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Thailand’s Investment Promotion Policies

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1 Thailand’s Investment Promotion Policies
Dr. Bonggot Anuroj Executive Director of Investment Marketing Bureau Thailand Board of Investment 30 March 2011 Distinguished guests, Ladies and gentlemen, It is my pleasure to meet with you. Much has occurred recently and it is my privilege to update you on the major developments in the investment environment. 1 1 1

2 Outline of Presentation
Investment Promotion Policy - Investment Trend - BOI Services At this time, let me address some comments to our recent investment trend and the continued confidence that investors have in Thailand. 2

3 BOI Investment Policies
Turning to BOI investment policy. 3 3 3

4 1 2 3 4 Liberal Investment Policy
No Restrictions on Repatriation of Profits 2 100% Foreign Ownership * 3 No Export requirements Thailand meets the WTO rules and regulations, and it is BOI’s policy for: No restrictions on foreign currency remittances No export requirement No foreign equity restrictions in manufacturing sectors and, No local content requirement 4 No local content requirement *some restrictions apply 4 4

5 List of BOI activities eligible for Investment Promotion
Agriculture and Agricultural products Mining, Ceramics, and Basic metals Light Industry Metal products, machinery and transport equipment Electronics industry and electronic appliances Chemicals, paper and plastic Services and public utilities 129 sub-items are eligible for investment promotion

6 Criteria for Project Approval
Minimum investment amount of at least 1 million baht (excluding land cost and working capital) Valued added for at least 20 percent of sales revenues A debt-equity ratio (D/E) of less than 3 to 1 Utilization of modern production processes and new machinery (used machinery must be less than 10 years old and certified by relevant parties) Adequate environmental protection systems

7 Criteria for Foreign Shareholding
Projects in agriculture, animal husbandry, fisheries, mineral exploration and mining and service businesses under List One of the Foreign Business Act B.E. 2542: Thai nationals must hold shares totaling not less than 51 percent of the registered capital Manufacturing projects: there are no equity restrictions for foreign investors The Board may set the amount of shares eligible to be held by foreign investors on promoted projects when deemed appropriate

8 Investment Incentives
TAX Incentives NON-TAX Incentives Import duty reductions or exemptions on machinery and raw materials Corporate income tax holidays up to 8 years; additional 50% reductions for 5 years Double deduction of public utility costs Deductions for construction/installation costs infrastructure Land ownership rights for foreign investors Permission to bring in foreign experts and technicians Work permit & VISA facilitation The Package of Privileges and Incentives consists of - Non-tax incentives - Tax incentives and - Skill, Technology and Innovation or STI policy. The Non-tax incentives: consist of 100% ownership, land rights for foreign investors and work permit for experts and technicians. The tax incentives: consist of corporate income tax exemption, import duty reduction or exemption on machinery and raw materials. 8 8 8

9 Major BOI Incentives Schemes
Decentralization Incentives vary according to zones Priority activities 8-year corporate income tax exemption and exemption of import duties on machinery regardless of locations Sector-specific policies Optional incentive scheme STI Scheme Special temporary measures: “Investment Promotion Policies for Sustainable Development” 9

10 Zone-Based Incentives
BOI Zoning Zone-Based Incentives Zone 1 includes Bangkok, Samut Prakan, Samut Sakhon, Nakhon Pathom, Nonhtaburi and Pathum Thani Zone 2 includes Ang Thong, Ayutthaya, Chachoengsao, Chon Buri, Kanchanaburi, Nakhon Nayok, Phuket, Ratchaburi, Rayong, Samut Songkhram, Saraburi, and Suphanburi Zone 3 encompasses the remaining 58 provinces And to promote decentralization and facilitate increased opportunities for the regions outside Bangkok, the country is divided into three investment zones. Zone 1 comprises Bangkok and 6 surrounding provinces, while Zone 2 is the 12 provinces surrounding Zone 1. The remaining 58 provinces are in Zone 3. Source: Thailand Board of Investment 10

