Thailand

Thailand

main_banner.jpg

Picture: The land of smiles
 
 
Picture: The land of smiles
 
Picture: An e-commerce market worth US$2.5 billion
 
 
Picture: An e-commerce market worth US$2.5 billion
 
Picture: A rising middle class
 
 
Picture: A rising middle class
 
Picture: Well-defined investment policies
 
 
Picture: Well-defined investment policies
 
Picture: Food and agribusiness: major manufacturing sectors
 
 
Picture: Food and agribusiness: major manufacturing sectors
 
Picture: Booming Chinese investment
 
 
Picture: Booming Chinese investment
 
Picture: A regional logistics hub
 
 
Picture: A regional logistics hub
 
Picture: Thailand 4.0
 
 
Picture: Thailand 4.0
 
Picture: 10 Special Economic Zones
 
 
Picture: 10 Special Economic Zones
 
Picture: Great potential for Hong Kong’s lifestyle products
 
 
Picture: Great potential for Hong Kong’s lifestyle products
 

Thailand: Market Profile

Picture: Thailand factsheet
Picture: Thailand factsheet

1. Overview

Thailand has made remarkable progress in social and economic development, moving from a low-income country to an upper-income country in less than a generation. Thailand's long-term economic goals are laid out in the country's 20-Year National Strategy (2017 – 2036) for attaining developed country status. According to the plan, the country will seek to achieve this through broad reforms including addressing economic stability, human capital constraints, equal access to economic opportunities, environmental sustainability, competitiveness, and effective governance. The sustained pace and quality of reforms, as well as sound implementation, will be crucial for translating the reform effort into the desired economic outcomes.

Source: World Bank, Fitch Solutions
Date last reviewed: August 14, 2018

2. Major Economic/Political Events and Upcoming Elections

May 2014
The army led by General Prayut Chan-ocha took power in a coup d'état and announced the suspension of "the constitution of 2007 except for the chapter on the monarch".

October 2016
King Bhumibol Adulyadej died after 70 years on the throne and was replaced by his son, Maha Vajiralongkorn. In December, Crown Prince Vajiralongkorn was proclaimed king, replacing his late father.

April 2017
King Vajiralongkorn signed the new, military-drafted constitution that paved the way for a return to democracy.

Source: BBC Country Profile – Timeline, Fitch Solutions Political Risk Analysis
Date last reviewed: August 14, 2018

3. Major Economic Indicators

Graph: Thailand real GDP and inflation
Graph: Thailand real GDP and inflation
Graph: Thailand GDP by sector (2017)
Graph: Thailand GDP by sector (2017)
Graph: Thailand unemployment rate
Graph: Thailand unemployment rate
Graph: Thailand current account balance
Graph: Thailand current account balance

e = estimate, f = forecast
Source: IMF, World Bank
Date last reviewed: August 6, 2018

4. External Trade

4.1 Merchandise Trade

Graph: Thailand merchandise trade
Graph: Thailand merchandise trade
Graph: Thailand major export commodities (2017)
Graph: Thailand major export commodities (2017)
Graph: Thailand major export markets (2017)
Graph: Thailand major export markets (2017)
Graph: Thailand major import commodities (2017)
Graph: Thailand major import commodities (2017)
Graph: Thailand major import markets (2017)
Graph: Thailand major import markets (2017)

Source: Trade Map, Fitch Solutions
Date last reviewed: August 14, 2018

4.2 Trade in Services

Graph: Thailand trade in services
Graph: Thailand trade in services

Source: WTO
Date last reviewed: August 14, 2018

5. Trade Policies

  • Thailand has been a WTO member since January 1, 1995.

  • Largely from 2015 all tariffs between Association of South East Asian Nations (ASEAN) member states have been removed – other members are Brunei Darussalam, Cambodia, Indonesia, Laos, Myanmar, Philippines, Singapore, Malaysia, and Vietnam. The rewards of lower tariffs within the area have been seen, with regional trade booming in recent years, especially as Malaysia, Singapore, Vietnam, Cambodia, and Myanmar are all Thailand's major exporting partners.

