doing business in thailand
TRANSCRIPT
Doing Business in Thailand
Danuvasin Charoen, Ph.D., PMPAssociate Professor and Associate Dean
NIDA Business School National Institute of Development Administration
Bangkok, [email protected]
NIDA Business School• NIDA Business School has
• 6 MBA Programs ranging from junior management to executive management and has double degree with Kelley School of Business, Indiana University Bloomington
• 1 MS in Finance (CFA Partner)• 1 Ph.D. Program.
NIDA Business School• NIDA Business School has two excellence centers
• Center for Business Innovation
• Center for Enhancing Competitiveness (Affiliate with Prof. Michael E. Porter at Institute for Strategy and Competitiveness Harvard Business School)
Consulting and training service NIDA-Wharton ELS for corporations 2013 have more than 50 millions baht or 2 million dollars
provides
Center for Business Innovation offers consulting and training service for business community. CBI products are• Executive Education Program
• NIDA-Wharton Executive Leadership Program
• Consulting Service• Revenue over 50 million baht (about 2 million US dollars)
Center for Enhancing Competitiveness make analysis on Thailand Competitive Ranking
5
Facts about Thailand
• THAILAND is the world’s 17th
largest manufacturer output• 28rd largest exporter• 24th largest economy by
purchasing power• And the 2nd largest economy in
ASEAN
Fast Facts
GDP US$365 Billion (2014)US$6,703 per capita
8.6% Agriculture
39% Industry
38% Services
Population 67 MillionLabor Force 40.2 million
Sources: MOC, NESDB, Pocket World in Figures 2013 Edition
Thai Economic Structure
Source: MOC.go.th
Top 10 Exports
2011 20122012
(Jan-Feb)2013
(Jan-Feb)
Motor cars, parts and accessories 16.98 22.91 3.02 3.82Automatic data processing machines and parts thereof 17.06 19.06 2.41 2.71
Refine fuels 10.09 12.90 2.10 1.85
Iron and steel and their products 4.99 7.05 0.76 1.68Rubber 12.70 8.75 1.73 1.61Polymers of ethylene, propylene, etc in primary forms 8.80 8.53 1.30 1.50
Chemical products 8.29 8.52 1.27 1.48Rubber products 8.39 8.41 1.37 1.37Precious stones and jewellery 12.30 13.15 2.68 1.05Machinery and parts thereof 6.11 6.24 0.96 1.03Others 116.85 114.00 17.18 18.09Total 222.58 229.52 34.78 36.20
Unit: US$ Billion
Source: www.moc.go.th as of April 4, 2013
Top 10 Imports
2011 20122012
(Jan-Feb)2013
(Jan-Feb)
Jewellery including silver bars and gold 19.92 13.03 2.21 5.59
Crude oil 32.90 35.84 4.73 5.10Machinery and parts 19.97 26.18 3.86 4.12
Electrical machinery and parts 13.35 17.01 2.37 2.66
Iron, steel and products 13.91 15.17 2.28 2.55
Parts and accessories of vehicles 6.53 12.61 1.54 2.34
Chemicals 14.82 14.77 2.18 2.23Computers, parts and accessories 8.61 9.83 1.42 1.59Other metal ores, metal waste scrap, and products 8.95 8.13 1.24 1.45
Electronic integrated circuits 10.11 9.18 1.28 1.38Others 79.72 85.86 12.23 14.24Total 228.78 247.59 35.37 43.24
Unit: US$ Billion
Source: www.moc.go.th as of April 4, 2013
Thailand: Highly Ranked#10 World Economic Freedom in Asia Pacific (2013)
#4 in Asia for Corporate Governance
#8 World’s Most Attractive FDI Destination (UNCTAD 2012-2014)
#18 worldwide for Ease of Doing Business#4 Easiest Place in Asia to Do Business
Global Top 20 Destination Cities by International Visitors (2015)
Rank City Visitor (Million) Rank City Visitor
(Million)
1 London 18.82 11 Tokyo 8.08
2 Bangkok 18.24 12 Barcelona 7.63
3 Paris 16.06 13 Amsterdam 7.44
4 Dubai 14.26 14 Rome 7.41
5 Istanbul 12.56 15 Milan 7.17
6 New York 12.27 16 Taipei 6.55
7 Singapore 11.88 17 Shanghai 5.85
8 Kuala Lumpur 11.12 18 Vienna 5.81
9 Seoul 10.35 19 Prague 5.47
10 Hong Kong 8.66 20 Los Angeles 5.20
Source: MasterCard Global Destination Cities Index 2012 as of June 22, 2015
IMD Competitiveness Ranking
Source : IMD 2015
ASIA – PACIFIC REGION
Country ScoreChina Hong Kong 96.04
Singapore 94.95
Taiwan 85.41
Malaysia 84.11
New Zealand 81.81
Australia 80.45
China Mainland 76.99
Korea Rep. 73.92
Japan 72.83
Thailand 69.79
Philippines 60.15
Indonesia 59.91
