Thailand

Board of Investment

Mr. Somphong Wanapha

Secretary General
Thailand Board of Investment

January 2003
 Outline of Presentation
Thailand
Board of Investment

• Macroeconomic Overview
• FDI in 2002/2003
• Thailand’s Competitive
Advantages
• Targeted Opportunities in
Thailand
 The Macroeconomic
Thailand
Board of Investment
Picture in Statistics (1 of 2)
1998 1999 2000 2001e* 2002e**

GDP Growth (%) -9.4 4.4 4.6 1.8 4.9

GDP (US$ Bil) 111.9 122.4 122.1 114.4 125.6

Inflation (%) 8.1 0.3 1.6 1.6 0.6

GDP Per Capita 1,820 1,980 1,957 1,830 1,990

(US$)

Fiscal Balance (US$ Bil) -2.6 -3.0 -2.6 -2.5 -2.8

Sources: * = Bank of Thailand
** = ThailandOutlook.com (January 10, 2003)
 The Macroeconomic
Thailand
Board of Investment
Picture in Statistics (2 of 2)
1998 1999 2000 2001e* 2002e**

Foreign Reserves 29.5 34.8 32.7 33.0 38.7/***

(US$ Bil.)

Export Growth (%) -6.6 7.4 19.5 -6.9 1.7

Value of Exports 54.5 56.8 67.9 63.2 64.3

(US$ Bil.)

Current Account 12.6 10.1 7.6 5.3 3.6

(% of GDP)

MPI 96.5 108.6 112.1 113.5 130.1***

(Manufacturing Production Index)

Sources: * = Bank of Thailand

** = ThailandOutlook.com (January 10, 2003) *** = As of January 3, 2003
 Government Stimulus
Thailand
Board of Investment

• Restructuring Farm Debts

• Providing Million Baht Grants
to all 70,000 villages
• Thailand Asset Management
Corporation
• Supporting SMEs via State
Banks
 Board of Investment Approved
Thailand
Board of Investment
Foreign Investment by Country
2000 2001 2002
Number Value of Number Value of Number Value of
of Investment of Investment of Investment
Projects (mil. US$) Projects (mil. US$) Projects (mil. US$)

Total 1,116 6,967 820

5,987
721 3,775
Foreign 761 5,295
575 4,713
483
2,316
By Country
Japan 282 2,674
257
1,874
Note 1: Investment projects with foreign equity participation from more than 215are
one country
reported in the figures for each country 892
U.S.A.
Note 2: 2000 US$=40.16 baht; 2001 US$=44.48 baht; 2002 US$=43.00 baht 73 944
40
 Investment from the US
Thailand
Board of Investment

• Approved projects in 2002

✔Honeywell — US$12 million to
produce plated thermal spreaders
✔Cargill — US$5 million in
agriculture (chicken)
✔Johnson Controls — US$8.5 million
for automotive seats
✔An International Procurement
Office from 3M
✔Regional Operating Headquarters
from ExxonMobil
 Regional Operating
Thailand
Board of Investment
Headquarters (ROH)
• In August, the Government
Established Regulations Covering
Regional Operating Headquarters
• Companies must be incorporated
under Thai law and have paid-up
minimum capital of 10 million baht
✔They must service branches or affiliates
in at least 3 countries
✔Income must come from managerial,
administrative, technical, or other
prescribed supporting services for
branches/associated companies
 ROH
Thailand
Board of Investment

• Benefits
✔Corporate income tax at 10% for:
➘Qualified services
➘Royalties from ROH in Thailand
➘Interest income on loans made to ROH
branches/associated enterprises
✔Tax exemption for dividends from
ROH branches/associated enterprises
✔Expats working for ROH are taxed
at 15% for 1st 2 years, instead of on
sliding scale
 FDI in 2003
Thailand
Board of Investment

• Targeting Same Level of

Investment as 2002
• Quality is More Important Than
Quantity
• We are Looking for Projects to:
✔Enhance the competitiveness of
Thai industry
✔Upgrade human capital (i.e.
human resource development)
✔Help develop and transfer skills
and technology
✔Nurture Thai talent
 FDI in 2003
Thailand
Board of Investment

• Objectives Include:
✔Encouraging Cluster Development
➘Particularly in automotive and
petrochemicals (Eastern Seaboard)
✔Targeting investment
➘By region and by industry
➘We have established 5 target
industries and will develop industry-
specific measure to support them
✔Non-target industries
➘No changes in policy, no backtracking
 Competitive Advantages
Thailand
Board of Investment

