Pandemic or not, Thailand remains all-time favorite regional trade base
In addition, in recent years, labor costs China are also becoming less competitive. Government support for foreign direct investment in South East Asia also becomes more sophisticated and attractive. Most importantly, especially in Thailand, investors can take advantage of the many regional and bilateral free trade agreements that Thailand concluded with its partner countries. All of these factors are vitally important when investors need to reduce the risk of supply chain disruptions.
The Eastern Economic Corridor (EEC) is also an important competitive advantage for investors Thailand, thanks to its well-established and functioning supply chains, its developed infrastructure, its privileges and incentives for investment and the availability of a skilled and affordable workforce. In addition, the UNECE Policy Committee is redefining target sectors and strategies to increase the possibilities of attracting foreign investment.
With a focus on the S-curve and new S-curve industries, the committee focuses on industries in which the EEC has a distinct competitive advantage.
There is no one-size-fits-all solution. Foreign investors should delve into the information before embarking on any planned relocation process. Therefore, a tailor-made approach is needed for each industry according to their requirements. And that’s where Thailand can make a difference, because personalized service is exactly what the Board of Investment (BOI) can offer its clients.
Prepare the ground for wider dissemination in the market
Currently, the government is considering measures to improve Thailand business environment for foreign investors. To do this, key laws will be improved or repealed to remove barriers, such as the cap on personal income tax for foreigners at a maximum of 17%, which Thailand more attractive compared to other countries in the region.
The government also aims to put Thailand on the World Bank’s list of the 10 easiest countries to do business for the next few years. Recently, Thailand climbed six places to 21 out of 190 countries in the World Bank’s 2020 rankings.
In addition, the Comprehensive Regional Economic Partnership Agreement (RCEP) signed on November 2020 by leaders of ASEAN countries, plus Australia, China, Japan, Republic of Korea and New Zealand, will greatly benefit the region in the post-COVID era.
The RCEP agreement, intended to enter into force January 2022, is the largest ASEAN free trade pact to date. It covers a market of 2.2 billion people worth $ 26.2 trillion or 30% of world GDP.
According to Thailand Department of Trade Negotiations, the country will benefit from the reduction of trade barriers on industrial and agricultural products, the reduction of customs duties, the expansion of market access in RCEP member states, the strength of supply chain connectivity as well as favorable RCEP rules of origin.
The agreement will allow significant growth in trade between RCEP members. In 2019, Thailand total trade flows among RCEP members accounted for 56.9% of its imports-exports.
The pact will also Thailand a preferred manufacturing base in Asia. RCEP supports strategies where companies set up production facilities for their supply chain in multiple countries in order to diversify the risks caused by disruption and become more competitive.
Favorable investment incentives … nobody likes Thailand
Duangjai Asawachintachit, Secretary General of the Board of Investment (BOI), explained that Thailand has strong supply chains in several sectors, particularly agribusiness, automotive, electronics / electrical appliances and medical supplies. In addition, upgraded Investment incentives are a major factor that attracts investors to the Kingdom.
In December 2020, The BOI has approved a series of measures aimed at accelerating investments, especially in target sectors, and encouraging companies to adopt digital technology. The Large Scale Project Promotion Package was designed to boost investment in the post-COVID-19 era.
As part of measures to accelerate investments in target industries, projects with investments made of at least THB 100 billion (33 million USD) within 12 months of issuance of the promotion certificate, will be eligible for an additional 50% corporate tax (IS) deduction over a period of five years, in addition to the five to eight year exemption from Lily. Qualified projects have between January 4th and the last working day of 2021 to submit their application.
The electronics industry, in particular, is flourishing with increased investment in IT infrastructure to support the continued adoption of cutting-edge technologies, including big data and 5G. Thailand is the first country in South East Asia to commercialize 5G technology.
Between July 2018 and September 2020, 170 requests for foreign direct investments were submitted to the BOI with a total investment of approximately 1 billion THB (3.3 billion USD). Most of the investors are from China, Taiwan and Hong Kong, who wanted to move their smart electronics, auto parts and metal products production facilities to Thailand.
Kriangkrai Thianukul, vice chairman of the Federation of Thai Industries (FTI), said meetings with investors from Japan, the United States and Europe earlier this year revealed that many companies were planning to quit China to reduce future risks. Thailand is one of the best choices in South East Asia because it has several seaports and is geographically located at the heart of the region.
Jitti Tangsithpakdi, chairman of the Thai-Chinese Chamber of Commerce, told Nikkei Asia that Chinese investments Thailand over the past two years, investors seeking to avoid higher U.S. tariffs have been drawn to Thailand policy to attract Chinese companies.
An eye on the basis for change
Japanese investors have been the largest foreign investor for decades Thailand, and the Japanese government continues to help its businessmen establish production bases in the Southeast Asian country. The Japan Foreign Trade Organization (JETRO) also claims that several Japanese manufacturers have received financial support from their country’s Ministry of Economy, Trade and Industry (METI) to relocate their production facilities to Thailand. In April 2020, Japan assigned a 2.2 billion USD economic recovery plan to help its manufacturers exit China as the COVID-19 pandemic disrupted supply chains. Among them are Amtech, San Alloy, Nadaka, Nikkiso, NikkiFrom and Riki.
However, a report by the Mitsui & Co Global Strategic Studies Institute shows that direct investment China has been increasing steadily since the second half of 2018, particularly in the manufacturing sector.
U.S. tech companies like Apple, Google, and Microsoft are also looking to move some hardware production facilities from China to other countries, including Thailand and Vietnam. Nikkei reported that Google asked a manufacturing partner Thailand to prepare the production lines of its smart home products, such as voice assistant compatible speakers. Other large companies that have moved Thailand include Casio Computers, Daikin Industries, Sony, Sharp, and Delta Electronics.
Capitalize on opportunities
Developers of industrial buildings are also taking steps to tap the growing demand. The Industrial Zones Authority of Thailand (IEAT) plans to invest 800 million THB ($ 26.7 million) to build the first phase of the Smart Park industrial zone in 2021, which is scheduled for completion in 2024. The authority will also accelerate the adoption of 5G technology in its five industrial zones, namely Map Ta Phut, Laem Chabang , Bang Pu, Lat Krabang and the industrial zone of the northern region at Lamphun. Over the next three years, 5G will dramatically transform the manufacturing process into a digital platform primarily controlled by the use of robots and automation.
In addition, the IEAT Board of Directors approved a proposal from private companies to establish three new industrial zones in the UNECE region with a total value of more than 80 billion THB (2.7 billion USD). These projects include the 2000 rai (790 acres) Rojana Industrial Zone and the 2600 rai (1028 acres) Asia Clean Industrial Zone, both of which are in Chon Buri, as well as the 650 rai (258 acres) Egco Industrial Zone. ). Property in Rayong.
In mid-October 2020, WHA Group, one of the Thailand leading supplier of integrated logistics and industrial facilities, has launched its first e-commerce park to improve logistics in the EEC zone. Covering an area of ââover 200,000 square meters in the Bang Pakong district of Chachoengsao, it was designed as a smart park equipped with advanced technologies, including automated loading doors, robotic and logistics solutions to facilitate distribution and e-commerce services.
The bar has been set high for any government wishing to attract foreign direct investment due to the new black swans of the century such as trade wars and a pandemic of unprecedented magnitude … but it seems Thailand has thought ahead of its time and is ready to deal with any unknown disruption to come, no matter what. Any investor wishing to come South East Asia should definitely look that way. For more information, write to us and we’ll put you in touch with the right people. [emailÂ protected]
SOURCE Ministry of Foreign Affairs, Thailand