Ta Phut
Songkhla
Inland port Deep Seaport
Klong Toey or Bangkok Port
• This port can handle approximately 1.5 million TEU/yr.
Laem Chabang
• One of Asia’s leading ports and the most important commercial deep-sea port of Thailand
• This port can handle approximately 6.9 million TEU/yr
Map Ta Phut Industrial Port
• Map Ta Phut is primarily a petrochemical complex, gas, mining and heavy industrial related goods
Chiang Saen Port
• The biggest inland port of the northern region
• The strategic inland port for trading among GMS region.
Current Development Plan
Laem Chabang : Laem Chabang Phase III will open for bidding by the end of 2017. After completion, its capacity will rise to 30 million TEU/year and this phase can serve for RORO vessels (Roll-on/Roll-off) that would be positive for Thailand’s automobile sector.
Phuket Port
• The latest international port on the west coast of the South
• Capacity of 450,000 tons annually
Songkhla Port
Phuket
• The only international port on the Southeast coast
• Capacity of 160,000 TEU/yr
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Railway Network
Data Source: BOI, Johomaps
Bangkok(Center Thailand) – Chiang Mai (Northern Thailand)
Northern Line (Blue)
1
Bangkok – Sugai Kolok(Southern Thailand)- Northern Malaysia
Southern (Red) 2
Bangkok – Aranyaprathet (Easthern Thailand )/ Marp Ta Put (Thailand gulf)
Easthern (Green)
3
Bangkok – Ubon Ratchathai (Easthern Thailand) Nong Khai (Northeasthern Thailand)- Center/ South of Lao PDR
Northeasthern (Yellow)
4
Thailand has 4 main operating railway networks. These networks are under upgrading, transform single to dual track as well as high speed train project.
Domestic railway Development Plan
Phase I (2010-2020) : Upgraded some part of existing line to dual track
Year spent: 2010-2025
Plan objectives: • Upgraded to duel track • Railway networks extension • High-speed railway
Railway development master plan
Phase II (2016-2020) : 1,025 km of railway network will be extended
Phase III (2020-2025) : Railway tracks added
High-Speed-Rail Project: This high-speed train project consists of four main lines: (1) Bangkok-Chiang Mai (finish in 2020) (2) Bangkok-Nong Khai (3) Bangkok-Rayong (4) Bangkok-Padang Besar.
Thailand current railway
networks
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Major Cities for Economic Activities by Region
Bangkok Metropolitan
Phuket
Ayutthaya
Chonburi
Rayong
Chiang Mai
Bangkok Metropolitan Main business hub • Trade, Banking & Finance, Real estate, Transport &
communication, Tourism, etc
Chonburi, Rayong, Ayuthaya Industrial zone • Automobile & parts, Electrical & Electronics, Plastics,
Petrochemical, Food & Beverage
Chiang Mai & Phuket Tourism hub • Hotel & Restaurant, Transportation, Tourism
related business
Eastern Economic Corridor (EEC)
Industrial zone • Smart Electronic, EV, Robotic, Digital City, Innovation
Food and Medical Hubs
Chacheongsao
EEC
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Country & Economy Overview
Key Industries & Opportunities
Doing Business in Thailand
KASIKORNBANK’s Support
Table of Content
17
Key Industries and Opportunities
Food & Beverages Automotive &
Parts Electrical & Electronics
International Headquarters and
International Trading Centers
New S-Curve Industries
Owing to its abundance of agricultural products, decent infrastructure & road network, well established supply chain, as well as investment promotion incentives, Thailand offers attractive investment opportunities for the following industries:
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Food & Beverage
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Food & Beverage – Overview
Data Source: National Food Institute, Ministry of Commerce
Thailand was ranked as The 13th World Largest Exporter of Food and Beverage; the country is known as the “
kitchen of the World” which exports one-third of its production.
0
50
100
150
200
250
2011 2012 2013 2014 2015 2016
Total Export Value of Food and Beverage, 2016 (US Billion) Top Five of Thailand’s Export
Processed Products & Beverage
Seafood (USD 3.6 Billion)
Sugar (USD 2.3 Billion )
Products from cassava (USD 2.9 Billion)
Prepared & Preserved Fruits (USD 2.0 Billion)
Beverages (USD1.5 Billion)
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Food Processing Industry – Overview
Processed Food Products Exports in ASEAN 2016, by Export Value (Billion US)
With a total export value of USD14.4 billion for processed food in 2016, Thailand was the largest processed food exporter in ASEAN.
