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Doing Business in Thailand: Overview Part 1
24/11/2021What is the general business, economic and cultural climate in Thailand?
Economy
Thailand continues to be one of the central hubs in the Association of Southeast Asian Nation (ASEAN) for attracting foreign direct investment (FDI), due to its advantages for foreign investors seeking to do business in Asia. It provides an attractive business and economic environment and government incentives, which have greatly contributed to the development of private sectors in creating and maintaining Thailand’s economic growth and prosperity along with its technological development.
The Government of Thailand has taken a supportive and positive position in promoting and welcoming foreign investment. Thailand’s Board of Investment (BOI) offers both tax and non-tax incentives, which aim to promote the development of certain target industries, and most key business sectors of the economy are open to foreign investors.
Thailand therefore continues to improve its attractiveness for FDI through many government initiatives which seek to make the country more accessible to those seeking to expand their presence in Asia while at the same time reducing the amount of red tape required for beginning or expanding business activities.
Dominant Industries
Manufacturing represents a significant portion of Thailand’s GDP, with electronics, cars and automotive components, and agricultural commodities and food products representing some of the largest industries. The service sector and agricultural sector are also important employers in Thailand.
Population and Language
As of 2021, the population of Thailand is just under 70 million, which includes a wide range of people from many ethnicities such as Chinese, Malays, Cambodians, Vietnamese, Indians and others. The official language in Thailand is Thai while English is also a common language and is widely used in business, particularly in Bangkok, Chonburi, Phuket and other major cities.
Business Culture
- Business cultures in Thailand are quite similar to its neighbouring countries in Asia. The Thai culture exercises significant influence on business dealings. Although the Thai people are tolerant of different behaviours, the optimal approach is one of politeness and respect without losing one’s temper or raising one’s voice. Conflicts should be resolved by polite discussion. There is a unique Thai identity, giving rise to “the Thai way” of doing things. Personal ties and trust are also important to the Thai people; accordingly, direct personal questions are common and not inappropriate. Yet, people tend to be indirect in their dealings with each other and go around an issue rather than directly to the key point. Tasks may therefore be accomplished less efficiently and less quickly than with a direct approach.
- However, there have recently been movements to challenge the established norms of a paternalistic society by questioning the status quo and arguing for openness, transparency, and accountability.
What are the key recent developments affecting doing business in Thailand?
Key Business and Economic Events
The Thailand 4.0 initiative has been making significant headway. Thailand 4.0 is a policy aimed at transforming the economy of Thailand into a “Value-Based Economy’ by emphasising research and development (R&D), creative thinking, and innovation. The Eastern Economic Corridor (EEC) Project, regulated under the Eastern Economic Corridor Act (EEC Act), is one of the initial projects driving the new policy. The EEC Act is designed to attract both foreign and domestic investments, initially in three Eastern provinces of Thailand: Chachoengsao, Chon Buri and Rayong. Its purpose is to turn Thailand’s Eastern region into a leading ASEAN economic zone. The EEC Project is targeting the following industries in the Eastern region:
- High wealth and medical tourism.
- Biofuel and biochemical.
- Food processing.
- Comprehensive healthcare.
- Advance agriculture and biotechnology.
- Aviation and logistics.
- The intelligent electronics.
- Robotics.
- Next-generation automotive.
- Digital.
In addition to the above industries, the EEC Project also focuses on the development of infrastructure, technology and transportation. It plans to implement various transportation projects in the Eastern areas. Various projects are already in the works, including the:
- High-Speed Railway Project, which will link three major airports in Thailand (Don Mueang International Airport, Suvarnabhumi International Airport and U Tapao Airport).
- Double-Track Rail Lines Project which aims to connect industrial zones within the country.
Political Events
Politics in the past year has been dominated by the COVID-19 pandemic and the government’sresponse to it.
New Legislation
The business climate in Thailand continues to be positive and welcoming to foreign investment. Currently, deregulation and trade liberalisation are taking place on many fronts, largely driven by Thailand’s participation in the ASEAN Economic Community (AEC). In 2015, the AEC Blueprint 2025 was adopted, providing the AEC with a broad economic direction which resulted in more autonomous movement of goods, services, capital and labour. Certain changes have already come into effect, such as:
- A substantial reduction in tariffs on many goods originating from ASEAN member states.
- Harmonisation of securities regulations.
- Relaxation on the restriction on foreign owners wholly-owning a subsidiary or holding a majority interest of a company in Thailand.
- Allowing foreign nationals to carry out certain restricted businesses under the Foreign Business Act BE 2542 (1999) (FBA).
The BOI has launched new investment promotion schemes, making it easier for foreign nationals to conduct business in Thailand. Many temporary COVID-19 relief measures have also been put in place over the past year. Some are still in effect and future measures are possible.
Legal System
What is the general legal system in Thailand?
Thailand has a codified legal system, where all rules and regulations are enacted in writing. In accordance with that system, Thailand also has a civil law and dual court system. Although court decisions do not generate binding precedent, rulings are significantly influenced by decisions of higher courts and other past rulings or legal interpretations.
The codified legal system in Thailand operates in a hierarchy of laws that are divided mainly between:
- Constitutional Acts.
- Organic Acts.
- Royal Ordinances.
- Royal Decrees.
- Ministerial Regulations.
By Darani Vachanavuttivong, Ploynapa Julagasigorn, Michael Ramirez, Supasit Saypan, Chaiwat Keratisuthisathorn, Pimvimol (June) Vipamaneerut, Chanchai Jhongsathit, Kobkit Thienpreecha, Nutavit Sirikan, Penrurk Phetmani, Kasama Sriwatanakul, Gvavalin Mahakunkitchareon and Charuwan Charoonchitsathian, Tilleke & Gibbins, Thailand, a Transatlantic Law International affiliated firm.
For further information or for any assistance please contact thailand@transatlanticlaw.com
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