Thailand: Market Profile 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, 23 Jan 2019 1
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Thailand: Market Profile
1. Overview
Thailand has made remarkable progress in social and economic development, movingfrom 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 NationalStrategy (2017-2036) for attaining developed country status. According to the plan, thecountry will seek to achieve this through broad reforms including addressing economicstability, human capital constraints, equal access to economic opportunities,
environmental sustainability, competitiveness, and effective governance. The sustainedpace and quality of reforms, as well as sound implementation, will be crucial fortranslating the reform effort into the desired economic outcomes.
Sources: World Bank, Fitch Solutions
2. Major Economic/Political Events and Upcoming Elections
May 2014The army led by General Prayut Chan-ocha took power in a coup d'état and announcedthe suspension of "the constitution of 2007 except for the chapter on the monarch".
October 2016King 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 2017King Vajiralongkorn signed the new, military-drafted constitution that paved the way fora return to democracy.
Sources: BBC Country Profile – Timeline, Fitch Solutions
3. Major Economic Indicators
e = estimate, f = forecastSources: IMF, World BankDate last reviewed: October 8, 2018
4. External Trade
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4.1 Merchandise Trade
Source: WTODate last reviewed: October 16, 2018
Sources: Trade Map, Fitch SolutionsDate last reviewed: October 16, 2018
4.2 Trade in Services
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e = estimateSource: WTODate last reviewed: October 8, 2018
5. Trade Policies
Thailand has been a WTO member since January 1, 1995.Since 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 andVietnam). The rewards of lower tariffs within the area have been seen, with regionaltrade booming in recent years, especially as Malaysia, Singapore, Vietnam,Cambodia and Myanmar are all Thailand's major exporting partners.Although Thailand has abolished most tariffs, this mainly benefits regional (membersof ASEAN) investors and a few other countries with which it has free tradeagreements (FTAs). Consequently, high tariffs in many sectors and non-tariffbarriers such as licencing requirements and excessively burdensome importrequirements remain an impediment to market access. Price controls and excisetaxes, often based on an exceedingly complex tax structure, also negatively impacttrade in some sectors. Thailand is not a signatory to the WTO Agreement onGovernment Procurement.Under Article 27 of the Customs Act of 1926 and subsequent amendments, certainitems are prohibited by law from passing into or out of Thailand. Habit formingnarcotics and other illicit drugs are banned. The same article of the Customs Act of1926, allow the Ministry of Commerce to designate certain classes of goods assubject to import controls, generally, in the form of licensing or governmentpermissions.
ASEAN Free Trade Area: Thailand signed the Framework Agreement on Enhancing1.ASEAN Economic Cooperation in 1992. The agreement was to establish an ASEANFTA (AFTA) which in total now affects ten countries. In 2015, the ASEAN EconomicCommunity (AEC) was officially launched, with nearly all tariffs eliminated, thoughfurther liberalisation of services, capital, and labour will take more time to
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implement. Along with the other ASEAN members, Thailand is currently negotiatingwith China, Korea, Japan, Australia, New Zealand, and India to form a RegionalComprehensive Economic Partnership (RCEP) agreement; has implemented an FTAwith Australia in 2005, signed an FTA with New Zealand in 2005 and with Japan inApril 2007.ASEAN-New Zealand-Australia FTA and Economic Integration Agreement: Australia2.is Thailand's sixth largest exporting partner.ASEAN-Japan FTA: Japan is Thailand's third largest export partner and second3.largest import partner.ASEAN-South Korea FTA and Economic Integration Agreement: South Korea is4.Thailand's fifteenth largest exporting partner, and due to regional proximity andalready strong trade ties this agreement has stimulated the flow of trade betweenthe countries.
Under Negotiation
Negotiations for an EU-Thailand FTA were launched in March 2013. The negotiations aimto conclude a comprehensive FTA.
