Thailand Investment Guide. July 2017 World Business Advisory Center World Business Division

Transcription

1 Thailand Investment Guide July 2017 World Business Advisory Center World Business Division 1

2 Table of Content Country & Economic Overview Key Industries & Opportunities Doing Business in Thailand KASIKORNBANK s Support 2

3 Why Thailand? Thailand, the Gateway to ASEAN 1 Logistic Hub of ASEAN 2 Attractive Investment Policy for target industries, the new growth engines THAILAND Bangkok 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 3

4 Table of Content Country & Economic Overview Key Industries & Opportunities Doing Business in Thailand KASIKORNBANK s Support 4

5 Country Overview Country Name: Area: Kingdom of Thailand 513,115 sq.km. the second largest economy in ASEAN Population: 65.9 million (2016) Form of Government: Currency: A parliamentary democracy with the King as head of state Thai Baht (THB) GDP (Current Price): USD billion (2016) GDP per capita: USD 6,032 (2016) Bangkok Timeline and Milestone: : Bangkok Declaration signed, Starting of ASEAN community 1990: Financial liberalization policy 1995: Entry into WTO : Tom Yum Kung crisis 2015: Starting of ASEAN Economic Community (AEC) 2020: Enhance competitiveness to overcome the middle income trap with sustainable growth 5 Data Source: DOPA,NESDB,World Bank, IMF

6 f 2017f 2018f 2019f 2020f USD thousand Economic Overview Driven by service sector, Thailand is an upper middle income economy with growing middle class. GDP composition, as of 2016 GDP per capita, f agriculture 8% services 56% GDP USD 410 billion industry 36% Service sector mainly tourism and wholesale & retails Industry mainly automobile, electrical & electronics GDP per capita reach USD 7,000 by 2020 Middle class 53% of population 6 Data Source: NESDB, IMF

7 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 USD Billion USD 116 billion Foreign investment project approved by BOI during Japan USD 34.5 billion Top investors China USD 4.3 billion Singapore USD 4.1 billion USA USD 4.1 billion 7 Source: Thailand Board of Investment (BOI)

8 billion USD 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. 1. ASEAN 2. China 3. USA 4. Japan Trade Flows and Balance, Top trade partners by trade value Export Import Trade Balance Key Import products & Its % of total export Import products Thailand imports foreign electrical & electronic parts in manufacturing for its export. Electrical and Electronic parts and products 33% Mineral fuels, oils 13% Electrical and Electronic parts and products 31% Vehicle and Parts 12% Export products Thailand is the second largest hard disk drive exporter globally and the main vehicle exporter of this region Key Export products & Its % of total export Iron and Steel 5% Rubber 6% 8 Data Source: Trademap, Ministry of Commerce

9 Thailand Border-Trade Overview Thailand-Myanmar Trade Volume USD 5.3 billion Major Customs: Mae Sot/Myawaddy Myanmar Export Product Natural gas Livestock/ aquatic Wood and related products Myanmar Import Product Alcohol and non-alcohol beverage Sugar Garment and textile Thailand-Malaysia Trade Volume USD 14.3 billion Major Customs: Songkhla/Kuala Perlis Malaysia Export Product Audio device Computer and parts Magnetic head, main components for hard disk drive Malaysia Import Product Rubber and related products Computer Processed wood Major official border customs Trade volume with Thailand as of Thailand-Laos Trade Volume USD 5.8 billion Major Customs: Nong Khai/Vientiane 3 Laos Export Product Electricity Mineral; copper transmitters; television, telephone Laos Import Product Petrol Vehicles Iron, steel Thailand-Cambodia Trade Volume USD 3.5 billion Major Customs: Aranyaprathet/Poi Pet Cambodia Export Product Vegetable and garments transmitters; television, telephone Insulated wire/cable Cambodia Import Product Non-alcohol beverage Vehicles and parts Motorcycle and parts Border trade is an effective means for Thailand to integrate with regional market: Expand consumer goods and fuel to CLM market. Supply raw material and serving as regional supply chain hub. Total value of boarder trade in 2016 = USD29 billion 9 Data Source: KResearch, Department of Foreign Trade Thailand

