Supply Chains: Thailand
Since the 1960s, Thailand has made significant strides in moving from a lower- to an upper-middle-income country and is currently the second-largest economy in ASEAN. As a means of furthering economic development, Thailand encourages foreign direct investment (FDI) across various sectors and maintains a relatively conducive investment climate. The majority of inbound FDI is currently concentrated around the manufacturing and financial services sectors. However, in recent years, FDI has slowed. In 2020, Thailand’s FDI levels fell to US$6.1 billion versus US$5.6 billion five years earlier, a decrease of 208 percent. Due to the COVID-19 pandemic and economic fallout, real GDP growth in 2020 decreased by 6.1 percent.
Although Thailand’s well-developed infrastructure system, low-cost and skilled labor force, and strategic location in the Mekong Basin region make the economy attractive for investment, some investors find that local regulations lack transparency and are challenging to navigate. Currently, Thailand ranks 31 out of 146 in economic complexity. Diversifying economic activity beyond tourism services and increasing local manufacturing are some key ways Thailand is aiming to increase its economic complexity.
To further boost foreign investment, the Thai government has introduced initiatives, including the Investment Promotion Act and the Eastern Economic Corridor Act (EEC), which aim to improve the business climate for investors and develop manufacturing bases in specialized industries. The EEC is also a part of the “Thailand 4.0” strategy, which provides incentives for investments in 12 key sectors including automation, digital technology, defense manufacturing, autonomous vehicles, artificial intelligence, and food processing, among others. In recent years, top foreign sources of investment have been China, Japan and Singapore.
Recent Investment/Supply Chain Policies
On January 13, 2021, the Bio-Circular-Green (BCG) Economy Committee, chaired by Prime Minister General Prayut Chan-o-cha, approved the 2021–2026 BCG Strategic Plan as part of Thailand’s national agenda. The plan aims to promote sustainability and boost the competitiveness of four sectors – food and agriculture; medical wellness; bioenergy, biomaterial and biochemical; and tourism. Incentives include corporate tax exemptions for up to 13 years for companies, depending on the industry.
On April 1, 2020, the Board of Investment announced that it had approved Measures to Facilitate Investors Affected by COVID-19 Situation. This includes measures to "postpone corporate income tax submission for the 2019 accounting year" and the launching of an "online document submission service."
On February 6, 2020, in a follow-up to September 2019's Thailand Plus stimulus package, the Board of Investment approved a range of measures to boost investment. These include an additional 50 percent corporate income tax deduction for select companies for a duration of five years and an "extension and improvement of the promotion measures allowing companies to enjoy tax benefits when they invest in projects supporting the grassroots economy."
- On July 20, 2020, the Board of Investment (BOI) announced the launch of an international promotional campaign, titled “Think Resilience, Think Thailand," to "showcase the country’s tested strengths and reinforce its status as the region’s prime investment destination." According to BOI Secretary General Duangjai Asawachintachit, “The new campaign captures four core competencies that are engrained in Thailand’s strategic positioning as ASEAN’s investment hub and gateway to Asia: Diversity, Ecosystem, Location and Supply Chain."
Information and Communication Technology
On June 30, 2021, the Board of Investment announced a series of measures to encourage development in research and development (R&D) for the semiconductor and digital sectors. Companies that “invest or spend at least 200 million baht [US$6.1 million] or 1 percent of their total sales of the first 3 years” in relevant projects will be granted tax breaks for up to 13 years without corporate income tax exemption ceilings. Additionally, “companies that participate in apprenticeship programs or spend on advanced technology training can also enjoy greater tax incentives.”
On December 21, 2020, the Board of Investment (BOI) announced that it had approved "a series of measures to accelerate investments, particularly in target industries and to encourage business to adopt digital technologies." Most importantly, the BOI will reduce the corporate income tax for select investors and activities.
On January 8, 2020, the Board of Investment announced that it will introduce "incentives to Enhance Human Resource Development and Support Educational Institutions” to support the "digital hub of Southeast Asia." Measures include tax incentives to companies engaged in human resource development, as well as corporate income tax exemptions for companies investing in the establishment of education and vocational training institutes specializing in science, technology, engineering, and mathematics.
- On January 8, 2020, the Board of Investment announced a set of labor-related measures to "enhance human resource development," "support educational institutions," and ultimately bolster Thailand's position as the "digital hub of Southeast Asia." This includes the introduction of "SMART visas” to enable foreign investors and their families –– as well as other workers in the business, science and education sectors –– to reside in the country for up to four years without a work permit.
- On January 8, 2020, the Board of Investment (BOI) announced a set of measures to "enhance human resource development," "support educational institutions," and ultimately bolster Thailand's position as the "digital hub of Southeast Asia." The BOI will merge four government departments into a new Ministry of Higher Education, Science, Research and Innovations, which will “work closely with the private sector in Thailand and overseas to increase research and human resource development."
SPECIAL ECONOMIC ZONES
- On December 21, 2020, the Board of Investment announced that it had approved "a series of measures to accelerate investments, particularly in target industries and to encourage business to adopt digital technologies." Measures include a two-year extension "of the application period for projects in dedicated districts of the country’s five southernmost provinces to the end of 2022," all of which have been granted various special tax incentive packages.
On November 4, 2020, the Board of Investment (BOI) announced that it had approved a set of incentives covering the medical supply chain "to boost Thailand’s competitiveness in health care and to strengthen the country’s medical hub status." According to the BOI, the incentives "promote clinical research, covering both Contract Research Organization (CRO) and Clinical Research Center (CRC) operations, with 8 years corporate income tax exemptions."
On April 13, 2020, the Board of Investment (BOI) announced that it approved incentives to promote R&D around medical devices and supplies. According to the BOI, support will be given “to the modification or transformation of existing production lines to increase the domestic availability of medical supplies." Measures include "a reduction of 50 percent of corporate income tax for an additional 3 years to qualified investments in the medical sector" and "adjustments to the benefits granted for the production of raw materials used in the manufacture of medical products to encourage a more complete value chain in Thailand."
- On November 4, 2020, the Board of Investment announced that it had "approved the roll out of a comprehensive set of incentives" covering the entire electric vehicle supply chain. Measures include tax exemptions and holidays for qualified activities and entities, expansion of the scope of products and activities covered under existing exemptions, and the reduction of import duties.