• ASEAN and AFTA

✔Progressively being implemented
• Location and Social Stability
✔Peaceful Buddhist country
✔Free from social unrest
✔Well-developed infrastructure
• Political System
✔Stable democracy
✔Reform-oriented government
• Workforce
✔Trainable and adaptable
 Competitive Advantages
Thailand
Board of Investment

• Cost-effective Local Inputs

✔Least expensive office space in
Asia
✔Vibrant supporting industries
support subcontracting
➘Canon sources 70% of all parts
locally
➘Toyota is looking to source 100%
locally by 2006
➘More and more manufacturers and
assemblers acknowledge that Thai
local inputs are key to global
competitiveness
 China
Thailand
Board of Investment

• Should You Put All Your Eggs

in the China Basket?
✔China has huge potential, but
investment landscape is a bit
uncertain
 China
Thailand
Board of Investment

• JETRO Report Found That:

✔In 14 categories, Thailand was
ranked better than China in 11,
including:
➘Legal framework
➘Transparency
➘Infrastructure
➘Development of parts industry
• For Global Markets, Even
China Invests in Thailand
 Target Industries
Thailand
Board of Investment

• We Have Identified 5 Groups of

Target Industries
Agro-Industry
Automotive
Fashion
Electronics and ICT
High-Value Services
 Target Industries
Thailand
Board of Investment

• Specific Policies and Measures

Will Be Developed for Each
Target Industry, Based On
Competitiveness
Levels of technology
Market potential
• Non-target Industries
No change in policy
No backtracking
No reduction in incentives
 Leading Agricultural Exports
Thailand
Board of Investment

Export Value
-----------------------------------------------------------------------------------
-
• Rice 73,812*
• Canned Seafood 65,957
• Shrimp 48,696*
• Rubber 43,942*
• Canned Tuna 21,886*
• Chicken 21,796
• Canned Fruit 21,767
• Sugar 21,687
• Canned Pineapple 11,433*

* #1 Exporter in the World Unit = Million Baht

 Agricultural Priority Activities
Thailand
Board of Investment

• Under revised BOI policy (effective

August 1, 2000), 26 agricultural activities
have been classified as priority activities,
including 8 newly-promoted categories:
1. Manufacturing of alcohol or fuel through plants
2. Fertilizers produced through biotechnology
3. Manufacturing of products through herbs
4. Analysis of plant disease
5. Analysis and certification of agricultural products
6. Soil and water analysis for agriculture
7. Agricultural Trading Centers
8. Agricultural Processing Zones
 Automotive Industry in 2001
Thailand
Board of Investment

• Assembly
Market 297,052 units +13.3%
Export 175,299 units +14.7%
Production 459,418 units +11.6%
• Total Component Industry – US$3.8
billion
OEM US$2.3 billion
OESpare US$0.5 billion
REM US$1.0 billion
• 500 Component Manufacturers
Employing 100,000 Workers
 Thai Automotive Markets
Thailand
Board of Investment

700,000 200,000
Sales
Exports 175,000
600,000

150,000
500,000
Total Sales

125,000
400,000

Exports
100,000
300,000
75,000
200,000
50,000

100,000 25,000

0 0
91

92

93

94

95

96

97

98

99

00

01

02
19

19

19

19

19

19

19

19

19

20

20

20
 Auto Parts & Components
Thailand
Board of Investment
Manufactured in Thailand
• Engines • Suspensions
 Diesels, Motorcycles  Shocks, Coils, Ball Joints
• Engine Components • Transmissions
 Starters, Alternators,  Gears, Casings, Rear
Pumps, Filters, Hoses, Axles, Drive Shafts,
Gears, Flywheels Propellor Shafts
• Body Parts • Electrical/Electronics
 Chassis, Bumpers,  Alternators, Starters,
Fenders, Hoods, Door Speedometers, Lamps,
Panels Motors, Flasher Relays
• Brake Systems • Interiors/Exteriors
 Master Cylinders, Drums,  Seats, Mats, Weather
Discs, Pads, Linings, Strips, Console Boxes
• Steering Systems • Others
 Steering Wheels, Gears,  Windshields, Seat Belts,
Columns, Pumps, Radiators, Wheels,
Linkages Compressors
 Components Not
Thailand
Board of Investment
Produced in Thailand
• Passenger Car Engines
• Fuel Injection Pumps
• Transmissions
• Differential Gears
• Final Gears
• Injection Nozzles
• Electronic Systems
• Electronic Control Units
 Thai Automotive Trends
Thailand
Board of Investment

