8 June 2018
Thailand: Market Profile
- Picture: Thailand factsheet
- Graph: Thailand real GDP and inflation
- Graph: Thailand GDP by sector (2016)
- Graph: Thailand unemployment rate
- Graph: Thailand current account balance
- Graph: Thailand merchandise trade
- Graph: Thailand major export commodities (2016)
- Graph: Thailand major export markets (2016)
- Graph: Thailand major import commodities (2016)
- Graph: Thailand major import markets (2016)
- Graph: Thailand trade in services
- Graph: Thailand FDI stock
- Graph: Thailand FDI flow
- Graph: Thailand short term political risk index
- Graph: Thailand long term political risk index
- Graph: Thailand short term economic risk index
- Graph: Thailand long term economic risk index
- Graph: Thailand vs global and regional averages
- Graph: Thailand major export commodities to Hong Kong (2017)
- Graph: Thailand major import commodities from Hong Kong (2017)
- Graph: Thailand merchandise exports to Hong Kong
- Graph: Thailand merchandise imports from Hong Kong
Thailand has made remarkable progress in social and economic development, moving from a low-income country to an upper-income country in less than a generation. Thailand has been one of the widely cited development success stories of the region, with annual economic growth averaging 7.5% in the boom years of 1960 to 1996 and 5% following the Asian financial crisis during 1999-2005. Thailand's long-term economic goals are laid out in the country's 20-Year National Strategy (2017 – 2036) for attaining developed country status. According to the plan, the country will seek to achieve this through broad reforms including addressing economic stability, human capital constraints, equal access to economic opportunities, environmental sustainability, competitiveness, and effective governance. The sustained pace and quality of reforms, as well as sound implementation, will be crucial for translating the reform effort into the desired economic outcomes.
Source: World Bank
2. Major Economic/Political Events and Upcoming Elections
The Constitutional Court delivers a guilty verdict, dismissing prime minister Yingluck Shinawatra and nine of her ministers for abuse of power. Commerce minister Niwatthamrong Boonsongphaisan steps into the prime minister's role and says the caretaker government will press ahead with plans for a July 20 election.
The army led by General Prayuth Chan-ocha takes power in a coup d'état and announces the supsension of "the constitution of 2007 except for the chapter on the monarch".
King Bhumibol Adulyadej dies after 70 years on the throne and is replaced by his son, Maha Vajiralongkorn. In December, Crown Prince Vajiralongkorn is proclaimed king, replacing his late father.
King Vajiralongkorn signs the new, military-drafted constitution that paves the way for a return to democracy.
Sources: BBC country profile – Timeline, BMI Political Risk Analysis
3. Major Economic Indicators
Sources: IMF, World Bank
4. External Trade
4.1 Merchandise Trade
Sources: WTO, World Bank WITS database
4.2 Trade in Services
5. Trade Policies
- Thailand has been a WTO member since 1 January 1995.
- Thailand is a founding member of Association of South East Asian Nations (ASEAN), which comprises 10 economies in the region: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam. Largely from 2015 all tariffs between ASEAN member states have been removed. The rewards of lower tariffs within the area have been seen, with regional trade booming in recent years, especially as Malaysia, Singapore, Vietnam, Cambodia, and Myanmar are all Thailand's major exporting partners.
- Though Thailand has abolished most tariffs, these mainly benefit regional (members of ASEAN) investors and a few other countries with which it has FTAs. Consequently, high tariffs in many sectors and non-tariff barriers such as licensing requirements and excessively burdensome import requirements remain an impediment to market access. Price controls and excise taxes, often based on an exceedingly complex tax structure, also negatively impact trade in some sectors. Thailand is not a signatory to the WTO Agreement on Government Procurement.
- Under Article 27 of the Customs Act of 1926 and subsequent amendments, certain items are prohibited by law from passing into or out of Thailand. Habit forming narcotics and other illicit drugs are banned. The same article of the Customs Act of 1926, allow the Ministry of Commerce to designate certain classes of goods as subject to import controls, generally, in the form of licensing or government permissions.
Source: WTO – Trade Policy Review
6. Trade Agreements
6.1 Trade Updates
Negotiations for an EU-Thailand Free Trade Agreement (FTA) were launched in March 2013. The negotiations aimed to conclude a comprehensive Free Trade Agreement in the short-medium term.
Thailand has signed 12 agreements (6 bilateral and 6 multilateral) and 9 FTAs are currently under negotiation.
