Thailand Board Of Investment

Thailand Board of Investment

Mr. Somphong Wanapha Secretary General Thailand Board of Investment

January 2003

Outline of Presentation Thailand Board of Investment

• Macroeconomic Overview • FDI in 2002/2003 • Thailand’s Competitive Advantages • Targeted Opportunities in Thailand

Thailand Board of Investment

The Macroeconomic Picture in Statistics (1 of 2) 1998 1999

GDP Growth (%)

-9.4

4.4

2000 4.6

2001e* 2002e** 1.8

4.9

GDP (US$ Bil)

111.9 122.4 122.1 114.4

125.6

Inflation (%)

8.1

0.6

GDP Per Capita

0.3

1,820 1,980

1.6

1.6

1,957 1,830

1,990

(US$)

Fiscal Balance (US$ Bil)

-2.6

-3.0 -2.6

Sources: * = Bank of Thailand ** = ThailandOutlook.com (January 10, 2003)

-2.5

-2.8

The Macroeconomic Picture in Statistics (2 of 2)

Thailand Board of Investment

Foreign Reserves

1998

1999

2000

29.5

34.8

32.7

2001e* 2002e** 33.0

38.7/***

(US$ Bil.)

Export Growth (%)

-6.6

7.4

19.5

-6.9

1.7

Value of Exports

54.5

56.8

67.9

63.2

64.3

Current Account

12.6

10.1

7.6

5.3

3.6

96.5

108.6

(US$ Bil.)

(% of GDP)

MPI

112.1 113.5 130.1***

(Manufacturing Production Index) Sources:

* = Bank of Thailand ** = ThailandOutlook.com (January 10, 2003)

*** = As of January 3, 2003

Government Stimulus Thailand Board of Investment

• Restructuring Farm Debts • Providing Million Baht Grants to all 70,000 villages • Thailand Asset Management Corporation • Supporting SMEs via State Banks

Thailand Board of Investment

Board of Investment Approved Foreign Investment by Country 2000

Number of Projects

Total

1,116

Foreign

By Country Japan

Value of Investment (mil. US$)

2001

Number Value of of Investment Projects (mil. US$)

2002

Number Value of of Investment Projects (mil. US$)

6,967 820 5,987 721 3,775 761 5,295 575 4,713 483 2,316

282 2,674 257 1,874 215are Note 1: Investment projects with foreign equity participation from more than one country 892 reported in the figures for each country Note 2: 2000 US$=40.16 baht; 2001 US$=44.48 baht; 2002 US$=43.00 baht U.S.A. 73 944 40

Investment from the US Thailand Board of Investment

• Approved projects in 2002 ✔Honeywell — US$12 million to produce plated thermal spreaders ✔Cargill — US$5 million in agriculture (chicken) ✔Johnson Controls — US$8.5 million for automotive seats ✔An International Procurement Office from 3M ✔Regional Operating Headquarters from ExxonMobil

Thailand Board of Investment

Regional Operating Headquarters (ROH) • In August, the Government Established Regulations Covering Regional Operating Headquarters • Companies must be incorporated under Thai law and have paid-up minimum capital of 10 million baht ✔They must service branches or affiliates in at least 3 countries ✔Income must come from managerial, administrative, technical, or other prescribed supporting services for branches/associated companies

ROH Thailand Board of Investment

• Benefits ✔Corporate income tax at 10% for: ➘Qualified services ➘Royalties from ROH in Thailand ➘Interest income on loans made to ROH branches/associated enterprises

✔Tax exemption for dividends from ROH branches/associated enterprises ✔Expats working for ROH are taxed at 15% for 1st 2 years, instead of on sliding scale

FDI in 2003 Thailand Board of Investment

• Targeting Same Level of Investment as 2002 • Quality is More Important Than Quantity • We are Looking for Projects to: ✔Enhance the competitiveness of Thai industry ✔Upgrade human capital (i.e. human resource development) ✔Help develop and transfer skills and technology ✔Nurture Thai talent

FDI in 2003 Thailand Board of Investment

• Objectives Include: ✔Encouraging Cluster Development ➘Particularly in automotive and petrochemicals (Eastern Seaboard)

✔Targeting investment ➘By region and by industry ➘We have established 5 target industries and will develop industryspecific measure to support them

