mr. somphong wanapha secretary general thailand board of investment january 2003

ThailandBoard of Investment

Mr. Somphong Wanapha

Secretary GeneralThailand Board of Investment

January 2003


Outline of PresentationOutline of PresentationOutline of PresentationOutline of Presentation

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

Advantages• Targeted Opportunities in

Thailand


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

1998 1999 2000 2001e* 2002e**

GDP Growth (%) -9.4 4.4 4.6 1.8 4.9

GDP (US$ Bil) 111.9 122.4 122.1 114.4 125.6

Inflation (%) 8.1 0.3 1.6 1.6 0.6

GDP Per Capita 1,820 1,980 1,957 1,830 1,990(US$)

Fiscal Balance (US$ Bil) -2.6 -3.0 -2.6 -2.5 -2.8

The Macroeconomic The Macroeconomic Picture in StatisticsPicture in Statistics (1 of 2)(1 of 2)



1998 1999 2000 2001e* 2002e**

Foreign Reserves 29.5 34.8 32.7 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 (US$ Bil.)

Current Account 12.6 10.1 7.6 5.3 3.6(% of GDP)

MPI 96.5 108.6 112.1 113.5 130.1***(Manufacturing Production Index)



Sources: * = Bank of Thailand** = ThailandOutlook.com (January 10, 2003) *** = As of January 3, 2003


Government Stimulus Government Stimulus Government Stimulus Government Stimulus

• Restructuring Farm Debts• Providing Million Baht Grants

to all 70,000 villages• Thailand Asset Management

Corporation• Supporting SMEs via State

Banks


Total 1,116 6,9678205,987721 3,775

Foreign 7615,295 575

4,713483

2,316By Country

Japan 282 2,674257 1,874

215 892U.S.A. 73

944 40 902 37 258

Taiwan 120 439 50 153 41 63

Hong Kong 31 155 20 218 5 37

Singapore 84 495 51 202 40 305

E.U. 144 776 79

518 65

378

2000 2001 2002 Number Value of Number Value of Number Value of

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

Note 1: Investment projects with foreign equity participation from more than one country are reported in the figures for each countryNote 2: 2000 US$=40.16 baht; 2001 US$=44.48 baht; 2002 US$=43.00 baht

Board of Investment Approved Board of Investment Approved Foreign Investment by CountryForeign Investment by CountryBoard of Investment Approved Board of Investment Approved Foreign Investment by CountryForeign Investment by Country


Investment from the USInvestment from the USInvestment from the USInvestment from the US

• Approved projects in 2002Honeywell — US$12 million to

produce plated thermal spreadersCargill — US$5 million in

agriculture (chicken)Johnson Controls — US$8.5 million

for automotive seatsAn International Procurement

Office from 3MRegional Operating Headquarters

from ExxonMobil


Regional Operating Regional Operating Headquarters (ROH)Headquarters (ROH)Regional Operating Regional Operating

Headquarters (ROH)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 bahtThey 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


ROHROHROHROH

• BenefitsCorporate income tax at 10% for:

Qualified servicesRoyalties from ROH in ThailandInterest income on loans made to ROH

branches/associated enterprisesTax exemption for dividends from

ROH branches/associated enterprisesExpats working for ROH are taxed

at 15% for 1st 2 years, instead of on sliding scale


FDI in 2003FDI in 2003FDI in 2003FDI in 2003

• Targeting Same Level of Investment as 2002

• Quality is More Important Than Quantity

• We are Looking for Projects to:Enhance the competitiveness of

Thai industryUpgrade human capital (i.e.

human resource development)Help develop and transfer skills

and technologyNurture Thai talent


FDI in 2003FDI in 2003FDI in 2003FDI in 2003

• Objectives Include:Encouraging Cluster Development

Particularly in automotive and petrochemicals (Eastern Seaboard)

Targeting investmentBy region and by industryWe have established 5 target

industries and will develop industry-specific measure to support them

Non-target industriesNo changes in policy, no backtracking


Competitive AdvantagesCompetitive AdvantagesCompetitive AdvantagesCompetitive Advantages

• ASEAN and AFTAProgressively being implemented

• Location and Social StabilityPeaceful Buddhist countryFree from social unrestWell-developed infrastructure

• Political SystemStable democracyReform-oriented government

• WorkforceTrainable and adaptable


Competitive AdvantagesCompetitive AdvantagesCompetitive AdvantagesCompetitive Advantages

• Cost-effective Local InputsLeast expensive office space in AsiaVibrant supporting industries

support subcontractingCanon sources 70% of all parts

locallyToyota is looking to source 100%

locally by 2006More and more manufacturers and

assemblers acknowledge that Thai local inputs are key to global competitiveness


ChinaChinaChinaChina

• Should You Put All Your Eggs in the China Basket?China has huge potential, but

investment landscape is a bit uncertain


ChinaChinaChinaChina

• JETRO Report Found That:In 14 categories, Thailand was

ranked better than China in 11, including:Legal frameworkTransparencyInfrastructureDevelopment of parts industry

