Thailand has had a remarkable economic development trajectory over the past 60 years and foreign direct investment (FDI) has been pivotal in this success. Thailand was one of the first movers in opening up to manufacturing FDI and in establishing proactive investment promotion and facilitation policies. While challenges remain in some areas of responsible business conduct, there is strong political will to address them. Thailand aspires to become a high-income economy by 2037 by upgrading to a value based green economy. Inward FDI will play a prominent role in achieving this goal but this requires a concerted effort to reform the investment climate to remain an attractive host to foreign investment and to benefit fully from that investment. While the COVID-19 crisis might temporarily delay progress, the policy recommendations in this Investment Policy Review of Thailand draw attention to potential reform priorities to help Thailand fulfil its development ambitions aligned with the Sustainable Development Goals and to contribute to a more inclusive and sustainable recovery from the pandemic. Find out more at: http://www.oecd.org/investment/oecd-investment-policy-reviews-thailand-2020-c4eeee1c-en.htm

1. High-level virtual launch, 24 February
2021
Martin Wermelinger, OECD Investment Division
Tihana Bule, OECD Centre for Responsible
Business Conduct
OECD Investment Policy Review of Thailand

2. 1. Assessment and recommendations
2. Thailand’s development trajectory: Past and future strategies
3. A snapshot of Thailand’s competitiveness
4. Trends and qualities of FDI in Thailand
5. Investment promotion policies to build a knowledge-based economy
6. Improving Thailand’s foreign investment regime
7. Domestic legal framework for investment protection and dispute settlement
8. Investment treaty policy in Thailand
9. Promoting and enabling responsible business conduct
10. Promoting investment for green growth
11. Promoting Thai outward investments
Scope of the Review
2

3. 3
Thailand’s FDI dependence and rising outward FDI
• FDI has played a key role for Thailand’s
integration in global value chains
• But: relative to ASEAN, FDI stocks and flows
have fallen over past two decades
• Thai investments abroad have increased
rapidly, including in CLMV; outward FDI >
inward FDI in recent years; OFDI stocks =
25% of GDP in 2018
• FDI dropped significantly in 2020 due to
COVID-19 crisis
Source: OECD based on World Bank and UNCTAD databases

4. 4
Foreign firms contribute positively to economic and
social outcomes
• Foreign firms (both manufacturers and
service provides) are larger, more
productive and better integrated in
GVCs than their Thai peers
• Foreign firms also pay higher wages
and hire more skilled workers*
• Thai manufacturers with FDI linkages
perform better
Impact
of
foreign
ownership
on
firm
performance
Note: *effect of foreign ownership disappears when controlling for size and sectors
Source: OECD based on Thailand’s Industrial Census and Business Trade and
Services Survey, using the OECD FDI Qualities Indicators methodology

5. Thailand’s strategy for the future: Towards a value-
based and innovation-driven economy
5
People
Inequalities
Green
Productivity
Innovation
• Positive but low productivity growth
• Competitive edge in priority
activities (S-curve) is improving but
gap remains significant, particularly
in services
• Important productivity inequalities
across regions and firm-types (EEC
and BKK successful; other regions
lagging)
• COVID-19 likely to increase SME
productivity gap
• Significant job loss due to COVID-19
• R&D and innovation output is expanding but
from low levels
• Modest FDI growth in R&D/tech sectors;
could be slowed by COVID-19
• Concentration of FDI in sectors with higher
R&D activity
• Foreign firms spend more on R&D,
particularly in strategic sectors
• FDI is prevalent in cleaner and less CO2
emitting sectors
• COVID-19 hampers the green transition
Thailand 4.0;
20-year National
Strategy;
Bio-Circular-
Green model;
SDGs
• Quality of basic education needs improvement
• Distribution of skills across qualification could
be improved
• Foreign and large domestic firms increasingly
engage in in-house training

6. POLICY OPTIONS TO ADVANCE
THAILAND’S DEVELOPMENT
AMBITIONS
6

7. • Investment promotion and facilitation successful in stimulating
foreign and domestic investments
• Yet, investment promotion faces challenge to advance wider
objectives (e.g. related to innovation, skills, reducing regional
inequalities, SME development)
• 2015-21 investment promotion scheme aligned with greater
sustainable development ambitions of Thailand, but the
incentive scheme is complex and makes it hard to level the
playing field
• Board of Investment (BOI) has inherited new responsibilities
over the years (e.g. attracting foreign talent) – this over
reliance on BOI could weigh on its capacity to perform
effectively 7
Successful investment promotion and facilitation
Chapter 5: Investment
promotion and
facilitation
2011 2016
Promotion certificate status 2.5% 2.4%
Promoted foreign-owned (%
of all foreign-owned firms)*
68% 68%
Promoted exporter (% of all
exporters)
32% 35.5%
Value-added 34.4% 29.7%
Employment, among which: 20.3% 20.9%
Skilled 10.4% 10.9%
Unskilled 7.5% 7.4%
Other 2.4% 2.5%
Spending on R&D 52% 23%
Spending on training of
employees
32% 20%
Promoted firms in % of all establishments
(unless otherwise specified)
Source: OECD based on Thailand’s Industrial
Census 2021, 2017