• Gradual Recovery of Automotive

Market
• Expanding Exports
• Continued Investment in Parts &
Components
• Continued Investment in
Assembly
• Thailand is Hub of Auto
Industry in Region
 Fashion
Thailand

• Develop Thailand as Fashion Center

Board of Investment

for Southeast Asia

Leather
➘Opportunities lie in technical cooperation
and quality improvement, particularly in
design and branding
Jewelry
➘Thai gold, silver, and costume jewelry in
high demand , due to Thai artisanship
➘Opportunities to bring in high-tech
equipment and to help with design
✔Garments
➘Provide training institute to produce
international-standard fashion graduates
➘Provide consistent supply of high-quality
raw materials
 High Value Added Services
Thailand
Board of Investment

• High-Value Services
✔Regional Operating Headquarters
➘Attractive package of tax incentives
(comparable to any in the region)
➘Non-tax incentives from the BOI
✔Long-Stay Tourism
➘Retirement homes
➘“Snowbirds”
✔ICT-Related Services
➘E-Commerce Application Service
Providers
➘E-Commerce Users
 Electronics & Electrical
Thailand
Board of Investment
Appliances in Thailand
• Consumer Electronics
• Computers & Peripherals
• Telecom & Office Equipment
• Electronic Components & Parts
• Electrical Products & Parts
• The Industry
750 Companies
300,000 –350,000 Employees
US$17.2 Billion Investment
Export US$21 billion annually
 Thailand
Board of Investment
Electronics Exports
• Consumer Electronics
 2000 Exports – US$3.3 Billion (+17%)
 2001 Exports – US$2.9 Billion (-12%)
• Computers and Peripherals
 2000 Exports – US$7.8 Billion (+3%)
 2001 Exports – US$6.8 Billion (-12%)
• Telecoms and Office Equipment
 2000 Exports – US$1.2 Billion (+10%)
 2001 Exports – US$1.0 Billion (-17%)
• Electronic Components and Parts
 2000 Exports – US$9.3 Billion (+23%)
 2001 Exports – US$7.8 Billion (-15%)
• Electrical Products and Parts
 2000 Exports – US$1.9 Billion (+17%)
 2001 Exports – US$2.1 Billion (+11%)
 BOI on the Internet
Board
Thailand
Thailand
BoardofofInvestment
Investment
http://www.boi.go.th
For the past two years, the BOI web site
was ranked #5 Investment Promotion Agency
website in the world by Corporate Location
Email: head@boi.go.th
• Up-to-date Info on BOI • Database of Promoted
Policies, Procedures, Companies
Incentives and Services • Comprehensive
• Links to Business News Information From
About Thailand Other Government
• What’s New at the BOI Agencies
• Links to Important • BOI Statistics
Business Sites • Trade Statistics
• Cost of Doing Business • Demographic Data
in Thailand • Industrial Estates
 Thailand
Board of Investment

EXTRA
SLIDES
 The Road Ahead
Thailand
Board of Investment

• Seven Key Strategies to Keep

Thailand Competitive
Remove obstacles to investment
Proactive marketing of Thailand
Improve overseas networking
Improve competitiveness
Market community enterprises
Monitor global trends
Cut through “red tape”
 Removing Obstacles
Thailand
Board of Investment

• The BOI Wants to be Your

Business Partner
✔We constantly meet with
investors to find out what we can
do to improve investment climate
✔We are committed to playing a
coordinating role with other
government agencies
✔We have set up an investment
facilitation unit to work with
investors to help solve problems
 Proactive Marketing
Thailand
Board of Investment

• Target Three Key Regions

✔Europe (EU)
✔Asia (Japan, China, Singapore,
Hong Kong, Korea)
✔North America (U.S. and Canada)
• Plans to Open New Offices in:
✔Shanghai
✔San Francisco
✔Osaka
• Promote Target Industries
 Improve Networking
Thailand
Board of Investment

• Develop Linkages, Networks,

Partnerships With:
✔Banks
✔Investment Promotion Agencies
✔Provincial Governments
• Develop Sister City/Sister
Province Relationships
• Work With Chambers of
Commerce
✔Both in Thailand and overseas
 Improving Thai
Thailand
Board of Investment
Competitiveness
• Send a “Wake-Up Call” to Thai
Industry, Particularly SMEs
✔Inform them of changes in global
marketplace
✔Make them aware of need to
adopt “industry best” practices
and technology
✔Help them coordinate skills
transfer through training
 Marketing Community
Thailand
Board of Investment
Enterprises
• BOI Will Play a Coordinating
Role With Thai SMEs
✔Working with other Ministries to
ensure SMEs receive maximum
government support
✔Encourage foreign SMEs to
partner with Thai SMEs to provide
➘Technical assistance
➘Foreign market access
➘Assistance in adapting Thai products
for foreign markets
 Monitoring International
Thailand
Board of Investment
Investment Trends
• Separate Unit at BOI to
Monitor Global Investment
Environment
✔Provide both the Thai
government and the Thai
investment community early
warnings about legislative and
procedural changes in the
international investment arena
 Improve the BOI
Thailand
Board of Investment