✔Non-target industries ➘No changes in policy, no backtracking

Competitive Advantages Thailand Board of Investment

• ASEAN and AFTA

✔Progressively being implemented

• Location and Social Stability

✔Peaceful Buddhist country ✔Free from social unrest ✔Well-developed infrastructure

• Political System

✔Stable democracy ✔Reform-oriented government

• Workforce

✔Trainable and adaptable

Competitive Advantages Thailand Board of Investment

• Cost-effective Local Inputs

✔Least expensive office space in Asia ✔Vibrant supporting industries support subcontracting

➘Canon sources 70% of all parts locally ➘Toyota is looking to source 100% locally by 2006 ➘More and more manufacturers and assemblers acknowledge that Thai local inputs are key to global competitiveness

China Thailand Board of Investment

• Should You Put All Your Eggs in the China Basket? ✔China has huge potential, but investment landscape is a bit uncertain

China Thailand Board of Investment

• JETRO Report Found That: ✔In 14 categories, Thailand was ranked better than China in 11, including: ➘Legal framework ➘Transparency ➘Infrastructure ➘Development of parts industry

• For Global Markets, Even China Invests in Thailand

Target Industries Thailand Board of Investment

• We Have Identified 5 Groups of Target Industries Agro-Industry Automotive Fashion Electronics and ICT High-Value Services

Target Industries Thailand Board of Investment

• Specific Policies and Measures Will Be Developed for Each Target Industry, Based On Competitiveness Levels of technology Market potential

• Non-target Industries No change in policy No backtracking No reduction in incentives

Leading Agricultural Exports Thailand Board of Investment

Export

Value

• • • • • • • • •

73,812* 65,957 48,696* 43,942* 21,886* 21,796 21,767 21,687 11,433*

-----------------------------------------------------------------------------------

Rice Canned Seafood Shrimp Rubber Canned Tuna Chicken Canned Fruit Sugar Canned Pineapple

* #1 Exporter in the World

Unit = Million Baht

Agricultural Priority Activities Thailand Board of Investment

• Under revised BOI policy (effective August 1, 2000), 26 agricultural activities have been classified as priority activities, including 8 newly-promoted categories: 1. 2. 3. 4. 5. 6. 7. 8.

Manufacturing of alcohol or fuel through plants Fertilizers produced through biotechnology Manufacturing of products through herbs Analysis of plant disease Analysis and certification of agricultural products Soil and water analysis for agriculture Agricultural Trading Centers Agricultural Processing Zones

Automotive Industry in 2001 Thailand Board of Investment

• Assembly

Market 297,052 units Export 175,299 units Production 459,418 units

+13.3% +14.7% +11.6%

• Total Component Industry – US$3.8 billion OEM OESpare REM

US$2.3 billion US$0.5 billion US$1.0 billion

• 500 Component Manufacturers Employing 100,000 Workers

Thai Automotive Markets Thailand Board of Investment

700,000 600,000

Sales Exports

175,000 150,000 125,000

400,000 100,000 300,000 75,000 200,000 100,000

19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02

0

50,000 25,000 0

Exports

Total Sales

500,000

200,000

Thailand Board of Investment

Auto Parts & Components Manufactured in Thailand

• Engines  Diesels, Motorcycles • Engine Components  Starters, Alternators, Pumps, Filters, Hoses, Gears, Flywheels • Body Parts  Chassis, Bumpers, Fenders, Hoods, Door Panels • Brake Systems  Master Cylinders, Drums, Discs, Pads, Linings, • Steering Systems  Steering Wheels, Gears, Columns, Pumps, Linkages

• •

•

• •

Suspensions  Shocks, Coils, Ball Joints Transmissions  Gears, Casings, Rear Axles, Drive Shafts, Propellor Shafts Electrical/Electronics  Alternators, Starters, Speedometers, Lamps, Motors, Flasher Relays Interiors/Exteriors  Seats, Mats, Weather Strips, Console Boxes Others  Windshields, Seat Belts, Radiators, Wheels, Compressors

Components Not Produced in Thailand

Thailand Board of Investment

• • • • • • • •

Passenger Car Engines Fuel Injection Pumps Transmissions Differential Gears Final Gears Injection Nozzles Electronic Systems Electronic Control Units