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 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. Aviation Thailand has 6 main international airports, located in Bangkok, Samut Prakan, Chiang Mai, Chiang Rai, Phuket and Songkhla province. Water Transport There are 8 international deep seaports and 3 major river ports in Thailand. The highest capacity seaseaport, Lam Chabang, can handle 6.9 million TEU/yr. While, inland port, Bangkok Port, has capacity of 1.5 million TEU/yr. Railway Thailand has railway lines, covering 47 provinces with a total distance of 4,043 km., about 93% of which is single-track. 10 Data Source: KResearch, BOI

11 oad Network: GMS Economic Corridors 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. GMS Transport Sector Strategy ( ) facilitates grater connectivity. Road Road transport is the primary means of passenger and freight transport which can carries around 86% of freight traffic East West Economic Corridor (Dark brown) Myanmar(MawLaMyine)-Thailand(East-Western)-Laos (Savannakhet)-Vietnam (Da Nang) North-South Economic Corridor (Red) China (Kunming) Northern Laos/Myanmar Thailand (North-Sourthern) - Malaysia Central Corridor (Green) China (Southern) Laos (Northern) Thailand (Bangkok)/(Eastern) Cambodia North-eastern Corridor (Light brown) China (Nanning) Vietnam(Northern) Laos (Northern) Thailand (Bangkok/Laem Chabang) Southern Corridor (Lower Dark Brown) Myanmar (Dawei) Thailand (Bangkok/Laem Chabang) 11 Cambodia (Phnom Penh) Vietnam (Ho Chi Min City) Data Source: WB_Advisory, BOI

12 Aviation Thailand international airport Chiang Mai Phuket Don Mueang, Bangkok Hat Yai, Songkhla Mae Fah Luang, Chiang Rai Suvarnabhumi, Samut Prakarn Thailand is the second largest air cargo service provider in ASEAN, after Singapore. Total air cargo: Rank (In ASEAN): 2 Rank (Global): 20 Additional service: Passenger Capacity 2016 Chiang Rai Hat Yai Chiang Mai Phuket Don Mueang Suvarnabhumi Air cargo service information 2016: 1.3 Million tons One stop service basis such as Trading, Partial Import Clearance, and so on million passenger 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 Don Mueang: Approved a new budget for enhancing annual capacity to handle 40 million passengers and serve flights/hr. It s expected to finish in 2022 Phuket: The new phase opened in It could be handle 18 million passenger/ year. 12 Data Source: Airport council international, Airport of Thailand

13 Water transportation 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 Laem Chabang Deep Seaport 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 Klong Toey or Bangkok Port This port can handle approximately 1.5 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 Inland port The biggest inland port of the northern region The strategic inland port for trading among GMS region. Songkhla Port The only international port on the Southeast coast Capacity of 160,000 TEU/yr Phuket Port The latest international port on the west coast of the South Capacity of 450,000 tons annually Current Development Plan Laem Chabang : Laem Chabang Phase III will open for bidding by the end of 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. Bangkok Leam Chabang Map Ta Phut Phuket Songkhla 13 Data Source: BOI,Transportation Institute Chulalongkorn University, Chaophaya Terminal International

14 Railway Network Thailand has 4 main operating railway networks. These networks are under upgrading, transform single to dual track as well as high speed train project. Thailand current railway networks Railway development master plan Year spent: Plan objectives: Upgraded to duel track Railway networks extension High-speed railway Northern Line (Blue) Bangkok(Center Thailand) Chiang Mai (Northern Thailand) Southern (Red) Bangkok Sugai Kolok(Southern Thailand)- Northern Malaysia Easthern (Green) Bangkok Aranyaprathet (Easthern Thailand )/ Marp Ta Put (Thailand gulf) Northeasthern (Yellow) Bangkok Ubon Ratchathai (Easthern Thailand) Nong Khai (Northeasthern Thailand)- Center/ South of Lao PDR Domestic railway Development Plan Phase I ( ) : Upgraded some part of existing line to dual track Phase II ( ) : 1,025 km of railway network will be extended Phase III ( ) : 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. 14 Data Source: BOI, Johomaps

