Benefits of Doing Business in Thailand

20.06.2024
Jeremy Cheong
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Jeremy Cheong

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+65 8800 8074

Located in Southeast Asia, Thailand is a popular holiday destination. Many people know it for its beautiful beaches and warm and welcoming people. Consequently, it’s not necessarily the most obvious connection to think of Thailand as a business hotspot.

Thailand is a newly industrialised economy, but many people don’t necessarily regard it as a ‘go-to’ business destination. However, Thailand has long enjoyed a reputation for being one of the world’s most straightforward and undemanding countries in which to do business.

In this article we will discuss the benefits of doing business in Thailand.

The economy and the political scene

COVID-19 affected the economy quite severely in Thailand and, like elsewhere, caused many businesses to close. Unfortunately, a third wave of infections in the spring of 2021 slowed recovery. However, GDP growth has steadily improved since then, with predictions painting a positive picture for the future. The economy has now returned to its pre-pandemic state.

The government of Thailand is forward-thinking, with innovative strategies and policies, keen to support and promote economic advancement and development. Over the last twenty years, Thailand has worked to make the country’s environment attractive and favourable for foreign companies and businesses.

Thailand welcomes foreign investors and supports this with active deregulation and trade liberalisation, underpinned by the country’s involvement in the ASEAN Economic Community (AEC). In 2015, Thailand adopted the AEC Blueprint 2025 with a defined economic goal, including benefits such as a decrease in tariffs on goods from ASEAN countries.

Good choice for start-ups

Thailand is rapidly becoming the first choice for entrepreneurs, and as more choose to begin their business ventures there, others will follow. The bureaucratic process is simple and uncomplicated, and company registration costs are low compared to other countries.

Thailand ranked tenth on the ‘Best Countries to Start a Business’ list by the US News and World Report.

Under Thai legislation, the government permits 100% foreign ownership of companies – another attraction. The law doesn’t specifically distinguish between a foreign and a Thai shareholder, so any foreigner can register a business without needing a Thai partner.

Furthermore, the US-Thailand Treaty of Amity and Economic Relations (AER) provides opportunities for US citizens and businesses to conduct business on the same footing as Thai companies.

Ease of doing business

In 2020, Thailand was ranked 21 out of 190 countries in the World Bank Group’s ‘2020 Ease of Doing Business’ report. Room for improvement yes, but a solid footing on the global rankings.

Incorporating and registering a new company is very similar to the structure followed in the UK and US. Depending on the business type and investor preference, various options are available, including sole proprietorship, partnership, and joint ventures.

Although the scope of business allowed for foreigners is restricted under the Foreign Business Act (1999), if a company is allowed permission to operate, then it will be able to receive tax and other benefits offered by the Board of Investment (BOI), including corporate income tax exemptions, and import duty exemptions on raw materials.

If a new or existing company invests in key development projects in Thailand, 100% foreign ownership is allowed. Plus, companies promoted by the BOI can participate in business activities that are usually restricted under the Foreign Business Act.

BOI offers tax incentives for the following business activities:

  • Technological development and innovation
  • Public utilities and services
  • Electronics and electrical appliances
  • Light industry
  • Chemicals, paper, and plastics
  • Ceramics and mining
  • Metal products for machinery and transport equipment
  • Agriculture and agricultural products

BOI incentives are categorised into two groups, A and B. Group A activities are eligible for corporate income tax reductions, plus machinery and raw materials duty incentives. Group B activities are those that only receive machinery and raw materials duty incentives, plus other non-tax incentives.

Reasonable operating costs

Corporate income taxes are reasonable in Thailand, ranging from 10% to 30%, depending on the business and the profits generated. Office space is affordable, and the manufacturing sectors’ utility costs (power and water) are lower than in many other Asian countries.

As we discussed in our article regarding challenges of doing business in Singapore, the high costs of rent, utilities and labour was a particular challenge, something which is far less of a challenge in Thailand.

