1

Thailand Investment Guide

July 2017

World Business Advisory Center

World Business Division

2

Country & Economic Overview

Key Industries & Opportunities

Doing Business in Thailand

KASIKORNBANK’s Support

Table of Content

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THAILAND

Bangkok

Why Thailand?

Thailand, the Gateway to ASEAN

2 Attractive Investment Policy for target industries, the new growth engines

3 Eastern Economic Corridor: the next major economic zone of ASEAN

4 Liberal trade & investment regime

5 Potential regional trading and high value manufacturing hub

1 Logistic Hub of ASEAN

4

Country & Economic Overview

Key Industries & Opportunities

Doing Business in Thailand

KASIKORNBANK’s Support

Table of Content

5

Bangkok

Country Overview

Country Name: Kingdom of Thailand

Area: 513,115 sq.km.

Population: 65.9 million (2016)

Form of Government: A parliamentary democracy with the King as head of state

Currency: Thai Baht (THB)

GDP (Current Price): USD 410.3 billion (2016)

GDP per capita: USD 6,032 (2016)

1990

Timeline and Milestone:

Data Source: DOPA,NESDB,World Bank, IMF

1990: Financial liberalization policy

1995: Entry into WTO

1997-98: Tom Yum Kung crisis

2015

2015: Starting of ASEAN Economic Community (AEC)

2020

2020: Enhance competitiveness to overcome the “middle income trap” with sustainable growth

1967: Bangkok Declaration signed, Starting of ASEAN community

the second largest economy in ASEAN

6

agriculture 8%

industry 36% services

56%

-

1

2

3

4

5

6

7

8

2010

2011

2012

2013

2014

2015

20

16

f

20

17

f

20

18

f

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19

f

20

20

f

USD

th

ou

san

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Economic Overview

GDP composition, as of 2016

USD 410 billion

Middle class 53% of population

GDP per capita, 2010 - 2020f

Data Source: NESDB, IMF

Service sector mainly tourism and

wholesale & retails

Industry mainly automobile, electrical & electronics

GDP

GDP per capita reach USD 7,000 by 2020

Driven by service sector, Thailand is an upper middle income economy with growing middle class.

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Foreign Direct Investment

Thailand’s FDI has been driven by Japan for decades, which strategically invested in manufacturing, especially auto

industry. China is caching up to become a major investor in Thailand, aligned with their One Belt One Road strategy.

Foreign Investment Project Approved by Thailand Board of Investment (BOI) during 2014-2016

Top investors

2011-2016

Japan USD 34.5 billion 1

Singapore USD 4.1 billion 3

USA USD 4.1 billion 4

USD 116 billion Foreign investment project approved by BOI during 2011- 2016

China USD 4.3 billion 2

Source: Thailand Board of Investment (BOI)

14 14

10

2014 2015 2016

USD Billion

8

Thailand Trade Overview

Thailand has been enjoying trade surplus in past two years. ASEAN is the main trading partner with Thailand, followed by China, US and Japan.

Key Import products & Its % of total export

Import products

Data Source: Trademap, Ministry of Commerce

Electrical and Electronic parts and

products

Mineral fuels, oils 13%

Iron and Steel 5%

33%

Export products

Key Export products & Its % of total export

6%

Electrical and Electronic parts and products 31%

Vehicle and Parts 12%

Thailand is the second largest hard disk drive exporter globally and the main

vehicle exporter of this region

Trade Flows and Balance, 2010-2016

Top trade partners by trade value 1. ASEAN 2. China 3. USA 4. Japan

Thailand imports foreign electrical & electronic parts in manufacturing

for its export.

-100

-

100

200

300

2010 2011 2012 2013 2014 2015 2016

bill

ion

USD

Export Import Trade Balance

Rubber

9

Thailand Border-Trade Overview

Data Source: KResearch, Department of Foreign Trade Thailand

1

2

3

4

Major official border customs

Myanmar Import Product • Alcohol and non-Alcohol beverage • Sugar • Garment and textile

Myanmar Export Product • Natural gas • Livestock/ aquatic • Wood and related products

Malaysia Import Product • Rubber and related products • Computer • Processed wood

Malaysia Export Product • Audio device • Computer and parts • Magnetic head, main components

for hard disk drive

Laos Import Product • Petrol • Vehicles • Iron, steel

Laos Export Product • Electricity • Mineral; copper • transmitters; television, telephone

Cambodia Import Product • Non-alcohol beverage • Vehicles and parts • Motorcycle and parts

Cambodia Export Product • Vegetable and garments • transmitters; television, telephone • Insulated wire/cable

Trade volume with Thailand as of 2016

Expand consumer goods and fuel to CLM market.

Supply raw material and serving as regional supply chain hub.

Border trade is an effective means for Thailand to integrate with regional market:

Thailand-Myanmar Trade Volume USD 5.3 billion Major Customs: Mae Sot/Myawaddy

Thailand-Malaysia Trade Volume USD 14.3 billion Major Customs: Songkhla/Kuala Perlis

Thailand-Laos Trade Volume USD 5.8 billion Major Customs: Nong Khai/Vientiane

Thailand-Cambodia Trade Volume USD 3.5 billion Major Customs: Aranyaprathet/Poi Pet

Total value of boarder trade

in 2016 = USD29 billion

10

Infrastructure Overview

Already well-established infrastructure, Thailand continues to push forward infrastructure development projects, especially in the railway sector, to enhance regional connection in AEC region.

