With numerous upcoming major trade deals like the TPP and CAFTA, in addition to Thailand joining the ASEAN Economic Community, the country is developing a host of strategically located and incentivized SEZs to take advantage of the upcoming opportunities.
Thailand has been a long-time investor darling in Southeast Asia due to its historically investor friendly policies. However, the global economic challenges and increasing regional competition with countries such as Cambodia, Laos, Myanmar, and Vietnam (CLMV) have led to a slowdown in economic growth and investment in the country. Despite these challenges, Thailand is making major moves to enhance its economy through the upcoming trade pacts including becoming a member state of the ASEAN Economic Community (AEC) and eyeing both the US-backed Trans-Pacific Partnership (TPP) and the China-led Regional Comprehensive Economic Partnership (RCEP). In recognition of this, Thailand’s government has begun rolling out a series of investor-friendly initiatives aimed at increasing investment. Of these, perhaps most importantly is the creation of a host of SEZs strategically located along Thailand’s borders.
One of the most strategic advantages that Thailand has is its advantageous geographical location. Specifically, Thailand occupies a large landmass and is centrally located between Myanmar, Laos, and Cambodia. On its southern tip, Thailand has a land connection to Malaysia, in addition to its massive access to the Gulf of Thailand. In order to take full potential of its geographic positioning, the government in 2014 launched a pilot project to set up six special economic zones in five provinces, namely Tak, Mukdahan, Sa Kaeo, Songkhla, and Trat. In the second phase, which began this year, seven economic zones will be established in another five provinces: Chiang Rai, Kanchanaburi, Nong Khai, Nakhon Phanom, and Narathiwat. According to Thailand’s Board of Investment, the primary focus of these special economic zones is targeted toward 61 business activities, including agro-industry, fisheries, logistics, tourism, and manufacturing. In addition to this, Prime Minister Prayut Chano-o-cha stressed the importance of developing infrastructure to take full economic advantage of these zones’ implementation. With this, the Thai government approved an infrastructure development plan, which in 2015 comprises 45 projects worth over $70 million and in 2016 an additional 79 projects worth over $220 million. Importantly, these projects not only aim to develop Thailand’s internal infrastructure, but seek to build critical infrastructure linking Thailand to its neighboring countries.
In addition to the establishment of the SEZs along with the accompanying infrastructure, Thailand aims to make itself attractive to investors through its unique taxation policy. The Thailand Board of Investment has approved tax benefits for investment applications in 2015 and 2016 with actual investment needed by the end of 2017. Projects in the government’s special economic zones will have tax exemption for two years or a 50% tax deduction for five years, depending on existing privileges. Moreover, the Board of Investment has underscored the desire for value-added sector investment by providing special economic incentives for those that qualify. For those value-adding investors, tax incentives can provide for as much as eight years of tax exemption along with exemption of import duty on machinery and raw materials. Along the same lines, the Thai government has put a renewed focus on areas such as R&D, electronics design, aircraft manufacturing, and the production of aircraft parts. With this, tax exemption policies are also in place in order to facilitate the importation of raw materials.
In summary, Thailand has positioned itself for economic growth through its SEZ implementation in strategic geographic regions in the country. Alongside these, the Thai government has rolled out a host of tax exemptions and infrastructure improvements in order to attract investors and improve the internal and border infrastructure of the country. Crucially, all indicators suggest that for now these initiatives are on the right track and are being implemented in line with the expectations of the government and foreign investors. As explained exclusively to TBY by several major foreign chambers, including Stanley Kang, Chairman of the Joint Foreign Chambers of Commerce in Thailand, and AMCHAM President Darren Buckley, the SEZ’s initiatives have generated substantial interest from their respective members, who were perhaps previously seeking a sense of direction from the current government. Today, it is clear that this direction is heading toward the future, with innovation, specialized productivity, and greater regional connectivity leading the way.
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