11 From Zone-Based to Sectoral Approach
Sector Matrix: Incentives to strengthen competitiveness Strategic or Priority Activities Maximum incentives regardless of location Customized packages Zone-Based Incentives: Zone 1 Zone 2 Zone 3 Zone and Sector Matrix BOI Incentives are based on a Zone and Sector Matrix, for industrial decentralization, and for strengthening competitiveness of strategic, or priority sectors regardless of zone or location. 11 11

12 Examples of Priority Activities
Agriculture and agro-industries R&D Software development Molds & Dies Biotechnology Alternative energy Manufacture of hi-tech products e.g. advanced ceramics Here you can see examples of the priority activities that are promoted by the BOI. These activities are entitled to maximum incentives, regardless of location. 12

13 Additional Incentive Package for STI (Skill, Technology & Innovation)
Privileges will be based on the project’s total investment in STI expenditures in any of the following 4 categories: Adv Tech Training R&D There is an additional Incentive Package for Skill, Technology and Innovation (STI) Policy - Under the STI policy, the value ceiling of corporate income tax exemption is removed, which is usually capped. The privilege of corporate income tax exemption is increased by 1 to 3 years, depending on STI expenditure. However, the total corporate income tax exemption period is not over 8 years. The categories of STI expenditure consist of ➣R&D or design ➣Advanced technology training ➣Support for educational or research institution SciTech Funding S&T Dev Fund 13 13

14 Requirement and Additional Incentive for STI Activities
STI Expenditure Additional Incentives 1% of total sales for the first 3 years of operations or at least 150 million baht 1 year (uncapped) 2% of total sales for the first 3 years of operations or at least 300 million baht 2 years (uncapped) 3% of total sales for the first 3 years of operations or at least 450 million baht 3 years (uncapped) Note: 1. Investment ceiling uncapped. Corporate income tax holiday may not exceed eight years. 2. Exemption of import duty on machinery

15 New Policies for 2010-2012 “Investment for Sustainable Development”
Application submission deadline: December 31, 2012 1. Special incentives for 3 groups of targeted activities Manufacture of eco-friendly material and product, e.g. bioplastics Energy saving and alternative energy High technology activities e.g. industrial electronics, electronic parts for vehicles, biotech, nano-tech, functional fiber etc. Incentives Exemption of import duties on machinery 8-year exemption of corporate income tax with no cap 5-year 50% reduction of corporate income tax on net profit 10-year double deduction of transportation, electricity and water supply costs deduction from net profit of 25% of investment in infrastructure installation and construction costs in addition to normal capital depreciation This January, the BOI announced a new policy to promote sustainable development. These new policies will include certain activities of the now expired Thailand Investment Year such as Manufacture of eco-friendly material and product, e.g. bioplastics Energy saving and alternative energy businesses High technology activities e.g. industrial electronics, electronic parts for vehicles, biotech, nano-tech, functional fiber These 3 groups of activities will receive the maximum incentives from the BOI. 15 15 15

16 New Policies for 2010-2012 “Investment for Sustainable Development”
2) Measure to promote energy conservation, alternative-energy utilization or reduction of environmental impacts Incentives Import duty exemption on machinery, regardless of zone. 3-year corporate income tax exemption on the revenue of existing projects, accounting for 70% of the investment under this measure excluding cost of land and working capital. For existing projects only, we have a new measure to promote energy conservation, alternative energy utilization or reduction of environmental impact. If you submit an investment plan to BOI showing a change in machinery to save energy, introduce alternative energy into your project, or reduce the environmental impact or energy consumption at a stipulated ratio, you qualify for additional incentives. 16 16

17 New Policies for 2010-2012 “Investment for Sustainable Development”
3) Measure to promote production efficiency improvement by technology upgrade for manufacturing of new products Incentives Exemption from import duties on machinery, regardless of zone. Exemption from corporate income tax for 3 years, regardless of zone. The benefit from this exemption may not exceed 100% of the project’s investment value. We also have a new measure to promote production efficiency improvement by technology upgrade for manufacturing of new products. Conditions are that it must be for the manufacture of a new product that must be included in the List of Activities Eligible for Promotion and be eligible for corporate income tax exemption. Also, the project must invest in new high-tech machinery and improve an existing production line that does not include the assembly line. 17