  • Though Thailand has abolished most tariffs, these mainly benefit regional (members of ASEAN) investors and a few other countries with which it has FTAs. Consequently, high tariffs in many sectors and non-tariff barriers such as licensing requirements and excessively burdensome import requirements remain an impediment to market access. Price controls and excise taxes, often based on an exceedingly complex tax structure, also negatively impact trade in some sectors. Thailand is not a signatory to the WTO Agreement on Government Procurement.
  • Under Article 27 of the Customs Act of 1926 and subsequent amendments, certain items are prohibited by law from passing into or out of Thailand. Habit forming narcotics and other illicit drugs are banned. The same article of the Customs Act of 1926, allow the Ministry of Commerce to designate certain classes of goods as subject to import controls, generally, in the form of licensing or government permissions.

Source: WTO – Trade Policy Review, Fitch Solutions
Date last reviewed: August 15, 2018

6. Trade Agreements

6.1 Trade Updates

Negotiations for an EU-Thailand Free Trade Agreement (FTA) were launched in March 2013. The negotiations aim to conclude a comprehensive Free Trade Agreement in the short-medium term.

6.2 Multinational Trade Agreements

Active

  1. ASEAN Free Trade Area (AFTA): Thailand signed the Framework Agreement on Enhancing ASEAN Economic Cooperation in 1992. The agreement was to establish an ASEAN Free Trade Agreement (AFTA) which in total now affects ten countries. In 2015, the ASEAN Economic Community (AEC) was officially launched, with nearly all tariffs eliminated, though further liberalisation of services, capital, and labour will take more time to implement. Along with the other ASEAN members, Thailand is currently negotiating with China, Korea, Japan, Australia, New Zealand, and India to form a Regional Comprehensive Economic Partnership (RCEP) agreement; has implemented an FTA with Australia in 2005, signed an FTA with New Zealand in 2005 and with Japan in April 2007.

  2. ASEAN-New Zealand-Australia Free Trade Agreement and Economic Integration Agreement: Australia is Thailand's sixth largest exporting partner.

  3. ASEAN-Japan FTA: Japan is Thailand's third largest export partner and second largest import partner.

  4. ASEAN-South Korea Free Trade Agreement and Economic Integration Agreement: South Korea is Thailand's fifteenth largest exporting partner, and due to regional proximity and already strong trade ties this agreement has stimulated the flow of trade between the countries.

Under Negotiation

Negotiations for an EU-Thailand Free Trade Agreement (FTA) were launched in March 2013. The negotiations aim to conclude a comprehensive Free Trade Agreement.

Note: Only major FTAs cited
Source: WTO Regional Trade Agreements database, Fitch Solutions
Date last reviewed: August 15, 2018

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Thailand FDI stock
Graph: Thailand FDI stock
Graph: Thailand FDI flow
Graph: Thailand FDI flow

Source: UNCTAD
Date last reviewed: August 6, 2018

7.2 Foreign Direct Investment Policy

  1. The Thai business climate continues to be positive and welcoming to foreign investment though local laws favour domestic companies in many aspects. All businesses operating in Thailand must register and obtain a Foreign Business License from the Ministry of Commerce. Manufacturing firms must also register with the Ministry of Industry, and the Ministry of Labour and Social Welfare.

  2. The Foreign Business Act (FBA) of 1999 is the primary piece of legislation with respect to foreign business activities. In spite of some reforms, company ownership restrictions remain in place and foreign nationals may own 49% of a company while it remains majority-Thai owned.

  3. Certain types of business activities are reserved for Thai nationals only according to the Fording Business Act. Generally, foreign Investment in these areas cannot comprise more than 50% of share capital unless specifically permitted and/or otherwise permitted. Some exemptions can be obtained such as permission by the Director General of the Department of Business Development, with approval of the Foreign Business Committee together with obtaining a foreign business license.

  4. Foreign ownership of wireless/mobile telecommunications services; banking, accounting, bookkeeping and auditing services; tax consultancy; agriculture and forestry; transportation; tourism capped at 49%; mining and oil & gas and waste management and water supply is capped at 75%.

  5. Under the Land Code, the Condominium Act and the Property Leasing Act, foreigners are not allowed to own land in Thailand - save for government industrial estates or Special Economic Zones (SEZ). In addition, foreign investments in excess of THB40mn are entitled to own 1,600sq m of land for residential use with the permission of the Ministry of Interior. Rather than purchasing, many foreign businesses instead sign long-term leases and then construct buildings on the leased land.

  6. Under the Condominium Act of 2007, foreign ownership in a condominium building cannot exceed 49%. Meanwhile, property can be expropriated under Thai law, but the risk of asset seizure is low.