Specifically, in the region, it is the top exporter for products such as (1) processed seafood and meat, (2) sugar and (3) processed fruit and vegetables.
Thailand and its ASEAN neighbors maintain ‘strategic trade relationships’ in F&B industry:
ASEAN represents an important export market for Thailand
Thai import is an important source of F&B products for some ASEAN countries (Myanmar and Laos)
Thailand is the top processed food exporter in ASEAN; it maintains strategic trade relationships with its regional peers.
Data Source: UN COMTRADE
Complied by KASIKORNBANK, World Business Advisory Center
14.4
5.1
4.5
4.5
3.9
1.5
0.1
0.04
0.03
0.01
- 5.0 10.0 15.0
Thailand
Malaysia
Indonesia
Singapore
Vietnam
Philippines
Myanmar
Laos
Cambodia
Brunei
21
Food & Beverage – Food Processing Opportunity
1 2 3 cheap raw material sourcing market expansion in Thailand ASEAN market access
rice
fish & seafood
fruits
sugar cane
casava
• Expand strategically nationwide • Utilize Thailand’s strong regional distribution network
• Gain knowledge of regional consumer behavior via experience in Thailand
By investing in food processing in Thailand and cooperate with local suppliers, foreign investor can utilize cheap raw material, expand customer base nationwide, and gain access to the ASEAN market.
22
Automotive & Parts Industry
23
Source: Thai Autoparts Manufacturer Associations, and the BOI
Thailand’s Automotive & Parts Industry – Overview (1/2)
Structure of Thai Automobile Industry/ supply chain
Assembler (18 car makers, 8 motorcycle
makers) 100,000 workers
Tier 1 (709 companies) 250,000 workers
Tier 2,3 (1,700 companies) 175,000 workers
Source: Thai Autoparts Manufacturer Associations
Domestic sales 40%
Export 60%
Production of Automotive in Thailand in 2016
1.9 million cars produced
1.1 million car
0.76 million car
Thailand is the largest automotive producer in ASEAN,
ranking 12th globally with deep and wide automotive supply chain thanks to FDI by Japanese automotive enterprises.
With 60% of car production used for export, Thailand is one of major car exporters in the world.
With its well established supply chain, Thailand is well portioned to be the ASEAN auto production hub for Japan and Chinese car makers
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Thailand’s Automotive & Parts Industry – Overview (2/2)
2015 – 2018 2019 – 2021
Vision of Thailand Automotive Industry in 2021
Vision: production hub
for electric vehicle
Plug-in Hybrid Electronic Vehicles
Battery Electric Vehicles
Fuel Cell Electronic Vehicles
8- year corporate income tax exemption
Lower excise tax for low emission & hybrid car
Highlight tax incentives for green automobile producer
Thai government has implemented alternative tax incentives to attain Thailand as the regional production hub for green automobile.
“ Since June 2017, the government announced the new excise tax incentives, which aimed at promoting EV as one of ten targeted industry cluster and it will be expired in late 2025”
Electric Vehicles Preferential Excise Tax Program
New Existing
HEVs / PHVx PPV with Co2 emission of lass than 175g/km
23%
25%
Double-cab pickup teuck with Co2 emission of less than 175g/km
10% 12%
Passenger cars • Co2 emission of less than
100g/km. • Co2 emission of less than 150g/km • Less than 200 g/km
5%
10%
12.5%
10%
20% 25%
BEVs 2% 10%
Source: Excise Tax Department
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Thailand’s Automotive & Parts Industry – Opportunities
1 2 3 Investment in infrastructure for green
auto and related services Production of green auto parts and
assembly machinery
Establishment of production
base and distribution center
Automobile manufacturing hub
Driven by high tax incentives and decent local supply chain, foreign can invest in infrastructure for green auto, produce green auto parts, and establish production base & distribution center in Thailand.