6.2 Multinational Trade Agreements
- Thailand signed the Framework Agreement on Enhancing ASEAN Economic Cooperation in 1992. The agreement was to establish an ASEAN Free Trade Agreement (AFTA) which in total now affects ten countries. In 2015, the ASEAN Economic Community (AEC) was officially launched, with nearly all tariffs eliminated, though further liberalisation of services, capital, and labour will take more time to implement. Along with the other ASEAN members, Thailand is currently negotiating with China, Korea, Japan, Australia, New Zealand, and India to form a Regional Comprehensive Economic Partnership (RCEP) agreement; has implemented an FTA with Australia in 2005, signed an FTA with New Zealand in 2005 and with Japan in April 2007.
- ASEAN-New Zealand-Australia. Australia is Thailand's eighth largest exporting partner.
- ASEAN-Japan. Japan is Thailand's third largest trading partner.
- ASEAN-South Korea. South Korea is Thailand's fifteenth largest exporting partner, and due to regional proximity and already strong trade ties this agreement has stimulated the flow of trade between the countries.
Negotiations for an EU-Thailand Free Trade Agreement (FTA) were launched in March 2013. The negotiations aim to conclude a comprehensive Free Trade Agreement.
Sources: WTO Regional Trade Agreements database, European Commission
7. Investment Policy
7.1 Foreign Direct Investment
7.2 Foreign Direct Investment Policy
- The Thai business climate continues to be positive and welcoming to foreign investment though local laws favour domestic companies in many aspects. All businesses operating in Thailand must register and obtain a Foreign Business License from the Ministry of Commerce. Manufacturing firms must also register with the Ministry of Industry, and the Ministry of Labour and Social Welfare.
- The Foreign Business Act (FBA) of 1999 is the primary piece of legislation with respect to foreign business activities. In spite of some reforms, company ownership restrictions remain in place and foreign nationals may own 49% of a company while it remains majority-Thai owned.
- Certain types of business activities are reserved for Thai nationals only according to the Foreign Business Act. Generally, foreign investment in these areas cannot comprise more than 50% of share capital unless specifically permitted and/or otherwise permitted. Some exemptions can be obtained such as permission by the Director General of the Department of Business Development, with approval of the Foreign Business Committee together with obtaining a foreign business license.
- Foreign ownership of wireless/mobile telecommunications services; banking, accounting, bookkeeping and auditing services; tax consultancy; agriculture and forestry; transportation; tourism capped at 49%; mining and oil & gas and waste management and water supply is capped at 75%.
- Under the Land Code, the Condominium Act and the Property Leasing Act, foreigners are not allowed to own land in Thailand - save for government industrial estates or Special Economic Zones (SEZ). In addition, foreign investments in excess of THB40mn are entitled to own 1,600sq m of land for residential use with the permission of the Ministry of Interior. Rather than purchasing, many foreign businesses instead sign long-term leases and then construct buildings on the leased land.
- Under the Condominium Act of 2007, foreign ownership in a condominium building cannot exceed 49%. Meanwhile, property can be expropriated under Thai law, but the risk of asset seizure is low.
- The Alien Employment Act prohibits foreign nationals from working in 39 occupations and professions including but not limited to labourer, goldsmith, farmer, accountant, auditor, engineer, architect, among others. Additionally, companies need to have certain minimum amount of fully paid up capital in order to qualify to employ specific numbers of foreign nationals in Thailand. Other conditions include having at least fifty local employees per expatriate. Businesses that are wholly foreign owned and incorporated in Thailand in terms of Thailand's Board of Investment (BOI) are allowed to employ foreign nationals on a ratio of local to foreign national of 4:1.
Sources: Government websites, BMI, The International Trade Administration (ITA), U.S. Department of Commerce
7.3 Free Trade Zones and Investment Incentives
|Free Trade Zone/Incentive Programme||Main Incentives Available|
|There are 12 Special Free Zones reserved for the location of industries to manufacture only in Thailand. These zones are located in Chonburi, Lampun, Pichit, Songkhla, Samut Prakarn, Bangkok (at Lad Kragbang), Ayuddhya, and Chachoengsao.||These zones are reserved for the location of industries manufacturing for export only, to which businesses may import raw materials and export finished products free of duty (including value added tax).|
Enterprises located in Thailand's special investment promotion zones are eligible for additional incentives.
A reduction of 50% of corporate income tax for five years after the termination of a 'normal' income tax holiday period or from the date on which income is earned.
Entitlement to claim double tax deductions for the cost of transportation, electricity and water supply expenses, and entitlement to deduct from the taxable corporate income up to 25% of the investment costs of installing infrastructure facilities for ten years from the date of income derivation.
Double deduction for transportation, electricity, and water utility cost, up to 25% deduction for utility construction costs.
Foreign ownership of land and foreign expert employment.