• For Global Markets, Even China Invests in Thailand


Target IndustriesTarget IndustriesTarget IndustriesTarget Industries

• We Have Identified 5 Groups of Target IndustriesAgro-IndustryAutomotiveFashionElectronics and ICTHigh-Value Services


Target IndustriesTarget IndustriesTarget IndustriesTarget Industries

• Specific Policies and Measures Will Be Developed for Each Target Industry, Based OnCompetitivenessLevels of technologyMarket potential

• Non-target IndustriesNo change in policyNo backtrackingNo reduction in incentives


Leading Agricultural ExportsLeading Agricultural ExportsLeading Agricultural ExportsLeading Agricultural Exports

Export Value -----------------------------------------------------------------------------------

-• Rice 73,812*• Canned Seafood 65,957• Shrimp 48,696*• Rubber 43,942*• Canned Tuna 21,886*• Chicken 21,796• Canned Fruit 21,767• Sugar 21,687• Canned Pineapple 11,433*

* #1 Exporter in the World Unit = Million Baht


Agricultural Priority ActivitiesAgricultural Priority ActivitiesAgricultural Priority ActivitiesAgricultural Priority Activities

• Under revised BOI policy (effective August 1, 2000), 26 agricultural activities have been classified as priority activities, including 8 newly-promoted categories:1. Manufacturing of alcohol or fuel through plants2. Fertilizers produced through biotechnology3. Manufacturing of products through herbs4. Analysis of plant disease5. Analysis and certification of agricultural products6. Soil and water analysis for agriculture7. Agricultural Trading Centers8. Agricultural Processing Zones


Automotive Industry in 200Automotive Industry in 20011Automotive Industry in 200Automotive Industry in 20011• Assembly

Market 297,052 units +13.3%Export 175,299 units

+14.7%Production 459,418 units +11.6%

• Total Component Industry – US$3.8 billionOEM US$2.3 billionOESpare US$0.5 billionREM US$1.0 billion

• 500 Component ManufacturersEmploying 100,000 Workers


Thai Automotive Markets Thai Automotive Markets Thai Automotive Markets Thai Automotive Markets

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Tot

al S

ales

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

Exports

SalesExports


Auto Parts & Components Auto Parts & Components Manufactured in ThailandManufactured in ThailandAuto Parts & Components Auto Parts & Components Manufactured in ThailandManufactured 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 Components Not Produced in ThailandProduced in Thailand

Components Not Components Not Produced in ThailandProduced in Thailand

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


Thai Automotive TrendsThai Automotive TrendsThai Automotive TrendsThai Automotive Trends

• 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 Fashion Fashion Fashion • Develop Thailand as Fashion Center

for Southeast AsiaLeather

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

JewelryThai gold, silver, and costume jewelry in

high demand , due to Thai artisanshipOpportunities to bring in high-tech

equipment and to help with designGarments

Provide training institute to produce international-standard fashion graduates

Provide consistent supply of high-quality raw materials


High Value Added ServicesHigh Value Added ServicesHigh Value Added ServicesHigh Value Added Services

• High-Value ServicesRegional Operating Headquarters

Attractive package of tax incentives (comparable to any in the region)

Non-tax incentives from the BOILong-Stay Tourism

Retirement homes“Snowbirds”

ICT-Related ServicesE-Commerce Application Service

ProvidersE-Commerce Users


Electronics & Electrical AppElectronics & Electrical Appliances in Thailandliances in Thailand

Electronics & Electrical AppElectronics & Electrical Appliances in Thailandliances in Thailand

• Consumer Electronics• Computers & Peripherals• Telecom & Office Equipment• Electronic Components & Parts• Electrical Products & Parts• The Industry

750 Companies300,000 –350,000 EmployeesUS$17.2 Billion InvestmentExport US$21 billion annually


Electronics ExportsElectronics ExportsElectronics ExportsElectronics Exports• Consumer Electronics

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

• Computers and Peripherals2000 Exports – US$7.8 Billion (+3%)2001 Exports – US$6.8 Billion (-12%)

• Telecoms and Office Equipment2000 Exports – US$1.2 Billion (+10%)2001 Exports – US$1.0 Billion (-17%)

• Electronic Components and Parts2000 Exports – US$9.3 Billion (+23%)2001 Exports – US$7.8 Billion (-15%)

• Electrical Products and Parts2000 Exports – US$1.9 Billion (+17%)2001 Exports – US$2.1 Billion (+11%)