• The BOI is Always Looking to

Improve the Way We Do
Business
✔Already ISO 9002 certified,
ensuring all investors receive fair
and transparent treatment
✔We will continue to improve
range of services
✔We will look to streamline
procedure to cut through “red
tape”
 The Board of Investment
Thailand
Thailand
Organization Chart
Board
BoardofofInvestment
Investment

Office of the Prime

Board of Investment
Minister
Policy Administrative

Office of the Board of

Investment
 Office of the Board of Investment
Thailand
Board of Investment
Sectoral Divisions
B O I S e c to r a l D iv is io n s

D iv is io n 1
A g r ic u ltu r e a n d A g r ic u ltu r a l P r o d u c ts

D iv is io n 2
M in in g , C e r a m ic s , a n d B a s ic M e ta l I n d u s tr ie s

D iv is io n 3
L ig h t I n d u s tr ie s

D iv is io n 4
M e ta l-w o r k in g , M a c h in e r y , a n d T r a n s p o r t E q u ip m e n t

D iv is io n 5
E le c tr o n ic s a n d E le c tr ic a l I n d u s tr ie s

D iv is io n 6
C h e m ic a l I n d u s tr ie s , P a p e r , P la tic P r o d u c ts

D iv is io n 7
S e r v ic e s a n d I n f r a s tr u c tu r e S e r v ic e s
 Thailand
Board of Investment

MIDA
EDB
EDB
EDB
MIDA
MIDA
EDB BOI
MIDA
EDB
EDB
MIDA
 Thailand EDB
Board of Investment

MIDA

MIDA
EDB BOI
MIDA
EDB EDB
BOI
MIDA
EDB
MIDA
 MIDA BOI
EDB
MIDA
สำำนักงำนส่งเสริมกำรลงทุนในญี่ปุ่น
Thailand
EDB
MIDA
Board of Investment

MIDA
EDB

EDB

MIDA
 BOI Policy
Thailand
Board of Investment
Priority Activities (1 of 2)
• Agriculture – Backbone of the Country
• Technological and human resource
development
• Infrastructure, public utilities and
basic services
• Environmental protection/conservation
• Targeted Industries - such as:
Steel casting using induction furnace
Forged steel parts
Electronic design
Software and software park
 BOI Policy
Thailand
Board of Investment
Priority Activities (2 of 2)
• These five categories of priority
activities are eligible for special
incentives:
Import duty exemption on
machinery
Eight-year corporate income tax
holiday, regardless of zone
 Services of the BOI
Thailand
Board of Investment

• The BOI offers :

 Investment Matchmaker Program
 Support around the world – 4 overseas offices
(New York, Paris, Frankfurt, Tokyo)
 One-Stop Shop for Visas and Work Permits –
Work Permits within 3 hours
 Services of BUILD Unit to promote industrial
subcontracting – Vendors Meet Customers
Program
 ASEAN Supporting Industry Database (ASID)
 Comprehensive, world-class website
 Help with work and residency permits
 Interaction with other government agencies on
behalf of investors
 Asia’s Most
Thailand
Board of Investment
Affordable Office Space
Tokyo (Inner
140 136 Central)
Hong Kong
Mumbai
120 Seoul
Taipei
100 Beijing
Singapore

80 Shanghai (Puxi)
Guangzhou
61
58
60 Manila

44 42
Jakarta
37 Kuala Lumpur
40 51 Bangkok

16
20 26 11
14 14 13
0
Cost Per Square Foot - US$/year Source: CB Richard Ellis -- July 2002
 Big Mac Index
Thailand
Board of Investment

3.00
2.54
2.50
2.25
1.89 2.01
2.00
1.67
(US$)