The Thai business climate continues to be positive and welcoming to foreign1.investment though local laws favour domestic companies in many aspects. Allbusinesses operating in Thailand must register and obtain a Foreign BusinessLicense from the Ministry of Commerce. Manufacturing firms must also register withthe Ministry of Industry, and the Ministry of Labour and Social Welfare.The Foreign Business Act (FBA) of 1999 is the primary piece of legislation with2.respect to foreign business activities. In spite of some reforms, company ownershiprestrictions remain in place and foreign nationals may own 49% of a company whileit remains majority-Thai owned.Certain types of business activities are reserved for Thai nationals only according to3.the FBA. Generally, foreign investment in these areas cannot comprise more than
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50% of share capital unless specifically permitted. Some exemptions can beobtained such as permission by the director general of the Department of BusinessDevelopment, with approval of the Foreign Business Committee together withobtaining a foreign business license.Foreign ownership of wireless/mobile telecommunications services; banking,4.accounting, bookkeeping and auditing services; tax consultancy; agriculture andforestry; transportation; tourism capped at 49%; mining, oil and gas, wastemanagement and water supply is capped at 75%.Under the Land Code, the Condominium Act and the Property Leasing Act, foreigners5.are not allowed to own land in Thailand - save for government industrial estates orSpecial Economic Zones (SEZ). In addition, foreign investments in excess of THB40million are entitled to own 1,600sq m of land for residential use with the permissionof the Ministry of Interior. Rather than purchasing, many foreign businesses insteadsign long-term leases and then construct buildings on the leased land.Under the Condominium Act of 2007, foreign ownership in a condominium building6.cannot exceed 49%. Meanwhile, property can be expropriated under Thai law, butthe risk of asset seizure is low.The Alien Employment Act prohibits foreign nationals from working in 39 occupations7.and professions including but not limited to labourer, goldsmith, farmer, accountant,auditor, engineer, architect, among others. Additionally, companies need to havecertain minimum amount of fully paid up capital in order to qualify to employspecific numbers of foreign nationals in Thailand. Other conditions include having atleast fifty local employees per expatriate.
Businesses that are wholly foreign owned and incorporated in Thailand in terms ofThailand's Board of Investment (BOI) are allowed to employ foreign nationals on aratio of local to foreign national of 4:1.
Sources: WTO – Trade Policy Review, ITA, US Department of Commerce, Fitch Solutions
7.3 Free Trade Zones and Investment Incentives
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Free Trade Zone/Incentive Programme Main 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.
- SEZs 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 (VAT)).
- Enterprises located in Thailand's special economic
zones are eligible for the following 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.
- 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.
- A double deduction for transportation, electricity and
water utility cost and up to a 25% deduction for utility
construction costs.
- Foreign ownership of land and foreign expert
employment.
Sources: US Department of Commerce, Fitch Solutions
8. Taxation – 2018
NIL
9. Foreign Worker Requirements
9.1 Foreign Worker Permits
Prior to starting employment, all non-Thai nationals are required to obtain a work permitunder the Alien Employment Act of 2008. Foreign nationals first need to secure an initialnon-immigrant visa, which must be obtained before entering Thailand. The duration ofthe work permit is generally the same as the applicant's visa. Generally, work permits areissued for one year but are renewable. Foreign nationals are not allowed to perform workthat is not permitted by their visa. To change occupations, they need to obtainauthorisation from the Ministry of Labour.
9.2 Localisation Requirements
The Alien Employment Act prohibits foreign nationals from working in 39 occupations andprofessions (such as labourers, goldsmiths, farmers, accountants, auditors, engineersand architects).
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Companies need to have a certain minimum amount of fully paid up capital in order toqualify to employ specific numbers of foreign nationals in Thailand. Other conditionsinclude having at least 50 local employees per every expatriate. Businesses that arewholly foreign owned and incorporated in Thailand in terms of Thailand's Board ofInvestment are allowed to employ foreign nationals on a ratio of local to foreign nationalof 4:1.
9.3 Visa/Travel Restrictions
In general, Thailand has an open visa policy. The country has Bilateral Agreements with anumber of other countries which award preferential treatment to nationals of thesecountries in terms of the number of days granted to stay in Thailand visa free. Nationalsfrom five countries have visa free access into Thailand for 90 days, five others haveaccess for 30 days, 45 nations are granted 30 days visa free access as well as beingallowed to enter Thailand through other means than through the country's airports. Manyother countries can get a visa on arrival whereas only a few need to apply for a visabefore departing for Thailand.