• 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

For the past two years, the BOI web site For the past two years, the BOI web site was ranked was ranked #5 Investment Promotion Agency Investment Promotion Agency

website in the world bywebsite in the world by Corporate LocationEmail: [email protected]: [email protected]


BOI on the InternetBOI on the Internethttp://www.boi.go.thhttp://www.boi.go.thBOI on the InternetBOI on the Internethttp://www.boi.go.thhttp://www.boi.go.th


EXTRA SLIDES


The Road AheadThe Road AheadThe Road AheadThe Road Ahead

• Seven Key Strategies to Keep Thailand CompetitiveRemove obstacles to investmentProactive marketing of ThailandImprove overseas networkingImprove competitivenessMarket community enterprisesMonitor global trendsCut through “red tape”


Removing ObstaclesRemoving ObstaclesRemoving ObstaclesRemoving Obstacles

• The BOI Wants to be Your Business PartnerWe 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 MarketingProactive MarketingProactive MarketingProactive Marketing

• 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:ShanghaiSan FranciscoOsaka

• Promote Target Industries


Improve NetworkingImprove NetworkingImprove NetworkingImprove Networking

• Develop Linkages, Networks, Partnerships With:BanksInvestment Promotion AgenciesProvincial Governments

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

CommerceBoth in Thailand and overseas


Improving Thai Improving Thai CompetitivenessCompetitivenessImproving Thai Improving Thai CompetitivenessCompetitiveness

• Send a “Wake-Up Call” to Thai Industry, Particularly SMEsInform them of changes in global

marketplaceMake them aware of need to

adopt “industry best” practices and technology

Help them coordinate skills transfer through training


Marketing Community Marketing Community EnterprisesEnterprises

Marketing Community Marketing Community EnterprisesEnterprises

• BOI Will Play a Coordinating Role With Thai SMEsWorking with other Ministries to

ensure SMEs receive maximum government support

Encourage foreign SMEs to partner with Thai SMEs to provideTechnical assistanceForeign market accessAssistance in adapting Thai products

for foreign markets


Monitoring International Monitoring International Investment TrendsInvestment Trends

Monitoring International Monitoring International Investment TrendsInvestment Trends

• Separate Unit at BOI to Monitor Global Investment EnvironmentProvide both the Thai

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


Improve the BOIImprove the BOIImprove the BOIImprove the BOI

• The BOI is Always Looking to Improve the Way We Do BusinessAlready 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”


The Board of Investment The Board of Investment Organization ChartOrganization Chart

Board of Investment

Office of the Board of Investment

Office of the Prime Minister

Policy Administrative



Office of the Board of InvestmentOffice of the Board of InvestmentSectoral DivisionsSectoral Divisions

Office of the Board of InvestmentOffice of the Board of InvestmentSectoral DivisionsSectoral Divisions

B O I S ecto ra l D iv is io n s

D iv is ion 7S erv ices and Infrastructure S erv ices

D iv is ion 6C hem ica l Ind ustr ie s , P ap er , P la tic P rod ucts

D iv is ion 5E lec tronics and E lec tr ica l Ind ustr ie s

D iv is ion 4M eta l-w ork ing , M achinery, and T ransp ort E q uip m ent

D iv is ion 3L ight Ind ustr ie s

D iv is ion 2M ining , C eram ics , and B as ic M eta l Ind ustr ie s

D iv is ion 1A gr iculture and A gr icultura l P rod ucts


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BOI Policy BOI Policy Priority ActivitiesPriority Activities


• 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 furnaceForged steel partsElectronic designSoftware and software park

1( 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

2( of 2)


Services of the BOIServices of the BOIServices of the BOIServices of the BOI

• The BOI offers :Investment Matchmaker ProgramSupport around the world – 4 overseas offices

(New York, Paris, Frankfurt, Tokyo)One-Stop Shop for Visas and Work Permits –

Work Permits within 3 hoursServices of BUILD Unit to promote industrial

subcontracting – Vendors Meet Customers Program

ASEAN Supporting Industry Database (ASID) Comprehensive, world-class websiteHelp with work and residency permitsInteraction with other government agencies on

behalf of investors


Asia’s Most Asia’s Most Affordable Office SpaceAffordable Office Space

Asia’s Most Asia’s Most Affordable Office SpaceAffordable Office Space

136

6158

51

44 42 37

2616

14 14 13

11

0

20

40

60

80

100

120

140 Tokyo (InnerCentral)Hong Kong

Mumbai

Seoul

Taipei

Beijing

Singapore

Shanghai (Puxi)

Guangzhou

Manila

Jakarta

Kuala Lumpur

Bangkok

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


Big Mac IndexBig Mac IndexBig Mac IndexBig Mac Index

2.54

1.27

1.89

1.67

1.28 1.271.19

1.40

2.012.25

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Source: The Economist, April 2002


