Thailand is a fairly developed economy with an upper-middle-income status. Situated in the heart of Southeast Asia, the country serves as a gateway to one of the world’s most dynamic markets. Despite a decade of political instability and economic shocks, the economy grew at a rate of 3.7 percent in 2017 and is expected to touch 4 percent in 2018, led by strong exports and a vibrant domestic consumer market. However, in comparison to some of its neighbors, the country’s growth rate is among the lowest in Southeast Asia.
Though a moderately-growing economy, Thailand offers abundant resources and a skilled and cost-effective workforce for foreign investors. Thailand has a well-defined investment policy framework that encourages liberalization and promotes free trade. The government, through its several agencies such as the Board of Investment (BOI) and the Industrial Estate Authority of Thailand (IEAT) and its many bilateral agreements, offers numerous tax and non-tax incentives to support investors. Investors can significantly gain from agreements such as the ASEAN Comprehensive Investment Agreement (ACIA), the ASEAN Framework Agreement on Services (AFAS), and the Treaty of Amity and Economic Relations between Thailand and the US (Treaty of Amity).
The Foreign Business Act of 1999 is the chief law that governs most investment activities by foreign nationals. Since its implementation, the Act has opened several new business sectors to foreign investment, and increased maximum ownership stakes permitted in some sectors above the standard 49 percent limitation. The law restricts foreign-majority participation in certain businesses; however, this restriction does not apply to most manufacturing ventures.
Thailand’s economy is heavily export-dependent, with exports accounting for more than two-thirds of its total gross domestic product (GDP). Some of its major exports include computer hardware, motor vehicles and auto parts, jewelry and electrical circuits. Crude oil, machinery and parts, and alloy steel and steel products are the top import products.
Sector-wise, the industry and service sectors account for about 90 percent of GDP. Thailand has a diversified industrial base and is known for manufacturing electronics, steel and automotive around the world. The country is an assembly hub for international car brands.
The service sector, including tourism and financial services, employs nearly 38 percent of the active population. The country is among the top 10 travel destinations in the world.
The agricultural sector, comprising mostly of small-scale farms, contributes less than 10 percent of GDP but employs about one-third of the labor force. The country is one of the leading producers and exporters of rice and also has rubber, sugar, corn, jute, cotton, and tobacco as major crops. Fishing is also an important economic activity with farmed shrimp being a major export item.
Government initiatives 2017
In 2017, the Thai government amended the Investment Promotion Act B.E.2520 (1997) by Investment Promotion Act B.E 2560 (2017). The new legislation broadens the scope of incentives – both tax and non-tax, offered to foreign investors. For instance, the exemption of import duties which was previously limited to materials used for manufacture for re-exportation has now been revised to include materials imported for use domestically in research and development activities and related testing.
The government also announced the new National Competitiveness Enhancement Act for Targeted Industries, B.E. 2560 – as a part of Thailand’s long-term investment promotion strategy, Thailand 4.0 and the country’s national agenda on investment-led transformation. The new law aims to enhance the competitiveness of industries in line with Thailand’s capabilities. As a result, foreign investment will be encouraged in certain industries that are new to the country or use new technology or advanced production that will bring in development and promote of innovation.
Read the full article from ASEAN Briefing on Thailand’s Investment Outlook 2018 here!
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