Recharging infrastructure and equipment
Automobile repair service
Green automobile parts
Assembly machinery
26
Electrical & Electronics
27
Thailand’s Electronics Industry – Overview
Data Source: Kasikorn Research
Thailand’s Electronics Exports 2016
70% of Thai electronics exports are Hard Disk Drives,
Integrated Circuit, and Printed Circuit Board.
Thailand’s electronics industry mainly relies on production of hard disk drive, integrated circuit, and printed circuit board, and became one of ASEAN leading production base for these electronic parts. The total export value was US 29.7 billion.
Key Electronics Products:
Hard Disk Drive
2nd in the world
• 2nd largest after China; presence of global makers, Seagate and Western Digital (WD) and local supply chains.
• Highly dependent on global HDD market
• Recent Evolvement:
• Segment change: personal computer -> expansion of enterprise segment (cloud computing, enterprise data storage / server)
• Switch to Solid State Drive (SSD) for fast data transfer and startup.
Printed Circuit Board
8th in the world
Integrated Circuit
11th in the world
• Steadily gain traction due to interconnection with automotive and electrical appliance industries.
• Export value doubled between 2011 and 2014.
Hard Disk Drive 35%
Integrate Circuit 26%
Printed Circuit Board
4%
Others 35%
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Thailand’s Electrical Industry – Overview
Data Source: Kasikorn Research
Thailand’s Electrical Appliances Exports 2016
Thailand is the world’s second largest suppliers of refrigerator and air conditioner after China with the total export
value of USD 5.8 billion and these two products are accounted for 35% of total electrical export value.
Air Conditioner
26%
VDO Recording &
Parts 9%
Refrigerator 9% Washing
Machine 6%
Others 50%
• The inverter system is now replacing the old model of air conditioner as the global energy saving trend. Presently, Thailand is manufacturing around 30% of the inverter market and it plans to cover the whole market within five years.
• The limitation to import refrigerant R22 will increase the
production cost to some models and it could be lead to the technology transition to produce the high technology model that use another refrigerant likes R401a and R32.
• Even Thailand lost the production base of television to Vietnam but Thailand still has opportunity to manufacture more advanced electrical appliances likes smart home appliances.
Key Information
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Automotive
Smart Home Appliances
Medical Devices
Thailand’s Electronics Industry – Market Outlook
Outlook of Thailand’s Electronics Industry
Outlook of Thailand’s electronics industry depends upon global electronic appliance market and Thailand’s competitiveness; With capability to produce above 10,000 mechanical parts in an automobile, Thailand has key competitiveness in electro-mechanics; Matching this competitiveness with global market trend creates bright outlook for automotive electronics, smart home appliances, and medical devices.
Electro-mechanics
Grab business opportunities in automotive electronics o Tremendous demands as ASEAN No. 1 automotive makers
with 2 million cars produced each year o Increasing use of electronic parts in car production
High potential in smart home appliance o Bright global outlook toward smart home appliances o Thailand as one of the world class manufacturers in home
appliances e.g. air conditioner, refrigerator, etc
New opportunities for medical devices o Enormous demand for medical devices as regional medical hub o Mechanical parts commonly used in automotive and electrical
industries (e.g. pump and motor) can be use in medical devices o High incentives for investment in medical devices
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Thailand’s Electronics Industry – Potential Investment
Electronic System Design
Hi-Tech IC Assembly
Hi- Tech PCB Fabrication
High Potential Activities for Investment in Thailand
With bright business outlook for serving automotive electronics and home appliances in the internet of things era, electronic system
design, hi-tech IC assembly, and hi-tech PCB fabrication are high potential activities for investment in Thailand.
o Embedded system design o PCB design o IC design
o System In Package Technology(SIP) o Package on Package Technology (PoP) o 3D – Integrated Circuit (3DIC)
o Multi-Layer PCB (9 layers + ) o Flexible PCB
31
International Headquarters (IHQ) and International Trading Centers (ITC)
32 o Central Economic Corridor is a road network linking Bangkok Vientiane, and Southern part of China.
o Major SEZs -> Vita park SEZ (Vientiane)
International Headquarters (IHQ) – Overview
What is International Head Quarter (IHQ)?
o Background: Thai government initiates a new investment promotion policy to enhancing “Thailand Plus One” movement by granting high tax incentives to qualified companies as international head quarter.
o Definition: International Head Quarter is a company incorporated under Thai laws that provides qualifying services to its branches or associated enterprises, whether located in Thailand or overseas.
