Thank you for taking the time from preparing for the many road shows and presentations encouraging  investment in Thailand you are currently involved in, plus your preparations to accompany Prime Minister Taksin Shinawatra on his visit to Washington, DC, to talk to business-in-asia.com.   I also thank you for your and the Board of Investment's support of the upcoming Investment seminar to be held in Portland, Oregon on Tuesday, July 15, 2003.  Finally we appreciate BOI's kind invitation to the State of Oregon to participate in the APEC Investment Mart in conjunction with the October 2003 Asia Pacific Economic Cooperation Summit in Bangkok, Thailand.  The State of Oregon Office of Economic & Community Development Department (OECDD) has accepted your invitation and plans to lead a delegation of Oregon companies to attend and participate in this important upcoming event. 

Question 1:    This last year, economically was a difficult year for many parts of the world. How did Thailand do in terms of economic development in 2002 and what are your projections for economic growth and inflation in 2003?

Answer:  Even though last year was difficult year for many countries, it was one of the best years for the Thai economy, both in terms of GDP growth and export growth. Our economic grew by an impressive rate of 5.2% with low inflation of 0.6%, and exports grew by 5.8% despite global economic uncertainty.

According to the Bank of Thailand, in 2003, the economy is expected to grow at 3.5 – 4.5%, while inflation is expected to remain low, at 1.7%. At the same time, exports remain strong and we expect higher export growth than last year.

Question 2:    Which countries are Thailand’s major trading partners and has this ranking changed or remained fairly stable over the last ten years?

Answer: USA, Europe and Japan have been Thailand’s major trading partners over the last 10 years. These countries comprise more than half of all Thai exports. 

Question 3:    Could you tell us what comparative advantages Thailand offers a foreign investor looking for a site to relocate his manufacturing or other operations? Given the above factors, which types of business has Thailand been most successful in attracting? Could you give examples of factories that have recently relocated or commenced operation and the size of investment and sectors they represent?

Answer:  There are several reasons foreign investors choose to relocate manufacturing operations to Thailand. One of the important factors in the selection of investment location is the country’s business environment. This is an area in which Thailand is especially attractive due to a proactive government and the nation’stable political and social environment.  Other important factors in the investment decision are the opportunity to improve market access and business inputs.  With a population of more than 60 million, Thailand provides investors with access to a growing domestic market, and low-cost domestic inputs make it attractive for companies to use a base in Thailand as a springboard into South-East Asia.  In addition, the government’s policy to improve the quality of human capital will enhance the future competitiveness of industry in Thailand.

There are many examples of automotive factories that have recently relocated or commenced operation in Thailand. Mitsubishi has already invested US$500 to relocate its worldwide production base of one-ton pickup trucks from Japan to Thailand.  Currently, two more companies, Toyota and Isuzu, are in the process of relocating their worldwide production bases for one-ton pickup trucks from Japan to Thailand.

Question 4:    Are there sectors that the Board of Investment and your government is currently targeting for priority investment? If so, could you tell us what those sectors are and what incentives the government is offering to attract these investment projects?

Answer: The Thailand Board of Investment is actively promoting the following five (5) target industries:  

• Agriculture  and agricultural products, especially food processing and related products, rubber products, and biotechnology

• Fashion, particularly leather, garments and jewelry

• Automotive assembly and parts and components industries including the development of industry and supporting industry clusters to create a ‘Detroit of Asia’

• ICT and electronics industries, with a focus on high value added electronics and ICT software, hardware and multimedia

• High value added services such as call centers, regional operating headquarters and high value added printing and packaging

In addition, the Revenue Department and the BOI have introduced a new incentive package for regional operating headquarters (ROH). Incentives offered include a reduction on corporate income tax rate to 10%, instead of the customary 30%, on net profits from income derived from qualifying services, royalties, and interest received from branches or associated enterprises for loans made from other sources and extended to the ROH’s branches or associated enterprises. Moreover, the business receives a tax exemption for dividends received from the ROH’s associated enterprises. These incentives continue for as long as the business operates in accordance with the regulations. Furthermore, a new category for call centers has been approved for promotion by the BOI in 2003.

For the ICT and software sector in Thailand, there are significant opportunities for investors in web-services, CRM, ERP, data warehousing, data mining and education technology. Since the Thai government has emphasized the development of e-commerce, e-government, and e-education,  the e-government project is expected to generate a market for hardware, software, and services. The government will focus also on developing an education network (ednet) to link educational institutions, enabling them to share information and promote remote learning. The project is expected to link as many as 10,000 schools and 7,000 villages around the country.  Furthermore, the government has established a software industry promotion agency (SIPA), to promote the software industry and facilitate visas and work permits for foreign experts.

