A helping hand for investors

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    Dr. Atchaka Sibunruang
    Dr. Atchaka Sibunruang, Secretary General, Board of Investment Thailand

    Thailand’s Board of Investment (BOI) is the main facilitator of investment projects in the country. The state-run agency has seen a double-digit percentage growth in project applications in 2011 and a foreign direct investment inflow of 396 billion baht.

    Interviewee:  Dr. Atchaka Sibunruang, Secretary General, Board of Investment Thailand

    The floods that Thailand encountered in November 2011 did not discourage foreign investors from applying for new projects in the country. According to the Secretary General of the Thai Board of Investment, Dr. Atchaka Sibunruang, project applications have grown at a healthy rate over the last year and exceeded the expectations by far. This again underpins the attractiveness of the Southeast Asian tiger economy for foreign direct investments.

    Q: Could you give an overview of the current value of Foreign Direct Investment in Thailand? From where are the investors coming, and in which sector are they interested the most?

    A: We had a total of 2,112 project applications in 2011, which is a growth of 38 per cent compared to 2010. The investment value for these projects is 672.8 billion baht, a growth of 63 per cent compared to 2010. The total value of applying foreign direct investments was 396 billion baht as opposed to 236 billion baht in 2010, a growth of 68 per cent. The majority of the investors interested in Thailand came from Japan, with 560 applications at a value of 194 billion baht, followed by China, Singapore, and Hong Kong. They are interested in many sectors, but mostly in metal products and machinery, chemicals and paper, agricultural products such as rubber, electronics, and petrochemicals. These are sectors where we also see a high growth potential. Foreign companies are invited to take part in our economy.

    Q: The Industry Minister has said that the investment promotion strategies of the BOI should be revised to support higher-value sectors that focus on technology and innovation and are capital-intensive. What is your approach to this?

    A: We have already done this. Yes, we are promoting investments into higher value-adding industries, as this is crucial for the growth of the economy. Examples for this are ready-to-eat food products, or ethanol and bioplastics made out of agricultural products like sugar cane or tapioca. However, we have also to look at the profitability of such businesses. For example, the production of ethanol is currently not profitable for companies without receiving government subsidies. On the other hand, we are moving towards more value-added manufacturing in Thailand, because other countries have become more attractive for investors in terms of lower labour costs. We also advise Thai companies to look outside the country for low-end labour-intensive manufacturing to remain competitive.

    Q: What are the sectors with the highest investment value? What are the sectors with the highest returns?

    A: The sector we are promoting the most and where we a seeing a high growth potential in terms of value adding are food, agriculture, rubber as a raw material for tyres, car parts, electronics and white goods, and petrochemical products. For example, the car industry has made Thailand the biggest automotive hub in the region, with many international corporations having set up production bases here such as General Motors, Ford, Toyota, or Honda. We are also promoting small car manufacturing in Thailand, and many car companies have already taken advantage of this. Among others, Nissan produces the March model here and the Almera, Honda its Brio models, Suzuki its Swift, Mitsubishi its Mirage and Toyota its small Yaris hatchback car. Related to the car industry is the steel sector, which we also consider a quite important investment field.

    Q: What investments are currently considered a priority and beneficial to the country’s economic growth?

    A: It is important that many of the electronics manufacturers now have reopened their plants after the floods, as this industry has a high benefit for the economy and for employment. Another sector of importance is the petrochemical sector, mainly because of the size of the projects. For example, we are promoting the petrochemical complex of Map Ta Phut as it is one of the most important industrial areas in the country. There is also a huge a Thai-backed deep sea port project going on in Myanmar where the Italian-Thai Development Company, one of the biggest developers and construction companies in Thailand, has originally invested. Now Japan and other Asian countries want to get onboard. This project has ten times the size of the Map Ta Phut deep sea port. Other industries considered priority sectors are high-tech, and food processing and machinery, for example.

    Q: What are the incentives for foreign companies that want to start a business in Thailand? Who qualifies for a tax waiver/tax reliefs?

    A: There are a number of incentives for investors from tax and non-tax incentives, exemption from  or reduction of import/export duties, state guarantees, to investment protection. The incentives granted depend on the project itself, on the size and nature of the investment. There are additional incentives in the fields of skills training, technology, and innovation.

    Q: What can small and medium businesses and innovative companies expect from the BOI?

    A: In 2010, we have changed the criteria under which small and medium enterprises are eligible for incentives, bringing the business categories from ten to 57, which has led to a surge in new SME applications. Promoted SMEs are, for example, exempted from import duties on machinery, together with other special incentives such as an eight-year corporate income tax exemption.