What are qualifying services for IHQ ?
Business Planning
Marketing Procurement
Research & Development
Technical Support
Management activities R&D related activities
• Borrowing in Thai Baht from financial institutions or associated enterprises in Thailand.
• Lending in Thai Baht to associated enterprises in Thailand.
Treasury related activities Trade & related activities
Goods Procurement Warehousing
Transportation of Goods Packaging
Thai government offers attractive investment incentives including 15 years corporate income tax (CIT) exemption for revenue from abroad to firms setting up international head quarter (IHQ) and international trade center (ITC) in Thailand.
33
International Trade Center (ITC) – Overview
What is International Trade Center (ITC)?
Definition: A company incorporated under Thai laws that purchases and sells goods, raw materials and parts or that provides international trading related services to juristic persons incorporated under foreign laws.
What are qualifying services for ITC ?
Trade & related services
Goods Procurement Warehousing Packaging Transportation of Goods
By using Thailand as international trade center for Greater Mekong Sub-region (GMS) , firms can avoid too much exposure on the CLM countries’ currencies by settlement international transaction in Thailand, and gain corporate income tax (CIT) exemption, at the same time.
ITC
associate
firm customer
• CIT exemption on income derived from trading and related services with overseas entities, whereby goods are not imported into Thailand (out-out transaction).
Example of ITC Incentive
34
IHQ & ITC – Overview (1/2)
Bangkok
Cambodia
Vientiane
Hanoi Naypyidaw
Avg 1.00 hr. by flight
Thailand is one of the attractive location to place IHQ/ITC of GMS region as the high growth in FDI inflow, either decent or established infrastructure and standard of skilled labor.
Tax incentive
IHQ Exemption of corporate income tax on
income derived from overseas branch offices
ITC Exemption from corporate income tax
from sales made available through purchasing and selling goods abroad
Strategic location
Thailand is located in center of GMS region, with an easy access to its border countries through all channel (air, water, and land).
Infrastructure
Thailand provides decent infrastructure that suitable for setting up IHQ and ITC , such as utility and telecommunication.
Skilled labor
With long development in education sector and
experienced in trading with CLMV, Thailand is
ready to provide the decent skilled labor for IHQ and ITC.
Source: roedl.com, asean.org
Livability for expats
Within GMS region, Thailand is the most livable country for expats and their families, with an easy access for mass transportation, education with numerous of international schools, high standard of health care, various types of amenities.
35
IHQ & ITC – Overview (2/2)
Thailand’s IHQ & ITC schemes provide attractive incentives when compared to Singapore and Malaysia, such as the lowest paid-up capital , less operating cost and the longest fixed promotion period.
Total Number of Project Approval By BOI during 2015-2016
Source: Board of Investment
Major Investments
IHQ
ITC
2015 2016
29 Projects
90 Projects
143 Projects
270 Projects
(Unit : USD) Thailand Singapore Malaysia
Paid-up capital 300,000 343,000
(within 3 years) Approx. 582,000
Minimum Operating cost / year
450,000 Approx. 1,500,000
Approx. 698,000
Promotion period 15 Yr 5 Yr 5Yr+5Yr
IHQ Incentive Comparison Among 3 Major Countries
36
IHQ & ITC – Opportunity
1 Support services Research and
development center 2 Sale office 3
Foreign investors can use Thailand as a gateway to expand their business into the Greater Mekong Subregion and establish support services, R&D center, sale office, and other marketing events or exhibition.
Others 4
Call center
Maintenance/ Technical support
Training center
Marketing events
International
meetings.
Exhibition
37
New S-Curve Industry
38
S- Curved Industry - Overview
Source: Board of Investment
Since 2015, Thailand has brought in additional incentives under the S-Curved scheme to attract more FDI in higher technology base, which is aimed to enhance the nation’s competitiveness.