Question 5:    China exceeded the U.S. for the first time in 2002 as the number one location for Foreign Investment (FDI) in 2002. Most U.S. newspapers and magazines are reporting on China and plans by U.S. companies to relocate their manufacturing to there or to open offices there. Has this rush to China affected Thailand’s efforts to attract foreign investment and what plans is the government contemplating to help promote Thailand as a site to relocate manufacturing and to do business? Also, can Thailand compete with China and are there areas where Thailand clearly beats not only China but also other nations in the region as a site for investment?

Answer:  Althogh many countries have been affected by the FDI rush to China, applications for investment promotion privileges in Thailand increased significantly last year. 

In 2002, the Board of Investment (BOI), launched its investment strategy and policy, which was designed to improve investment competitiveness. The Board of Investment (BOI) new investment policies are divided into 3 dimensions.

1.    Attracting investments based on quality rather than quantity,focusing on investments that  will promote knowledge and skills building

2.    Promoting cluster development

3.    Providing customized incentive packages tailored to the needs of investors

The BOI also has plans to further improve its service delivery and ICT system, and will be working proactively with relevant government agencies to improve the investment climate, in order to facilitate investment in Thailand.  In addition, the BOI has already established a new office in Shanghai, and is expected to establish additional offices in the target countries of USA and Japan.

The EIU’s Asian Business environment ranking released in April 2002 shows that Thailand business environment improved to 8th position from #9 in 2001. Thailand also ranks 3rd in Asia as an investment destination, and is the 4th freest economy in Asia. These rankings are the result of significant advantages for foreign investors in Thailand, including a strong business environment, socio-economic stability and developed international regulatory systems.  In particular, the issue of intellectual property rights compares favorably with copyrights is very favorable compared with China and other countries in the region.

In addition, Thai workers are highly skilled and have a strong knowledge base. The cost of labor in Thailand may not be the cheapest in the region, however it still provides advantages when compared to developed neighbors. By concentrating on knowledge-based investment, the Thai government intends to position the country as an attractive site for value-added manufacturing.

Question 6:    Recently there has been much in the international press about Sudden Acute Respiratory Syndrome (SARS), which first started in Guangdong province and then spread to Hong Kong, Hanoi and Singapore. Has the fear of SARS infected investment in Thailand and are you seeing less investors willing to visit? Also, do you see this as a short term or long term issue for Asia?
 
Answer: Of course, the outbreak of  Sudden Acute Respiratory Syndrome (SARS) may have some impact on Thailand, as it does on all of Asia, especially in the tourism sectors and some export. However, BOI views SARS as a short-term issue for Asia and less so to Thailand as Thailand has been a transmission-free zone for SARS. In terms of site selection and exploration of alternative investment locations, investors are able to perform these tasks from the home office, are able to communicate electronically, and can make investment decisions through the use of technology. If investors are keen to invest in Thailand, they can easily visit the BOI website at www.boi.go.th, where they can obtain information on investment environment in Thailand or make inquiries by sending e-mail to  head@boi.go.th.

Furthermore, The Thai government places a strong emphasis on preventing SARS from spreading to Thailand and promoting proactive government regulations that, in return, has provided tremendous confidence to both Thai citizens and the foreign community.

Question 7:    Thailand has one of the most successful tourism industries in the World. Is Thailand’s tourism sector now saturated with investment and does the Thai government and the BOI still welcome investment in tourism?

Answer: The Thailand Board of Investment promotes a number of activities in the tourism sector that cover many aspects of tourism activities such as tourism promoted services like ocean marina services, amusement parks, cultural center, aquariums, cable cars, to  support tourism activities like convention halls, hotels, international exhibition centers. The highlight activity is retirement homes and care centers as well as a dedicated health center. For more information and a list of activities promoted under the tourism sector, please contact www.boi.go.th. In addition, for the government, the most significant area of tourism that could be explored is the long-stay project, which shows great potential, and Thailand, with its relatively low cost of living, rich culture and high quality services is well situated to develop this market. Also visit  www.tourismthailand.org for information on long-stay tourism.

Question 8:    The importance of education in terms of turning out qualified engineers, technicians, middle managers and even production workers has become a key concern of many international companies in seeking a site for investment. How seriously does the current Thai government focus on improving education and what does Thailand offer in term of providing a well education workforce and society?

Answer: The government of Thailand has very much emphasized the importance of education, as human capital is a priority for country competitiveness. In our educational institutes, there are significant attempts to improve the quality of the curriculum in order to serve specific needs from different industries, as well as to enhance management skills and knowledge. Also, educational institutes are becoming more competitive in terms of establishing new areas of study, such as biotechnology, chemical engineering and diversified industry design for manufacturing.