Road is the main transportation route. Thailand has well established road network in both urban and rural area with GMS connectivity. Hence, Thailand has high potential to be regional logistic hub.

Road There are 8 international deep seaports and 3 major river ports in Thailand. The highest capacity sea-seaport, Lam Chabang, can handle 6.9 million TEU/yr. While, inland port, Bangkok Port, has capacity of 1.5 million TEU/yr.

Water Transport Aviation Thailand has 6 main international airports, located in Bangkok, Samut Prakan, Chiang Mai, Chiang Rai, Phuket and Songkhla province.

Railway Thailand has railway lines, covering 47 provinces with a total distance of 4,043 km., about 93% of which is single-track.

Data Source: KResearch, BOI

11

Road Network: GMS Economic Corridors

Road transport is the primary means of passenger and freight transport which can carries around 86% of freight traffic.

Road Myanmar(MawLaMyine)-Thailand(East-Western)-Laos (Savannakhet)-Vietnam (Da Nang)

East West Economic Corridor (Dark brown)

1

China (Kunming) – Northern Laos/Myanmar – Thailand (North-Sourthern) - Malaysia

North-South Economic Corridor (Red)

2

China (Southern) – Laos (Northern) – Thailand (Bangkok)/(Eastern) – Cambodia

Central Corridor (Green)

3

China (Nanning) – Vietnam(Northern) – Laos (Northern) – Thailand (Bangkok/Laem Chabang)

North-eastern Corridor (Light brown) 4

GMS Transport Sector Strategy (2006 – 2015) facilitates grater connectivity.

Thailand is located in the center of every route in the GMS road network; The nation has an advantage to be the hub of the region inland freight transport.

Data Source: WB_Advisory, BOI

Myanmar (Dawei) –Thailand (Bangkok/Laem Chabang) – Cambodia (Phnom Penh) – Vietnam (Ho Chi Min City)

Southern Corridor (Lower Dark Brown) 5

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Total air cargo: 1.3 Million tons

Rank (In ASEAN): 2

Rank (Global): 20

Additional service: One stop service basis such as Trading, Partial Import Clearance, and so on

New Aviation Development Plan

Suvarnabhumi : Begin the phase two extension project which will uplift passenger handling from 50 million passenger per year to 60 million. It is expected to complete by 2019

Aviation

Thailand international airport

Suvarnabhumi, Samut Prakarn

Don Mueang, Bangkok

Mae Fah Luang, Chiang Rai

Chiang Mai

Phuket

Hat Yai, Songkhla

Data Source: Airport council international, Airport of Thailand

Passenger Capacity 2016

Air cargo service information 2016:

Don Mueang: Approved a new budget for enhancing annual capacity to handle 40 million passengers and serve 40-50 flights/hr. It’s expected to finish in 2022

Phuket: The new phase opened in 2016. It could be handle 18 million passenger/ year.

Thailand is the second largest air cargo service provider in ASEAN, after Singapore.

- 10 20 30 40 50 60

Suvarnabhumi

Don Mueang

Phuket

Chiang Mai

Hat Yai

Chiang Rai

million passenger

13

Water transportation

Data Source: BOI,Transportation Institute Chulalongkorn University, Chaophaya Terminal International

With a coastline of 3,219 km, Thailand is located between Bay of Bengal and South China Sea, with high potential to be regional port center. Chiang Sean

Bangkok

Leam Chabang

Map Ta Phut

Songkhla

Inland port Deep Seaport

Klong Toey or Bangkok Port

• This port can handle approximately 1.5 million TEU/yr.

Laem Chabang

• One of Asia’s leading ports and the most important commercial deep-sea port of Thailand

• This port can handle approximately 6.9 million TEU/yr

Map Ta Phut Industrial Port

• Map Ta Phut is primarily a petrochemical complex, gas, mining and heavy industrial related goods

Chiang Saen Port

• The biggest inland port of the northern region

• The strategic inland port for trading among GMS region.

Current Development Plan

Laem Chabang : Laem Chabang Phase III will open for bidding by the end of 2017. After completion, its capacity will rise to 30 million TEU/year and this phase can serve for RORO vessels (Roll-on/Roll-off) that would be positive for Thailand’s automobile sector.

Phuket Port

• The latest international port on the west coast of the South

• Capacity of 450,000 tons annually

Songkhla Port

Phuket

• The only international port on the Southeast coast

• Capacity of 160,000 TEU/yr

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Railway Network

Data Source: BOI, Johomaps

Bangkok(Center Thailand) – Chiang Mai (Northern Thailand)

Northern Line (Blue)

1

Bangkok – Sugai Kolok(Southern Thailand)- Northern Malaysia

Southern (Red) 2

Bangkok – Aranyaprathet (Easthern Thailand )/ Marp Ta Put (Thailand gulf)

Easthern (Green)

3

Bangkok – Ubon Ratchathai (Easthern Thailand) Nong Khai (Northeasthern Thailand)- Center/ South of Lao PDR

Northeasthern (Yellow)

4

Thailand has 4 main operating railway networks. These networks are under upgrading, transform single to dual track as well as high speed train project.