India 59.48
Competitiveness Factor 2011 2012 2013 2014 2015
Economic Performance 10 15 9 12 13
Government Efficiency 23 26 22 28 27
Business Efficiency 19 23 18 25 24
Infrastructure 47 49 48 48 48
THAILAND’S OVERALL RANKING 2009 - 201460 COUNTRIES
Source : IMD 2009
IMD Competitiveness Ranking
6
10
15
9
12
18
23
26
22
28
20 19
23
18
25
46 4749 48 48
-
10
20
30
40
50
60
2010 2011 2012 2013 2014
Economic Performance
Government Efficiency
Business Efficiency
Infrastructure
Thailand Brazil China India Korea Russia
OVERALL 30 56 22 44 25 45
Economic Performance
13 51 4 16 15 43
Government Efficiency
27 60 35 47 28 44
Business Efficiency
24 51 27 33 37 54
Infrastructure 46 53 25 58 21 36
Source : IMD 2015
BENCHMARKING BRICs + 2
The Global Competitiveness Index
144 ECONOMIESOver 100 INDICATORS 160 PARTNER INSTITUTES
The Global Competitiveness Index Framework
The Global Competitiveness IndexThailand 2009 - 2014
3638 39 38 37
31 32
0
5
10
15
20
25
30
35
40
45
2009 2010 2011 2012 2013 2014 2015
Thailand GCI Ranking 2009 - 2014
2010 2011 2012 2013 2014 2015
Global Competitiveness Index 38 39 38 37 31 32
Basic requirements 48 46 45 49 40 42
Efficiency enhancers 39 43 47 40 39 38
Innovation and sophistication factors 49 51 55 52 54 48
Thailand GCI Ranking
38 39 38 37
31 32
4846 45
49
4042
39
43
47
40 39 38
4951
5552
54
48
0
10
20
30
40
50
60
2010 2011 2012 2013 2014 2015
GlobalCompetitivenessIndexBasic requirements
Efficiency enhancers
Innovation andsophistication factors
Basic requirements (40.0%)Rank 40 (Out of 144) Score 5.0 (1-7)
Efficiency enhancers (50.0%)Rank 39 (Out of 144) Score 4.5 (1-7)
Innovation and sophistication factors (10.0%)Rank 54 (Out of 144) Score 3.8 (1-7)
Thailand and AsiaGlobal
Competitiveness Index
Basic Requirements
Efficiency Enhancers
Innovation and Sophistication
FactorsSingapore 2 1 2 11
Japan 6 24 8 2
Malaysia 18 22 22 17
Korea, Rep. 26 18 25 22
China 28 28 32 34
Thailand 32 42 38 48
Indonesia 37 49 46 33
Philippines 47 66 51 47
Vietnam 56 72 70 88
India 55 80 58 46
Lao PDR 83 86 106 103
Cambodia 90 93 101 121
Myanmar 131 128 131 134
Doing BusinessCOMPARING BUSINESS REGULATIONS FOR DOMESTIC FIRMS IN 189 ECONOMIES
What Doing Business Measure
Doing Business Rank
Doing Business 2015 Rank
Doing Business 2014 Rank Change in Rank
26 28 2
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Topics DB 2015 Rank DB 2014 Rank Change in Rank
Starting a Business 75 68 -7
Dealing with Construction Permits 6 11 5
Getting Electricity 12 12 No change
Registering Property 28 28 No change
Getting Credit 89 86 -3
Protecting Minority Investors 25 21 -4
Paying Taxes 62 63 1
Trading Across Borders 36 33 -3
Enforcing Contracts 25 25 No change
Resolving Insolvency 45 44 -1
Top 5 problem factors for doing business in Thailand
Thailand and Asia PacificEconomy Ease of Doing Business Rank
Singapore 1
Hong Kong SAR, China 3
Malaysia 18
Taiwan, China 19
Thailand 26
Vietnam 78
China * 90
Philippines 95
Brunei Darussalam 101
Indonesia * 114
Cambodia 135
Lao PDR 148
Myanmar 177
Infrastructure• 7 International Airports In 2009, 53.9 million passengers, 1.1 million tons
of cargoes Suvarnabhumi Airport – Capacity: 45 million
passengers and 3 million tons if cargo per year• Over 70,000 km Highway Systems• 6 Deep Sea Ports & 2 International River Ports Capacity over 10 million TEUs Laem Chabang Sea Port – Capacity: 10.8
million TEUs, with additional 8 million TEUs expansion
e-Customs facilities• 4,346 km Rail links to Malaysia & Singapore• 60 Industrial Estates
Investment Budget Plan for Transportation, 2013-2020
ROAD (33.9%)US$21.78 billion
RAIL(60.8%)US$39.07 billion
MARINE(3.3%)US$2.13 billion
AIR(1.93%)US$1.24 billion
Total budget: US$64.2 billion
Source: The Office of Transport and Traffic Policy and Planning (BOI’s Overseas Office Meeting) as of Oct 31, 2012 US$1=Bt29.80 in Q1, 2013
“Logistics Shortcut”- Dawei & Laem Chabang Ports
The linkage between Thailand’s Eastern Seaboard and
Myanmar’s Dawei will provide immense business opportunities
as the emerging Economic Driver in the region.
