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U.S. Department of State
Thailand Country Commercial Guide
Office of the Coordinator for Business Affairs
COUNTRY COMMERCIAL GUIDE: THAILAND - 1996
The Country Commercial Guide (CCG) presents a comprehensive look at
Thailand's commercial environment through economic, political, and
market analysis.
The CCGs were established by recommendation of the Trade Promotion
Coordinating Committee (TPCC), a multi-agency task force, to consolidate
various reporting documents prepared for the U.S. business community.
Country Commercial Guides are prepared annually at U.S. Embassies
through the combined efforts of several U.S. government agencies.
TABLE OF CONTENTS
I. COMMERCIAL OVERVIEW
II. ECONOMIC TRENDS AND OUTLOOK
- Major Trends and Outlook
- Principal Growth Sectors
- Government Role in the Economy
- Balance of Payments Situation
- Infrastructure Situation
III. POLITICAL ENVIRONMENT
- Nature of Bilateral Relationship
- Major Political Issues
- Political System
IV. MARKETING U.S. PRODUCTS AND SERVICES
- Distribution and Sales Channels
- Use of Agents/Distributors - Finding a Partner
- Franchising
- Direct Marketing
- Joint Ventures/Licensing
- Steps to Establishing an Office
- Selling Factors/Techniques
- Advertising and Trade Promotion
- Pricing Product
- Sales Service/Customer Support
- Selling to the Government
- Protecting Your Product from IPR Infringement
- Need for a Local Attorney
V. LEADING TRADE PROSPECTS FOR U.S. BUSINESS
- Agriculture Sector Prospects
- Non-agricultural Sector Prospects
VI. TRADE REGULATIONS AND STANDARDS
- Trade Barriers
- Customs Valuation
- Import Licenses
- Export Controls
- Import/Export Documentation
- Temporary Entry
- Labeling, Marking Requirements
- Prohibited Imports
- Standards
- Free Trade Zones/Warehouses
- Membership in Free Trade Arrangements
VII. INVESTMENT CLIMATE
- Openness to Foreign Investment
- Laws Governing Foreign Ownership
- Board of Investment Incentives
- Conversion and Transfer Policies
- Expropriation and Compensation
- Dispute Settlement
- Political Violence
- Performance Requirements/Incentives
- Right to Private Ownership and Establishment
- Protection of Property Rights
- Regulatory System: Laws and Procedures
- Capital Markets and Portfolio Investment
- Bilateral Investment Agreements
- Labor
- Foreign Trade Zones/Free Ports
- Capital Outflow Policy
- Major Foreign Investors
- Embassy Support
VIII. TRADE AND PROJECT FINANCING
- The Banking System
- Foreign Exchange Controls Affecting Trading
- Exports: Methods of Payment
- Export Financing and Insurance
- Project Financing Available
IX. BUSINESS TRAVEL
- Business Customs
- Travel Advisory and Visas
- Holidays
- Business Infrastructure
APPENDICES
APPENDIX A
COUNTRY DATA
APPENDIX B
DOMESTIC ECONOMY
APPENDIX C
TRADE
APPENDIX D
INVESTMENT
APPENDIX E
U.S. AND THAILAND CONTACTS
APPENDIX F
MARKET RESEARCH
APPENDIX G
TRADE EVENTS SCHEDULE
I. COMMERCIAL OVERVIEW
Overview of the Import Market
Thailand is one of Asia's fastest growing, most attractive markets for
U.S. exporters and investors. U.S. sales to Thailand were nearly $4.9
billion in 1994, up $1.1 billion or 29 percent over 1993. The first
quarter of 1995 was very promising, with U.S. exports up 43 percent over
first quarter 1994. Major economic indicators encouraging U.S.
exporters include the continued rapid annual growth (8.5 percent) of the
Thai economy, massive public sector investment in infrastructure
development ($60 billion to the year 2000), and an increasingly affluent
($6,000 per capita income in Bangkok and $2,400 nationally) consumer
base of around 60 million people.
Thailand's imports grew 17.8 percent in 1994 to $53.5 billion. The
Japanese supplied 30.2 percent of the market last year, followed by the
EC with 15.1 percent. The U.S. was third with 11.8 percent. By value,
the most successful U.S. exports to Thailand were integrated circuits
and microassemblies.
