Successfully investing in Thailand

last updated on 16 June 2023 | reading time approx. 4 minutes

How do you assess the current economic situation in Thailand? »
How would you describe the investment climate in Thailand? Which sectors offer the largest potential? »
What challenges does a German entrepreneur face when entering Thailand? »
How far has Thailand come with digitalisation? »
In your opinion, how will Thailand develop? »

How do you assess the current economic situation in Thailand?

Thailand is one of the most important and developed countries in Southeast Asia. This makes it an interesting location for many foreign companies.

The Corona pandemic had hit Thailand quite hard, however since then the economic situation has steadily recovered. While the year 2021 was still affected strongly by the pandemic, the economy grew in 2022 by about 2.64 per cent.

For 2023, the government is expecting a growth of 3 to 4 per cent. Pre-pandemic levels of growth are expected for the following years. The development of tourism is the most important factor: With the end of the Zero-Covid-Policy in China since January 2023, the government expects a considerable increase in tourist income. There are no longer entry restrictions for travelers from China, which is of enormous economic importance for Thailand. However, this has been even slower than expected.

The recovery in the tourism sector, among others, has significantly strengthened the Thai Baht in comparison to the US dollar at the end of 2022, but due to the also stronger Euro, this does not have a significant impact on the European region, where the exchange rate is around 37 baht to the Euro.

Foreign trade and tourism will continue to be the main pillars of the Thai economy for the future. The government is planning major investments in infrastructure by offering investors attractive investment incentives. Nevertheless, the pandemic is likely to still have a long-term negative impact due to the sharp increase in private household debt.

The support measures, especially the "Eastern Economic Corridor", are showing good results so far. Additionally, as part of the Thailand 4.0 investment program, the Board of Investments (BOI) announced a comprehensive relocation program in December 2022 which and offers various incentives to relocate companies to Thailand.

In the "Ease of Doing Business", Thailand continues to rank a good 21st place. Within ASEAN, only Malaysia (rank 12) and Singapore (rank 2) are rated better.

Unfortunately, there is still no free trade agreement between Thailand and the EU. However, on 15 March 2023 it was announced that negotiations are now continuing. The EU-Commission emphasized that sustainability is the most important topic of the negotiations. Previously, a Partnership and Cooperation Agreement was signed in 2022.

Looking at the parliamentary elections in mid-May 2023 there is hope that the negotiations for a free trade agreement will gain a new momentum under a newly formed government.

How would you describe the investment climate in Thailand? Which sectors offer the largest potential?

The government continues to focus on innovation under the "Thailand 4.0" policy. Following the development through agriculture (Thailand 1.0), light industry (Thailand 2.0) and heavy industry (Thailand 3.0), investments in innovation and digitalization should enable Thailand to break through to become a "high-income country".

Every investment is welcome. However, the following areas are especially promoted:

High class tourism
Biofuels and biochemistry
Food marketing
Medical centers
Advanced agriculture and biotechnology – Air transport and logistics

Intelligent electronics
Robotic industries
Modern automotive Industry
Digital Industry

After the pandemic, investors should be attracted especially in the field of medicine. A prominent example of rapid implementation is the legalization of marijuana for medical and industrial use.

Overall, Thailand will continue to depend on foreign investments, with the People's Republic of China and other Asian countries becoming increasingly important. In comparison, European and Western influence is unfortunately declining.

What challenges does a German entrepreneur face when entering Thailand?

German entrepreneurs must ask themselves whether the respective prerequisites for a successful market entry in Thailand are given and how their goals can be achieved as effectively as possible. The Thai market is strictly regulated for foreign investors. However, there are numerous government subsidy opportunities that make investing in Thailand attractive. It is important to understand the investment laws and find the best access to the market for your own company.

In addition, a successful market entry requires to recognize and observe the local business culture and its peculiarities. A certain degree of intercultural skills are also an advantage - when dealing with Thai employees, customers, as well as business partners. This is often the key to success.

How far has Thailand come with digitalisation?

In Thailand, digitalization is manifesting itself in various areas, above all in the course of the "Thailand 4.0" policy. Continuous efforts are being made to handle communication with authorities through electronic means and first successes can be noted. Due to the pandemic, simplified regulations concerning holding shareholders' and directors' meetings electronically have been introduced. Overall, the pandemic has helped to boost the digital development quite significantly.

In practice, the digitization is mostly developing in industrial and urban areas. Rural areas are lagging. Visible changes are for example the payment behavior of consumers. The trend towards cashless payments via smartphone is continuing. Banks and financial service providers are pioneers in the area of digitalization.

Offers for services within the framework of digital assets (coins and tokens) are evident. More expertise is also developed in the administration, especially in the tax authorities. We assume that there will be further regulations.

In your opinion, how will Thailand develop?

The political situation in Thailand remains volatile, although the major protests of 2020 and 2021 have not been repeated so far. The political conflict is ultimately rooted in the strong imbalance of wealth and economic power in Thailand, and no timely resolution is on the horizon. The impact of the elections of 14 May 2023 are unclear. According to the first results, the previous opposition parties have a majority in the House of Representatives. It remains to be seen if and when this will lead to a new coalition government.

Economically, Thailand is on a path to recovery, even if the country's growth rates now lag behind some their neighbour countries. However, Thailand's heavy dependence on tourism and FDIs has had a very bad impact during this crisis, especially on the large low-income population in informal employment. Allowing this population group to participate more in the development of the country's prosperity is essential for the country's development and domestic peace.

Thailand is striving to drive the country's development forward with innovative industries, such as a focus on renewable energies, digital services, and high-tech industries. Development of key infrastructure projects in railway and road transport, as well as ports and airports, proceeding slow but steady, are already making a positive contribution. Continuing this growth at all levels, will be one of the great challenges of a new government.

For the future, the overall global economic situation will continue to yield a heavy influence on the development in Thailand. In this regard it would be good if further integration in the ASEAN economic area can be achieved. A timely conclusion of the FTA with the European Union is also very desirable.