First S-Curve Industry New S-Curve Industry
Next-Generation Automotive Cluster
Electrical and Electronics Smart Electronics
Petrochemical and Chemical Biofuel and Biochemical
Food for the future Food Innovation
Aerospace Aviation and Logistics
Automation and Robotics
Eco friendly petrochemical, biochemical
Agriculture and Biotechnology
Medical Hub Medical Cluster Medical & Wellness Tourism
Ten Targeted S-Curve Industries
Dig
ital
Eco
no
my
39
S- Curved Industry – Market Outlook
Source: Board of Investment
New S-Curve (USD 222 Million)
First S-Curve (USD 760 Million)
Others (USD 788 Million)
Application Submitted to BOI (Jan-Mar 2017)
12%
43%
45%
Digital, Petrochemical, Robotics
Automobile, Electric & Electrical, Agriculture
Logistics, R&D, IHQ&ITC, Energy
The S-Curved scheme form the government has received positive responses as the application submitted to BOI in the
Q1 2017 has shown the significant growth from last year, which worth approximately USD 1.7 Billion.
What is the additional incentive ?
• Corporate Income Tax (CIT) exemption up to 8 years • 50% CIT reduction up to 5 years (for promoted areas)
Additional Incentives • Corporate income tax exemption for up to 13 years for
business using advanced technology and R&D • 50% Corporate income tax reduction for up to 10 years
• Permission to bring skilled worker and experts to work in promoting activities
40
S- Curved Industry – Challenge and Opportunity
Challenges Opportunity
• Abundant of semi-skilled labors with industrial experience -> opportunity to upgrade
• Lucrative investment promotion incentives • Well established supply chain in auto and E&E
industries • Plenty of natural resources for food innovation • Regional connectivity to leverage regional
supply chain
• Most workforce still lack of Research & Development (R&D) experience, hence firms may have challenges finding sufficient skilled labors to fulfill all S-Curve industries
• Infrastructure is being developed in some potential areas.
• Foreign investors may consider to invest in S-curve industries to enjoy special privileges and incentives; potential industries include Food Innovation, Automotive, Medical Devices, and Biochemical that Thailand has a strong position in the global market.
• Foreign investors may improve labor skills by bringing in foreign experts and work with education institute to secure capable workforce in the long term.
Recommendation
41
Country & Economy Overview
Key Industries & Opportunities
Doing Business in Thailand
KASIKORNBANK’s Support
Table of Content
42
Register “company limited” at Department of Business Development
Apply for “investment promotion incentives” at Board of Investment
For exporter, apply for “certificate of origin” to utilize Thailand’s trade privilege.
“One Start One Stop Investment Center” can coordinate and organize all legal applications for foreign investors.
Overview of Doing Business in Thailand
How to start a business in Thailand
Major cost of Investment
Labor Electricity/ Water supply Tax
43
Major Costs - Labor
Salaries of English Speaking Worker in 2017
Position Average Monthly Pay (USD)
Office staff 430 – 720
Technician 430 – 1,000
Junior Engineer 660 – 1,200
Senior Engineer 1,300 – 2,300
Middle Level Manager 2,000 – 4,000
Director and Top Management 4,000 – 8,000
Data Source: ADECCO Compiled by: KASIKORNBANK, WB advisory center
Labor: minimum monthly wage in ASEAN 2017, USD
44
Major Costs – Utility
Water Rate: for business usage in Bangkok
Note: minimum usage fee is 2.57 USD
Usage: USD/m³
0 to 10 m3 0.27
11 to 100 m3 0.31 – 0.41
101 to 200 m3 0.42 – 0.44
Over 200 m3 0.45
Electricity rate: each size of business has 2 options
Size of business Option A Option B
Small firm Normal rate Time of Use rate
Medium firm Normal rate Time of Use rate
Large firm Time of Day rate Time of Use rate
Note: size of business is determined by a maximum 15-minute integrated demand of electricity.
