Thailand A Base for Doing Business in Asia

1
ThailandA Base for Doing Business in Asia

• Presentation by
• The Ministry of Foreign Affairs
• Royal Thai Government

2
Rapid Growth Slows Down

• Fastest Growing Economy in the World From
  1985-1994 Average Per Capita GDP Growth of 8.2
• Double-Digit Export Growth for Years
• Rapid Industrialisation and Growth of Supporting
  Industries
• Strong Fiscal Policy Foreign Reserves

3
Economic and Social Fundamentals

• Stable Macro-Economic Environment
• Cost-Effective Labour Force and Abundant Natural
  Resources
• Strategic Location at the Heart of Southeast Asia
• Favourable Approach to Foreign Investment
• Social Stability, Strong Emphasis on Personal
  Freedoms

4
What Went Wrong?Major Economic Challenges

• 1996 - A Year of Warning Signals
• Export Stagnation
• Economic Growth Slowdown
• Rising Current Account Deficit
• Stock Market Melt-Down
• 1997 - The Situation Worsens
• Stock Market Continues to Fall
• Baht Floated on July 2
• Non-Performing Loans to Unsustainable Levels
• 58 Finance Companies Suspended
• IMF-Led Rescue Package on August 20

5
At the Crossroads

• Two Key Challenges Converge
• Short-Term Loss of Confidence in the Financial
  Sector
• Longer-Term Deterioration of Competitiveness in
  the Real Sector
• Regional Economies in Turmoil
• First the Baht, the Peso, Rupiah, Ringget, etc.
• IMF assists Philippines, Thailand, Indonesia
• On the Domestic Front
• Shortage of Financing, Infrastructure, Confidence
• Inadequate Investments in People and Technology
• IMF Macro-economic Management

6
Lessons Learned from the Crisis

• Need for Effective and Transparent Regulatory
  Frameworks and Public Sector Accountability
• Importance of a Strong, Sound Financial System
• Need for Better Corporate Governance
• Necessity of Human Resource Development and
  Technology Upgrading

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A Comprehensive 5-Point Program to Recovery

• Macro-economic Stability and Growth
• Financial Sector Reforms
• Industrial and Agricultural Restructuring
• Political and Civil Service Reforms
• Social and Environmental Programmes

8
Right Time for Investment

• Multiple Signs of Economic Recovery
• Stable Macro-economic Situation
• On the Rise Manufacturing, Investment,
  Consumption, and Exports
• 3-4 Growth Forecast for 1999
• Increasingly Competitive Labour Force, with Wages
  at Pre-crisis Levels
• BOI Incentives

9
Improving the Business Climate - 1

• Promotion of Supporting Industries in a Wide
  Range of Areas
• Supporting Industrial Upgrading via Additional
  Import Duty Exemptions
• Actively Promoting Thailand as a Base for
  Regional Trading and Investment
• Establishing the One-Stop Service Centre for
  Visas and Work Permits

10
Improving the Business Climate - 2

• BOI-Promoted Foreign Companies can Own Land for
  Residential and Business Purposes
• Facilitating Permanent Residence in Thailand for
  Foreign Investors
• Specific Measures in Response to the Crisis
• Reducing Import Duty Guarantee Requirements for
  Exporters
• Greater Assistance for Expansion Projects
• Flexibility in Responding to the Needs of
  Investors and to National Interests

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Investment Promotion Zones
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Top Incentives for Investments in Zone 3 - Away
from Bangkok

• 100 Import Duty Exemption on Machinery
• 100 Corporate Income Tax Exemption for 8 Years,
  50 Reduction for 5 More Years
• Import Duty Exemption on Raw and Essential
  Materials for Projects Exporting 30 of Total
  Sales
• 5 year 75 Reduction on Import Duty of Raw and
  Essential Materials Used in Production for
  Domestic Sales, Subject to Annual Renewal
• Double Deduction on Taxable Income of Water,
  Electricity, and Transport Costs for 10 Years
  from Date of First Sale
• Deduction from Net Profits of 25 of Costs of
  Project's Infrastructure

13
Policies to Promote Export Industries

• The Board of Investment Offers
• Exemption of Import Duties on Raw and Essential
  Materials Imported Specifically for Use in
  Products for Export
• Exemption of Import Duties on Products Imported
  for Re-export
• Exemption of Export Duties
• Permission to Deduct From Assessable Income for
  Corporate Income Tax an Amount Equal to 5 of the
  Increased Income Over the Previous Year,
  Exclusive of Insurance and Freight Charges
• Classification as Priority Activity - Maximum
  Benefits, Regardless of Location

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Short-term Measures Incentive Enhancement

• Relaxed Location Requirements
• Further Tax Exemptions
• Import Duty Exemptions on Raw Materials for
  Non-BOI Promoted Projects (if used for export
  production)
• Better Terms for Foreign Shareholdings

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The Business-Related Services of the Board of
Investment

• Strong BOI Regional and Overseas Offices
• The BOI Unit for Industrial Linkage Development
  (the BUILD Program)
• Information on Opportunities in the Greater
  Mekong Sub-region and Beyond
• The One Stop Service Centre for Obtaining
  Licenses, Work Permits, and Other Required
  Documentation
• Investment Information and Matchmaking Centre
• Information on Investment Opportunities and
  Policy Developments
• BOI FAIR 2000

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What are the Key Investment Opportunities?

• Agro-industry Higher Value-added Food Processing
  and biotechnology
• Automotive Assembly, Parts, and Export
• Electronics Integrated Circuits, Hard-disk
  Drives, Telecommunications Products
• Privatisation Opportunities Communications,
  Energy, Banking and Finance, Transportation, Water

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Thailands Economic and Business Strengths

• Resilient, Diversified Economy
• Deepening and Broadening of Support Industries
• Abundant Natural Resources
• Large and Highly-Productive Labour Force
• Large and Expanding Domestic Market of 62 Million
  with Significant Income
• Strategic Location at the Centre of Southeast
  Asia and the Greater Mekong Sub-region
• Support for Foreign Investors

18
Thailands Policy Strengths

• IMF-guided Economic Policy
• Consensus on Economic Restructuring
• Favourable Approach to the Private Sector
  Government As Supporter Not Regulator
• Positive Attitudes to Foreign Investment, and to
  Internationalisation and Integration
• Steady Moves to Liberalisation and Privatisation

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Thailands Social Strengths

• The Monarchy Provides the Thai People with a
  Special Sense of Unity and Identity
• The Buddhist Religion Promotes Understanding and
  a Peaceful Approach
• Strong Traditions of Personal and Economic
  Freedom
• Respect for Freedom of the Press
• Comprehensive Social and Recreational Resources
  and International Schools

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In Conclusion ....An Invitation to do Business
in Thailand

• Thailands Economy is Already Rebounding
• Working with International Experts to Restructure
  the Economy for Sustainable Growth
• Strengthening the Public-Private Partnership
• Private Sector Opportunities are Real and the
  Need for Foreign Investment and Technical
  Expertise is Great