The Big Picture: Auto & Electronics Investment Projects After Floods

Yuthasak KanasawatExecutive Director of Investment Strategy & Policy Bureau

Thailand Board of Investment (BOI)

ASEAN Manufacturing Forum#1Ballroom, Raffles Hotel Singapore

March 8, 2012

Outline

• Post-Flood Economic Overview

• Investment Promotion & Investment Rehabilitation Measures

• Quick Recovery of Automotive & Electronics Industries

• Why Still Thailand?

Post-Flood Economic & Post-Flood Economic & Industrial OverviewIndustrial Overview

GDP -9% in Q4 of 2011

6 5.33.9

-4.2

-7-5.2

-2.8

5.9

12

9.26.6

3.8 3.2 2.7 3.7

-9

-15

-10

-5

0

5

10

15

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11

%

Source : NESDB

GDP in the 4th Quarter drastically change from forecasted 5% (annual rate) to -9% because of the flood, which makes GDP growth rate of Thailand at very low rate of 0.1% in 2011

MPI -34.4% in Q4 of 2011

11.6 9.45.8

-9.7

-22

-10.7-5.5

11.5

31.2

17.6

9.8

2.6

-2.5

1.6

-34.4

-15.2

-2.1

-40

-30

-20

-10

0

10

20

30

40

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q4/11 Jan-12

%

Source: OIE

Manufacturing Production Index (MPI) plummeted as much as -34.4% in the Q4 because of flood in Thailand. It recovered to -15.2% in Jan 2012.

Economic Performance

Economic Projections 2009 2010 2011 2012e

1) GDP (%) -2.3 7.8 0.1 5.5 - 6.5

2) Export, FOB value (%) -14.0 28.5 17.2 17.2

3) Import, CIF value (%) -25.2 36.8 24.9

4) Manufacturing Production Index (%) -7.2 14.4 -9.3

5) Headline Inflation -0.9 3.3 2.9 3.5 - 4

6) Core Inflation 0.3 1.0 1.7 2.2

Source: NESDB. & Bank of Thailand as of Jan 2012

Investment Promotion & Investment Investment Promotion & Investment Rehabilitation MeasuresRehabilitation Measures

1231

14901591

2112

0

500

1000

1500

2000

2500

2008 2009 2010 2011

446

639

447

673

0

100

200

300

400

500

600

700

2008 2009 2010 2011

Number of Projects Investment Value(Billion Baht)

Net Application for Investment Promotion at Recorded Level in 2011

Billion BahtBillion Baht

2121 2929 2525 3636 1919 21215454

18185454

7171

00

5050

100100

150150

200200

250250

300300

JanJan

4040

8080

120120

160160

200200

9090 9595105105

9696 101101

136136 132132

160160159159

148148

178178191191

ProjectsProjectsNumber of projects 2011Number of Projects 2010

Investment 2010Investment 2010Investment 2011Investment 2011

56564040 4646 5252 33 88

105105

141141

172172

136136145145170170

4242

161161

5353

11 6060

3636

171755

106106101101

164164

4545

136136

4242

FebFeb MarMar AprApr MayMayJunJun JulJul AugAug SepSep OctOct NovNovDecDec

482482

7070

112112

Number of projects 2012

7979

Source: BOI, as of 14 Feb 2012Source: BOI, as of 14 Feb 2012

22 77

Investment 2012Investment 2012

Application for Investment Remains StrongApplication for investment promotion 251 billion baht in the 4th quarter of 2011, increase 50.3%, despite the great flood. The positive trend continued in Jan 2012

Investment Promotion Measures to Promote Industrial Rehabilitation

a) Tax exemption on machinery and equipment to replace those damaged by flood.

b) Normal investment promotion package to new projects

c) Special investment promotion package to BOI-promoted companies directly affected by the great flood that are still enjoying their tax holidays

Eligibility• Existing BOI-promoted projects directly affected by flood • Still have remaining unused corporate tax exemption period

Special Investment Promotion Package

Remaining Corporate Income

Tax Exemption

New Corporate Income Tax Holiday

1. Projects subject to a cap

stay at existing

province

Renew 8 years tax holiday (150% cap on new investment * + remaining unused cap)

Relocation Renew 8 years tax holiday (100% cap on new investment* + remaining unused cap)

2. Projects not subject to a cap

≤ 5 years left + 3 more years

> 5-6 years left + 2 more years & 2-year 50% tax reduction

> 6-7 years left + 1 more year & 4-year 50% tax reduction

> 7-8 years left + 5-year 50% tax reduction

Or choose new tax incentive scheme no. 1

*All fixed assets (except land) including repairs of existing machinery and replacement machinery previously imported under the BOI scheme*All fixed assets (except land) including repairs of existing machinery and replacement machinery previously imported under the BOI scheme

Measures to support construction of flood prevention systems by industrial estates

Industrial estates that invest in flood prevention systems are offered 8-year tax holidays with the corporate income

tax exemption ceiling of 200% of their investment excluding land cost and working capital.

Quick Recovery of Automotive & Quick Recovery of Automotive & Electronics IndustriesElectronics Industries

Number of Companies %

Total 867 100

Feb 2012 422 49.5

March 2012 506 58.4

April 2012 586 67.6

May 2012 595 68.6

June 2012 611 70.5

July 2012 620 71.5

Progress on Factories’ Rehabilitation in 7 industrial estates

Progress on Factories’ Rehabilitation in 7 industrial estates

Almost all industries have returned to normal in Jan 2012, except E&E, textile, & Apparel

Auto assembly -11.4% to 1.46m in 2011

750

928

327 411

459

584

389

434 525

559

158

1,177

1650

999

1458

533626

409

144

571485

589

363

296

218262

683

545

780 800

332

233180

42

17515213066

14821

539

534

900

734

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000ผลิ�ต จำ�� หน่�ยใ น่ประ เทศ ส่งออก

As automotive industry will return to normal in the 2nd quarter, auto assembly is forecasted to be at recorded level of 2 million in 2012. With flood impact was limited, motorcycle assembly increased 10% to 2.95 million in 2011

New Projects in E&ECompany Invest

(Million $US)Products

Mitsubishi Electric 260 Air conditioners

Microchip 215 IC assembly & testing

Canon 200 Digital copiers

Electrolux 65 Refrigerators

Makita 60 Hand tools

New Projects in Automotive SectorCompany Invest

(Million $US)Products

Toyota Motor 600 Automobiles & engines

Jatco 300 Continuously variable transmission (CVT)

Linglong Tyres 90 Automotive tires

Mitsubishi Motor 80 Engines

Why Still Thailand?Why Still Thailand?

Business Sentiment Recovered Sharply After the Flood

Thailand’s Undeniable Strengths • Strong macroeconomic fundamentals

• Good infrastructure

• Strategic location at the center of ASEAN

• Center of many strategic industries/services: food, automotive, petrochemical, HDD, white goods, tire, tourism, medical services, etc

• Competitive corporate income tax rate of 23% at present and will reduced to 20% from Jan 1, 2013

• Ease of doing business: # 17 out of 183 countries around the world / # 2 in South East Asia

Integrated water management system with single command will be implemented, including construction and upgrade of many reservoirs, flood ways or water diverting channels, preventive dikes, etc.

THANK THANK YOUYOU