Data Source: Metropolitan Waterworks Authority Compiled by: KASIKORNBANK, WB advisory center
45
Major Cost - Electricity Rate for Small Firm
Data Source: mea.or.th
Normal rate Time of Use rate (TOU)
Category Electricity price
(USD/Unit) Service
(USD/ month)
1. Voltage 12-24 kV 0.11 8.92
2. Voltage < 12 kV 1.32
2.1 First 150 unit (kV/hr)
0.09
2.2 151-400 unit 0.12
2.3 401 unit and above 0.13
Category Electricity price (USD/Unit) Service
(USD/month) On Peak Off Peak
1. Voltage 12-24 kV 0.15 0.07 8.92
2. Voltage < 12 kV 0.17 0.08 1.32
Note: On Peak: 9.00 – 22.00 Monday – Friday Off Peak: 22.00 – 9.00 Monday – Friday : 00.00 – 24.00 Saturday – Sunday : Public Holiday *The prices may vary across region – depending on the source cost of utility.
TOU is a rate calculated from the weight average between electricity used in On Peak and Off Peak period
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Category
Demand Charge (USD/kW)
Electricity price (USD/Unit) Service
(USD/month)
On Peak Off Peak On Peak Off Peak
1. Voltage > 69 kV 2.12 0 0.12 0.07 8.92
2. Voltage 12-24 kV 3.80 0 0.12 0.08 8.92
3. Voltage < 12 kV 6.00 0 0.12 0.08 8.92
Major Cost - Electricity Rate for Medium Firm
Normal rate
Time of Use rate (TOU)
Category Demand Charge
(USD/kW)
Electricity price
(USD/Unit)
Service (USD/month)
1. Voltage > 69 kV 5.02 0.09 8.92
2. Voltage 12-24 kV 5.61 0.09 8.92
3. Voltage < 12 kV 6.33 0.09 8.92
Demand Charge is an extra electricity charge for the firm, required to use massive electricity
Data Source: mea.or.th
TOU is a rate calculated from the weight average between electricity used in On Peak and Off Peak period
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Major Cost - Electricity Rate for Large Firm
Time of Day rate (TOD)
Time of Used rate (TOU)
Category Demand Charge (USD/kW)
Price per unit
Service (USD/month)
(USD/Unit)
On Peak Partial Peak Off Peak All-Day
1. Voltage > 69 kV 6.41 0.85 0 0.09 8.92
2. Voltage 12-24 kV 8.14 1.68 0 0.09 8.92
3. Voltage < 12 kV 9.51 1.95 0 0.09 8.92
Category
Demand Charge (USD/kW)
Price per unit
Service (USD/month)
(USD/Unit)
On Peak Off Peak On Peak Off Peak
1. Voltage > 69 kV 2.12 0 0.12 0.07 8.92
2. Voltage 12-24 kV 3.80 0 0.12 0.08 8.92
3. Voltage < 12 kV 6.00 0 0.12 0.08 8.92
TOD is similar to TOU with more detailed categories including on peak, partial peak, and off peak.
Note: TOD On Peak: 18.30 – 21.30 Everyday Partial Peak: 08.00 – 18.30 Everyday Off Peak: 21.30 – 08.00 Monday – Friday
Data Source: mea.or.th
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Monthly Income (THB) Tax Rate
0 – 150,000 0%
150,001 – 300,000 5%
300,001 – 500,000 10%
500,001– 750,000 15%
750,001 – 1,000,000 20%
1,000,001 – 2,000,000 25%
2,000,001 – 5,000,000 30%
Above 5,000,000 35%
Types of Tax Tax rate
Corporate Tax 20%
Value Added Tax (VAT) 7%
Property and Land Rent Tax 12.5%
Source: KPMG ASEAN Tax Guide, PwC
Tax System
Personal Income Tax Corporate Taxes
Corporate Taxes Rate for SME
Net Income (THB) Tax rate
Less than 300,000 0%
300,000 – 1,000,000 15%
Above 1,000,000 20%
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1) Sole Proprietorship 2) Ordinary Partnership
Non-Juristic Business
Juristic Business
1) Juristic Ordinary Partnership 2) Limited Partnership 3) Limited Company 4) Public Limited Company
Types of Business Organization in Thailand
Register Limited Company
Limited company is the most common type of business
organization, in which business registration procedures are as following;
• Reserve the Corporate Name
• Submit the Memorandum of Association (MOA), convening a statutory meeting and depositing paid in capital
• Register the company within 3 months from date of convening a statutory meeting
Limited Company: Business Registration Procedure
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Foreign Business Act B.E. 2542 (1999)
Before register a business in Thailand,
there are some restrictions for foreigners operating business in Thailand.