8. 8
Making investment promotion and facilitation
yet more effective
Chapter 5: Investment
promotion and
facilitation
• Streamline the tax incentive framework and rethink design of some schemes to limit
forgone revenues and attract investment with higher sustainability impacts
• Conduct a thorough and informed cost-benefit analysis of the overall effectiveness of the
2015-21 tax incentives scheme
• Sharpen the quality of the investment generation activities to better target top foreign firms,
particularly foreign R&D performers, and continue the efforts to facilitate investment entry
and retention
• To safeguard BOI’s efficiency, consider the option of liberating it from some of its
(regulatory) functions (e.g. non-tax incentives to foreign investors and foreign workers)
• Further involve the private sector and other relevant stakeholders in the decision-making
process of the BOI
• Develop new statistics to support evidence-based investment promotion policy making
Recommendations

9. 9
Thailand’s foreign investment regime
• Thailand was quick to open up to foreign
investment (in manufacturing) in the
1970s
• Other ASEAN have caught up and
surpassed Thailand in terms of openness
to FDI
• Most services remain restricted, with
recent considerations to open some
• Exemption channels enable foreign
investment into restricted activities
• Unofficially, some investors have
exploited legal loopholes (e.g. preferential
shares and indirect ownership) to by-
pass some of the restrictions in place
Chapter 6: FDI policy
regime

10. 10
Removing uncertainties related to market access
and opening services
Chapter 6: FDI policy
regime
• Undertake a comprehensive regulatory impact assessment
• Reform the institutional setting of the Foreign Business Commission, notably to include
representatives of other public and private stakeholders
• Align the general minimum capital requirement for foreign investors to start a business in
Thailand with capital requirements for domestic investors.
• Align the statutory regime with current practice where feasible in order to avoid
unnecessary regulatory uncertainty (e.g. related to legal loopholes under the Foreign
Business Act (FBA) and the dual-track system of the Investment Promotion Act and the
FBA)
• Further liberalise FDI restrictions particularly in services sectors to match levels of
openness in other emerging economies and to foster greater convergence towards
Thailand 4.0.
Recommendations

11. • Continue to prioritise efforts to improve the effectiveness of intellectual property (IP)
enforcement measures (e.g. implementation of recent government initiatives for IP
protection)
• Maintain cybersecurity as a national policy priority and ensure effective implementation of
the Cybersecurity Maintenance Act 2019 and the Personal Data Protection Act 2019
• Evaluate possibilities for improving key investment protections under Thai law (e.g.
consolidation of key protections, incentives and obligations for investors into a single law)
• Evaluate the costs and benefits of maintaining the current restrictions on land ownership
for foreigners
11
Enhancing domestic investment protection
Chapter 7: domestic
investment protection
Recommendations

12. • Conduct a gap analysis between Thailand’s domestic laws and its obligations under
investment treaties with respect to investment protections to ensure that overlapping legal
regimes are coherent
• Manage potential exposure under existing investment treaties proactively (e.g. continue
development of ISDS dispute prevention and case management tools; participation in
UNCITRAL’s Working Group III; awareness-raising efforts for line agencies)
• Continue to actively participate in and follow closely government and other action on
investment treaty reforms including at the OECD’s FOI Roundtable and at UNCITRAL
• Continue to implement plans to assess and where appropriate update investment treaties to
bring them in line with the government’s current priorities (e.g. through joint interpretations or
treaty amendments)
12
Improving investment treaty policy
Recommendations
Chapter 8: investment
treaty policy

13. • Strengthen the OFDI policy framework through inter-agency coordination (e.g. clarify OFDI
policy objective under 2017-22 plan; clarify overlapping roles
• Conduct a comparative review of OFDI policy frameworks and governance in other relevant
outward investing countries (such as Japan and Korea), which would help define and prioritise
OFDI policies in Thailand.
• Clarify policy approaches for two distinct sets of OFDI priorities in support of Thailand 4.0
ambitions (i.e. OFDI can support the relocation of labor-intensive production stages; OFDI to
acquire brands and knowledge)
• Increase resources dedicated for OFDI information services and technical advice (including
on RBC supply chain due diligence) and align efforts across government and private actors
• Design and implement a policy package dedicated to promoting OFDI in high-value assets in
advanced economies, including financial instruments and investment risk insurance
13
Developing a policy framework for outward
investment
Recommendations
Chapter 11:
outward FDI