15 Major Cities for Economic Activities by Region Chiang Mai Bangkok Metropolitan Main business hub Trade, Banking & Finance, Real estate, Transport & communication, Tourism, etc Ayutthaya Phuket EEC Bangkok Metropolitan Chonburi Rayong Chacheongsao Chonburi, Rayong, Ayuthaya Industrial zone Automobile & parts, Electrical & Electronics, Plastics, Petrochemical, Food & Beverage Eastern Economic Corridor (EEC) Industrial zone Smart Electronic, EV, Robotic, Digital City, Innovation Food and Medical Hubs Chiang Mai & Phuket Tourism hub Hotel & Restaurant, Transportation, Tourism related business 15

16 Table of Content Country & Economy Overview Key Industries & Opportunities Doing Business in Thailand KASIKORNBANK s Support 16

17 Key Industries and Opportunities 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: Food & Beverages Automotive & Parts Electrical & Electronics International Headquarters and International Trading Centers New S-Curve Industries 17

18 Food & Beverage 18

19 Food & Beverage Overview Thailand was ranked as The 13 th World Largest Exporter of Food and Beverage; the country is known as the kitchen of the World which exports one-third of its production. Total Export Value of Food and Beverage, 2016 (US Billion) Top Five of Thailand s Export Processed Products & Beverage Seafood (USD 3.6 Billion) Products from cassava (USD 2.9 Billion) Sugar (USD 2.3 Billion ) Data Source: National Food Institute, Ministry of Commerce Prepared & Preserved Fruits (USD 2.0 Billion) Beverages (USD1.5 Billion) 19

20 Food Processing Industry Overview Thailand is the top processed food exporter in ASEAN; it maintains strategic trade relationships with its regional peers. Processed Food Products Exports in ASEAN 2016, by Export Value (Billion US) Brunei Cambodia Laos Myanmar Philippines Vietnam Singapore Indonesia Malaysia Thailand Data Source: UN COMTRADE Complied by KASIKORNBANK, World Business Advisory Center 14.4 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) 20

21 Food & Beverage Food Processing Opportunity 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 cheap raw material sourcing market expansion in Thailand ASEAN market access rice fruits sugar cane casava fish & seafood Expand strategically nationwide Utilize Thailand s strong regional distribution network Gain knowledge of regional consumer behavior via experience in Thailand 21

22 Automotive & Parts Industry 22

23 Thailand s Automotive & Parts Industry Overview (1/2) Production of Automotive in Thailand in 2016 Export 60% 1.1 million car 1.9 million cars produced Domestic sales 40% 0.76 million car Thailand is the largest automotive producer in ASEAN, ranking 12 th globally with deep and wide automotive supply chain thanks to FDI by Japanese automotive enterprises. Structure of Thai Automobile Industry/ supply chain Assembler (18 car makers, 8 motorcycle makers) 100,000 workers 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 Source: Thai Autoparts Manufacturer Associations Tier 1 (709 companies) 250,000 workers Tier 2,3 (1,700 companies) Source: Thai Autoparts Manufacturer Associations, 175,000 and workers the BOI 23

24 Thailand s Automotive & Parts Industry Overview (2/2) 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 Vision of Thailand Automotive Industry in 2021 targeted industry cluster and it will be expired in late Electric Vehicles Preferential Excise Tax Program Vision: production hub for electric vehicle Plug-in Hybrid Electronic Vehicles Battery Electric Vehicles Fuel Cell Electronic Vehicles Highlight tax incentives for green automobile producer 8- year corporate income tax exemption Lower excise tax for low emission & hybrid car HEVs / PHVx PPV with Co2 emission of lass than 175g/km Double-cab pickup teuck with Co2 emission of less than 175g/km Passenger cars Co2 emission of less than 100g/km. Co2 emission of less than 150g/km Less than 200 g/km New Existing 23% 25% 10% 12% 5% 10% 12.5% 10% 20% 25% BEVs 2% 10% 24 Source: Excise Tax Department

25 Thailand s Automotive & Parts Industry Opportunities 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. 1 Investment in infrastructure for green 2 Production of green auto parts and 3 auto and related services assembly machinery Establishment of production base and distribution center Recharging infrastructure and equipment Green automobile parts Automobile repair service Automobile manufacturing hub Assembly machinery 25

26 Electrical & Electronics 26

27 Thailand s Electronics Industry Overview 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. Thailand s Electronics Exports 2016 Printed Circuit Board 4% Others 35% Integrate Circuit 26% Hard Disk Drive 35% 70% of Thai electronics exports are Hard Disk Drives, Integrated Circuit, and Printed Circuit Board. Key Electronics Products: Hard Disk Drive 2 nd in the world 2 nd 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 8 th in the world Integrated Circuit 11 th in the world Steadily gain traction due to interconnection with automotive and electrical appliance industries. Export value doubled between 2011 and Data Source: Kasikorn Research