Domestic railway Development Plan

Phase I (2010-2020) : Upgraded some part of existing line to dual track

Year spent: 2010-2025

Plan objectives: • Upgraded to duel track • Railway networks extension • High-speed railway

Railway development master plan

Phase II (2016-2020) : 1,025 km of railway network will be extended

Phase III (2020-2025) : Railway tracks added

High-Speed-Rail Project: This high-speed train project consists of four main lines: (1) Bangkok-Chiang Mai (finish in 2020) (2) Bangkok-Nong Khai (3) Bangkok-Rayong (4) Bangkok-Padang Besar.

Thailand current railway

networks

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Major Cities for Economic Activities by Region

Bangkok Metropolitan

Phuket

Ayutthaya

Chonburi

Rayong

Chiang Mai

Bangkok Metropolitan Main business hub • Trade, Banking & Finance, Real estate, Transport &

communication, Tourism, etc

Chonburi, Rayong, Ayuthaya Industrial zone • Automobile & parts, Electrical & Electronics, Plastics,

Petrochemical, Food & Beverage

Chiang Mai & Phuket Tourism hub • Hotel & Restaurant, Transportation, Tourism

related business

Eastern Economic Corridor (EEC) Industrial zone • Smart Electronic, EV, Robotic, Digital City, Innovation

Food and Medical Hubs

Chacheongsao

EEC

16

Country & Economy Overview

Key Industries & Opportunities

Doing Business in Thailand

KASIKORNBANK’s Support

Table of Content

17

Key Industries and Opportunities

Food & Beverages Automotive &

Parts Electrical & Electronics

International Headquarters and

International Trading Centers

New S-Curve Industries

Owing to its abundance of agricultural products, decent infrastructure & road network, well established supply chain, as well as investment promotion incentives, Thailand offers attractive investment opportunities for the following industries:

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Food & Beverage

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Food & Beverage – Overview

Data Source: National Food Institute, Ministry of Commerce

Thailand was ranked as The 13th World Largest Exporter of Food and Beverage; the country is known as the “ kitchen of the World” which exports one-third of its production.

0

50

100

150

200

250

2011 2012 2013 2014 2015 2016

Total Export Value of Food and Beverage, 2016 (US Billion) Top Five of Thailand’s Export

Processed Products & Beverage

Seafood (USD 3.6 Billion)

Sugar (USD 2.3 Billion )

Products from cassava (USD 2.9 Billion)

Prepared & Preserved Fruits (USD 2.0 Billion)

Beverages (USD1.5 Billion)

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Food Processing Industry – Overview

Processed Food Products Exports in ASEAN 2016, by Export Value (Billion US)

With a total export value of USD14.4 billion for processed food in 2016, Thailand was the largest processed food exporter in ASEAN.

Specifically, in the region, it is the top exporter for products such as (1) processed seafood and meat, (2) sugar and (3) processed fruit and vegetables.

Thailand and its ASEAN neighbors maintain ‘strategic trade relationships’ in F&B industry:

ASEAN represents an important export market for Thailand

Thai import is an important source of F&B products for some ASEAN countries (Myanmar and Laos)

Thailand is the top processed food exporter in ASEAN; it maintains strategic trade relationships with its regional peers.

Data Source: UN COMTRADE

Complied by KASIKORNBANK, World Business Advisory Center

14.4

5.1

4.5

4.5

3.9

1.5

0.1

0.04

0.03

0.01

- 5.0 10.0 15.0

Thailand

Malaysia

Indonesia

Singapore

Vietnam

Philippines

Myanmar

Laos

Cambodia

Brunei

21

Food & Beverage – Food Processing Opportunity

1 2 3 cheap raw material sourcing market expansion in Thailand ASEAN market access

rice

fish & seafood

fruits

sugar cane

casava

• Expand strategically nationwide • Utilize Thailand’s strong regional distribution network

• Gain knowledge of regional consumer behavior via experience in Thailand

By investing in food processing in Thailand and cooperate with local suppliers, foreign investor can utilize cheap raw material, expand customer base nationwide, and gain access to the ASEAN market.

22

Automotive & Parts Industry

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Source: Thai Autoparts Manufacturer Associations, and the BOI

Thailand’s Automotive & Parts Industry – Overview (1/2)

Structure of Thai Automobile Industry/ supply chain

Assembler (18 car makers, 8 motorcycle

makers) 100,000 workers

Tier 1 (709 companies) 250,000 workers

Tier 2,3 (1,700 companies) 175,000 workers

Source: Thai Autoparts Manufacturer Associations

Domestic sales 40%

Export 60%

Production of Automotive in Thailand in 2016

1.9 million cars produced

1.1 million car

0.76 million car

Thailand is the largest automotive producer in ASEAN, ranking 12th globally with deep and wide automotive supply chain thanks to FDI by Japanese automotive enterprises.

With 60% of car production used for export, Thailand is one of major car exporters in the world.

With its well established supply chain, Thailand is well portioned to be the ASEAN auto production hub for Japan and Chinese car makers

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Thailand’s Automotive & Parts Industry – Overview (2/2)

2015 – 2018 2019 – 2021

Vision of Thailand Automotive Industry in 2021

Vision: production hub for electric vehicle

Plug-in Hybrid Electronic Vehicles

Battery Electric Vehicles

Fuel Cell Electronic Vehicles

8- year corporate income tax exemption

Lower excise tax for low emission & hybrid car

Highlight tax incentives for green automobile producer

Thai government has implemented alternative tax incentives to attain Thailand as the regional production hub for green automobile.