18 Board of Investment Announcement
Subject: Measure to promote SMEs Investment ส่งเสริมการลงทุนเป็นการพิเศษแก่ SMEs เปิดส่งเสริมการลงทุนบางประเภทเป็นการพิเศษ ให้สิทธิและประโยชน์เป็นการพิเศษ ผ่อนปรนเงื่อนการส่งเสริม

19 BOI’s Role on SMEs Investment Promotion
Special Promotion for SMEs Investment To promote on some special activities Allow special rights and benefits Market Opportunities Business Matching Supported service on industrial information via the Internet network Regional Investment Networking Domestic product exhibition Supported Service for SMEs Cooperate with Government agency and Financial institution Measure to promote R&D between industrial sector and education sector ส่งเสริมการลงทุนเป็นการพิเศษแก่ SMEs เปิดส่งเสริมการลงทุนบางประเภทเป็นการพิเศษ ให้สิทธิและประโยชน์เป็นการพิเศษ ผ่อนปรนเงื่อนการส่งเสริม

20 Listed of Activities Eligible for SMEs investment Promotion
52 activities are eligible for promotion Agriculture and Agricultural Product (13 activities) Mining, Ceramics and Basic Metals (7 activities) Light Industry (11 activities) Metal Product, Machinery and Transport Equipment ( 12 activities) Electronic Industry and Electrical Appliance (5 activities) Chemicals, Paper and Plastics ( 3 activities) Service and Public Utilities ( 1 activities) ประเภทกิจการที่ให้การส่งเสริมตามนโยบาย SMEs ให้การส่งเสริมทั้งหมด 52 ประเภท แบ่งเป็น 1. เกษตรกรรมและผลิตผลจากการเกษตร 13 ประเภท 2. เหมืองแร่ เซรามิกส์ และโลหะขั้นมูลฐาน 7 ประเภท 3. อุตสาหกรรมเบา 11 ประเภท 4. ผลิตภัณฑ์โลหะ เครื่องจักร และอุปกรณ์ขนส่ง 12 ประเภท 5. อุตสาหกรรมอิเล็กทรอนิกส์และเครื่องใช้ไฟฟ้า 5 ประเภท 6. เคมีภัณฑ์ กระดาษ และพลาสติก 3 ประเภท 7. บริการและสาธารณูปโภค 1 ประเภท

21 Conditions (1/2) Project with an investment of 500,000 baht or more
(excluding cost of land and working capital) Not less than 51 % of the registered capital must be Thai shares Must have a debt equity ratio of less than 3:1 Used machinery which cost less than 10 million baht are allowed to be used; investment on new machinery must cost more than 25% of used machine’s value เงื่อนไข 1. ขนาดลงทุนขั้นต่ำ (ไม่รวมค่าที่ดินและทุนหมุนเวียน) 500,000 บาท 2. หุ้นไทยไม่น้อยกว่าร้อยละ 51 3. อัตราส่วนหนี้สินต่อทุนไม่เกิน 3 : 1 4. ใช้เครื่องจักรเดิมไม่เกิน 10 ล้านบาท และเครื่องจักรใหม่ ไม่น้อยกว่า 1 ใน 4 ของมูลค่าเครื่องจักรเดิม 5. ขนาดการลงทุน (ไม่รวมค่าที่ดินและทุนหมุนเวียน) ไม่เกิน 80 ล้านบาท กิจการจะต้องมีสินทรัพย์ถาวรสุทธิ หรือขนาดการลงทุน (ไม่รวมค่าที่ดินและทุนหมุนเวียน) ไม่เกิน 200 ล้านบาท 6. มาตรการสิ้นสุดปี 2554

22 Conditions (2/2) Investment amount of each project must be less than 80 million baht (excluding cost of land and working capital). Overall, total value of company’s net asset must be less than 200 million baht (excluding cost of land and working capital) Applications must be submitted by December 31, 2011

23 BOI Announcement No. 1/2554 (2011) Granting of Rights and Benefits under section 36(1) and (2) to existing companies to alleviate the impact of the Strengthening of the Baht