28 Thailand s Electrical Industry Overview 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. Thailand s Electrical Appliances Exports 2016 Key Information Others 50% Air Conditioner 26% Washing Machine 6% VDO Recording & Parts 9% Refrigerator 9% 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. 28 Data Source: Kasikorn Research

29 Thailand s Electronics Industry Market Outlook 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. Outlook of Thailand s Electronics Industry Automotive 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 Smart Home Appliances 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 Electro-mechanics Medical Devices 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 29

30 Thailand s Electronics Industry Potential Investment 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. High Potential Activities for Investment in Thailand Electronic System Design o Embedded system design o PCB design o IC design Hi-Tech IC Assembly o System In Package Technology(SIP) o Package on Package Technology (PoP) o 3D Integrated Circuit (3DIC) Hi- Tech PCB Fabrication o Multi-Layer PCB (9 layers + ) o Flexible PCB 30

31 International Headquarters (IHQ) and International Trading Centers (ITC) 31

32 International Headquarters (IHQ) Overview 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. 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? Management activities R&D related activities Treasury related activities Trade & related activities Business Planning Marketing Procurement Research & Development Borrowing in Thai Baht from financial institutions or associated enterprises in Thailand. Goods Procurement Technical o Central Economic Corridor is a road network linking Bangkok Lending in Thai Baht to associated Support Vientiane, and enterprises Southern in Thailand. part of China. Packaging o Major SEZs -> Vita park SEZ (Vientiane) Warehousing 32 Transportation of Goods

33 International Trade Center (ITC) Overview 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. What is International Trade Center (ITC)? Example of ITC Incentive 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. associate firm customer What are qualifying services for ITC? Trade & related services ITC Goods Procurement Warehousing Packaging Transportation of Goods CIT exemption on income derived from trading and related services with overseas entities, whereby goods are not imported into Thailand (out-out transaction). 33

34 IHQ & ITC Overview (1/2) 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 ITC Exemption of corporate income tax on income derived from overseas branch offices 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. Naypyidaw Bangkok Hanoi Vientiane Avg 1.00 hr. by flight Cambodia 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. 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. 34 Source: roedl.com, asean.org

35 IHQ & ITC Overview (2/2) IHQ Incentive Comparison Among 3 Major Countries (Unit : USD) Thailand Singapore Malaysia Paid-up capital Minimum Operating cost / year 300, , ,000 (within 3 years) Approx. 1,500,000 Approx. 582,000 Approx. 698,000 Promotion period 15 Yr 5 Yr 5Yr+5Yr 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. Major Investments Total Number of Project Approval By BOI during IHQ 29 Projects 90 Projects ITC 143 Projects 270 Projects 35 Source: Board of Investment

36 IHQ & ITC Opportunity 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. 1 Support services 2 Research and 3 Sale office development center Call center 4 Others Marketing events Maintenance/ Technical support International meetings. Training center Exhibition 36

37 New S-Curve Industry 37

38 Digital Economy S- Curved Industry - Overview 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. Ten Targeted S-Curve Industries First S-Curve Industry Next-Generation Automotive Cluster New S-Curve Industry Aerospace Aviation and Logistics Electrical and Electronics Smart Electronics Automation and Robotics Petrochemical and Chemical Biofuel and Biochemical Food for the future Food Innovation Medical Cluster Medical & Wellness Tourism Eco friendly petrochemical, biochemical Agriculture and Biotechnology Medical Hub 38 Source: Board of Investment

39 S- Curved Industry Market Outlook The S-Curved scheme form the government has received positive responses as the application submitted to BOI in the Q has shown the significant growth from last year, which worth approximately USD 1.7 Billion. Application Submitted to BOI (Jan-Mar 2017) New S-Curve (USD 222 Million) Digital, Petrochemical, Robotics 12% What is the additional incentive? Corporate Income Tax (CIT) exemption up to 8 years 50% CIT reduction up to 5 years (for promoted areas) First S-Curve (USD 760 Million) Automobile, Electric & Electrical, Agriculture Others (USD 788 Million) Logistics, R&D, IHQ&ITC, Energy 43% 45% 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 39 Source: Board of Investment