    Q: There are more special incentives for less-developed areas, but how can investors offset the higher costs for logistics and infrastructure?

    A: Our investment incentives are related to the location where investments are made. We have three investment zones. Zone 1 is mostly metropolitan Bangkok and its vicinities, Zone 2 is the greater area in Central Thailand, and Zone 3 are 58 provinces in the North, South, and East which are less-developed and therefore receive higher incentives such as a 50 per cent reduction of corporate income tax after the eight-year exemption period has expired, and several additional deductions on the taxable income. This is attractive, and we need to grant these special incentives, as we don’t have so many projects in Zone 3.

    Q: The new Thai government plans to cut the corporate tax rate, now at 30 per cent, to 23 per cent next year and 20 per cent in 2013. Do you think this will attract more foreign investors? On the other hand, the minimum salary is also rising in Thailand which increases the costs for businesses.

    A: The corporate tax reduction has already been implemented. A lot of companies are welcoming this. It is certainly a good signal to investors. Regarding the minimum wage, this is of course going to affect industries, and we expect some companies to relocate their production facilities. But there is no way around the rise of the minimum wage if Thailand wants to raise the living standard of its people and increase domestic demand in the long term. Other countries such as China are doing this, too.

    Q: The Thai government has recently emphasised it wants to strengthen the business relations to the GCC and approach companies/investors there to look for opportunities in Thailand. What activities have been scheduled ?

    A: We find it quite difficult to intensify the business relations to the GCC. There has been a hotel project going on with Bahrain, and some infrastructure projects, but we currently don’t have a representation in the GCC. For this region, we want to focus on trade and tourism, especially medical tourism, because the region is an important source market for health travelers. Another business sector that could be of interest in this respect is the halal food industry, a sector that the Thailand government has set on the “urgent” agenda because of its rapid growth. Halal food can not only be targeted at the six millions Muslims living in Thailand, but also exported to Malaysia and Indonesia as well as the Middle East. Thailand’s expertise and experience in the food production sector together with halal products is a good mix, I guess.

     

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    Reading Time: 5 minutes

    Dr. Atchaka Sibunruang, Secretary General, Board of Investment Thailand

    Thailand’s Board of Investment (BOI) is the main facilitator of investment projects in the country. The state-run agency has seen a double-digit percentage growth in project applications in 2011 and a foreign direct investment inflow of 396 billion baht.

    Reading Time: 5 minutes

    Dr. Atchaka Sibunruang
    Dr. Atchaka Sibunruang, Secretary General, Board of Investment Thailand

    Thailand’s Board of Investment (BOI) is the main facilitator of investment projects in the country. The state-run agency has seen a double-digit percentage growth in project applications in 2011 and a foreign direct investment inflow of 396 billion baht.

    Interviewee:  Dr. Atchaka Sibunruang, Secretary General, Board of Investment Thailand

    The floods that Thailand encountered in November 2011 did not discourage foreign investors from applying for new projects in the country. According to the Secretary General of the Thai Board of Investment, Dr. Atchaka Sibunruang, project applications have grown at a healthy rate over the last year and exceeded the expectations by far. This again underpins the attractiveness of the Southeast Asian tiger economy for foreign direct investments.

    Q: Could you give an overview of the current value of Foreign Direct Investment in Thailand? From where are the investors coming, and in which sector are they interested the most?

    A: We had a total of 2,112 project applications in 2011, which is a growth of 38 per cent compared to 2010. The investment value for these projects is 672.8 billion baht, a growth of 63 per cent compared to 2010. The total value of applying foreign direct investments was 396 billion baht as opposed to 236 billion baht in 2010, a growth of 68 per cent. The majority of the investors interested in Thailand came from Japan, with 560 applications at a value of 194 billion baht, followed by China, Singapore, and Hong Kong. They are interested in many sectors, but mostly in metal products and machinery, chemicals and paper, agricultural products such as rubber, electronics, and petrochemicals. These are sectors where we also see a high growth potential. Foreign companies are invited to take part in our economy.

    Q: The Industry Minister has said that the investment promotion strategies of the BOI should be revised to support higher-value sectors that focus on technology and innovation and are capital-intensive. What is your approach to this?

    A: We have already done this. Yes, we are promoting investments into higher value-adding industries, as this is crucial for the growth of the economy. Examples for this are ready-to-eat food products, or ethanol and bioplastics made out of agricultural products like sugar cane or tapioca. However, we have also to look at the profitability of such businesses. For example, the production of ethanol is currently not profitable for companies without receiving government subsidies. On the other hand, we are moving towards more value-added manufacturing in Thailand, because other countries have become more attractive for investors in terms of lower labour costs. We also advise Thai companies to look outside the country for low-end labour-intensive manufacturing to remain competitive.

