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Doing Business in Thailand

The presentation is about NIDA Business School and issues related to doing business in Thailand.

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Doing Business in Thailand

  1. 1. Doing Business in Thailand Danuvasin Charoen, Ph.D., PMP Associate Professor and Associate Dean NIDA Business School National Institute of Development Administration Bangkok, Thailand danuvasin@gmail.com
  2. 2. 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.
  3. 3. 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
  4. 4. 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)
  5. 5. Center for Enhancing Competitiveness make analysis on Thailand Competitive Ranking 5
  6. 6. 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
  7. 7. Fast Facts GDP US$365 Billion (2014) US$6,703 per capita 8.6% Agriculture 39% Industry 38% Services Population 67 Million Labor Force 40.2 million Sources: MOC, NESDB, Pocket World in Figures 2013 Edition
  8. 8. Thai Economic Structure Source: MOC.go.th
  9. 9. Top 10 Exports 2011 2012 2012 (Jan-Feb) 2013 (Jan-Feb) Motor cars, parts and accessories 16.98 22.91 3.02 3.82 Automatic data processing machines and parts thereof 17.06 19.06 2.41 2.71 Refine fuels 10.09 12.90 2.10 1.85 Iron and steel and their products 4.99 7.05 0.76 1.68 Rubber 12.70 8.75 1.73 1.61 Polymers of ethylene, propylene, etc in primary forms 8.80 8.53 1.30 1.50 Chemical products 8.29 8.52 1.27 1.48 Rubber products 8.39 8.41 1.37 1.37 Precious stones and jewellery 12.30 13.15 2.68 1.05 Machinery and parts thereof 6.11 6.24 0.96 1.03 Others 116.85 114.00 17.18 18.09 Total 222.58 229.52 34.78 36.20 Unit: US$ Billion Source: www.moc.go.th as of April 4, 2013
  10. 10. Top 10 Imports 2011 2012 2012 (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 5.10 Machinery 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 2.23 Computers, parts and accessories 8.61 9.83 1.42 1.59 Other metal ores, metal waste scrap, and products 8.95 8.13 1.24 1.45 Electronic integrated circuits 10.11 9.18 1.28 1.38 Others 79.72 85.86 12.23 14.24 Total 228.78 247.59 35.37 43.24 Unit: US$ Billion Source: www.moc.go.th as of April 4, 2013
  11. 11. 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
  12. 12. 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
  13. 13. IMD Competitiveness Ranking
  14. 14. Source : IMD 2015 ASIA – PACIFIC REGION Country Score China 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
  15. 15. 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 - 2014 60 COUNTRIES Source : IMD 2009
  16. 16. IMD Competitiveness Ranking 6 10 15 9 12 18 23 26 22 28 20 19 23 18 25 46 47 49 48 48 - 10 20 30 40 50 60 2010 2011 2012 2013 2014 Economic Performance Government Efficiency Business Efficiency Infrastructure
  17. 17. 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
  18. 18. The Global Competitiveness Index 144 ECONOMIES Over 100 INDICATORS 160 PARTNER INSTITUTES
  19. 19. The Global Competitiveness Index Framework
  20. 20. The Global Competitiveness Index Thailand 2009 - 2014 36 38 39 38 37 31 32 0 5 10 15 20 25 30 35 40 45 2009 2010 2011 2012 2013 2014 2015
  21. 21. 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
  22. 22. Thailand GCI Ranking 38 39 38 37 31 32 48 46 45 49 40 42 39 43 47 40 39 38 49 51 55 52 54 48 0 10 20 30 40 50 60 2010 2011 2012 2013 2014 2015 Global Competitiveness Index Basic requirements Efficiency enhancers Innovation and sophistication factors
  23. 23. Basic requirements (40.0%) Rank 40 (Out of 144) Score 5.0 (1-7)
  24. 24. Efficiency enhancers (50.0%) Rank 39 (Out of 144) Score 4.5 (1-7)
  25. 25. Innovation and sophistication factors (10.0%) Rank 54 (Out of 144) Score 3.8 (1-7)
  26. 26. Thailand and Asia Global Competitiveness Index Basic Requirements Efficiency Enhancers Innovation and Sophistication Factors Singapore 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
  27. 27. Doing Business COMPARING BUSINESS REGULATIONS FOR DOMESTIC FIRMS IN 189 ECONOMIES
  28. 28. What Doing Business Measure
  29. 29. Doing Business Rank Doing Business 2015 Rank Doing Business 2014 Rank Change in Rank 26 28 2 The linked image cannot be displayed. The file may have been moved, renamed, or deleted. Verify that the link points to the correct file and location.
  30. 30. The linked image cannot be displayed. The file may have been moved, renamed, or deleted. Verify that the link points to the correct file and location. 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
  31. 31. Top 5 problem factors for doing business in Thailand
  32. 32. Thailand and Asia Pacific Economy 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
  33. 33. 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
  34. 34. 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
  35. 35. “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
  36. 36. No restrictions on foreign currency 100% foreign ownership No export requirements No local content requirements LIBERAL INVESTMENT REGIME Thailand and the BOI offer:
  37. 37. 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
  38. 38. (39) Tax Incentives Corporate income tax holidays up to 8 yrs •Additional 50% reductions of corporate income tax for 5 yrs may apply in zone 3 Import duty reductions or exemptions on machinery and raw materials Double deduction of public utility costs Deductions 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 facilitation One-Stop-Shop Visas & Work Permits are issued in 3 hours Basic BOI privileges and Measures
  39. 39. CLUSTER INITIATIVE
  40. 40. 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)
  41. 41. Clusters and Competitiveness Clusters 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
  42. 42. 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
  43. 43. 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.
  44. 44. Clusters and Competitiveness Clusters reflect the fundamental influence of linkages and spill-overs across firms and associated institutions in competition
  45. 45. Cluster Mapping in Thailand
  46. 46. BOI Zoning and Incentives Zone: 1 2 3 Incentives: Lower Higher Import Duty Privileges Outside I.E Inside I.E Zone 1 50% Reduction 50% Reduction Zone 2 50% Reduction Exempt Zone 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
  47. 47. Sectors of Opportunity Target Industries Agriculture and food processing Automotive Machinery Mold & Die Target Industries Biotechnolo gy Alternative energy E&E
  48. 48. Chiang Mai Tourism Cluster
  49. 49. Bangkok Digital Content Cluster
  50. 50. Chantaburi Gem Cluster
  51. 51. Southern Marine Food Cluster
  52. 52. Past Competitiveness • Low Cost Input • Tax Incentive • Large Market • Location • Foreign Direct Investment • Industrial/Exporting Zones
  53. 53. Challenges • Minimum wage has been increasing • Many foreign firms have started to move out • No Global/local Linkages • Lack of Regional Integration • Politics
  54. 54. 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
  55. 55. 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.
  56. 56. Mba.nida.ac.th

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