  7. The Alien Employment Act prohibits foreign nationals from working in 39 occupations and professions including but not limited to labourer, goldsmith, farmer, accountant, auditor, engineer, architect, among others. Additionally, companies need to have certain minimum amount of fully paid up capital in order to qualify to employ specific numbers of foreign nationals in Thailand. Other conditions include having at least fifty local employees per expatriate.

    Businesses that are wholly foreign owned and incorporated in Thailand in terms of Thailand's Board of Investment (BOI) are allowed to employ foreign nationals on a ratio of local to foreign national of 4:1.

Source: WTO – Trade Policy Review, the International Trade Administration (ITA), US Department of Commerce, Fitch Solutions
Date last reviewed: August 15, 2018

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
There are 12 Special Free Zones reserved for the location of industries to manufacture only in Thailand. These zones are located in Chonburi, Lampun, Pichit, Songkhla, Samut Prakarn, Bangkok (at Lad Kragbang), Ayuddhya, and Chachoengsao.These zones are reserved for the location of industries manufacturing for export only, to which businesses may import raw materials and export finished products free of duty (including value added tax).

Enterprises located in Thailand's special investment promotion zones are eligible for additional incentives.

A reduction of 50% of corporate income tax for five years after the termination of a 'normal' income tax holiday period or from the date on which income is earned.

There is entitlement to claim double tax deductions for the cost of transportation, electricity and water supply expenses, and entitlement to deduct from the taxable corporate income up to 25% of the investment costs of installing infrastructure facilities for 10 years from the date of income derivation.

Double deduction for transportation, electricity, and water utility cost, up to 25% deduction for utility construction costs.

Foreign ownership of land and foreign expert employment.

Source: US Department of Commerce, Fitch Solutions
Date last reviewed: August 15, 2018

8. Taxation – 2018

  • Value Added Tax: 10% (but reduced to 7% until September 30, 2018)
  • Corporate Income Tax: 20%

Source: PwC Tax Summaries 2018
Date last reviewed: August 15, 2018

8.1 Important Updates to Taxation Information

  • On March 14, 2018, Thailand's cabinet passed two provisional royal decrees aimed at regulating the cryptocurrency market. The Finance Ministry recived a royal decree outlining new tax guidelines for the cryptocurrency market. According to Thai regulatory authorities, the measures taken are to protect traders from losing their money. 

  • The Value Added Tax (VAT) on cryptocurrency came in at 7% on all traders while the Capital Gains Tax (CGT) came in at 15%.  

  • In January 2018, it was announced that Thailand's cabinet had approved the proposal by the Finance Ministry to allow households to deduct THB60,000 (THB30, 000 each) from their taxable income in 2018 for their second legitimate child. The incentive is meant to counter the country's ageing population problem.

  • The standard VAT rate is 10%, but has been reduced to 7% until September 20, 2018.

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Income Tax20%
Capital Gains TaxTreated as business income. A 2018 decree has introduced a 15% tax on all capital gains on cryptocurrencies. For personal income, most capital gains are treated as personal income except for a few exceptions.
Value Added Tax10% (but reduced to 7% until September 30, 2018). A decree passed in 2018 also introduces a 7% VAT on all cryptocurrency trades.
Personal Income TaxPersonal income below THB150,000 is exempt from personal income taxation. Otherwise, the personal income rate is progressive ranging between 5%-35%.
Social security contributions – payable by employerAn employer in Thailand with one or more employees is required to register for social security fund and each is required to contribute at a rate of 5% per month.

9. Foreign Worker Requirements

9.1 Localisation Requirements

The Alien Employment Act prohibits foreign nationals from working in 39 occupations and professions including but not limited to labourer, goldsmith, farmer, accountant, auditor, engineer, architect, among others.

Additionally, companies need to have a certain minimum amount of fully paid up capital in order to qualify to employ specific numbers of foreign nationals in Thailand. Other conditions include having at least fifty local employees per every expatriate.

Businesses that are wholly foreign owned and incorporated in Thailand in terms of Thailand's Board of Investment (BOI) are allowed to employ foreign nationals on a ratio of local to foreign national of 4:1.

9.2 Obtaining Foreign Worker Permits for Skilled Workers

Prior to commencing employment, all non-Thai nationals are required to obtain a work permit under the Alien Employment Act, 2008.

Foreign nationals first need to secure an initial non-immigrant visa, which must be obtained before entering Thailand.