New Activities Eligible New Activities Eligible for Promotionfor Promotion

New Activities Eligible New Activities Eligible for Promotionfor Promotion

• E-Commerce Application Service Provider

• E-Commerce User• Regional Headquarters• International Distribution Centers• International Procurement Offices• Retirement Homes• Dedicated Health Centers• Waste Recycling


Supporting IndustriesSupporting Industriesin ASEANin ASEAN

Supporting IndustriesSupporting Industriesin ASEANin 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 RegimeLiberal Investment RegimeLiberal Investment RegimeLiberal Investment Regime

• No Export Requirements• No Foreign Equity Restrictions

in Manufacturing Sectors• No Local-Content

Requirements• No Location Requirement in

All But 6 Activities


BOI Policy ObjectivesBOI Policy ObjectivesBOI Policy ObjectivesBOI Policy Objectives

• Attract Investment to Speed RecoveryQuality more important than quantity

• Continue DecentralizationMaximum incentives for least developed

provinces• Strengthen Competitiveness

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

• Develop New Activities and Industries • Good Governance

Transparent policiesPerformance-based incentives


The Board of Investment The Board of Investment Basic Incentives and MeasuresBasic Incentives and Measures

The Board of Investment The Board of Investment Basic Incentives and MeasuresBasic Incentives and Measures

• Guarantees and PermissionsGuarantees against nationalization and

price controlsPermission 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



The Board of Investment The Board of Investment Basic Incentives and Measures Basic Incentives and Measures

The Board of Investment The Board of Investment Basic Incentives and Measures Basic Incentives and Measures

• To reduce initial investment costs:Tax exemption or reduction on

imported machineryTax exemption or reduction on

imported inputsExemptions from corporate

income tax for 3-8 years


Zones of OpportunityZones of OpportunityZones of OpportunityZones of Opportunity


Import Duty on MachineryImport Duty on MachineryImport Duty on MachineryImport Duty on Machinery

Zone

1 Reduce 50%

2 Reduce 50%

3 Exempt


Import Duty on Import Duty on Raw MaterialsRaw Materials

Import Duty on Import Duty on Raw MaterialsRaw Materials

Zone

1 1 Year Exemption

2 1 Year Exemption

3 5 Year Exemption


Corporate Income Corporate Income Tax ExemptionTax Exemption

Corporate Income Corporate Income Tax ExemptionTax Exemption

ZoneInside

Industrial Estate

Outside Industrial

EstateZone 1 3 Years Not ExemptZone 2 5 Years 3 YearsZone 3 8 Years 8 Years

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


Additional Zone 3 Incentives Additional Zone 3 Incentives Additional Zone 3 Incentives Additional Zone 3 Incentives

40 provincesInside Industrial Estate

Outside Industrial Estate

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


Additional Zone 3 Incentives Additional Zone 3 Incentives Additional Zone 3 Incentives Additional Zone 3 Incentives

18 least-developed provinces

Inside Industrial Estate

Outside Industrial Estate

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


Criteria and ConditionCriteria and ConditionssCriteria and ConditionCriteria and Conditionss

Criteria• Value added• D/E ratio• Modern technology• Environmental prot

ection

Conditions• ISO 9000• Performance bas

ed• Cap on corporate

income tax exemption (equal to investment capital)


Why Thailand?Why Thailand?Why Thailand?Why Thailand?

• Reform-oriented Economic Policy• Favorable Approach to the Private S

ector: Government As Supporter Not Regulator

• Consistently Positive Attitude Toward Foreign Investment

• Steady Moves to Liberalize Business Environment and Privatize State-owned Enterprises


Why Thailand?Why Thailand?Why Thailand?Why Thailand?

• 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 So

utheast Asia


Total 1,116 279,800820266,300604 144,000

Foreign 761212,649575

209,622408

89,366By Country

Japan 282107,382 257

83,369177

32,574U.S.A. 73

37,916 40 40,131

33 10,388

Taiwan 120 17,632 50

6,824 38

2,554Hong Kong 31 6,241

20 9,710 4 1,518

Singapore 84 19,910 51

8,985 35

12,471E.U. 144

31,175 79

23,019 5715,389

2000 2001 2002 (Jan.-Oct.) Number Value of Number Value of Number Value of

of Investment of Investment of Investment Projects (mil. baht) Projects (mil. baht) Projects (mil. baht)

Note: Investment projects with foreign equity participation from more than one country are reported in the figures for each country

Board of Investment Approved Board of Investment Approved Foreign Investment by CountryForeign Investment by CountryBoard of Investment Approved Board of Investment Approved Foreign Investment by CountryForeign Investment by Country

mr. somphong wanapha secretary general thailand board of investment january 2003

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