Commercial Environment
Thailand has succeeded in developing an open market economy based on a
free enterprise system. Despite frequent changes in government, Thai
leaders have pursued consistently conservative fiscal and monetary
policies that have benefited the private sector. Generally close
cooperation exists between public officials and private companies. This
arrangement is assured through a balancing of interests among the
military, bureaucracy, and private sector, with the Crown as the primary
stabilizer.
Although the government initiates and controls much of the public
infrastructure through 65 state enterprises, private sector
participation is increasing in such areas as telecommunications,
transportation, and electric power via concessions and "build, operate
and transfer" schemes. Manufacturing and construction activities, the
most dynamic aspects of the local economy in recent years, are firmly in
the hands of private investors--both domestic and foreign.
The Royal Thai Government (RTG) encourages free trade and foreign direct
investment in Thailand. The U.S.-Thai Treaty of Amity has long
permitted U.S. citizens and businesses incorporated in the U.S. or in
Thailand to operate under the same basic conditions as Thais. The
treaty exempts Americans from most of the restrictions on foreign
investment imposed by the Alien Business Decree. U.S. exporters and
investors typically find the legal environment familiar in Thailand.
Therefore, such tasks as executing a distributorship agreement or
setting up an office in Thailand are not difficult. Local lawyers can
usually complete the paperwork quickly and easily.
Major steps have been taken in recent years to reduce and simplify
import tariffs, impacting positively on imports to Thailand. However,
as this country is among a select group of rapidly expanding markets in
the world, U.S. firms will find the competition from local and
international firms quite stiff.
Major Business Opportunities
Major industry sectors that current offer trade opportunities for U.S.
companies are numerous. Most promising are: computer software and
hardware; telecommunications; electric power systems; airport & ground
support equipment; pumps, valves and compressors; process control;
pollution control; food processing/packaging; franchising; defense;
health care; chemical and plastics; travel and tourism; and construction
equipment. On the agricultural side, major opportunities exist for the
sale of cotton, wheat, temperate hardwood lumber, soybean meal,
processed foods, wine, and fresh citrus fruits.
Major Obstacles
In compliance with GATT Uruguay Round commitments, a simplified import
regime will result in a system of only six rates and a maximum duty for
almost all products of 30 percent. Still, arbitrary customs valuation
procedures constitute a real barrier to U.S. exports. The Customs
Department keeps records of the highest declared prices of products
imported into Thailand from invoices of previous shipments, and uses
these "check prices" to assess tariffs on subsequent shipments of
similar products from the same country. The overall licensing process
also poses an import barrier on many food products because of its cost,
duration, and requirement for proprietary information. Inadequate
protection for U.S. copyright, patent, and trademark holders has been
one of the most prominent obstacles; however, gradual progress is being
made. Under current Thai regulations, only persons of Thai nationality
may be licensed in many professional services, including accounting,
architecture, engineering, construction management, brokerage services,
and legal services. Again, however, market access commitments made
under the Uruguay Round should bring improvements. Finally, lack of a
double taxation treaty raises the cost of business in Thailand.
Nature of Local and Third Country Competition
U.S. firms must do what U.S. firms do well, namely, draw upon their
marketing advantages and technical skills to compete against Thai firms
and third country competition (especially the Japanese and Europeans).
U.S. firms should choose their market niches carefully and constantly
upgrade their product offerings. U.S. competitive advantages currently
include the ability to offer more styles and designs, newer models, and
the latest technology. American firms must continue to emphasize
quality and customer service.
Country Commercial Guides are available on the National Trade Data Bank
on CD-ROM or through the Internet. Please contact STAT-USA at 1-800-
STAT-USA for more information. To locate Country Commercial Guides via
the Internet, please use the following World Wide Web address: WWW.STAT-
USA.gov. CCGs can also be ordered in hard copy or on diskette from the
National Technical Information Service (NTIS) at 1-800-553-NTIS.