24 Rights and Benefits (1/2)
Application must be existing companies with investment capital, excluding cost of land and working capital, of not less than one million baht in the following industries - Production of ready-to-wear garments - Production of leatherwear - Production of footwear - Production of furniture or decorative items - Production of textiles - Production of toys - Production of sport equipment - Gems and jewelry - Production of lenses - Printing

25 Rights and Benefits (2/2)
Applicants must be certified by an association or agency approved by BOI Promoted project shall receive rights and benefits in accordance with section 36 (1) and (2) for period of 1 year, and the renewal thereof shall be pursuant to criteria prescribed by BOI Promoted project shall comply with regulations and procedures for the application of rights and benefits in accordance with section 36(1) and (2), as set forth by BOI Applicants must submit the application within 31 December 2011

26 Recent Investment Trend
At this time, let me address some comments to our recent investment trend and the continued confidence that investors have in Thailand. 26

27 (Includes Foreign and Domestic Projects)
Comparison of All Net Applications for Investment Promotion 2008 – Feb 2011 (Includes Foreign and Domestic Projects) Number of Projects Amount Invested +7% Bt Billion 638.1 -30% 1,591 1,489 1,262 446.3 447.4 During 2009, the BOI received a record number of applications for investment promotion, due to special incentives program introduced under Thailand Investment Year which was introduced at the end of 2008 and due to global economic recovery in the second half of the year. The increase was not only in the value, at US$20.13 billion, but also in the number of projects, with 1,489 projects applying for investment promotion. For 2010, despite the obstacles that have received so much press, we nevertheless continue upwards. We see US$ billion in applications, pointing to another good year. 269 69.3 Source: BOI, as of 15 March 2011 27

28 Japan Remains No. 1 Investor in Thailand Foreign Direct Investment Applications
-32.7% Among all investors, Japan remains the number one investor country in Thailand. Source: BOI, as of Jan 17, 2011 28

29 BOI Approved SMEs Projects (Jan 2003-Feb 2011)
Type of Activities 1. Agriculture and Agricultural Product Number of Project 177 Value (Million baht) 9,269 2. Mining, Ceramics and Basic Metals 4 85 3. Light Industry 23 324 4. Metal Product, Machinery and Transport Equipment 35 677

30 BOI Approved SMEs Projects Jan 2003- Feb 2011
Type of Activities 5. Electronic Industry and Electrical Appliance Number of Project 13 Value (Million baht) 176 6. Chemicals, Paper and Plastics 48 754 7. Service and Public Utilities 2 32 Total 302 11,319

31 BOI Services 31

32 BOI Support Services Investment Matchmaking Program
Overseas offices Country desks 1-Stop for visas & work permits: work permits in 3 hours Interaction with other govt. agencies on behalf of investors Industrial Subcontracting Services Vendors meet customers program (BUILD Unit) Investment Matchmaking Program ASEAN Supporting Industry Database BOI Support Services Our services are such as investment matchmaking program, one-stop service for visas and work permits, BOI Industrial linkage program and database to link foreign investors with local part suppliers and country desks to facilitate foreign investors from various regions. 32 32 32

33 BOI Unit for Industrial Linkage Development (BUILD) 15 years of service
If we talk about the need to create an enabling environment and respond to investors needs, then the BOI Unit for Industrial Linkage Development has been a great success story for us. This unit addresses the supply chain needs of the manufacturing sector, and by building up local sourcing it reduces logistics costs and also strengthens the parts and components sector of the country. A win-win situation.

34 BUILD Activities Provide information on subcontracting
opportunities in Thailand via database web applications Assist foreign buyers wishing to source from Thai manufacturers Match buyers and subcontractors in related businesses Arrange participation of Thai manufacturers in trade shows and exhibitions abroad BUILD fulfills its objectives through a number of activities, including our subcontracting database, matchmaking services and our assistance in arranging for company participation in trade shows and exhibitions. Most recently, we were proud to take part in Subcon Thailand 2007, which was a 4-day subcontractor exhibition held in Bangkok.

