Moreover, over the past few years, labour costs in China are also becoming less competitive. Governmental support for foreign direct investment in Southeast Asia is also becoming more sophisticated and attractive. Most importantly, particularly in Thailand, investors are able to capitalise from the numerous regional and bilateral free trade agreements that Thailand has concluded with its partner countries. All these factors are of vital importance at times when investors need to lower the risk of supply-chain disruptions.
The Eastern Economic Corridor (EEC) is also a strong competitive advantage for investors in Thailand, thanks to its well-established and functioning supply chains, developed infrastructure, investment privileges and incentives, and availability of a skilled and affordable workforce. Moreover, the EEC Policy Committee is redefining target industries and strategies to boost opportunities to attract foreign investment.
With an added focus on S-Curve and New S-Curve industries, the committee focuses on industries in which the EEC has a distinct competitive edge.
There is no one-size fits all. Foreign investors need to dive deep into information before embarking on any planned relocation process. Hence, a tailor-made approach is required for each industry as per its requirements. And this is where Thailand can make a difference, because customised service is exactly what the Board of Investment (BOI) can provide for its clients.
Preparing the field for a wider, market outreach
Currently, the government is eyeing measures to upgrade Thailand’s business environment for foreign investors. In order to do this, key laws will be improved or repealed to remove obstacles, such as capping personal income tax for foreigners at no more than 17%, making Thailand more attractive compared to other countries in the region.
The government also aims to put Thailand on the World Bank’s list of top 10 countries in ease-of-doing business over the next few years. Recently, Thailand moved up six places to 21 out of 190 countries in World Bank’s 2020 ranking.
In addition, the Regional Comprehensive Economic Partnership (RCEP) Agreement signed on November 2020 by leaders of ASEAN countries, plus Australia, China, Japan, Republic of Korea and New Zealand, will benefit the region significantly in the post-COVID era.
The RCEP agreement, targeted to enter into force in January 2022, is Asean’s biggest free-trade pact to date. It covers a market of 2.2 billion people worth USD26.2 trillion or 30% of the world’s GDP.
According to Thailand’s Department of Trade Negotiations, the country will benefit from lower trade barriers on industrial and agricultural goods, reduction of tariffs, expansion of market access in RCEP members states, strength of supply chain connectivity as well as RCEP’s favourable rules of origin.
The agreement will enable significant growth in trade among RCEP members. In 2019, Thailand’s total trade flow between RCEP members accounted for 56.9% of its imports-exports.
The pact will also make Thailand a preferred manufacturing base in Asia. RCEP supports strategies where businesses set up production facilities for their supply chain in several countries to diversify risk caused by disruption and to become more competitive.
Favourable Incentives for Investment…no one does it like Thailand
Duangjai Asawachintachit, Secretary-General of the Board of Investment (BOI), explained that Thailand has strong supply chains in several industries, especially food, automotive, electronics/electrical appliances and medical supplies. Moreover, upgraded investment incentives are a major factor that attract investors to the Kingdom.
In December 2020, BOI approved a series of measures to accelerate investment, particularly in target industries, and to encourage businesses to adopt digital technology. The package promoting large-scale projects was designed to boost investment in the post-COVID-19 period.
Under measures to…