Sources: Government websites, Fitch Solutions
10. Risks
10.1 Sovereign Credit Ratings
Rating (Outlook) Rating Date
Moody's Baa1 (Stable) 18/07/2017
Standard & Poor's BBB+ (Stable) 21/12/2015
Fitch Ratings BBB+ (Stable) 07/06/2018
Sources: Moody's, Standard & Poor's, Fitch Ratings
10.2 Competitiveness and Efficiency Indicators
World Ranking
2016 2017 2018
Ease of Doing Business Index 49/189 46/190 26/190
Ease of Paying Taxes Index 70/189 69/190 67/190
Logistics Performance Index 45/160 N/A 32/160
Corruption Perception Index 101/176 96/180 N/A
IMD World Competitiveness 28/63 27/63 30/63
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Sources: World Bank, IMD, Transparency International
10.3 Fitch Solutions Risk Indices
World Ranking
2016 2017 2018
Economic Risk Index Rank 33/202
Short-Term Economic Risk Score 71.0 73.1 72.3
Long-Term Economic Risk Score 69.3 70.4 70.1
Political Risk Index Rank 115/202
Short-Term Political Risk Score 66.7 70.8 70.2
Long-Term Political Risk Score 57.9 58.9 58.9
Operational Risk Index Rank 58/201
Operational Risk Score 61 59.4 58.9
Source: Fitch SolutionsDate last reviewed: August 15, 2018
10.4 Fitch Solutions Risk Summary
ECONOMIC RISKOver the next five years, the Thai economy is expected to grow as the country's newconstitution should provide policy continuity regardless of the election outcome. Weexpect continued business environment improvements, potentially including big-bangstate-owned enterprises reforms, boosting productivity.
OPERATIONAL RISKThailand offers investors considerable advantages within its operational environment,which include a large, predominantly youthful workforce with basic literacy and numeracyskills, increasing levels of foreign economic participation and trade, and a developedlogistics network. However, significant risks exist, notably the ongoing separatist violencein the south of the country.
Source: Fitch SolutionsDate last reviewed: October 16, 2018
10.5 Fitch Solutions Political and Economic Risk Indices
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100 = Lowest risk, 0 = Highest riskSource: Fitch Solutions Economic and Political Risk IndicesDate last reviewed: October 16, 2018
100 = Lowest risk, 0 = Highest riskSource: Fitch Solutions Operational Risk IndexDate last reviewed: October 16, 2018
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11. Hong Kong Connection
11.1 Hong Kong’s Trade with Thailand
Note: Graph shows the main Hong Kong exports to/import from Thailand (byconsignment)Date last reviewed: October 8, 2018
Note: Graph shows Hong Kong exports to/import from Thailand (by consignment)Exchange rate HK$/US$, average7.76 (2013)7.75 (2014)7.75 (2015)7.76 (2016)7.79 (2017)Source: Hong Kong Census and Statistics DepartmentDate last reviewed: October 8, 2018
2017 Growth rate (%)
Number of Thai residents visiting Hong Kong 560,207 -5.8
Number of Thais residing in Hong Kong 19,492 1.6
Sources: Hong Kong Tourism Board, United Nations Department of Economic and SocialAffairs - Population Division
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2017 Growth rate (%)
Number of Asia Pacific residents visiting Hong Kong 54,482,538 3.5
Number of East Asians and South Asians residing in Hong Kong 2,784,870 1.6
Sources: United Nations Department of Economic and Social Affairs - Population Division,Fitch SolutionsDate last reviewed: October 16, 2018
11.2 Commercial Presence in Hong Kong
2017 Growth rate (%)
Number of Thai companies in Hong Kong N/A N/A
- Regional headquarters
- Regional offices
- Local offices
11.3 Treaties and Agreements between Hong Kong and Thailand
Thailand has a Bilateral Investment Treaty with Hong Kong that entered into forceon April 18, 2006.Thailand has Double Taxation Agreements (DTA) and Investment Promotion &Protection Agreement (IPPA) with China and concluded the DTA with Hong Kong inApril 2006.
Source: Hong Kong Department of Justice, Fitch Solutions
11.4 Chamber of Commerce (or Related Organisations) in Hong Kong
Hong Kong-Thailand Business CouncilThe Hong Kong-Thailand Business Council is an independent, non-government bodyrepresenting companies of all sizes and individuals with an interest in the development ofbusiness and commercial ties between Hong Kong and Thailand.
Address: 16/F, Worldwide House, 19 Des Voeux Road, Central, Hong KongEmail: [email protected]: (852) 3606 9066Fax: (852) 2869 1609
Source: Hong Kong-Thailand Business Council
Royal Thai Consulate-General, Hong KongAddress: 8/F, Fairmont House, 8 Cotton Tree Drive, Central, Hong KongEmail: [email protected]: (852) 2521 6481
Hong Kong residents are permitted to stay up to 30 days under the Bilateral Agreementwith Thailand if entering via an international airport or through a land border checkpointfrom a neighboring country, such as Laos, Myanmar and Cambodia.
Sources: Thailand Government websitesDate last reviewed: October 16, 2018
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