With high potential to open the Western gateway for the
existing production bases in East Asia, the new trade and
transportation route will create “Logistics Shortcut” for the
region and the supersized co-production base will be an important Growth Nodes
linking the GMS region to global market.
Source: NESDB, as of July 10,2012
No restrictions on foreign currency
100% foreign ownership
No export requirements
No local content requirements
LIBERAL INVESTMENT REGIME
Thailand and the BOI offer:
Activities Eligible for BOI Promotion Agriculture and Agro-Industries Mining and Mineral Processing Light Industries e.g. jewelry, shoe, garments Metal-Working Industries, including automotive Electrical and Electronics Chemicals and Petrochemicals Services and Public Utilities
(39)
Tax IncentivesCorporate income tax holidays up
to 8 yrs•Additional 50% reductions of corporate income tax for 5 yrsmay apply in zone 3
Import duty reductions or exemptions on machinery and raw materialsDouble deduction of public utility
costsDeductions for infrastructure
construction/installation costs
Non-Tax Incentives Land ownership rights for
foreign investors Permission to bring in
foreign experts and technicians
Work permit/visa facilitationOne-Stop-Shop Visas & Work Permits
are issued in 3 hours
Basic BOI privileges and Measures
CLUSTER INITIATIVE
What is a Cluster?A geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities (external economies)
Clusters and CompetitivenessClusters Increase Productivity / Operational Efficiency
Efficient access to specialized inputs, services, employees, information, institutions, training programs, and other “public goods” (local outsourcing) Ease of coordination and transactions across firms Rapid diffusion of best practices Ongoing, visible performance comparisons and strong incentives to improve vs. local rivals Proximity of rivals encourages strategic differentiation
Clusters and Competitiveness
Clusters Stimulate and Enable Innovations Density enables recognition of innovation opportunities (e.g., unmet needs, sophisticated customers, new combinations of services, or better technologies) Presence of multiple suppliers and institutions to assist in knowledge creation Ease of experimentation given locally available resources
Clusters and Competitiveness
Clusters Facilitate Commercialization and New Business Formation
Opportunities for new companies and new lines of established business are apparent Spinoffs and startups are encouraged by the presence of other companies, commercial relationships, and concentrated demand Commercializing new products and starting new companies is easier because of available skills, suppliers, etc.
Clusters and Competitiveness
Clusters reflect the fundamental influence of linkages and spill-overs across firms and associated institutions in competition
Cluster Mapping in Thailand
BOI Zoning and Incentives
Zone: 1 2 3Incentives: Lower Higher
Import Duty Privileges Outside I.E Inside I.E
Zone 1 50% Reduction 50% ReductionZone 2 50% Reduction ExemptZone 3 Exempt Exempt
Corporate Income Tax Outside I.E Inside I.E
Zone 1 No Privilege 3 years
Zone 2 3 years 7 years
Zone 3 8 years 8 years
Objective: Decentralization
Sectors of Opportunity
Target Industries
Agriculture and food processing
Automotive
Machinery
Mold & Die
Target Industries
Biotechnology
Alternative energy
E&E
Chiang Mai Tourism Cluster
Bangkok Digital Content Cluster
Chantaburi Gem Cluster
Southern Marine Food Cluster
Past Competitiveness
• Low Cost Input• Tax Incentive • Large Market• Location • Foreign Direct Investment • Industrial/Exporting Zones
Challenges
• Minimum wage has been increasing • Many foreign firms have started to move out • No Global/local Linkages• Lack of Regional Integration• Politics
Opportunities
• Skill and Innovation Upgrade• Regional Integration (GMS or AEC)• Institutions that create linkages between foreign and local firms• Developing local suppliers• Move from local cost and commodity input to high value added
products/services • Cluster Policy
Conclusions
• Search for stability under “Thai road to democracy” • “Business as usual” attitude traditional in Thailand: we
have seen it all before• We need to upgrade skills and innovations. We can no
longer rely on “low cost”. • In order to compete globally, there must be a linkage
between local and global firms.
Mba.nida.ac.th