Thai Automotive Trends Thailand Board of Investment

• Gradual Recovery of Automotive Market • Expanding Exports • Continued Investment in Parts & Components • Continued Investment in Assembly • Thailand is Hub of Auto Industry in Region

Fashion Thailand Board of Investment

• Develop Thailand as Fashion Center for Southeast Asia Leather

➘Opportunities lie in technical cooperation and quality improvement, particularly in design and branding

Jewelry

➘Thai gold, silver, and costume jewelry in high demand , due to Thai artisanship ➘Opportunities to bring in high-tech equipment and to help with design

✔Garments

➘Provide training institute to produce international-standard fashion graduates ➘Provide consistent supply of high-quality raw materials

High Value Added Services Thailand Board of Investment

• High-Value Services ✔Regional Operating Headquarters ➘Attractive package of tax incentives (comparable to any in the region) ➘Non-tax incentives from the BOI

✔Long-Stay Tourism ➘Retirement homes ➘“Snowbirds”

✔ICT-Related Services ➘E-Commerce Application Service Providers ➘E-Commerce Users

Thailand Board of Investment

Electronics & Electrical Appliances in Thailand • • • • • •

Consumer Electronics Computers & Peripherals Telecom & Office Equipment Electronic Components & Parts Electrical Products & Parts The Industry 750 Companies 300,000 –350,000 Employees US$17.2 Billion Investment Export US$21 billion annually

Thailand Board of Investment

Electronics Exports

• Consumer Electronics

 2000 Exports – US$3.3 Billion (+17%)  2001 Exports – US$2.9 Billion (-12%)

• Computers and Peripherals

 2000 Exports – US$7.8 Billion (+3%)  2001 Exports – US$6.8 Billion (-12%)

• Telecoms and Office Equipment

 2000 Exports – US$1.2 Billion (+10%)  2001 Exports – US$1.0 Billion (-17%)

• Electronic Components and Parts

 2000 Exports – US$9.3 Billion (+23%)  2001 Exports – US$7.8 Billion (-15%)

• Electrical Products and Parts

 2000 Exports – US$1.9 Billion (+17%)  2001 Exports – US$2.1 Billion (+11%)

Thailand Thailand Board BoardofofInvestment Investment

BOI on the Internet http://www.boi.go.th

For the past two years, the BOI web site was ranked #5 Investment Promotion Agency website in the world by Corporate Location Email: [email protected]

• Up-to-date Info on BOI Policies, Procedures, Incentives and Services • Links to Business News About Thailand • What’s New at the BOI • Links to Important Business Sites • Cost of Doing Business in Thailand

• Database of Promoted Companies • Comprehensive Information From Other Government Agencies • BOI Statistics • Trade Statistics • Demographic Data • Industrial Estates

Thailand Board of Investment

EXTRA SLIDES

The Road Ahead Thailand Board of Investment

• Seven Key Strategies to Keep Thailand Competitive Remove obstacles to investment Proactive marketing of Thailand Improve overseas networking Improve competitiveness Market community enterprises Monitor global trends Cut through “red tape”

Removing Obstacles Thailand Board of Investment

• The BOI Wants to be Your Business Partner ✔We constantly meet with investors to find out what we can do to improve investment climate ✔We are committed to playing a coordinating role with other government agencies ✔We have set up an investment facilitation unit to work with investors to help solve problems

Proactive Marketing Thailand Board of Investment

• Target Three Key Regions ✔Europe (EU) ✔Asia (Japan, China, Singapore, Hong Kong, Korea) ✔North America (U.S. and Canada)

• Plans to Open New Offices in: ✔Shanghai ✔San Francisco ✔Osaka

• Promote Target Industries

Improve Networking Thailand Board of Investment

• Develop Linkages, Networks, Partnerships With: ✔Banks ✔Investment Promotion Agencies ✔Provincial Governments

• Develop Sister City/Sister Province Relationships • Work With Chambers of Commerce

✔Both in Thailand and overseas

Thailand Board of Investment

Improving Thai Competitiveness • Send a “Wake-Up Call” to Thai Industry, Particularly SMEs ✔Inform them of changes in global marketplace ✔Make them aware of need to adopt “industry best” practices and technology ✔Help them coordinate skills transfer through training