40 S- Curved Industry Challenge and Opportunity Challenges 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. 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 Recommendation 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. 40

41 Table of Content Country & Economy Overview Key Industries & Opportunities Doing Business in Thailand KASIKORNBANK s Support 41

42 Overview of Doing Business in Thailand Major cost of Investment Labor Electricity/ Water supply Tax How to start a business in Thailand One Start One Stop Investment Center can coordinate and organize all legal applications for foreign investors. 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. 42

43 Major Costs - Labor Labor: minimum monthly wage in ASEAN 2017, USD Salaries of English Speaking Worker in 2017 Position Average Monthly Pay (USD) Office staff 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 43

44 Major Costs Utility Water Rate: for business usage in Bangkok Usage: USD/m³ 0 to 10 m to 100 m to 200 m Note: Over 200 minimum m 3 usage fee is 2.57 USD 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 44

45 Major Cost - Electricity Rate for Small Firm Normal rate Time of Use rate (TOU) Category Electricity price (USD/Unit) Service (USD/ month) 1. Voltage kv Voltage < 12 kv First 150 unit (kv/hr) unit unit and above 0.13 TOU is a rate calculated from the weight average between electricity used in On Peak and Off Peak period Category Electricity price (USD/Unit) On Peak Off Peak Service (USD/month) 1. Voltage kv Voltage < 12 kv Note: On Peak: Monday Friday Off Peak: Monday Friday : Saturday Sunday : Public Holiday *The prices may vary across region depending on the source cost of utility. 45 Data Source: mea.or.th

46 Major Cost - Electricity Rate for Medium Firm Normal rate Category Demand Charge (USD/kW) Electricity price (USD/Unit) Service (USD/month) 1. Voltage > 69 kv Voltage kv TOU is a rate calculated from the weight average between electricity used in On Peak and Off Peak period 3. Voltage < 12 kv Time of Use rate (TOU) Demand Charge is an extra electricity charge for the firm, required to use massive electricity Category Demand Charge (USD/kW) Electricity price (USD/Unit) On Peak Off Peak On Peak Off Peak Service (USD/month) 1. Voltage > 69 kv Voltage kv Voltage < 12 kv Data Source: mea.or.th

47 Major Cost - Electricity Rate for Large Firm TOD is similar to TOU with more detailed categories including on peak, partial peak, and off peak. Time of Day rate (TOD) Demand Charge (USD/kW) Category Price per unit (USD/Unit) Service (USD/month) On Peak Partial Peak Off Peak All-Day 1. Voltage > 69 kv Voltage kv Voltage < 12 kv Time of Used rate (TOU) Category Demand Charge (USD/kW) Price per unit (USD/Unit) On Peak Off Peak On Peak Off Peak Service (USD/month) 1. Voltage > 69 kv Voltage kv Voltage < 12 kv Note: TOD On Peak: Everyday Partial Peak: Everyday Off Peak: Monday Friday 47 Data Source: mea.or.th

48 Tax System Corporate Taxes Types of Tax Tax rate Corporate Tax 20% Value Added Tax (VAT) 7% Property and Land Rent Tax 12.5% Personal Income Tax Monthly Income (THB) Tax Rate 0 150,000 0% 150, ,000 5% 300, ,000 10% 500, ,000 15% Corporate Taxes Rate for SME Net Income (THB) Tax rate Less than 300,000 0% 300,000 1,000,000 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% Above 1,000,000 20% 48 Source: KPMG ASEAN Tax Guide, PwC

49 Register Limited Company Limited company is the most common type of business organization, in which business registration procedures are as following; Types of Business Organization in Thailand Limited Company: Business Registration Procedure 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 Non-Juristic Business 1) Sole Proprietorship 2) Ordinary Partnership Juristic Business 1) Juristic Ordinary Partnership 2) Limited Partnership 3) Limited Company 4) Public Limited Company 49

50 Foreign Business Act B.E (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 foreigncontrolled business 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. 50 For more details, www. boi.go.th