    Q: What are the sectors with the highest investment value? What are the sectors with the highest returns?

    A: The sector we are promoting the most and where we a seeing a high growth potential in terms of value adding are food, agriculture, rubber as a raw material for tyres, car parts, electronics and white goods, and petrochemical products. For example, the car industry has made Thailand the biggest automotive hub in the region, with many international corporations having set up production bases here such as General Motors, Ford, Toyota, or Honda. We are also promoting small car manufacturing in Thailand, and many car companies have already taken advantage of this. Among others, Nissan produces the March model here and the Almera, Honda its Brio models, Suzuki its Swift, Mitsubishi its Mirage and Toyota its small Yaris hatchback car. Related to the car industry is the steel sector, which we also consider a quite important investment field.

    Q: What investments are currently considered a priority and beneficial to the country’s economic growth?

    A: It is important that many of the electronics manufacturers now have reopened their plants after the floods, as this industry has a high benefit for the economy and for employment. Another sector of importance is the petrochemical sector, mainly because of the size of the projects. For example, we are promoting the petrochemical complex of Map Ta Phut as it is one of the most important industrial areas in the country. There is also a huge a Thai-backed deep sea port project going on in Myanmar where the Italian-Thai Development Company, one of the biggest developers and construction companies in Thailand, has originally invested. Now Japan and other Asian countries want to get onboard. This project has ten times the size of the Map Ta Phut deep sea port. Other industries considered priority sectors are high-tech, and food processing and machinery, for example.

    Q: What are the incentives for foreign companies that want to start a business in Thailand? Who qualifies for a tax waiver/tax reliefs?

    A: There are a number of incentives for investors from tax and non-tax incentives, exemption from  or reduction of import/export duties, state guarantees, to investment protection. The incentives granted depend on the project itself, on the size and nature of the investment. There are additional incentives in the fields of skills training, technology, and innovation.

    Q: What can small and medium businesses and innovative companies expect from the BOI?

    A: In 2010, we have changed the criteria under which small and medium enterprises are eligible for incentives, bringing the business categories from ten to 57, which has led to a surge in new SME applications. Promoted SMEs are, for example, exempted from import duties on machinery, together with other special incentives such as an eight-year corporate income tax exemption.

    Q: There are more special incentives for less-developed areas, but how can investors offset the higher costs for logistics and infrastructure?

    A: Our investment incentives are related to the location where investments are made. We have three investment zones. Zone 1 is mostly metropolitan Bangkok and its vicinities, Zone 2 is the greater area in Central Thailand, and Zone 3 are 58 provinces in the North, South, and East which are less-developed and therefore receive higher incentives such as a 50 per cent reduction of corporate income tax after the eight-year exemption period has expired, and several additional deductions on the taxable income. This is attractive, and we need to grant these special incentives, as we don’t have so many projects in Zone 3.

    Q: The new Thai government plans to cut the corporate tax rate, now at 30 per cent, to 23 per cent next year and 20 per cent in 2013. Do you think this will attract more foreign investors? On the other hand, the minimum salary is also rising in Thailand which increases the costs for businesses.

    A: The corporate tax reduction has already been implemented. A lot of companies are welcoming this. It is certainly a good signal to investors. Regarding the minimum wage, this is of course going to affect industries, and we expect some companies to relocate their production facilities. But there is no way around the rise of the minimum wage if Thailand wants to raise the living standard of its people and increase domestic demand in the long term. Other countries such as China are doing this, too.

    Q: The Thai government has recently emphasised it wants to strengthen the business relations to the GCC and approach companies/investors there to look for opportunities in Thailand. What activities have been scheduled ?

    A: We find it quite difficult to intensify the business relations to the GCC. There has been a hotel project going on with Bahrain, and some infrastructure projects, but we currently don’t have a representation in the GCC. For this region, we want to focus on trade and tourism, especially medical tourism, because the region is an important source market for health travelers. Another business sector that could be of interest in this respect is the halal food industry, a sector that the Thailand government has set on the “urgent” agenda because of its rapid growth. Halal food can not only be targeted at the six millions Muslims living in Thailand, but also exported to Malaysia and Indonesia as well as the Middle East. Thailand’s expertise and experience in the food production sector together with halal products is a good mix, I guess.

     

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