“ Since June 2017, the government announced the new excise tax incentives, which aimed at promoting EV as one of ten targeted industry cluster and it will be expired in late 2025”

Electric Vehicles Preferential Excise Tax Program

New Existing

HEVs / PHVx PPV with Co2 emission of lass than 175g/km

23%

25%

Double-cab pickup teuck with Co2 emission of less than 175g/km

10% 12%

Passenger cars • Co2 emission of less than

100g/km. • Co2 emission of less than 150g/km • Less than 200 g/km

5%

10%

12.5%

10%

20% 25%

BEVs 2% 10%

Source: Excise Tax Department

25

Thailand’s Automotive & Parts Industry – Opportunities

1 2 3 Investment in infrastructure for green auto and related services Production of green auto parts and assembly machinery Establishment of production base and distribution center

Automobile manufacturing hub

Driven by high tax incentives and decent local supply chain, foreign can invest in infrastructure for green auto, produce green auto parts, and establish production base & distribution center in Thailand.

Recharging infrastructure and equipment

Automobile repair service

Green automobile parts

Assembly machinery

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Electrical & Electronics

27

Thailand’s Electronics Industry – Overview

Data Source: Kasikorn Research

Thailand’s Electronics Exports 2016

70% of Thai electronics exports are Hard Disk Drives, Integrated Circuit, and Printed Circuit Board.

Thailand’s electronics industry mainly relies on production of hard disk drive, integrated circuit, and printed circuit board, and became one of ASEAN leading production base for these electronic parts. The total export value was US 29.7 billion.

Key Electronics Products:

Hard Disk Drive

2nd in the world

• 2nd largest after China; presence of global makers, Seagate and Western Digital (WD) and local supply chains.

• Highly dependent on global HDD market

• Recent Evolvement:

• Segment change: personal computer -> expansion of enterprise segment (cloud computing, enterprise data storage / server)

• Switch to Solid State Drive (SSD) for fast data transfer and startup.

Printed Circuit Board

8th in the world

Integrated Circuit

11th in the world

• Steadily gain traction due to interconnection with automotive and electrical appliance industries.

• Export value doubled between 2011 and 2014.

Hard Disk Drive 35%

Integrate Circuit 26%

Printed Circuit Board

4%

Others 35%

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Thailand’s Electrical Industry – Overview

Data Source: Kasikorn Research

Thailand’s Electrical Appliances Exports 2016

Thailand is the world’s second largest suppliers of refrigerator and air conditioner after China with the total export value of USD 5.8 billion and these two products are accounted for 35% of total electrical export value.

Air Conditioner

26%

VDO Recording &

Parts 9%

Refrigerator 9% Washing

Machine 6%

Others 50%

• The inverter system is now replacing the old model of air conditioner as the global energy saving trend. Presently, Thailand is manufacturing around 30% of the inverter market and it plans to cover the whole market within five years.

• The limitation to import refrigerant R22 will increase the

production cost to some models and it could be lead to the technology transition to produce the high technology model that use another refrigerant likes R401a and R32.

• Even Thailand lost the production base of television to Vietnam but Thailand still has opportunity to manufacture more advanced electrical appliances likes smart home appliances.

Key Information

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Automotive

Smart Home Appliances

Medical Devices

Thailand’s Electronics Industry – Market Outlook

Outlook of Thailand’s Electronics Industry

Outlook of Thailand’s electronics industry depends upon global electronic appliance market and Thailand’s competitiveness; With capability to produce above 10,000 mechanical parts in an automobile, Thailand has key competitiveness in electro-mechanics; Matching this competitiveness with global market trend creates bright outlook for automotive electronics, smart home appliances, and medical devices.

Electro-mechanics

Grab business opportunities in automotive electronics o Tremendous demands as ASEAN No. 1 automotive makers

with 2 million cars produced each year o Increasing use of electronic parts in car production

High potential in smart home appliance o Bright global outlook toward smart home appliances o Thailand as one of the world class manufacturers in home

appliances e.g. air conditioner, refrigerator, etc

New opportunities for medical devices o Enormous demand for medical devices as regional medical hub o Mechanical parts commonly used in automotive and electrical

industries (e.g. pump and motor) can be use in medical devices o High incentives for investment in medical devices

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Thailand’s Electronics Industry – Potential Investment

Electronic System Design

Hi-Tech IC Assembly

Hi- Tech PCB Fabrication

High Potential Activities for Investment in Thailand

With bright business outlook for serving automotive electronics and home appliances in the internet of things era, electronic system design, hi-tech IC assembly, and hi-tech PCB fabrication are high potential activities for investment in Thailand.

o Embedded system design o PCB design o IC design

o System In Package Technology(SIP) o Package on Package Technology (PoP) o 3D – Integrated Circuit (3DIC)

o Multi-Layer PCB (9 layers + ) o Flexible PCB

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International Headquarters (IHQ) and International Trading Centers (ITC)

32 o Central Economic Corridor is a road network linking Bangkok Vientiane, and Southern part of China.

o Major SEZs -> Vita park SEZ (Vientiane)

International Headquarters (IHQ) – Overview

What is International Head Quarter (IHQ)?

o Background: Thai government initiates a new investment promotion policy to enhancing “Thailand Plus One” movement by granting high tax incentives to qualified companies as international head quarter.

o Definition: International Head Quarter is a company incorporated under Thai laws that provides qualifying services to its branches or associated enterprises, whether located in Thailand or overseas.