8. Taxation – 2017
- Value added tax: 7%
- Corporate income tax: 20%
Source: PwC Taxes at a Glance 2017
8.1 Important Updates to Taxation Information
On March 14, 2018, Thailand's cabinet passed two provisional royal decrees aimed at regulating the cryptocurrency market. The Finance Ministry recived a royal decree outlining new tax guidelines for the cryptocurrency market. According to Thai regulatory authorities, the measures taken are to protect traders from losing their money.
The Value Added Tax (VAT) on cryptocurrency came in at 7% on all traders while the capital gains tax (CGT) 15%.
In January 2018, it was announced that Thailand's cabinet had approved the proposal by the Finance Ministry to allow households to deduct THB60,000 (THB30, 000 each) from their taxable income in 2018 for their second legitimate child. The incentive is meant to counter the country's ageing population problem.
8.2 Business Taxes
|Type of Tax||Tax Rate and Base|
|Corporate Income Tax||The standard Corporate Income Tax is 20%. For accounting periods beginning on or from 2017, the Corporate Income Tax rate ranges between 0% and 20% for small and medium enterprises.|
|Dividends||5% on net earnings (except distribution by companies in oil and gas sector).|
|Capital Gains Tax||Treated as business income. A 2018 decree will introduce a 15% tax on all capital gains on cryptocurrencies. For personal income, most capital gains are treated as personal income except for a few exceptions.|
|Value Added Tax||Standard 7% on goods and services. A decree passed in 2018 introduces a 7% VAT on all cryptocurrency trades.|
|Personal Income Tax||Personal income below THB150,000 is exempt from Personal Income Taxation. Otherwise, the personal income rate is progressive ranging between 5%-35%.|
|Social security contributions – payable by employer||An employer in Thailand with one or more employees is required to register for social security fund and each is required to contribute at a rate of 5% per month.|
9. Foreign Worker Requirements
9.1 Localisation Requirements
The Alien Employment Act prohibits foreign nationals from working in 39 occupations and professions including but not limited to labourer, goldsmith, farmer, accountant, auditor, engineer, architect, among others.
Additionally, companies need to have a certain minimum amount of fully paid up capital in order to qualify to employ specific numbers of foreign nationals in Thailand. Other conditions include having at least fifty local employees per every expatriate.
Businesses that are wholly foreign owned and incorporated in Thailand in terms of Thailand's Board of Investment (BOI) are allowed to employ foreign nationals on a ratio of local to foreign national of 4:1.
9.2 Obtaining Foreign Worker Permits for Skilled Workers
Prior to commencing employment, all non-Thai nationals are required to obtain a work permit under the Alien Employment Act, 2008.
Foreign nationals first need to secure an initial non-immigrant visa, which must be obtained before entering Thailand.
The duration of the work permit is generally the same as the applicant's visa. Generally, work permits are issued for one year but are also renewable.
Foreign nationals are not allowed to perform work that is not in condition with their visa. To change occupations, they need to obtain authorization from the Ministry of Labour.
9.3 Visa/Travel Restrictions
In general, Thailand has an open visa policy. The country has bilateral agreements with a number of other countries which award preferential treatment to nationals of these countries in terms of number of days granted to stay in Thailand visa free.
Nationals from five countries have visa free access into Thailand for 90 days; five others have access for 30 days; 45 nations are granted 30 days visa free as well entering Thailand other than through the country's airports. Many other countries get a visa on arrival whereas only a few need to apply for a visa before departing for Thailand.
9.4 Religious/Cultural Barriers
The freedom to practise religion is protected by the Constitution together with other laws and policies. This is generally enforced in practice by the government.
Reports by Non-governmental organizations (NGOs), academics, and religious groups estimate that 85 to 95% of the Thai population is Theravada Buddhist; 5-10% is Muslim and other groups including animist, Christian, Confucian, Hindu, Jewish, Sikh, and Taoist populations constitute less than 5%.
While Thailand has no state religion, there are allegations that Theravada Buddhism receives significant government support. In particular, the 2007 constitution retains the requirement from the previous charter that the monarch be Buddhist, requiring that the state should protect it as the religion observed by most Thais.