The duration of the work permit is generally the same as the applicant's visa. Generally, work permits are issued for one year but are also renewable.

Foreign nationals are not allowed to perform work that is not in condition with their visa. To change occupations, they need to obtain authorization from the Ministry of Labour.

9.3 Visa/Travel Restrictions

In general, Thailand has an open visa policy. The country has bilateral agreements with a number of other countries which award preferential treatment to nationals of these countries in terms of number of days granted to stay in Thailand visa free.

Nationals from five countries have visa free access into Thailand for 90 days; five others have access for 30 days; 45 nations are granted 30 days visa free as well entering Thailand other than through the country's airports. Many other countries get a visa on arrival whereas only a few need to apply for a visa before departing for Thailand.

Source: Government websites, Fitch Solutions
Date last reviewed: August 15, 2018

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody'sBaa1 (Stable)18/07/2017
Standard & Poor'sBBB+ (Stable)21/12/2015
Fitch RatingsBBB+ (Stable)07/06/2018

Source: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
49/18946/19026/190
Ease of Paying Taxes Index
70/18969/19067/190
Logistics Performance Index
45/160N/A32/160
Corruption Perception Index
101/17696/180N/A
IMD World Competitiveness28/6327/6330/63

Source: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices


World ranking
201620172018
Economic Risk Index Rank36/202
Short-Term Economic Risk Score71.073.171.5
Long-Term Economic Risk Score69.370.469.7
Political Risk Index Rank116/202
Short-Term Political Risk Score66.770.870.2
Long-Term Political Risk Score57.958.958.9
Operational Risk Index Rank  58/201
Operational Risk Score 61 59.458.8

Source: Fitch Solutions
Date last reviewed: August 15, 2018

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK

Over the next five years, the Thai economy is expected grow by an average of 3.5% as the country's new constitution should provide policy continuity regardless of the election outcome, with continued business environment improvements, potentially including big-bang SOE reforms, boosting productivity.

OPERATIONAL RISK

Thailand offers investors considerable advantages within its operational environment, which include a large, predominantly youthful workforce with basic literacy and numeracy skills, increasing levels of foreign economic participation and trade, and a developed logistics network. However, significant risks exist, notably the simmering political violence as well as the ongoing separatist violence in the south of the country.

Source: Fitch Solutions
Date last reviewed: August 15, 2018

10.5 Fitch Solutions Political & Economic Risk Indices

Graph: Thailand short term political risk index
Graph: Thailand short term political risk index
Graph: Thailand long term political risk index
Graph: Thailand long term political risk index
Graph: Thailand short term economic risk index
Graph: Thailand short term economic risk index
Graph: Thailand long term economic risk index
Graph: Thailand long term economic risk index

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: August 15, 2018

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Thailand Score58.856.765.268.245.2
East and Southeast Asia Average55.356.555.754.454.4
East and Southeast Asia Position (out of 18)897612
Asia Average48.950.647.747.150.1
Asia Position (out of 35)8117622
Global Average49.749.850.049.349.9
Global Position (out of 201)58504539111

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Thailand vs global and regional averages
Graph: Thailand vs global and regional averages
Country
Operational Risk
Labour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Singapore83.077.8
89.9
74.7
89.7
Hong Kong81.371.2
88.5
75.9
89.5
Taiwan74.466.4
74.3
77.9
79.2
South Korea70.663.5
67.5
78.1
73.1
Malaysia67.861.6
73.5
75.4
60.5
Macau62.464.2
66.9
50.5
68.0
Brunei60.962.8
57.2
53.0
70.6
Thailand58.856.7
65.2
68.2
45.2
China56.653.9
52.2
65.8
54.4
Vietnam53.452.6
55.5
54.5
51.3
Indonesia52.851.5
53.9
57.6
48.4
Mongolia51.657.8
52.4
41.9
54.1
Philippines43.651.3
47.3
44.6
31.3
Cambodia42.546.7
46.0
37.9
39.5
Laos38.744.2
38.0
36.0
36.7
North Korea32.649.6
20.3
29.6
30.8
Myanmar32.045.5
28.2
29.5
24.9
Timor-Leste31.940.5
26.6
28.0
32.5
Regional Averages55.356.555.754.454.4
Emerging Markets Averages46.84847.545.8
46
Global Markets Averages49.749.850
49.3
49.9

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: August 15, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Thailand