What are qualifying services for IHQ ?

Business Planning

Marketing Procurement

Research & Development

Technical Support

Management activities R&D related activities

• Borrowing in Thai Baht from financial institutions or associated enterprises in Thailand.

• Lending in Thai Baht to associated enterprises in Thailand.

Treasury related activities Trade & related activities

Goods Procurement Warehousing

Transportation of Goods Packaging

Thai government offers attractive investment incentives including 15 years corporate income tax (CIT) exemption for revenue from abroad to firms setting up international head quarter (IHQ) and international trade center (ITC) in Thailand.

33

International Trade Center (ITC) – Overview

What is International Trade Center (ITC)?

Definition: A company incorporated under Thai laws that purchases and sells goods, raw materials and parts or that provides international trading related services to juristic persons incorporated under foreign laws.

What are qualifying services for ITC ?

Trade & related services

Goods Procurement Warehousing Packaging Transportation of Goods

By using Thailand as international trade center for Greater Mekong Sub-region (GMS) , firms can avoid too much exposure on the CLM countries’ currencies by settlement international transaction in Thailand, and gain corporate income tax (CIT) exemption, at the same time.

ITC

associate

firm customer

• CIT exemption on income derived from trading and related services with overseas entities, whereby goods are not imported into Thailand (out-out transaction).

Example of ITC Incentive

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IHQ & ITC – Overview (1/2)

Bangkok

Cambodia

Vientiane

Hanoi Naypyidaw

Avg 1.00 hr. by flight

Thailand is one of the attractive location to place IHQ/ITC of GMS region as the high growth in FDI inflow, either decent or established infrastructure and standard of skilled labor.

Tax incentive

IHQ Exemption of corporate income tax on

income derived from overseas branch offices

ITC Exemption from corporate income tax

from sales made available through purchasing and selling goods abroad

Strategic location

Thailand is located in center of GMS region, with an easy access to its border countries through all channel (air, water, and land).

Infrastructure

Thailand provides decent infrastructure that suitable for setting up IHQ and ITC , such as utility and telecommunication.

Skilled labor

With long development in education sector and

experienced in trading with CLMV, Thailand is ready to provide the decent skilled labor for IHQ and ITC.

Source: roedl.com, asean.org

Livability for expats

Within GMS region, Thailand is the most livable country for expats and their families, with an easy access for mass transportation, education with numerous of international schools, high standard of health care, various types of amenities.

http://www.google.co.th/url?sa=i&source=images&cd=&cad=rja&uact=8&ved=0CAgQjRw&url=http://www.shutterstock.com/pic-192415898/stock-vector-forbidden-symbol-no-tax.html&ei=qPUlVdSPEcObuQTy_YGICg&psig=AFQjCNHCO8DtN9NRuY5owAdNWSLmRe5Hcg&ust=1428637480340911

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IHQ & ITC – Overview (2/2)

Thailand’s IHQ & ITC schemes provide attractive incentives when compared to Singapore and Malaysia, such as the lowest paid-up capital , less operating cost and the longest fixed promotion period.

Total Number of Project Approval By BOI during 2015-2016

Source: Board of Investment

Major Investments

IHQ

ITC

2015 2016

29 Projects

90 Projects

143 Projects

270 Projects

(Unit : USD) Thailand Singapore Malaysia

Paid-up capital 300,000 343,000

(within 3 years) Approx. 582,000

Minimum Operating cost / year

450,000 Approx. 1,500,000

Approx. 698,000

Promotion period 15 Yr 5 Yr 5Yr+5Yr

IHQ Incentive Comparison Among 3 Major Countries

36

IHQ & ITC – Opportunity

1 Support services Research and development center 2 Sale office 3

Foreign investors can use Thailand as a gateway to expand their business into the Greater Mekong Subregion and establish support services, R&D center, sale office, and other marketing events or exhibition.

Others 4

Call center

Maintenance/ Technical support

Training center

Marketing events

International

meetings.

Exhibition

37

New S-Curve Industry

38

S- Curved Industry - Overview

Source: Board of Investment

Since 2015, Thailand has brought in additional incentives under the S-Curved scheme to attract more FDI in higher technology base, which is aimed to enhance the nation’s competitiveness.

First S-Curve Industry New S-Curve Industry

Next-Generation Automotive Cluster

Electrical and Electronics Smart Electronics

Petrochemical and Chemical Biofuel and Biochemical

Food for the future Food Innovation

Aerospace Aviation and Logistics

Automation and Robotics

Eco friendly petrochemical, biochemical

Agriculture and Biotechnology

Medical Hub Medical Cluster Medical & Wellness Tourism

Ten Targeted S-Curve Industries

Dig

ital

Eco

no

my

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S- Curved Industry – Market Outlook

Source: Board of Investment

New S-Curve (USD 222 Million)

First S-Curve (USD 760 Million)

Others (USD 788 Million)

Application Submitted to BOI (Jan-Mar 2017)

12%

43%

45%

Digital, Petrochemical, Robotics

Automobile, Electric & Electrical, Agriculture

Logistics, R&D, IHQ&ITC, Energy

The S-Curved scheme form the government has received positive responses as the application submitted to BOI in the

Q1 2017 has shown the significant growth from last year, which worth approximately USD 1.7 Billion.