For vocational training institutes, the curriculum has also improved to support more training at industrial sites, while additional skills, such as English language, business management, and communication skills, have already been encouraged in order to upgrade the Thai workforce to an international standard.  In additional to this, there are several corporate institutes that provide special training to industry, such as the Thai Automotive Institute, The Electrical and Electronic Institute, Thai-German Institute, which assist technicians from factories or business to upgrade communication and leadership skills and technical skills 

The Thailand Board of Investment is also working to develop human capital and in order to improve matchmaking between industrial demand and workforce supply. In fact, the BOI continuously works with industry to train the university and vocational students to help develop practical experience to use in real life work situations in order to develop a skilled work force.

Finally, the Ministry of Labor has established training centers throughout the country to improve the general quality of labor in Thailand and to develop skills with new tools and machinery.

Question 9:    South of Bangkok and very close to Rayong which is now a site of many factories, off shore natural gas and on-shore petroleum facilities is the former U-Taphao Air Base which was used by the U.S. Military during the Vietnam War and is said to have the longest runway anywhere in Southeast Asia. Over the years there have been plans to redevelop the Airbase as a regional air freight hub or for a more commercial purpose. Are any of these plans still active and what are the plans to take better advantages of this facility?

Answer: The U-taphao Air Base development plan is now being revised by NESDB (National Economic and Social Development Board). The concept has changed from serving as part of the Global Transpark (GTP) network to Aerotropolis, which will serve as an industrial transportation complex, i.e. heavy aircraft maintenance, in cooperation with Suvarnabhumi Airport (New Bangkok International Airport).

Question 10:    Thailand is a member of ASEAN which has plans for a Free Trade Area (AFTA). When will AFTA take affect and how important is intra-ASEAN trade to the country and to the region?

Answer: The progressive implementation of AFTA, which began in 2002 for the original ASEAN members, and the ongoing implementation of ASEAN Investment Area (AIA), staring in 2003, increased intra-ASEAN trade and investment.  In addition,  recent FDI statistics show that intra-ASEAN investment to Thailand and to the ASEAN region has become increasingly important. 

Intra-ASEAN trade in 2001-2002 continued the trend of recent years.  In 2000, the value of intra-ASEAN trade increased by 21.34 percent, from 74,935.6 million dollar in 1999 to 95,267 million dollar in the same period in 2000.   Thailand's imports from ASEAN increased slightly (4.1 percent) from US$ 61,795.2 million in 2001 to US$ 64,313.5 million in 2002, while exports to ASEAN increased by 5.7  percent from US$ 65,183.2 million in 2001 to US$ 68,902.9 million in 2002.

Question 11:    I have seen reports that last year ASEAN and China agreed to institute a Free Trade Area (ASEAN-China FTA) within ten years. How realistic do you see these plans and if they do take place will they enhance or hurt Thailand as a site for investment.

Answer: The ASEAN and Chinese leaders have already signed the Framework Agreement on ASEAN-China Economic Cooperation during the 8th ASEAN Summit in Phnom Penh, Cambodia in November, 2002. This agreement will lead to the establishment of the free-trade area by 2010. Both sides have organized regularly scheduled meetings, and the schedule is proceeding as planned.

As part of this agreement, ASEAN and China will coordinate, facilitate and promote investment between the two parties. This agreement will therefore help enhance the FDI flow from China, and will lead to the expansion of Thai investment in China. FDI from China to Thailand has been increasing gradually in recent years, as China encourages investment abroad with Thailand considered one of the best locations.

Question 12:    The Board of Investment has a very excellent website, which has lots of information on Thailand as a site for foreign Investment. Beyond this, if a foreign investor would like to learn more about Thailand as a site for investment, what other sources of information are available to potential investors interested in Thailand? Also, are there plans to bring information about Thailand as a site for investment to Europe, the U.S. and other parts of Asia over the next year?

Answer: The BOI website, www.boi.go.th has twice been ranked the #5 Investment Promotion Agency website in the world by Corporate Location Magazine.

If  investors would like to learn more about Thailand as a site for investment, the BOI would like to recommend other useful websites such as www.customs.go.th, www.revenue.go.th, www.thairegistration.com, www.industry.go.th and www.oie.go.th.  These websites provide information about investing in Thailand,  how to do business in Thailand, and how to register a new company in Thailand. In addition, if investors would like to search for part and components within ASEAN, they can visit the website  www.asid.org.

In addition, the BOI last year established target regions for attracting investment from the three main focused areas—North America, Asia and the Pacific, and Europe. Hence, early this year, the BOI has committed several road shows to several countries in those key market areas in order to build recognition towards the BOI, with the regard to Thailand as a potential location for investment.