1.50 1.28 1.27 1.40

1.27
1.19
1.00

0.50

0.00

Hong
China

Kong
J apan
Malaysia
US

Philippines
Indonesia

Bahrein
Singapore
Thailand

Source: The Economist, April 2002

 New Activities Eligible
Thailand
Board of Investment
for Promotion
• E-Commerce Application Service
Provider
• E-Commerce User
• Regional Headquarters
• International Distribution Centers
• International Procurement Offices
• Retirement Homes
• Dedicated Health Centers
• Waste Recycling
 Supporting Industries
Thailand
Board of Investment
in ASEAN
• ASEAN Supporting Industry
Database
Expands the scope of ASEAN’s
supporting industries by serving as the
region’s industrial yellow pages
The ASID home page (www.asidnet.org)
contains information about more than
11,000 supporting industry companies
throughout ASEAN
Provides communication links to
facilitate electronic commerce between
ASEAN suppliers and foreign
purchasers.
 Liberal Investment Regime
Thailand
Board of Investment

• No Export Requirements
• No Foreign Equity Restrictions
in Manufacturing Sectors
• No Local-Content
Requirements
• No Location Requirement in
All But 6 Activities
 BOI Policy Objectives
Thailand
Board of Investment

• Attract Investment to Speed Recovery

Quality more important than quantity
• Continue Decentralization
Maximum incentives for least developed
provinces
• Strengthen Competitiveness
Require international-standard
certification (e.g. ISO 9002)
• Develop New Activities and Industries
• Good Governance
Transparent policies
Performance-based incentives
 The Board of Investment
Thailand
Thailand
Basic Incentives and Measures
Board
BoardofofInvestment
Investment

• Guarantees and Permissions

Guarantees against nationalization and
price controls
Permission to own land and bring in
foreign experts
• Tax Incentives
Tax exemption /reduction on imported
machinery and input
Income tax exemption
• Support services
Advisory and information provision
Publications
 The Board of Investment
Thailand
Board of Investment
Basic Incentives and Measures
• To reduce initial investment
costs:
Tax exemption or reduction on
imported machinery
Tax exemption or reduction on
imported inputs
Exemptions from corporate
income tax for 3-8 years
 Zones of Opportunity
Thailand
Board of Investment
 Import Duty on Machinery
Thailand
Board of Investment

Zone
1 Reduce 50%
2 Reduce 50%
3 Exempt
 Import Duty on
Thailand
Board of Investment
Raw Materials

Zone
1 1 Year Exemption
2 1 Year Exemption
3 5 Year Exemption
 Corporate Income
Thailand
Board of Investment
Tax Exemption
The Amount of a Project’s Corporate Income Tax
Holiday is Capped at 100% of Investment Capital

Inside Outside
Zone Industrial Industrial
Estate Estate
Zone 1 3 Years Not Exempt
Zone 2 5 Years 3 Years
Zone 3 8 Years 8 Years
 Additional Zone 3 Incentives
Thailand
Board of Investment

Inside Outside
40 provinces Industrial Industrial
Estate Estate
50% reduction of
income tax for 5 
years
Double deduction of
water, electricity,
transport costs for 10
years 
25% deduction of
infrastructure
installation or 
construction costs
 Additional Zone 3 Incentives
Thailand
Board of Investment

18 least- Inside Outside

developed Industrial Industrial
provinces Estate Estate
50% reduction of
income tax for 5 years  
Double deduction of
water, electricity,
transport costs for 10  
years
25% deduction of
infrastructure
installation or  
construction costs
 Criteria and Conditions
Thailand
Board of Investment

Criteria Conditions
• Value added • ISO 9000
• D/E ratio • Performance
• based
Modern technology
• Cap on corporate
• Environmental income tax
protection exemption (equal
to investment
capital)
 Why Thailand?
Thailand
Board of Investment

• Reform-oriented Economic Policy

• Favorable Approach to the Private
Sector: Government As Supporter N
ot Regulator
• Consistently Positive Attitude
Toward Foreign Investment
• Steady Moves to Liberalize Business
Environment and Privatize State-
owned Enterprises
 Why Thailand?
Thailand
Board of Investment

• Resilient, Diversified Economy,

Supporting Industries Growing
• Abundant Natural Resources
• Large and Highly-productive Labor
Force
• Domestic Market of 63 Million
• Strategic Location at the Heart of
Southeast Asia
 Board of Investment Approved
Thailand
Board of Investment
Foreign Investment by Country
2000 2001 2002 (Jan.-Oct.)
Number Value of Number Value of Number Value of
of Investment of Investment of Investment
Projects (mil. baht) Projects (mil. baht) Projects (mil. baht)

Total 1,116 279,800

820
266,300
604
144,000
Foreign 761
212,649 575
209,622
408 89,366
By Country
Note: Investment projects with foreign equity participation from more than one country are
Japan
reported in the figures for each country 282 107,382
257