II. ECONOMIC TRENDS AND OUTLOOK
Major Trends and Outlook
Thailand's economic development policies are based on a competitive,
export-oriented, free market philosophy. Its economy is well along in a
transition from an agricultural base to a more open and broadly based
economy with a large manufacturing sector. Annual growth in gross
domestic product averaged over eight percent during the last decade, and
just over 10 percent annual growth from 1988 to 1994. Growth rates
slowed modestly in 1992, to 7.8 percent, in part related to political
unrest in May, 1992 which briefly undermined investor confidence.
However, Thailand's economic policies have remained consistent through
political problems and changes in government.
The fundamentals of the Thai economy remain strong, and Thailand should
maintain healthy economic growth for the foreseeable future. GDP growth
picked up in 1993 to 8.2 percent and rose further to 8.5 percent last
year. Thai GDP was $143 billion in 1994. Per capita income was $2,423.
Thailand's trade relations have traditionally been oriented toward
distant markets, particularly those in North America and Europe. The
creation of an ASEAN Free Trade Area, agreed to by ASEAN heads of
government at their January, 1992 summit meeting in Singapore, may
contribute to more rapid growth in Thai trade with its ASEAN partners in
the coming years. Thailand has already implemented the first round of
duty cuts on very high-tariff goods imported from ASEAN countries.
Principal Growth Sectors
Manufacturing: Since 1979 Thailand's increasingly diversified
manufacturing sector has made the largest contribution to the nation's
economy. Real output growth in the sector was 11.5 percent in 1994 and
is estimated to be 11.6 percent this year.
Manufactured exports continue to be dynamic, due mainly to substantial
growth in export-oriented direct investment and government policies
which encourage exports. Industries registering rapid increases in
export production were automatic data processing machines, up 44.9
percent, radios and televisions, up 53.3 percent, rubber, up 43.2
percent, footwear, up 39.2 percent, and integrated circuits, up 27.5
percent.
Agriculture: Growth in agricultural production was flat in 1993 due to a
lingering drought and low prices for many products. The sector grew 3.6
percent in 1994 and is forecast to grow 3.4 percent this year. About 57
percent of Thailand's labor force continues to be at least partially
employed in agriculture, but the sector contributed only about 10
percent of GDP last year. While the sector remains important to the
national economic well being, the relative size of agriculture's
contribution to GDP will continue to decline.
Construction: The construction sector was seriously overheated during
1990 when it grew 22.7 percent; a sharp drop in the number of new
project starts and softening rents, even in the central Bangkok area,
slowed growth to 4.4 percent in 1992. This sector grew 8.2 percent in
1993 and 7.9 percent last year. A large increase in planned public
sector spending for infrastructure projects may provide further sector
growth, but questions remain as to how rapidly the government will be
able to implement the new projects.
Tourism: After disappointing results in 1991 and 1992 caused by the Gulf
War and domestic unrest, the Thai tourist industry rebounded in 1993,
when arrivals surpassed the previous peak reached in 1990. In 1994,
tourist arrivals fell by 7.1 percent, but revenue from tourism grew
slightly to $5.8 billion from $5.5 billion in 1994 due to the stronger
baht.
Others: Output in the mining sector increased by 9.1 percent in 1994,
owing to the expansion in quarrying and fuel minerals. The trade sector
grew 7.6 percent and the service sector grew 6.2 percent.
Government Role in the Economy
The government led by Prime Minister Chuan Leekpai, which took office
following free elections in September 1992, was dissolved in May, 1995.
The Chuan government generally maintained the economic liberalization
policy of previous governments. It also addressed imbalances created
through rapid industrialization by emphasizing rural development and
reducing disparities in the distribution of income. Thai economic
policies have remained generally unchanged since the new government of
Banharn Silapa-archa was elected in July, 1995.
At the end of 1994, the Thai government controlled 77 state enterprises,
mainly utility, communication, transportation, and other infrastructure
companies. State enterprises employed 322,521 persons. Together with
the 1.2 million civil servants in Thailand, public sector employment
accounts for 4.4 percent of the workforce as a whole. However, growth
in government employment has stagnated since the 1970's. The prestige
of government jobs has waned and the better pay and benefits of the
private sector have led to an exodus of the best trained civil servants.