14. 14
Promoting and enabling responsible business
conduct as a key strategy for Thailand 4.0
• Support, enable and promote RBC due diligence among businesses throughout the economy, including at the provincial level.
• Promote due diligence in the activities where the state acts as an economic actor. This includes procurement and activities of state-owned enterprises.
Notably, due consideration should be given to how RBC expectations can be reflected in the implementation of the Public Procurement and Supplies
Management Act of 2017 and whether amendment is necessary. Additionally, the policy guidance for SOEs should be aligned with the 2015 OECD
Guidelines on Corporate Governance of State-Owned Enterprises and the specific expectation that SOEs establish and implement due diligence
according to international standards should be made clear.
• Provide and communicate clear expectations to businesses on RBC standards for outward Thai investments in the services provided for investors, in
collaboration with BOI, Federation of Thai Industries and the Board of Trade, EXIM Thailand and SEC. Assess whether further alignment in risk
management policies is necessary and whether specific due diligence requirements should be considered.
• Make RBC due diligence a standard operating procedure in special economic zones and the EEC, including promoting transparency around selection
of projects and the establishment and operations of zones, as well as meaningful stakeholder engagement with affected communities.
• Encourage and support implementation of RBC in the financial sector. This includes promoting RBC due diligence in the operations of large
institutional investors (such as the Social Security Fund), following the lead of the Thailand Government Pension Fund.
• Consider expanding the labour laws, regulations, and initiatives applied in the context of fisheries to other industrial sectors that have a large migrant
worker population.
• Ensure that recent protections for human rights defenders are implemented and consider whether further policy action is necessary. The role of non-
judicial grievance mechanisms and alternatives means of dispute resolution should be considered.
Recommendations
Chapter 9: responsible
business conduct

15. 15
Prioritising the promotion of green investment to
achieve broader ambitions
• Consider scaling down or phasing out investment incentives for ‘non-green’ activities, with a possible first step to include a
mapping of green and ‘non-green’ activities building on emerging taxonomies for green finance.
• Assess the applicability of creating targeted financing vehicles to mobilise financing for green investment beyond the energy
sector.
• Establish a legal system and framework for the application of Strategic Environmental Assessments and stakeholder
consultations, so that environmental considerations can be systematically integrated along with social and economic issues in
policy planning and decision making related to sectoral or geographical issues. When it comes to private sector involvement,
require risk-based responsible business conduct due diligence.
• Consider introducing pricing instruments, such as an environmental or ‘green’ tax, to put a price on pollution and incentivise
efforts to increase the efficiency of resource use and continue efforts to develop other pricing instruments by scaling up
recent pilots to establish an emissions trading system.
• Develop a roadmap to support greening of the national financial system, including the tracking and disclosure of ESG risks.
Building on the new roadmap on sustainable capital markets, continue to invest in building a cohesive framework, through its
sustainable finance taskforce and working group, bringing together the financial sector, the insurance sector and listed
companies, to encourage a more targeted performance on green finance and the SDGs.
Recommendations
Chapter 10: green
investment

16. 16
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Martin Wermelinger, Project manager, IPR Thailand
Martin.Wermelinger@oecd.org; @mjwermelinger
Letizia Montinari, Lead FDI trends and qualities (Chapter 4)
Letizia.Montinary@oecd.org
Fares Al Hussami, Lead FDI promotion and facilitation (Chapter 5)
Fares.Alhussami@oecd.org @fareshussami
Fernando Mistura, Lead FDI policy regime (Chapter 6)
Fernando.Mistura@oecd.org
Baxter Roberts, Lead investor protection (Chapter 7-8)
Baxter.Roberts@oecd.org
Tihana Bule, Lead, Responsible Business Conduct (Chapter 9)
Tihana.Bule@oecd.org @tbule0512
Naeeda Crishna Morgado, Lead green growth (Chapter 10)
Naeeda.Crishna@gmail.com
Alessandra Celani, Lead outward FDI (Chapter 11)
Alessandra.Celani@oecd.org
Stephen Thomsen, Head of IPR Unit
Stephen.Thomsen@oecd.org
For further information
Contacts
Policy Framework for Investment
www.oecd.org/investment/pfi.htm
Investment Policy Reviews
www.oecd.org/investment/countryreviews.htm
FDI Qualities
www.oecd.org/investment/fdi-qualities-indicators.htm
Investment Promotion and Facilitation
https://www.oecd.org/daf/inv/investment-policy/investment-promotion-and-
facilitation.htm
OECD International Investment Policy
@OECD_BizFin