Thailand Makes Its Move in the Trade War

November 22, 2019
Thailand Makes Its Move in the Trade War

The continuing tariff war between China and the United States has forced companies to reconsider their reliance on Chinese sourcing.  Other countries throughout Southeast Asia are taking advantage of this opportunity to promote their own attractions as a base of operations.

Thailand is long experienced with foreign (in particular, U.S.) investment, but has taken further steps to attract new entrants.  It now takes only 4-1/2 days to set up a business.  Established sectors with long experience in Thailand include automotive and electronics.

New incentives over and above tax relief target “strategic investments toward future sectors” with additional concessions based on workforce and productivity investments.  FDI is already high for Southeast Asia at $227 billion in 2018, but this expanded incentive targets mid-size projects of $32 million + for near-term implementation (plans must be submitted by 2020).

One particular sector of interest is aerospace, which particularly targets U.S. investment.  Besides incentives, Thailand is promoting its central location in the region and 13 free trade agreements.  The commitment goes deeper with active involvement of the government, right up to the Prime Minister, as part of a long term approach to economic growth.

Our Video Spotlight is a one-minute promotional video which features the attractions of investing in Thailand, including the support (but without specifics) of the government.  It is noteworthy that the emphasis is on technology, talent, and logistics, with no mention of low costs- the usual attraction of Asia operations.

Video Spotlight: The Time is Now | Invest in Thailand

This post is based on the Industry Week article, Note to Manufacturers- Thailand Wants your Business, by Adrienne M. Selko, November 2, 2019, and the YouTube videoThe Time is Now | Invest in Thailand, by Think Asia, Invest Thailand, July 4, 2019. Image source: Shutterstock/Freebird7977

Discussion Questions:

1. Why is Thailand moving aggressively to attract more foreign investment?

Guidance: Thailand is moving aggressively because they can take advantage of the China-U.S. tariff war, which has companies increasingly looking to diversify their supply chains. The country has strong experience to date with Western firms, especially in the sectors of Automotive and Electronics. At this point, their efforts focus on expanding on current incentives (which have primarily focused on tax concessions). It is a long term perspective to boost economic growth through targeted investment with the active support of the government

2. How do these incentives differ from existing programs?

Guidance: The focus is on speed. Companies can set up a business in 4-1/2 days. They offer to supplement existing programs with additional incentives for job creation and productivity investments. In this way, current operations within Thailand can qualify for additional benefits. Finally, there is active support and participation by government officials.

3. Is any particular sector targeted in this program?

Guidance: Aerospace, particularly the U.S. aerospace industry, is the primary sector targeted.


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