For the past six years Thailand has experienced a substantial government
budget surplus as revenues were fueled by a growing economy while
government investment expenditures for major infrastructure projects
lagged. In 1994 the government's overall surplus reached $2.6 billion,
1.8 percent of GDP.
Since 1984, the Thai baht has been pegged to a basket of currencies of
principal trading partners. The composition of the basket is a closely
guarded secret, but the U.S. dollar appears to represent well over half
of the value of the basket. The Exchange Equalization Fund, chaired by
a Deputy Governor of the Bank of Thailand, determines the exchange value
of the baht each working day. There is no parallel market in Thailand.
Global currency realignments since 1985, and especially the recent
appreciation of the Japanese yen, have tended to make U.S. exports to
Thailand more price competitive. The average annual baht/dollar
exchange rate has varied in a narrow range around 25 baht to the dollar
since 1987. The baht had appreciated to about 24.7 to the dollar by
mid-1995.
In recent years, the Thai government has implemented a series of
measures to liberalize the foreign exchange control regime. It accepted
the obligations of the International Monetary Fund's Article VIII in
1991, reducing restrictions on international transactions. Commercial
banks were given permission to process all foreign exchange transactions
and substantial increases were allowed in the ceiling on money transfers
not requiring Bank of Thailand pre-approval and on spending by Thai
tourists and business persons abroad. Foreign exchange reporting
requirements have been simplified. Banks offer foreign currency
accounts to individuals and businesses. The central bank also raised
limits on Thai capital transfers abroad and allowed free repatriation
(net of taxes) of investment funds, dividends, profits and loan
payments. It allowed exports to be paid for in baht without prior
permission, and companies to transfer foreign exchange between
subsidiaries without having to change those funds into baht.
Balance of Payments
Thai exports grew by 21.3 percent in 1994 to $44.5 billion. This was a
landmark for Thailand, as exports exceeded one trillion baht for the
first time. Import growth was also up strongly at 17.8 percent, to
$53.5 billion. The merchandise trade deficit grew to $9.1 billion and
the current account deficit rose to $8.5 billion, 5.9 percent of GDP.
The capital account recorded a surplus of $14.1 billion, mostly private
net capital inflows and almost entirely bank financing ($13.3 billion).
Non-bank flows were foreign direct investment ($594 million) and non-
bank sector loans of $819 million. Portfolio investment showed net
outflows in 1994 of $409 million.
The overall balance of payments surplus was $4.2 billion. Official
reserves ended 1994 at $30.3 billion, equivalent to about seven months
of imports, up from the 1993 level of $25.4 billion. Total debt
outstanding was $54.1 billion, $15.8 billion of which was public debt.
The total debt service ratio was 10.6 percent.
Infrastructure Situation
Rapid growth has had some drawbacks. Infrastructure bottlenecks remain
a problem and environmental degradation has worsened considerably in
recent years. Thailand's infrastructure bottlenecks and shortages of
skilled personnel will limit the pace of future growth. Metropolitan
Bangkok's public works (communications facilities, ports, electricity
grid, and - particularly - roads and mass transit) are already overtaxed
and will come under increasing pressure. The level of education of the
workforce will have to be raised to maintain Thailand's development pace
and competitiveness with neighboring countries with lower wage rates.
The need to improve Thailand's infrastructure is broadly recognized.
Thailand will spend more than $60 billion in the balance of this decade
on infrastructure, with $30 billion on expanded electrical generating
capacity. In addition to building electric power plants, other major
projects being implemented are two new oil refineries and petrochemical
facilities, a second Bangkok international airport, six million new
telephone lines, mass transit systems for Bangkok and regional centers,
new rail and highway development and expansions, new ports development
and expansions, development of a new central government administrative
city, and solid waste and waste water treatment centers for Bangkok and
provincial cities.
III. POLITICAL ENVIRONMENT
Nature of Bilateral Relationship
U.S.-Thai relations are excellent. Thailand is one of five U.S. treaty
allies in Asia. Strong American support for democracy, especially after
the May, 1992 political upheavals, has been well-received in Thailand.
Trade issues, ranging from protection of copyrights to worker rights,
dominate the bilateral agenda.