Thailand Board of Investment

Marketing Community Enterprises

• BOI Will Play a Coordinating Role With Thai SMEs

✔Working with other Ministries to ensure SMEs receive maximum government support ✔Encourage foreign SMEs to partner with Thai SMEs to provide ➘Technical assistance ➘Foreign market access ➘Assistance in adapting Thai products for foreign markets

Thailand Board of Investment

Monitoring International Investment Trends

• Separate Unit at BOI to Monitor Global Investment Environment

✔Provide both the Thai government and the Thai investment community early warnings about legislative and procedural changes in the international investment arena

Improve the BOI Thailand Board of Investment

• The BOI is Always Looking to Improve the Way We Do Business ✔Already ISO 9002 certified, ensuring all investors receive fair and transparent treatment ✔We will continue to improve range of services ✔We will look to streamline procedure to cut through “red tape”

Thailand Thailand Board BoardofofInvestment Investment

The Board of Investment Organization Chart

Board of Investment

Office of the Prime Minister

Policy

Administrative

Office of the Board of Investment

Thailand Board of Investment

Office of the Board of Investment Sectoral Divisions B O I S e c to r a l D iv is io n s D iv is io n 1 A g r ic u ltu r e a n d A g r ic u ltu r a l P r o d u c ts D iv is io n 2 M in in g , C e r a m ic s , a n d B a s ic M e ta l I n d u s tr ie s D iv is io n 3 L ig h t I n d u s tr ie s D iv is io n 4 M e ta l-w o r k in g , M a c h in e r y , a n d T r a n s p o r t E q u ip m e n t D iv is io n 5 E le c tr o n ic s a n d E le c tr ic a l I n d u s tr ie s D iv is io n 6 C h e m ic a l I n d u s tr ie s , P a p e r , P la tic P r o d u c ts D iv is io n 7 S e r v ic e s a n d I n f r a s tr u c tu r e S e r v ic e s

Thailand Board of Investment

MIDA EDB EDB MIDA

EDB MIDA

MIDA EDB EDB

EDB MIDA

BOI

EDB MIDA

Thailand Board of Investment

MIDA EDB MIDA EDB EDB MIDA EDB MIDA

BOI

BOI

EDB BOI MIDA MIDA

สำำนักงำนส่งเสริมกำรลงทุนในญี่ปุ่น

Thailand Board of Investment

MIDA EDB

EDB MIDA

EDB

MIDA

Thailand Board of Investment

BOI Policy Priority Activities (1 of 2)

• Agriculture – Backbone of the Country • Technological and human resource development • Infrastructure, public utilities and basic services • Environmental protection/conservation • Targeted Industries - such as: Steel casting using induction furnace Forged steel parts Electronic design Software and software park

Thailand Board of Investment

BOI Policy Priority Activities

(2 of 2) • These five categories of priority activities are eligible for special incentives: Import duty exemption on machinery Eight-year corporate income tax holiday, regardless of zone

Services of the BOI Thailand Board of Investment

• The BOI offers :

 Investment Matchmaker Program  Support around the world – 4 overseas offices (New York, Paris, Frankfurt, Tokyo)  One-Stop Shop for Visas and Work Permits – Work Permits within 3 hours  Services of BUILD Unit to promote industrial subcontracting – Vendors Meet Customers Program  ASEAN Supporting Industry Database (ASID)  Comprehensive, world-class website  Help with work and residency permits  Interaction with other government agencies on behalf of investors

Asia’s Most Affordable Office Space

Thailand Board of Investment

140

Tokyo (Inner Central) Hong Kong

136

Mumbai

120

Seoul Taipei

100

Beijing Singapore

80

Shanghai (Puxi)

61

60 40 20

Guangzhou

58

Manila

44

42

Jakarta

37

Kuala Lumpur

51

Bangkok

26

16

11 14

0

14

13

Cost Per Square Foot - US$/year Source: CB Richard Ellis -- July 2002

Big Mac Index Thailand Board of Investment

3.00

1.89

2.00

2.25

1.50

1.27

1.28

1.27

China

1.67 1.40 1.19

1.00

Bahrein

J apan

Hong Kong

Malaysia

Indonesia

Singapore

0.00

Thailand

0.50 US

(US$)

2.01

Philippines

2.50

2.54

Source: The Economist, April 2002

Thailand Board of Investment

New Activities Eligible for Promotion • E-Commerce Application Service Provider • E-Commerce User • Regional Headquarters • International Distribution Centers • International Procurement Offices • Retirement Homes • Dedicated Health Centers • Waste Recycling

Thailand Board of Investment

Supporting Industries in ASEAN • ASEAN Supporting Industry Database

Expands the scope of ASEAN’s supporting industries by serving as the region’s industrial yellow pages The ASID home page (www.asidnet.org) contains information about more than 11,000 supporting industry companies throughout ASEAN Provides communication links to facilitate electronic commerce between ASEAN suppliers and foreign purchasers.