Graph: Major export commodities to Thailand (2017)
Graph: Major export commodities to Thailand (2017)
Graph: Major import commodities from Thailand (2017)
Graph: Major import commodities from Thailand (2017)
Graph: Merchandise exports to Thailand
Graph: Merchandise exports to Thailand
Graph: Merchandise imports from Thailand
Graph: Merchandise imports from Thailand

Official exchange rate HK$/US$, average
7.76 (2012)
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Source: Hong Kong Census and Statistics Department, Fitch Solutions


2017
Growth rate (%)
Number of Thai residents visiting Hong Kong560,207-5.8
Number of Thais residing in Hong Kong19,4921.6

Source: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs - Population Division


2017
Growth rate (%)
Number of Asia Pacific residents visiting Hong Kong54,482,5383.5
Number of East Asians and South Asians residing in Hong Kong2,784,8701.6

Source: United Nations Department of Economic and Social Affairs - Population Division, Fitch Solutions

11.2 Commercial Presence in Hong Kong


2017
Growth rate (%)
Number of Thai companies in Hong KongN/AN/A
- Regional headquarters
- Regional offices
- Local offices

11.3 Treaties and Agreements between Hong Kong/PRC and Thailand

  • Thailand has a Bilateral Investment Treaty with Hong Kong that entered into force on April 18, 2006
  • Thailand has double taxation agreements (DTA) and Investment Promotion & Protection Agreement (IPPA) with the China (mainland) and concluded the DTA with Hong Kong in April 2006

Source: Hong Kong Department of Justice, Fitch Solutions

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

Hong Kong-Thailand Business Council

The Hong Kong-Thailand Business Council is an independent, non-government body representing companies of all sizes and individuals with an interest in the development of business and commercial ties between Hong Kong and Thailand.

Address: 16/F, Worldwide House, 19 Des Voeux Road, Central, Hong Kong
Email: hktbc@afh.hk
Tel: (852) 3606 9066
Fax: (852) 2869 1609

Source: Hong Kong-Thailand Business Council

Royal Thai Consulate-General, Hong Kong

Address: Fairmont House, 8/F, 8 Cotton Tree Drive, Central, Hong Kong
Email: thaicghk@thai-consulate.org.hk
Hours of Business: 9:00 a.m. - 1:00 p.m., 2:00 p.m. - 5:00 p.m.
Tel: (852) 2521 6481
Fax: (852) 2521 8629

Source: Thai Consulate General in Hong Kong

11.5 Visa Requirements for Hong Kong Residents

Citizens of Hong Kong are permitted to stay up to 30 days under the Bilateral Agreement with Thailand if entering via an international airport or through a land border checkpoint from a neighboring country, such as Laos, Myanmar and Cambodia.


Industrial Estate - New (Green Industrial…

Southeast Asia
Location: Thailand
Sectors: Industrial Park
Looking for: Open for Negotiation

M6 Bang Pa In - Nakhon Ratchasima (BPN)

Southeast Asia
Location: Thailand
Sectors: Transport & Logistics Infrastructure, Roads and Highways
Looking for: Public–private partnership
Capital Required (USD):
$ 264000000

M81 Bang Yai - Kanchanaburi (BKN)

Southeast Asia
Location: Thailand
Sectors: Transport & Logistics Infrastructure, Roads and Highways
Looking for: Public–private partnership
Capital Required (USD):
$ 194000000

Technology: Waste Treatment Improving Carbon…

China
Location: Colombia, Indonesia, Malaysia, …
Sectors: CleanTech, Waste Treatment
Looking for: Joint Venture, Licensing

Thailand - Alumunium Producer Looking for…

Southeast Asia
Location: Thailand
Sectors: Machinery, Natural Resources
Looking for: 100% Takeover
Capital Required (USD):
$ 35,000,000

Thailand - Infrastructure: Phuket Smart City

Southeast Asia
Location: Thailand
Sectors: Smart City
Looking for: Joint Venture

Thailand - Logistics: Phuket Light Rail

Southeast Asia
Location: Thailand
Sectors: Railways
Looking for: Joint Venture

Thailand - Property Development

Southeast Asia
Location: Thailand
Sectors: Urban Development
Looking for: Joint Venture
Capital Required (USD):
$ 320000000

Thailand - Telecommunications: Terrestrial…

Southeast Asia
Location: Thailand
Sectors: ICT Infrastructure, Telecommunications