Major Political Issues
The recent government of Chuan Leekpai devoted much effort to nurturing
democratic institutions, including working with the military (long a
force in Thai politics) to identify an appropriate role in the post-Cold
War world. Policy priorities of the Chuan government included meeting
basic economic needs and developing rural areas. While the Chuan
government was criticized for the slowness of its decision-making, it
was generally regarded as honest and friendly to business. The
succeeding government of Banharn Silapa-archa has adopted this approach
as well.
The U.S. government has been pressing for improvements in Thai
protection of intellectual property rights, particularly protection of
computer software, and enforcement against violators. The goal is to
encourage Thailand to raise protection of intellectual property up to
international levels. A new copyright law was enacted in March, 1995.
Enforcement of existing laws and regulations has generally improved.
Progress on IPR issues was sufficient for Thailand to be removed from
the USTR's Priority Watch List. However, this issue is likely to be an
area of continued discussion between the Thai and U.S. governments.
The United States has also sought improvements in Thailand's protection
of internationally recognized worker rights. Other concerns are child
labor abuse, workplace safety, and restrictions on public sector
employees' freedom of association and collective bargaining rights.
Political System
Thailand is a constitutional monarchy with a Westminster-style
parliament. Elections must be held every four years, but may be called
more frequently. The Prime Minister must be an elected member of
parliament. Political parties are not usually ideologically oriented.
In nearly every case, they are formed around a key figure, usually the
party leader. Thailand's political orientation is moderate to
conservative, and all political parties support a free market system.
On May 19, 1995, Prime Minister Chuan Leekpai dissolved Parliament after
one of the parties in his five-party coalition withdrew from the
government. During its two and one-half years in office, the Chuan
government restored domestic and foreign economic confidence in Thailand
through its pro-democracy and pro-market stances. General elections
that were held on July 2, 1995 resulted in continuity for Thailand's
economy and its investment climate.
IV. MARKETING U.S. PRODUCTS AND SERVICES
Distribution and Sales Channels
There are three main channels of distribution available to U.S.
exporters. The first includes large, well-established trading companies
with strong financial resources and sales volumes, as well as an
extensive presence in many industrial sectors. This category includes
many Japanese trading companies, as well as the Thai organization, Berli
Juker, the U.S. firm, Louis T. Leonowens, and European trading companies
such as B. Grimm, Diethelm, East Asiatic Company, FE Zuellig, and
Inchcape. In many cases, these large traders form marketing or
production joint ventures with foreign firms when import volumes reach a
sufficient level to justify local investment. Where the market is
highly specialized (eg. defense), however, these large
import/distribution companies often shy away from direct involvement,
preferring to rely on sub-dealers or agents who possess the requisite
contacts or expertise.
The second available channel is precisely these smaller importers who
generally specialize in one line of business in which they have proven
networks and market know-how. The third channel consists of start-up
companies that are just learning the ropes of the import/distribution
business.
Use of Agents/Distributors - Finding a Partner
Agreements between foreign suppliers and local agents/distributors are
governed by the general contract law under the Thailand Civil and
Commercial Code. The relationship between the two parties is basically
a buyer-seller relationship under a sale of goods contract. Under the
Thai Revenue Code, this arrangement avoids any tax liability for the
supplier. Importers must obtain licenses for products such as
foodstuffs, certain pharmaceuticals, and chemicals. It is the
responsibility of the local agent or distributor to apply for any
necessary licenses.
New market entrants should appoint an established agent/distributor with
good local contacts, market expertise, and technical know-how. U.S.
exporters must invest sufficient time in selecting a qualified agent and
providing training for marketing and technical support staff. Frequent
contact with local representatives is critical, especially at the
outset, in order to build a good working relationship based on shared
values and goals.
The U.S. Commercial Service and the Foreign Agricultural Services at the
American Embassy in Bangkok can provide valuable assistance in locating
potential representatives and acquiring preliminary market data. Staff
at both offices know many reputable local consultants who are qualified
to design market entry strategies and to recommend local business
partners. Depending on the extent of service and whether extensive
market research is included or not, U.S. firms can expect to pay an
average of $10,000 to $40,000 for local consulting projects.