Strong corporate governance

Thailand supports enhanced accountability and transparency principles, and this culture underpins regulations within the public sector and for corporate governance. Thailand scores highly in the eleven Asian markets, which were reviewed in a report published by the ACGA (Asia Corporate Governance Association). The country was ranked fourth.

Available workforce

Thailand has a versatile local workforce. Thailand’s Board of Investment (BOI) states that 94% of men and 90% of women are literate, providing a pool of available and affordable people.

A high percentage of Thai nationals have completed secondary education, and a segment of the population goes on to higher education in the UK, Canada, the USA, and Australia; these are all English speaking Thai people.

Thailand has created incentives to attract foreign workers by making visa applications swift with a streamlined process and offering flexible residency conditions. There is also a network of English schools throughout Thailand for those wanting to improve their language skills.

Affordable standard of living

The standard of living in Thailand is very affordable, impacting salaries. The average daily pay in Bangkok is approximately 433 THB, equivalent to S$16 (approximately), making Thailand a far more affordable destination for foreign business than countries like Singapore. Singapore has much to offer businesses, but enormous competition for the available workforce drives up salaries, creating much higher operating costs.

Thailand’s labour rates are almost a third of China’s, making it an attractive country for manufacturing businesses.

Living costs for foreign workers

Aside from the warm and welcoming Thai people and some matchless scenery, the way of life in Thailand is easy and economical. Food is inexpensive and social amenities are also very affordable.

Varied manufacturing sector

Thailand produces a wide range of goods, and agriculture is an important player in its economy. It produces 40% of the world’s natural rubber, as well as fruits, and sugar cane.

However, other sectors, including automotive, electronics, and service industries, are booming. The World Bank labels Thailand as a ‘middle-income’ country, moving from its underdeveloped position a few years ago.

Most foreign direct investment (FDI) focuses on the financial services sector and manufacturing. In 2017, Thailand’s FDI was US$3.4 billion, which had skyrocketed to US$11.4 billion in 2021 – that’s growth of 23.5%. 

Thailand is attractive for tourism and related businesses

Thailand’s holiday scene is very well known, and it is an attractive location for Westerners as well as businesses in this sector.

Location, location, location

Thailand is positioned in the centre of Asia. It offers a perfect point for international businesses looking to start initiatives in this area or expand their reach, including newly emerging markets like the Greater Mekong Basin region.

Shipping and logistics are excellent, with Laem Chabang being the largest port in Thailand, and the central hub for imports and exports for over thirty years. There are extensive container terminals, warehouses, and a dedicated ship repair facility. In 2020, Laem Chabang was rated the world’s third-largest gateway port, excluding gateway ports in China.

Laem Chabang is surrounded by industrial parks. Thailand’s principal economic and industrial zone, the Eastern Economic Corridor (EEC), is located here, making it one of Asia’s main industrial production hubs.

There are easy cargo connections from Laem Chabang to local, regional, and international destinations. 

Are there any drawbacks to Thailand as a business destination?

Well, there are some; after all, nothing’s perfect.

Starting and registering a business in Thailand is very complicated and usually requires hiring professional consultants or lawyers to guide you through the process.

Thailand has a strict eight-hour working day, so anything over that is classed as overtime, which attracts a triple rate, a serious cost consideration for many companies.

Final thoughts

Choosing Thailand as a destination for a new start-up seeking to make its mark or for an existing company to open new markets or expand its reach in Asia is a decision unique to every business.

If you have a manufacturing or service-based company, Thailand is one to consider, especially if your business will attract incentives and concessions under Thai legislation.

Expert advice and the use of local Thai professionals are essential in deciding whether to operate in Thailand and then set up a business there.

In the past decade or so, the Thai government and public sector have been working hard to improve Thailand’s position as a regional business hub in Southeast Asia.

Thailand is an excellent choice if you want access to the country’s domestic market (70 million people) whilst offering access to fast-growing CLMV – that’s Cambodia, Laos, Myanmar, and Vietnam – and the vast markets of China and India. Thailand is the gateway to Asia.

Jeremy Cheong
Author

Jeremy Cheong

WhatsApp

+65 8800 8074

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