51 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). Overview of Investment Promotion Incentives CORE INCENTIVES 1) Sector Based Incentives 2) Technology Based Incentives Maximum 8-year Corporate Income Tax Exemption High Incentive Sectors Advanced Manufacturing High Value Added Businesses & Services Low Incentive Sectors Basic Industries Supporting Industries 10-year Corporate Income Tax Exemption Biotechnology Advanced Material Technology Nanotechnology Digital Technology 3) Merit Based Incentives 4) Area Based Incentives 5) Special Incentives Additional incentives granted activities that enhance competitiveness Research & Development Advanced Technology Training Others Additional incentives depending on location of investment Eastern Economic Corridor (EEC) Special Economic Zones (SEZs) Others Additional incentives for specific purposes SME Supporting Incentives Measure to Promote Productivity Others 51

52 Investment Promotion Incentives (1) Sector Based Incentives 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. Definition of Group A & B Activities Group A activities Group B activities Advanced & high technology activities Environmental friendly activities Activities that utilize local abundant resources Low technology activities that are important as supporting activities in the value chain Incentive scheme A1 A2 A3 A4 B1 B2 Corporate Income Tax (CIT) exemption Import duty on machinery Import duty on raw materials 8-year Without cap 8-year 100% cap 5-year 100% cap 3-year 100% cap Exemption of import duty on new machines NONE NONE Exemption of import duty on raw materials used in manufacturing of exports products for 1 year (can be extended) Non-tax incentives Permission to own land, to employ foreign skilled workers, remit money abroad in foreign currency, etc. 52

53 Investment Promotion Incentives (2) Technology Based Incentives 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. 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 53

54 Investment Promotion Incentives (3) Merit Based Incentives 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. Type of activities eligible for this incentive R&D Number of years receiving a CIT exemption depends on a percentage of investment to combined revenue of the first 3 years. Donation to Technology and Human Resources Development Funds Percentage of investment to combined revenue of the first 3 years Additional CIT Exemption (with additional cap) IP acquisition/ license fees for commercializing technology developed in Thailand 1% or 200 million baht 1 year Advanced technology training Product & Package design 2% or 400 million baht 3% or 600 million baht 2 years 3 years 54

55 Investment Promotion Incentives (4) Area Based Incentives Bangkok Chonburi Chachoengsao Rayong 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. Existing Industrial Clusters in EEC Target Industries in EEC Eastern Economic Corridor (EEC) Incentives Projects in target industries that eligible for sector or technology-based incentives Additional 50% CIT reduction for 5 years EEC 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 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 Medical Cluster Key Players: Cardinal Health, Nikkiso Next-Generation Automotive Aviation Smart Electronics Automation and Robotics Digital Eco Friendly Petrochemical & Chemical Food for the Future Medical Hub Medical & Wellness Tourism 55

56 Investment Promotion Incentives (5) Special Incentives 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. Eligible Investment Conditions Incentives Investment in machinery replacement for Improvement in production efficiency e.g. automation Energy conservation Applicant Existing investment promotion projects with no CIT exemption left Investment Minimum THB 1 million For SME minimum THB 0.5 million 3-year corporate income tax (CIT) exemption Exemption on import duty on machinery Use of renewable energy Reduction of environmental impacts Deadline December 31,2017 R&D activities or engineering design 56

57 Trade Privileges Multilateral trade liberalization Bilateral trade liberalization ASEAN WTO GSP (with the below countries) o Canada o Japan o Norway o Switzerland o Turkey o USA Australia Chile China India Japan Peru New Zealand Sample of Certificate of Origin for FTA 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, 57

58 Table of Content Country & Economy Overview Key Industries & Opportunities Doing Business in Thailand KASIKORNBANK s Support 58

59 Stay Updated with ASEAN Investment Guide MYANMAR LAOS VIETNAM Cambodia Laos Available Now! Investment Guide for Myanmar Vietnam Indonesia KBANK AEC+ Advisory website offers comprehensive information about ASEAN which include: CAMBODIA Investment Guide Economic Update Industry Analysis News Update Intelligence Topics Benefits for Members (FREE): Download full reports Subscribe to regular publications INDONESIA Website: 59

60 KASIKORNBANK s Support Cross Border Banking Service Financial advisory Trade finance Financing Regional Support Local branch / representative office support, in China, Japan, Laos, Cambodia, Indonesia Myanmar, and Vietnam. Non-banking support Advisory service Business matching service 60

61 61