Successfully investing in Thailand

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last updated on 27 May 2020 | reading time approx. 4 minutes

 

 

 

How do you assess the current economic situation in Thailand?

Thailand is one of the most important and developed countries in Southeast Asia and therefore an interesting location for many foreign companies. Thailand's gross domestic product grew by approx. 2.5 per cent in 2019 – less than in the previous year. Elections were held in March 2019 and the current head of the military government was confirmed as the elected prime minister. Subsequently, talks on a Free Trade Agreement between Thailand and the European Union were resumed.
 
In 2019, foreign trade and tourism made a significant contribution to gross domestic product (GDP). In general, Thailand's growth continues to rely on public spending such as infrastructure measures and other major projects. At the same time, investment incentives are being offered to attract foreign direct investment.
 
In particular, the investment incentives for the “Eastern Economic Corridor” are successful. The expansion of the infrastructure continues to be the top priority, especially the deep-water ports in Laem Chabang (containers) and Map Ta Phut (petrochemicals) as well as the U-Tapao Airport.
 
In the “Ease of Doing Business” index, Thailand improved its ranking by six places in 2019 and is now ranked 21st. Within ASEAN only Malaysia (rank 12) and Singapore (rank 2) have obtained a better ranking.
 
2019 was marked by an extremely strong Thai Baht, which led the Bank of Thailand to lower the interest rate in several stages from 1.75 to initially 1 per cent. In the course of the Covid-19 crisis, the interest rate was lowered to 0.75 per cent.
 
It is becoming apparent that the economic impacts of the Covid-19 crisis will constitute a substantial issue for Thailand, which is mainly due to the dependence on exports and tourism. The International Monetary Fund sees Thailand's economy shrinking by about 7 per cent in 2020. The government has taken various measures such as credit programs and tax relief to minimize the consequences of the Covid-19 crisis.
 

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

The government continues to focus on innovation as part of the “Thailand 4.0” policy. After agriculture (Thailand 1.0), light industry (Thailand 2.0), heavy industry (Thailand 3.0), innovations and digitalization should enable Thailand's breakthrough into a “high-income country”.
 
Every investment is welcome. However, investments in the following areas will be promoted above all:
  • High-class tourism;
  • Biofuels and biochemistry;
  • Food Marketing;
  • Medical centers;
  • Advanced agriculture and biotechnology;
  • Air transport and logistics;
  • Intelligent electronics;
  • Robot Industry;
  • Modern automotive industry;
  • Digital industry.

 

Thailand will rely on foreign investment in the future. A robust demand continues to come from China and Japan. Companies from the European Union are also relevant. However, it remains to be seen how the Covid-19 crisis will affect the investment climate. The Board of Investment has already made arrangements to enable electronic meetings and introduced other electronic means to ease the process. In this regard, the crisis could bring about something useful: Simplification of Thailand's bureaucracy.

 

What challenges do German companies face during their business ventures into Thailand?

German companies must first determine whether the respective prerequisites for a successful market entry in Thailand – and possibly in the ASEAN region – are in place. Furthermore, they need to determine how to achieve the commercial goals as effectively as possible. The Thai market is strictly regulated for foreign investors. However, there are numerous investment incentives that make an investment in Thailand attractive. It is important to consider the investment laws and to find the best access to the market for your own company. Moreover, for a successful market entry it is necessary to recognise and respect the local business culture and its particularities. A degree of intercultural skills is also an advantage – in dealing with Thai employees, customers and business partners, as this is often the key to commercial success.
 

How far has digitalization progressed in Thailand?

In Thailand, digitization is manifested in various areas, most notably in the “Thailand 4.0” policy. Administratively, the aim is to handle communication with authorities more and more electronically, although the changeover will take time. The existing systems continue to suffer from technical teething troubles.
 
In practice, digitization is mainly taking place in industrial and urban areas. The rural areas are noticeably lagging behind. There are visible changes in the payment behavior of consumers, such as a trend towards cashless payment via smartphone. Accordingly, banks and financial service providers are pioneers of digitalization.
 
In the wake of the Covid-19 crisis, more and more public authorities are switching to electronic communication. A good example are applications for subsidies to the Board of Investment. Applications can be submitted completely electronically and necessary meetings can be held via online tools. We assume that this trend will continue even after the crisis.
 

In your opinion, how will Thailand develop?

The political situation in Thailand remains volatile, which is particularly evident from the ban on the “Future Forward” party, which achieved a notable success in the 2019 elections. Structurally, the very unequal distribution of wealth has a destabilizing effect.
 
The Covid-19 crisis painfully exposed Thailand's dependence on exports and tourism: If tourists and investments are staying away, GDP will shrink. However, it has to be said that the government has reacted to the crisis swiftly and with the overall right concepts.
 
Moreover, the government's basic economic concepts are correct – renewal, expansion of innovative industries, digitalization. A successful example of the implementation of these policies is the “Eastern Economic Corridor”.
 
Improving the issue of corruption remains a challenge: only a few concepts have been introduced. The overall global economic situation will be decisive for Thailand. A further economic integration within ASEAN would be desirable. Furthermore, a timely conclusion of the free trade agreement with the European Union would certainly be beneficial.

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