Source: Ministry of Foreign Affairs, Kingdom of Thailand
10.1 Sovereign Credit Ratings
|Rating (Outlook)||Rating Date|
|Standard & Poor's||BBB+ (Stable)||21/12/2015|
Sources: Moody's, Standard & Poor's, Fitch Ratings
10.2 Competitiveness and Efficiency Indicators
|Ease of Doing Business Index ||49/189||46/190||26/190|
|Ease of Paying Taxes Index||70/189||69/190||67/190|
|Logistics Performance Index ||45/160||N/A||N/A|
|Corruption Perception Index||101/176||96/180||N/A|
|IMD World Competitiveness||28/63||27/63||N/A|
Sources: World Bank, IMD, Transparency International
10.3 BMI Risk Indices
|Economic Risk Index Rank||33/202|
|Short-Term Economic Risk Score||71.0||73.1||71.5|
|Long-Term Economic Risk Score||69.3||70.4||70.3|
|Political Risk Index Rank||116/201|
|Short-Term Political Risk Score||66.7||70.8||70.2|
|Long-Term Political Risk Score||57.9||58.9||58.9|
|Operational Risk Index Rank||58/201|
|Operational Risk Score||61||59.4||59.1|
Source: BMI Research
10.4 BMI Political and Economic Risk Indices
BMI Risk Summary - Q2 2018
Thailand will continue to experience political uncertainty over the coming decade, with the death of King Bhumibol in October 2016 posing a risk to the existing political order despite the increasingly tight grip of the military government.
Over the next five years, we forecast the Thai economy will grow by an average of 3.5% as the country's new constitution should provide policy continuity regardless of the election outcome, with continued business environment improvements, potentially including big-bang SOE reforms, boosting productivity.
Thailand offers investors considerable advantages within its operational environment, which include a large, predominantly youthful workforce with basic literacy and numeracy skills, increasing levels of foreign economic participation and trade, and a developed logistics network. However, significant risks exist, notably the simmering political violence as well as the ongoing separatist violence in the south of the country.
Note: Higher score = Lower risk
Sources: BMI Economic, Political Risk Indices, BMI Country Risk summaries
10.5 BMI Operational Risk Index
|Operational Risk||Labour Market Risk||Logistics Risk||Trade and Investment Risk||Crime and Security Risk|
|East and Southeast Asia Average||55.3||56.5||54.4||55.7||54.7|
|East and Southeast Asia Position (Out of 18)||8||9||6||7||12|
|Asia Position (Out of 35)||8||11||6||7||20|
|Global Position (Out of 201)||58||50||39||45||106|
Note: 100 = Lowest risk, 0 = Highest risk
Source: BMI Operational Risk Index
|Country||Operational Risk ||Labour Market Risk||Logistics Risk||Trade and Investment Risk||Crime and Security Risk |
|Singapore||82.9||77.8 ||74.7 ||89.9 ||89.3|
|Emerging Markets Averages||46.8||48.0||45.8||47.5||46.1|
|Global Markets Averages||49.8||49.8||49.3||50.0||49.9|
Note: Higher Score = Lower Risk
Source: BMI Operational Risk Index
11. Hong Kong Connection
11.1 Hong Kong’s Trade with Thailand
|2017||Growth rate (%)|
|Number of Thai residents visiting Hong Kong||560,207||-5.8|
|Number of Thai residents in Hong Kong||19,492||N/A|
Sources: Hong Kong Tourism Board, Hong Kong Immigration Department
|2017||Growth rate (%)|
|Number of South and East Asia residents visiting Hong Kong||N/A||N/A|
|Number of South and East Asia residents in Hong Kong||2,784,870||N/A|
11.2 Commercial Presence in Hong Kong
|2016||Growth rate (%)|
|Number of Thai companies in Hong Kong||32||N/A|
|- Regional headquarters||N/A|
|- Regional offices||5|
|- Local offices||27|
Source: Hong Kong Census & Statistics Department
11.3 Treaties and Agreements between Hong Kong and Thailand
- Avoidance of Double Taxation on Income and Prevention of Fiscal Evasion
- Investment Promotion and Protection Agreements/Investment Agreements (IPPAs)
Thailand has double taxation agreements (DTA) and Investment Promotion & Protection Agreement (IPPA) with the China (mainland) and concluded the DTA with Hong Kong in 04/2006.
Source: Hong Kong Department of Justice
11.4 Chamber of Commerce (or Related Organisations) in Hong Kong
Hong Kong-Thailand Business Council
The Hong Kong-Thailand Business Council is an independent, non-government body representing companies of all sizes and individuals with an interest in the development of business and commercial ties between Hong Kong and Thailand.
Source: Hong Kong-Thailand Business Council
Royal Thai Consulate-General, Hong Kong
Address: Fairmont House, 8/F, 8 Cotton Tree Drive, Central, Hong Kong
Hours of Business: Monday to Friday, 9:00 a.m. - 5:00 p.m.
Honorary Consul: Mr. Asi Mamanee
Tel: (852) 2521 6481
Fax: (852) 2521 8629
Source: Hong Kong Protocol Division of Government Secretariat
11.5 Visa Requirements for Hong Kong Residents
Citizens of Hong Kong are permitted to stay up to 30 days under the Bilateral Agreement with Thailand if entering via international airport or through a land border checkpoint from a neighboring country, such as Laos, Myanmar and Cambodia.