Content of Foreign Business Act
Alien is defined as entities who do not possess Thai nationality. Companies are considered aliens if 50% or more of their share of capital belongs to foreign individuals or juristic entities
The Foreign Business Act has identified 3 lists of activities controlling foreigners doing business in Thailand.
3 lists of restricted activities of foreign-controlled business
1
2
3
Businesses that foreigners are not permitted to engage in for special reasons such as newspaper, radio, and television business Businesses concerning national security, safety, art and culture, native handicrafts, the environment, which require permission granted by the cabinet via Minister of Commerce.
Businesses in which Thais are not adequately prepared to compete on an equal footing with foreigners, which require permission granted by the Director-General of the Department of Business Development and endorsement by the Foreign Business Committee.
For more details, www. boi.go.th
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Investment Promotion Incentives – Overview
In 2017, to encourage investment in advanced and high-technology toward Thailand 4.0 era, the new investment promotion policy
has been launched with additional incentives, focusing on high technology investment in the Eastern Economic Corridor (EEC).
1) Sector Based Incentives 2) Technology Based Incentives
High Incentive Sectors Advanced Manufacturing High Value Added
Businesses & Services
Maximum 8-year Corporate Income Tax Exemption
Low Incentive Sectors Basic Industries Supporting Industries
10-year Corporate Income Tax Exemption
Biotechnology Advanced Material
Technology
Nanotechnology Digital Technology
5) Special Incentives 4) Area Based Incentives
• Eastern Economic Corridor (EEC) • Special Economic Zones (SEZs) • Others
Additional incentives depending on location of investment
3) Merit Based Incentives
Additional incentives granted activities that enhance competitiveness
• Research & Development • Advanced Technology Training • Others
Additional incentives for specific purposes
• SME Supporting Incentives • Measure to Promote Productivity • Others
CORE INCENTIVES
Overview of Investment Promotion Incentives
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Investment Promotion Incentives – (1) Sector Based Incentives
Group
A activities
Advanced & high technology activities Environmental friendly activities Activities that utilize local abundant
resources
Group
B activities
Low technology activities that are important as supporting activities in the value chain
Definition of Group A & B Activities Incentive scheme A1 A2 A3 A4 B1 B2
Corporate Income Tax
(CIT) exemption
Import duty on machinery
Import duty on raw materials
Non-tax incentives
8-year 100% cap
3-year 100% cap
5-year 100% cap
NONE
Exemption of import duty on new machines NONE
Exemption of import duty on raw materials used in manufacturing of exports products for 1 year (can be extended)
Permission to own land, to employ foreign skilled workers, remit money abroad in foreign currency, etc.
8-year Without cap
Approximately 250 activities across various sectors are eligible for investment promotion incentives; In each sector, activities
are classified into group A and B, in which group A activities are eligible for higher incentives with corporate income tax exemption.
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Investment Promotion Incentives – (2) Technology Based Incentives
Biotechnology Nanotechnology Advanced Material Technology Digital Technology
o Cell Culture/ Tissue Engineering Technology
o Gene and Molecular Technology o Genetic Engineering Technology o Omics Technology o Biodegradable Materials
Technology o Bioinformatics o Advanced Bioprocessing
Technology o Bio-Analytical Technology o Biomaterial Production
Technology
o Drug Delivery System o Nano-Encapsulation o Nanofiber Technology o Omics Technology o Nanomaterials Syntheses o Membrane Technology o Adsorption Technology o Nano-characterization and
Testing o Nanostructure Fabrication o Surface Coating/Engineering
Technology
o Advanced Catalyst Technology o Composite Material Technology o Functional Materials Technology o Photonics & Optical Technology o Printed Electronics and Organic
Electronics o Advanced Materials Forming
Process o Materials Characterization
Technology o Energy Storage
o Big Data Analytics Technology o Decentralized Sequential
Transaction Database o Human Computer Interaction
Technology/Brain Computer Interface
o Internet of Things Technology o Natural Language Processing
Technology o Virtual & Augmented Reality
Technology o Digital Engineering and
Manufacturing Technology o Software Testing Technology o Embedded Technology o Smart Grid o Wearable Technology o Artificial Intelligence Technology o Sensor Technology o Automation Technology o Robotics Technology
Under the technology based incentives, all technologies that can be classified into 4 main core technologies (the below list) are eligible
for 10 year corporate income tax exemption.
