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Foreign Investment in Thailand

Nov 15, 2017 | Emerging Trends Advisors, Thailand

Thailand is a country that is going from strength to strength and much of this can be attributed to Foreign Direct Investment (FDI) with Thailand being one of the major FDI destinations in Southeast Asia.

There are lots of reasons why the Kingdom is so appealing, it has a modern legal framework and the domestic economy benefits from regional dynamism.

As the country continues to develop the need for FDI decreases although there are still many overseas companies looking to invest in Thailand making the most of the Board of Investment (BOI) incentives that are available. The country is now economically and politically stable and this adds to the attraction. The fact that Thailand is the number one tourist destination along with being a leading logistical hub in the region opens up the potential for generating some serious financial returns.

Why do so many businesses and individuals want to invest in Thailand?

There are many reasons why Thailand is one of the main FDI destinations in Southeast Asia. The country is blessed with a skilled workforce that is capable of operating in a variety of different sectors. The cost of labour is relatively cheap compared to other countries in the region so this naturally opens up the opportunity to increase profitability.

The geographic location of Thailand is a huge bonus

The country is right at the heart of Asia meaning that logistically, it is the perfect gateway to the rest of Southeast Asia and the Upper Mekong Basin region. These are again areas that have been identified as emerging markets that have huge economic potential.

The Thai government is actively seeking to encourage overseas investment with schemes such as the BOI incentives. In addition, there are other incentives promoting investment from overseas outside of the BOI with active encouragement with regards to free trade between a number of different countries in the region and further afield.

All of the investment incentives that are offered at local level are in total harmony with all World Trade Organisation (WTO) regulations. In effect, this means that there are no restrictions placed upon the manufacturing sector such as local requirements or export conditions.

There are of course a few minor complications that are to be expected with investing in a foreign country but these can be overcome by taking advice from professionals. Potentially work permit and visa restrictions could come into play but so long as the correct research is completed and you follow all the rules the impact will be minimal.

Board of Investment (BOI)

The BOI is one of the main government measures that have been set up to encourage overseas investment. The BOI offers incentives for overseas companies to invest in six key industrial sectors. These are:

  • Agriculture and food
  • Renewable and alternative forms of energy
  • The automobile industry
  • Electronics, information and communication technologies (ICT)
  • Fashion
  • High value added services such as leisure, health and tourism

The incentives are very attractive and include eight years of tax exemptions for companies with a further 50% tax exemption for the following five years. Also included are double transport, electricity and re-supply deductions as well as 25% deduction on net profits for establishment and construction costs.

Thankfully, the BOI also recognises the potential problems associated with starting a new company and has implemented measures to ease liquidity. All raw materials that are imported for the purposes of production, of products that are intended for export, are import tax exempt.

Other opportunities for individuals

Of course, all of these opportunities are mainly aimed at larger companies but there are lots of options available for individuals who are looking to invest in Thailand. Thailand has a booming tourist industry that is growing at around 10% year-on-year. To satisfy this demand, developers and hoteliers are looking for investors in their developments. Most of the opportunities that arise are in the buy-to-let sector.

If you are interested in entering this market to gain handsome returns, there are a number of options that are available to you. The first is obviously to find tenants privately. This potentially will reap the greatest rewards although it does bring with it a number of complications such as finding suitable tenants in the first place.

The second option is to rent via an agent. This takes away a lot of the hassle although finding a reputable agent can be quite difficult, especially if you will be based overseas. Also, just because you have employed the services of an agent, it doesn’t guarantee that you will find suitable tenants. You should also consider that they will charge a fee for this service.

Finally, an option that is growing in popularity in Thailand is “rental guarantee concepts” whereby developers and hotel management companies sell units to buyers with the promise of guaranteed monthly rental returns for a fixed period of time. The return can be anything up to 10% p.a. and can last for 20 years. Arguably, this is by far the best way for individuals to invest in Thailand at the present time as it is low risk, little input is required and it still offers great returns.

Regardless of if you are a company or an individual, Thailand is a great place to invest with lots of opportunities around every corner.

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