35 ASEAN Supporting Industry Database (ASID)
Information and profiles of companies in supporting industries and manufacturers of parts and components in 10 ASEAN countries ASID can be easily accessed via the internet at I would like to take a moment to encourage you to visit the ASID website, which is a free of charge service that is provided to assist companies in search of subcontractors throughout ASEAN, including within Thailand.

36 19-21 May 2011 at BITEC Bangna

37 More Convenience, less time, more efficiency!
At the OSOS or One Start One Stop Investment Service Center, representatives from 21 government agencies relates to business operations gather under one roof to provide advice to those who would like to start business in Thailand. And let me remind you that the new location of the One-Stop for Visas and Work Permits is in just across the hall from OSOS which saves more time for investors. Now, the company can register tax ID, employer’s ID and company ID at the same time at OSOS. One Start One Stop Investment Center 18th Floor, Chamchuri Square Building 319 Phayathai Road, Pathumwan Bangkok 10330, Thailand Domestic Call: , Inter. Call: (66 2) 37 37 37 37

38 Services at OSOS Staff from relevant agencies will also be available for consultations on a range of topics. Help investors with applications to make sure investors know what is required to: Register a company Apply for investment promotion privileges Obtain a foreign business license Tax registration Complete an environmental impact assessment Obtain utilities, etc. OSOS staff will also accept applications for things such as corporate name registration, corporate tax ID numbers, VAT registration, foreign business licenses, investment promotion incentives, etc. 38

39 IMPACT Exhibition and Convention Center
November 2011 IMPACT Exhibition and Convention Center Organized by Thailand Board of Investment At this point, let me note that this year we will be holding the BOI Fair 2011, which will be from November 2011 at Muang Thong Thani convention center. In keeping with our sustainable investment policy, the theme of BOI Fair 2011 is “Going Green for the Future,” which reflects the increasing importance of environmentally-friendly production. I hope that you have the opportunity to join us at this event, and get a comprehensive look at what types of industries are in Thailand and the products being produced. 39 39

40 Objectives To celebrate the auspicious occasion of the 84th birthday of His Majesty the King. To highlight the achievements of Thai industry in the areas of technology and innovation, as these will greatly enhance efficiency and industrial competitiveness and result in new, environment-friendly production. To build confidence in the Thai economy, while also improving the country’s image; BOI Fair 2011 will give wide exposure to the Thai industrial sector’s commitment to serving society and preserving the natural environment. To provide an opportunity for members of the industrial community to meet, conduct business, and network. BOI Fair 2011 is being held in conjunction with the celebrations of the 7th cycle of His Majesty King Bhumibol Adulyadej The fair will serve as a showcase for Thai industry, with particular emphasis placed on technological advancements and innovation, as that is what will help Thailand achieve greater industrial competitiveness in the 21st century By organizing BOI Fair 2011, we are providing businessmen the opportunity to learn about best practices, state-of-the-art production and products and services that can help them become more competitive Last, but certainly not least, the fair will highlight the vibrant Thai economy and the commitment made by Thai industry to responsible manufacturing and production 40 40

41 “Going Green for the Future”
Theme “Going Green for the Future” โลกสดใส ไทยยั่งยืน The BOI’s policy on sustainable investment has dual objectives We aim to promote knowledge-based investment that extends our strength in industries such as automotive, electronics and agriculture. At the same time, we want to attract innovative projects in industries that are in their infancy today but will become more important to future competitiveness (for example, nanotechnology and materials, biotechnology, and advance ceramics). By focusing BOI Fair on Going Green for the Future, we are encouraging companies to showcase eco-friendly technologies and products 41 41

42 General Information Show date : 10 - 25 November 2011 (16 Days)
Venue : IMPACT Exhibition and Convention Center (237,000 sq.m) - Outdoor : Lakeside 166,000 sq.m - Challenger ,000 sq.m - Hall ,000 sq.m Exhibitors: 84 Outdoor Pavilions and more than 3,000 Indoor Booths Visitors : More than 5 million visitors expected With 237,000 sqm at IMPACT Exhibition and Convention Center, we can accommodate more pavilions and booths than ever before. Accordingly, we are targeting more than 5 million visitors over a 16-day period in November 2011. 42 42

43 Thank You! 43

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