Successfully investing in Thailand

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last updated on 9 June 2022 | reading time approx. 4 minutes

 

 

 

How do you assess the current economic situation in Thailand?

Thailand is one of the most important and most developed countries in Southeast Asia and therefore an interesting location for many foreign companies. 

2021 was still dominated by the pandemic, which hit Thailand hard, especially economically. However, there are first indicators of an economic rebound. The economy grew year on year by 1.6 percent. The economy shrank by around 6 per cent. 

For 2022, the government expects growth of 3.5 to 4.5 per cent. Pre-pandemic levels are expected to be reached in the coming years. Key will be the development in tourism. Recently, the sector is seeing increased arrivals due to the eased entry requirements. Fully vaccinated tourists can enter the country without quarantine. However, all these developments are under the condition of the health situation not deteriorating.  

The government continues to support the economy by several measures such as lowering social security contributions temporarily, tax reductions as well as credit to small and medium-sized enterprises. 

Domestic consumption (especially local tourism) is stimulated by various incentives, such as direct cash payments or special subsidies and benefits.

The social consequences are cushioned in various ways, with the business community also being made responsible, for example, through somewhat higher compensation for dismissals. In addition, the state is trying to reduce costs for the population, for example by lowering ancillary housing costs such as electricity and water. However, the pandemic will have lasting negative consequences due to high levels of private debts 

The Thai baht has slightly strengthened against the Euro in 2021 and now stands at around 37 Thai baht to one Euro.

Foreign trade and tourism will continue to be the mainstays in the future. The government continues to plan major investments in infrastructure and is attracting investors with attractive investment incentives. The support measures to date, especially the Eastern Economic Corridor, are showing good results. 

Thailand continues to rank 21st in the Ease of Doing Business, and within ASEAN, only Malaysia (12th) and Singapore (2nd) are ranked better.

Unfortunately, there is still no free trade agreement between the EU and Thailand. However, talks have continued in the meantime. It is possible that a Partnership and Cooperation Agreement will be signed in 2022, which would be an important step. In summer of 2021, Thailand and the European Union held first talks on the subject. 
 

How would you describe the investment climate in Thailand? Which sectors offer the largest potential?

The government continues to focus on innovation as part of its “Thailand 4.0” policy. After agriculture (Thailand 1.0), light industry (Thailand 2.0), heavy industry (Thailand 3.0), innovations and digitalisation are to enable Thailand's breakthrough to become a “High-Income Country”.
 
In principle, any investment is welcome. However, investments are primarily promoted in the following areas:
  • ​High-class tourism
  • Biofuels and biochemistry
  • Food marketing
  • Medical centers
  • Advanced agriculture and biotechnology
  • Air transport and logistics
  • Intelligent electronics
  • Robotics industry
  • Modern automotive industry
  • Digital industry
After the pandemic, investors are to be attracted above all in the field of medicine. Here, the first steps in the field of medical marijuana are also becoming apparent. The further development remains to be seen. 

Thailand will remain dependent on foreign investment in the future, with the People's Republic of China becoming increasingly important. In comparison, European influence unfortunately continues to decline. 
 

What challenges does a German entrepreneur face when entering Thailand?

German entrepreneurs must first ask themselves whether the respective prerequisites for a successful market entry in Thailand and, if applicable, the ASEAN region are in place and how their goals can be achieved as effectively as possible. The Thai market is strictly regulated for foreign investors. However, there are numerous government subsidy opportunities that make investing in Thailand in particular an attractive proposition. It is important to consider the investment laws and to find the best access to the market for your own company. In addition, for a successful market entry it is necessary to recognize and observe the local business culture and its peculiarities. A certain level of intercultural skills is also an advantage - when dealing with Thai employees, customers and business partners, this is often the key to success.
 

How far has Thailand come with digitalisation?

In Thailand, digitization is manifesting itself in various areas, above all in the course of the “Thailand 4.0” policy. Administratively, efforts are being made to handle more and more communication with public authorities electronically. Initial successes are emerging in this area. The pandemic also simplified the regulations for holding electronic meetings of shareholders and managing directors. Overall, the pandemic has helped digital development, as some government agencies have also switched to 100 per cent work-from-home. In some cases, even court hearings can be held electronically.

In practical terms, digitization is still taking place in industry and in urban centers. Rural areas are lagging behind. There have been visible changes in consumer payment behavior. The trend toward cashless payments via smartphone is continuing. Accordingly, banks and financial service providers are pioneers in the area of digitization. 

There are more offers for services within the framework of digital assets (coins and tokens). Here, more expertise is also accumulating in administration, especially in tax authorities. We assume that there will be further regulation here.
 

In your opinion, how will Thailand develop?

The political situation in Thailand remains volatile, however, 2022 has not seen mass protests similar to the levels of 2020 or 2021. The political conflict is ultimately rooted in the strong imbalance of wealth in Thailand, and no solution is in sight in the near future.

The overall health situation has developed rather well. While it took a while for Thailand to procure vaccines, everybody can get vaccinated easily now and the overall vaccination rate is good. Certificates with QR codes are issued electronically via an App and can be used for international travels. 

Economically, Thailand will recover. However, Thailand's heavy dependence on tourism and FDIs has been fatal, especially during this crisis. At the same time, it must be said that Thailand is trying to buck the trend with innovative industries. On the whole, the focus on renewable energy, digital services and high-tech industry is correct. We assume that the infrastructure will fundamentally improve. 
 
It remains to be hoped that an improvement in the corruption problem can be achieved. Unfortunately, only limited convincing concepts have been presented here so far. However, we are seeing some developments in regards to high profile criminal cases, for example against public officials, For the future, however, the overall global economic situation will be decisive for Thailand. In the course of this, it is to be hoped that further integration in the ASEAN economic area can be achieved. A timely conclusion of the FTA with the European Union would certainly be beneficial as well.
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