What is the additional incentive ?

• Corporate Income Tax (CIT) exemption up to 8 years • 50% CIT reduction up to 5 years (for promoted areas)

Additional Incentives • Corporate income tax exemption for up to 13 years for

business using advanced technology and R&D • 50% Corporate income tax reduction for up to 10 years

• Permission to bring skilled worker and experts to work in promoting activities

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S- Curved Industry – Challenge and Opportunity

Challenges Opportunity

• Abundant of semi-skilled labors with industrial experience -> opportunity to upgrade

• Lucrative investment promotion incentives • Well established supply chain in auto and E&E

industries • Plenty of natural resources for food innovation • Regional connectivity to leverage regional

supply chain

• Most workforce still lack of Research & Development (R&D) experience, hence firms may have challenges finding sufficient skilled labors to fulfill all S-Curve industries

• Infrastructure is being developed in some potential areas.

• Foreign investors may consider to invest in S-curve industries to enjoy special privileges and incentives; potential industries include Food Innovation, Automotive, Medical Devices, and Biochemical that Thailand has a strong position in the global market.

• Foreign investors may improve labor skills by bringing in foreign experts and work with education institute to secure capable workforce in the long term.

Recommendation

41

Country & Economy Overview

Key Industries & Opportunities

Doing Business in Thailand

KASIKORNBANK’s Support

Table of Content

42

Register “company limited” at Department of Business Development

Apply for “investment promotion incentives” at Board of Investment

For exporter, apply for “certificate of origin” to utilize Thailand’s trade privilege.

“One Start One Stop Investment Center” can coordinate and organize all legal applications for foreign investors.

Overview of Doing Business in Thailand

How to start a business in Thailand

Major cost of Investment

Labor Electricity/ Water supply Tax

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Major Costs - Labor

Salaries of English Speaking Worker in 2017

Position Average Monthly Pay (USD)

Office staff 430 – 720

Technician 430 – 1,000

Junior Engineer 660 – 1,200

Senior Engineer 1,300 – 2,300

Middle Level Manager 2,000 – 4,000

Director and Top Management 4,000 – 8,000

Data Source: ADECCO Compiled by: KASIKORNBANK, WB advisory center

Labor: minimum monthly wage in ASEAN 2017, USD

44

Major Costs – Utility

Water Rate: for business usage in Bangkok

Note: minimum usage fee is 2.57 USD

Usage: USD/m³

0 to 10 m3 0.27

11 to 100 m3 0.31 – 0.41

101 to 200 m3 0.42 – 0.44

Over 200 m3 0.45

Electricity rate: each size of business has 2 options

Size of business Option A Option B

Small firm Normal rate Time of Use rate

Medium firm Normal rate Time of Use rate

Large firm Time of Day rate Time of Use rate

Note: size of business is determined by a maximum 15-minute integrated demand of electricity.

Data Source: Metropolitan Waterworks Authority Compiled by: KASIKORNBANK, WB advisory center

45

Major Cost - Electricity Rate for Small Firm

Data Source: mea.or.th

Normal rate Time of Use rate (TOU)

Category Electricity price

(USD/Unit) Service

(USD/ month)

1. Voltage 12-24 kV 0.11 8.92

2. Voltage < 12 kV 1.32

2.1 First 150 unit (kV/hr)

0.09

2.2 151-400 unit 0.12

2.3 401 unit and above 0.13

Category Electricity price (USD/Unit) Service

(USD/month) On Peak Off Peak

1. Voltage 12-24 kV 0.15 0.07 8.92

2. Voltage < 12 kV 0.17 0.08 1.32

Note: On Peak: 9.00 – 22.00 Monday – Friday Off Peak: 22.00 – 9.00 Monday – Friday : 00.00 – 24.00 Saturday – Sunday : Public Holiday *The prices may vary across region – depending on the source cost of utility.

TOU is a rate calculated from the weight average between electricity used in On Peak and Off Peak period

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Category

Demand Charge (USD/kW)

Electricity price (USD/Unit) Service

(USD/month)

On Peak Off Peak On Peak Off Peak

1. Voltage > 69 kV 2.12 0 0.12 0.07 8.92

2. Voltage 12-24 kV 3.80 0 0.12 0.08 8.92

3. Voltage < 12 kV 6.00 0 0.12 0.08 8.92

Major Cost - Electricity Rate for Medium Firm

Normal rate

Time of Use rate (TOU)

Category Demand Charge

(USD/kW)

Electricity price

(USD/Unit)

Service (USD/month)

1. Voltage > 69 kV 5.02 0.09 8.92

2. Voltage 12-24 kV 5.61 0.09 8.92

3. Voltage < 12 kV 6.33 0.09 8.92

Demand Charge is an extra electricity charge for the firm, required to use massive electricity

Data Source: mea.or.th

TOU is a rate calculated from the weight average between electricity used in On Peak and Off Peak period

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Major Cost - Electricity Rate for Large Firm

Time of Day rate (TOD)

Time of Used rate (TOU)

Category Demand Charge (USD/kW)

Price per unit

Service (USD/month)

(USD/Unit)

On Peak Partial Peak Off Peak All-Day

1. Voltage > 69 kV 6.41 0.85 0 0.09 8.92

2. Voltage 12-24 kV 8.14 1.68 0 0.09 8.92

3. Voltage < 12 kV 9.51 1.95 0 0.09 8.92

Category

Demand Charge (USD/kW)

Price per unit

Service (USD/month)

(USD/Unit)

On Peak Off Peak On Peak Off Peak

1. Voltage > 69 kV 2.12 0 0.12 0.07 8.92

2. Voltage 12-24 kV 3.80 0 0.12 0.08 8.92

3. Voltage < 12 kV 6.00 0 0.12 0.08 8.92

TOD is similar to TOU with more detailed categories including on peak, partial peak, and off peak.