54
Investment Promotion Incentives – (3) Merit Based Incentives
Type of activities
eligible for this incentive Number of years receiving a CIT exemption
depends on a percentage of investment to combined revenue of the first 3 years.
R&D
Donation to Technology and Human Resources Development Funds
IP acquisition/ license fees for commercializing technology developed in Thailand
Advanced technology training
Product & Package design
Percentage of investment to combined revenue of the first 3 years
Additional CIT Exemption (with additional cap)
1% or ≥ 200 million baht 1 year
2% or ≥ 400 million baht
3% or ≥ 600 million baht
2 years
3 years
Merit based incentives are additional incentives with 1-3 year corporate income tax exemption; An investment project must apply for
either sector based incentives or technology based incentives to be able to eligible for merit based incentives.
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Investment Promotion Incentives – (4) Area Based Incentives
Eastern Economic Corridor (EEC) Incentives
Projects in target industries that eligible for sector or technology-based incentives Additional 50% CIT
reduction for 5 years
Strategic Investment Projects Max 15 year CIT
exemption Eligible to apply for
a grant for R&D and HR development
*Strategic investment projects must be in target industries that in line with Thailand 4.0, but cannot be attracted by other incentives
Bangkok
Chachoengsao
Rayong Chonburi
EEC
Existing Industrial Clusters in EEC Target Industries in EEC
Automotive Cluster Key Players: Toyota, Isuzu, Mazda, Mitsubishi, Ford, BMW
Electrical and Electronics Cluster Key Players: Samsung, Hitachi, Fujitsu, LG, Mitsubishi
Petrochemical & Chemical Cluster Key Players: PTT and SCG
Food Cluster Key Players: Ajinomoto
Next-Generation Automotive Aviation
Smart Electronics Automation and Robotics Digital
Eco Friendly Petrochemical & Chemical
Food for the Future
Medical Hub Medical & Wellness Tourism
Medical Cluster Key Players: Cardinal Health, Nikkiso
Among several area based incentives, the Eastern Economic Corridor (EEC) has lucrative investment potential; Investment projects in target industries are eligible for maximum 15 year corporate income tax exemption.
56
Investment Promotion Incentives – (5) Special Incentives
Eligible Investment
Improvement in production efficiency e.g. automation
• Investment in machinery replacement for
Energy conservation
Use of renewable energy
Reduction of environmental impacts
Conditions
• R&D activities or engineering design
Existing investment promotion projects with no CIT exemption left
Applicant
Investment
Minimum THB 1 million For SME minimum THB 0.5 million
Deadline
December 31,2017
Incentives
3-year corporate income tax (CIT) exemption
Exemption on import duty on machinery
Among several special incentives, measure to promote productivity has high potential; Firms are eligible for 3-year corporate income tax exemption for investing in machinery replacement to promote productivity and cut production cost.
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Trade Privileges
Multilateral trade liberalization
• ASEAN • WTO • GSP (with the below countries)
Bilateral trade liberalization
• Australia • Chile • China • India • Japan • Peru • New Zealand
o Canada o Japan o Norway o Switzerland o Turkey o USA
Certificate of Origin for Free Trade Agreement
To utilize all trade privileges, exporter must apply for “Certificate of Origin for Free Trade Agreement (C/O for FTA)”. In Thailand, Department of Foreign Trade, Ministry of Commerce is authorized agency to issue C/O for FTA.
For more information, www.dft.go.th Sample of Certificate of Origin for FTA
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Country & Economy Overview
Key Industries & Opportunities
Doing Business in Thailand
KASIKORNBANK’s Support
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KASIKORNBANK’s Support
•Financial advisory •Trade finance •Financing
Cross Border Banking Service
•Local branch / representative office support, in China, Japan, Laos, Cambodia, Indonesia Myanmar, and Vietnam.
Regional Support
•Advisory service •Business matching service
Non-banking support
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