Franchising
Many of the leading U.S. fast food franchisers are already firmly
established in Thailand. In other industries, however, few U.S. or
third country franchises currently exist. Thais are increasingly
receptive to the idea of franchising both as customers and as business
partners. Thai incomes are increasing rapidly ($6,000 per capita in
Bangkok) and many consumers prefer popular American brands. Thai
investors are interested in negotiating with franchisers about potential
deals, but are naturally concerned about lengthy payback periods and
high franchise fees, especially when it comes to lesser known U.S.
franchises.
The best way to tap opportunities in franchising is via joint venture
agreements, which allow the franchiser to retain considerable control
while ensuring uniformity of product and service. A joint venture also
provides the franchisee with greater security because the business and
financial risks are being shared. Currently, the best sales prospects
for franchising are fast-food restaurants, convenience stores,
maintenance and cleaning services, automotive services, educational and
technical training programs, printing and photocopying services, and
mailing and packaging services.
Direct Marketing
Direct marketing via personal selling is suitable to the Thai market and
is expected to take off in the near future. This approach is already
viewed by many as an excellent way to win money and praise while
expanding one's circle of friends and contacts. Direct marketing is
already extensively employed for the sale of housewares, toiletries and
cosmetics, and car care items.
Joint Ventures/Licensing
Joint ventures and licensing agreements are important market entry
strategies for American exporters to Thailand. In many cases, the only
way to overcome costly freight charges, import restrictions, and
competition from cheap local goods is via local production. This is
becoming increasingly so now that Thai firms have moved up the
technological ladder to compensate for rising local labor costs compared
with other parts of Southeast Asia and southern China.
Many Thai firms actively seek U.S. joint venture partners who bring
technical, marketing, and management skills to a business relationship.
In turn, Thai firms generally offer plenty of capital, valuable local
vendor and government contacts, and established business relationships
throughout the region. A number of aggressive U.S. companies have
already entered into strategic joint-venture relationships with Thai
partners in Indochina and China.
The American Chamber of Commerce in Thailand has several committees that
work hard to facilitate joint venture operations in the manufacturing
and service sectors. American Embassy officials participate actively on
these committees.
Steps to Establishing An Office
The primary organizational forms for commercial enterprises are the sole
proprietorship, partnership, limited liability company, joint venture
and foreign branch. All are similar in nature to those found in the
West. Limited liability companies, though, tend to be more private than
public in Thailand. The majority of foreign corporations operating in
Thailand do so through these private limited liability companies.
The U.S.-Thai Treaty of Amity and Economic Relations of 1966 has allowed
U.S.-majority-owned businesses incorporated either in the United States
or in Thailand almost equal footing with Thai corporate entities.
Consequently, U.S. corporations may establish wholly-owned subsidiaries
or branch offices in Thailand without the constraints that other foreign
firms face from the Alien Business Law. However, government
restrictions still can be applied in the communications, transport, and
banking sectors, and for the exploitation of land and natural resources
or the trade of domestic agricultural products. To register under the
Treaty of Amity, a U.S. company needs to file an application with the
Department of Commercial Registration at the Thai Ministry of Commerce.
Selling Factors/Techniques
To differentiate themselves from local and third country competitors,
U.S. firms should use their strengths such as quality, innovation,
technology enhancements, and customer service to maximum advantage.
Thai customers have come to expect more and better styles and designs,
regular product upgrades, and updated technology from U.S. companies.
Advertising and Trade Promotion
Advertising and trade promotion are important marketing tools in
Thailand. In particular, foodstuffs and consumer products should be
promoted heavily via a full range of mass media. In Thailand, many
companies rely heavily on the two major English-language newspapers,
"The Bangkok Post" and "The Nation," for advertising, but Thai-language
publication should also be considered. The most popular daily
newspapers in Thai are "Krung Thep Turrakit" (Bangkok Business News) and
"Manager". Special promotional campaigns should be conducted at local
shopping centers, hotels, and convention halls. For industrial
products, it is advisable to translate all product literature and
technical specifications into Thai, to advertise in trade journals, and
to organize technical seminars. Successful firms also arrange for Thai
agents and major customers to receive specialized training back at the
U.S. plant and even donate equipment for training purposes in Thailand.