Note: TOD On Peak: 18.30 – 21.30 Everyday Partial Peak: 08.00 – 18.30 Everyday Off Peak: 21.30 – 08.00 Monday – Friday

Data Source: mea.or.th

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Monthly Income (THB) Tax Rate

0 – 150,000 0%

150,001 – 300,000 5%

300,001 – 500,000 10%

500,001– 750,000 15%

750,001 – 1,000,000 20%

1,000,001 – 2,000,000 25%

2,000,001 – 5,000,000 30%

Above 5,000,000 35%

Types of Tax Tax rate

Corporate Tax 20%

Value Added Tax (VAT) 7%

Property and Land Rent Tax 12.5%

Source: KPMG ASEAN Tax Guide, PwC

Tax System

Personal Income Tax Corporate Taxes

Corporate Taxes Rate for SME

Net Income (THB) Tax rate

Less than 300,000 0%

300,000 – 1,000,000 15%

Above 1,000,000 20%

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1) Sole Proprietorship 2) Ordinary Partnership

Non-Juristic Business

Juristic Business

1) Juristic Ordinary Partnership 2) Limited Partnership 3) Limited Company 4) Public Limited Company

Types of Business Organization in Thailand

Register Limited Company

Limited company is the most common type of business organization, in which business registration procedures are as following;

• Reserve the Corporate Name

• Submit the Memorandum of Association (MOA), convening a statutory meeting and depositing paid in capital

• Register the company within 3 months from date of convening a statutory meeting

Limited Company: Business Registration Procedure

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Foreign Business Act B.E. 2542 (1999)

Before register a business in Thailand, there are some restrictions for foreigners operating business in Thailand.

Content of Foreign Business Act

Alien is defined as entities who do not possess Thai nationality. Companies are considered aliens if 50% or more of their share of capital belongs to foreign individuals or juristic entities

The Foreign Business Act has identified 3 lists of activities controlling foreigners doing business in Thailand.

3 lists of restricted activities of foreign-controlled business

1

2

3

Businesses that foreigners are not permitted to engage in for special reasons such as newspaper, radio, and television business Businesses concerning national security, safety, art and culture, native handicrafts, the environment, which require permission granted by the cabinet via Minister of Commerce.

Businesses in which Thais are not adequately prepared to compete on an equal footing with foreigners, which require permission granted by the Director-General of the Department of Business Development and endorsement by the Foreign Business Committee.

For more details, www. boi.go.th

51

Investment Promotion Incentives – Overview

In 2017, to encourage investment in advanced and high-technology toward Thailand 4.0 era, the new investment promotion policy

has been launched with additional incentives, focusing on high technology investment in the Eastern Economic Corridor (EEC).

1) Sector Based Incentives 2) Technology Based Incentives

High Incentive Sectors Advanced Manufacturing High Value Added

Businesses & Services

Maximum 8-year Corporate Income Tax Exemption

Low Incentive Sectors Basic Industries Supporting Industries

10-year Corporate Income Tax Exemption

Biotechnology Advanced Material

Technology

Nanotechnology Digital Technology

5) Special Incentives 4) Area Based Incentives

• Eastern Economic Corridor (EEC) • Special Economic Zones (SEZs) • Others

Additional incentives depending on location of investment

3) Merit Based Incentives

Additional incentives granted activities that enhance competitiveness

• Research & Development • Advanced Technology Training • Others

Additional incentives for specific purposes

• SME Supporting Incentives • Measure to Promote Productivity • Others

CORE INCENTIVES

Overview of Investment Promotion Incentives

52

Investment Promotion Incentives – (1) Sector Based Incentives

Group

A activities Advanced & high technology activities Environmental friendly activities Activities that utilize local abundant

resources

Group

B activities Low technology activities that are

important as supporting activities in the value chain

Definition of Group A & B Activities Incentive scheme A1 A2 A3 A4 B1 B2

Corporate Income Tax

(CIT) exemption

Import duty on machinery

Import duty on raw materials

Non-tax incentives

8-year 100% cap

3-year 100% cap

5-year 100% cap

NONE

Exemption of import duty on new machines NONE

Exemption of import duty on raw materials used in manufacturing of exports products for 1 year (can be extended)

Permission to own land, to employ foreign skilled workers, remit money abroad in foreign currency, etc.

8-year Without cap

Approximately 250 activities across various sectors are eligible for investment promotion incentives; In each sector, activities are classified into group A and B, in which group A activities are eligible for higher incentives with corporate income tax exemption.