Liberal Investment Regime Thailand Board of Investment

• No Export Requirements • No Foreign Equity Restrictions in Manufacturing Sectors • No Local-Content Requirements • No Location Requirement in All But 6 Activities

BOI Policy Objectives Thailand Board of Investment

• Attract Investment to Speed Recovery Quality more important than quantity

• Continue Decentralization

Maximum incentives for least developed provinces

• Strengthen Competitiveness

Require international-standard certification (e.g. ISO 9002)

• Develop New Activities and Industries • Good Governance Transparent policies Performance-based incentives

Thailand Thailand Board BoardofofInvestment Investment

The Board of Investment Basic Incentives and Measures • Guarantees and Permissions

Guarantees against nationalization and price controls Permission to own land and bring in foreign experts

• Tax Incentives

Tax exemption /reduction on imported machinery and input Income tax exemption

• Support services

Advisory and information provision Publications

Thailand Board of Investment

The Board of Investment Basic Incentives and Measures • To reduce initial investment costs:

Tax exemption or reduction on imported machinery Tax exemption or reduction on imported inputs Exemptions from corporate income tax for 3-8 years

Zones of Opportunity Thailand Board of Investment

Import Duty on Machinery Thailand Board of Investment

Zone 1

Reduce 50%

2

Reduce 50%

3

Exempt

Thailand Board of Investment

Import Duty on Raw Materials Zone 1

1 Year Exemption

2

1 Year Exemption

3

5 Year Exemption

Thailand Board of Investment

Corporate Income Tax Exemption The Amount of a Project’s Corporate Income Tax Holiday is Capped at 100% of Investment Capital

Zone Zone 1 Zone 2 Zone 3

Inside Industrial Estate 3 Years 5 Years 8 Years

Outside Industrial Estate Not Exempt 3 Years 8 Years

Additional Zone 3 Incentives Thailand Board of Investment

40 provinces 50% reduction of income tax for 5 years Double deduction of water, electricity, transport costs for 10 years 25% deduction of infrastructure installation or construction costs

Inside Industrial Estate

Outside Industrial Estate

  

Additional Zone 3 Incentives Thailand Board of Investment

18 leastdeveloped provinces 50% reduction of income tax for 5 years Double deduction of water, electricity, transport costs for 10 years 25% deduction of infrastructure installation or construction costs

Inside Industrial Estate

Outside Industrial Estate













Criteria and Conditions Thailand Board of Investment

Criteria • • • •

Value added D/E ratio Modern technology Environmental protection

Conditions

• ISO 9000 • Performance based • Cap on corporate income tax exemption (equal to investment capital)

Why Thailand? Thailand Board of Investment

• Reform-oriented Economic Policy • Favorable Approach to the Private Sector: Government As Supporter N ot Regulator • Consistently Positive Attitude Toward Foreign Investment • Steady Moves to Liberalize Business Environment and Privatize Stateowned Enterprises

Why Thailand? Thailand Board of Investment

• Resilient, Diversified Economy, Supporting Industries Growing • Abundant Natural Resources • Large and Highly-productive Labor Force • Domestic Market of 63 Million • Strategic Location at the Heart of Southeast Asia

Thailand Board of Investment

Board of Investment Approved Foreign Investment by Country 2000

Number of Projects

Total

1,116

Foreign

Value of Investment (mil. baht)

2001

Number Value of of Investment Projects (mil. baht)

2002 (Jan.-Oct.)

Number Value of of Investment Projects (mil. baht)

279,800 820 266,300 604 144,000 761 212,649 575 209,622 408 89,366

By Country Note: Investment projects with foreign equity participation from more than one country are reported in the figures for each country Japan 282 107,382

257