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Investment Promotion Incentives – (2) Technology Based Incentives

Biotechnology Nanotechnology Advanced Material Technology Digital Technology

o Cell Culture/ Tissue Engineering Technology

o Gene and Molecular Technology o Genetic Engineering Technology o Omics Technology o Biodegradable Materials

Technology o Bioinformatics o Advanced Bioprocessing

Technology o Bio-Analytical Technology o Biomaterial Production

Technology

o Drug Delivery System o Nano-Encapsulation o Nanofiber Technology o Omics Technology o Nanomaterials Syntheses o Membrane Technology o Adsorption Technology o Nano-characterization and

Testing o Nanostructure Fabrication o Surface Coating/Engineering

Technology

o Advanced Catalyst Technology o Composite Material Technology o Functional Materials Technology o Photonics & Optical Technology o Printed Electronics and Organic

Electronics o Advanced Materials Forming

Process o Materials Characterization

Technology o Energy Storage

o Big Data Analytics Technology o Decentralized Sequential

Transaction Database o Human Computer Interaction

Technology/Brain Computer Interface

o Internet of Things Technology o Natural Language Processing

Technology o Virtual & Augmented Reality

Technology o Digital Engineering and

Manufacturing Technology o Software Testing Technology o Embedded Technology o Smart Grid o Wearable Technology o Artificial Intelligence Technology o Sensor Technology o Automation Technology o Robotics Technology

Under the technology based incentives, all technologies that can be classified into 4 main core technologies (the below list) are eligible

for 10 year corporate income tax exemption.

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Investment Promotion Incentives – (3) Merit Based Incentives

Type of activities eligible for this incentive Number of years receiving a CIT exemption

depends on a percentage of investment to combined revenue of the first 3 years.

R&D

Donation to Technology and Human Resources Development Funds

IP acquisition/ license fees for commercializing technology developed in Thailand

Advanced technology training

Product & Package design

Percentage of investment to combined revenue of the first 3 years

Additional CIT Exemption (with additional cap)

1% or ≥ 200 million baht 1 year

2% or ≥ 400 million baht

3% or ≥ 600 million baht

2 years

3 years

Merit based incentives are additional incentives with 1-3 year corporate income tax exemption; An investment project must apply for

either sector based incentives or technology based incentives to be able to eligible for merit based incentives.

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Investment Promotion Incentives – (4) Area Based Incentives

Eastern Economic Corridor (EEC) Incentives

Projects in target industries that eligible for sector or technology-based incentives Additional 50% CIT

reduction for 5 years

Strategic Investment Projects Max 15 year CIT

exemption Eligible to apply for

a grant for R&D and HR development

*Strategic investment projects must be in target industries that in line with Thailand 4.0, but cannot be attracted by other incentives

Bangkok

Chachoengsao

Rayong Chonburi

EEC

Existing Industrial Clusters in EEC Target Industries in EEC

Automotive Cluster Key Players: Toyota, Isuzu, Mazda, Mitsubishi, Ford, BMW

Electrical and Electronics Cluster Key Players: Samsung, Hitachi, Fujitsu, LG, Mitsubishi

Petrochemical & Chemical Cluster Key Players: PTT and SCG

Food Cluster Key Players: Ajinomoto

Next-Generation Automotive Aviation

Smart Electronics Automation and Robotics Digital

Eco Friendly Petrochemical & Chemical

Food for the Future

Medical Hub Medical & Wellness Tourism

Medical Cluster Key Players: Cardinal Health, Nikkiso

Among several area based incentives, the Eastern Economic Corridor (EEC) has lucrative investment potential; Investment projects in target industries are eligible for maximum 15 year corporate income tax exemption.

56

Investment Promotion Incentives – (5) Special Incentives

Eligible Investment

Improvement in production efficiency e.g. automation

• Investment in machinery replacement for

Energy conservation

Use of renewable energy

Reduction of environmental impacts

Conditions

• R&D activities or engineering design

Existing investment promotion projects with no CIT exemption left

Applicant

Investment

Minimum THB 1 million For SME minimum THB 0.5 million

Deadline

December 31,2017

Incentives

3-year corporate income tax (CIT) exemption

Exemption on import duty on machinery

Among several special incentives, measure to promote productivity has high potential; Firms are eligible for 3-year corporate income tax exemption for investing in machinery replacement to promote productivity and cut production cost.

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57

Trade Privileges

Multilateral trade liberalization

• ASEAN • WTO • GSP (with the below countries)

Bilateral trade liberalization

• Australia • Chile • China • India • Japan • Peru • New Zealand

o Canada o Japan o Norway o Switzerland o Turkey o USA

Certificate of Origin for Free Trade Agreement

To utilize all trade privileges, exporter must apply for “Certificate of Origin for Free Trade Agreement (C/O for FTA)”. In Thailand, Department of Foreign Trade, Ministry of Commerce is authorized agency to issue C/O for FTA.

For more information, www.dft.go.th Sample of Certificate of Origin for FTA

58

Country & Economy Overview

Key Industries & Opportunities

Doing Business in Thailand

KASIKORNBANK’s Support

Table of Content

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KASIKORNBANK’s Support

•Financial advisory •Trade finance •Financing

Cross Border Banking Service

•Local branch / representative office support, in China, Japan, Laos, Cambodia, Indonesia Myanmar, and Vietnam.

Regional Support

•Advisory service •Business matching service

Non-banking support

61