Pricing the Product
Detailed market analysis is needed for developing a pricing strategy in
Thailand. U.S. firms need to study such factors as the channels of
distribution, the necessary sales and promotion techniques, and the
current pricing practices of key competitors.
Sales Service/Customer Support
To build confidence among Thai consumers and business partners, American
marketers should visit Thailand often and work closely with their local
agents and clients. Many firms benefit from rotating in American
engineers to assist with the training of local representatives and to
accompany them on sales calls. Successful firms understand the
importance of providing marketing and technical assistance. U.S. firms
should also find ways of extending credit to their Thai customers. The
Europeans and the Japanese often use aggressive financing tactics to win
deals.
Selling to the Government
U.S. exporters actively pursue government procurement opportunities in
such key fields as power generation and transmission, petroleum refining
and petrochemicals, telecommunications, transportation, the environment,
health care, and defense. The key to successful bidding on Thai
government contracts and supply tenders is to have a reputable local
representative with good access to the procuring agency and knowledge of
specific requirements. Without this intermediary, it is very difficult
to win a government project. Representatives are accepted, legitimate
players in the bidding process. Agents often provide an early "heads
up" to U.S. firms when they hear of attractive tenders. Before these
tenders are even issued, they can ensure that the principal's product is
specified.
A specific set of rules commonly referred to as the "Prime Minister's
Procurement Regulations" govern public sector procurement. These
regulations require that non-discriminatory treatment be accorded to all
potential bidders. They do, however, provide preferential treatment to
domestic suppliers who receive an automatic 15 percent price advantage
over foreign bidders in initial round bid evaluations. The specific
laws that apply to international tenders are Regulations 87 and 89,
which generally adhere to established international procedures.
Protecting Your Product from IPR Infringement
Inadequate protection in Thailand for U.S. copyright, patent, and
trademark holders remains a serious bilateral trade issue. U.S. firms
should protect themselves by registering all of their intellectual
property. Lawyers specializing in this area can initiate legal actions
to combat piracy, although this can be a lengthy process. The Thai
government is also taking legislative and administrative steps to update
and increase enforcement of existing copyright laws. The U.S.
Government continues to monitor Thailand's progress in implementing
protective measures. Thailand remains on the U.S. Trade
Representative's "Watch List."
Need for a Local Attorney
The services of a local attorney are required for executing
distributorship agreements and setting up offices in Thailand.
Normally, the paperwork can be completed quickly and easily. They also
advise on the various types of business organizations and assist in
registering firms under the Treaty of Amity and in obtaining the
requisite permits. Lawyers are needed for registering patents and
trademarks and for taking other legal measures to protect a product from
intellectual property right infringement. The U.S. Commercial Service
office at the American Embassy in Bangkok has a list of Thai lawyers and
American legal consultants who specialize in commercial law.
V. LEADING TRADE PROSPECTS FOR U.S. BUSINESS
Thailand's dynamic economy provides numerous opportunities for U.S.
exporting firms. The following, in ranked order of best prospects for
U.S. exporters, are some of the sectors that may be of greatest
interest. For additional information on each best prospect, see
Appendix B.
Agricultural Sector Prospects:
1. Cotton
2. Wheat
3. Temperate Hardwood Lumber
4. Soybean Meal
5. Processed Foods
6. Wine
7. Citrus Fruit
Non-agricultural Sector Prospects:
1. Computer Software
2. Telecommunications Equipment
3. Electric Power Systems
4. Airport/Ground Support Equipment
5. Pumps, Valves/Compressors
6. Computers & Peripherals
7. Process Control - Industrial
8. Pollution Control Equipment
9. Food Processing/Packaging Equipment
10. Franchising
11. Defense Industry Equipment
12. Medical Equipment
13. Industrial Chemicals
14. Travel and Tourism Services
15. Construction Equipment
16. Laboratory Scientific Instruments
17. Cosmetics/Toiletries
18. Automotive Parts/Service Equipment
19. Building Products
20. Architecture/Construction/Engineering Services
21. Machine Tools/Metalworking Equipment
22. Plastics Production Machinery
DATA ON BEST PROSPECTS FOR AGRICULTURE
AND INDUSTRY SECTOR EXPORTS
1. Best Prospects for U.S. Agricultural Exports to Thailand
1994 1995 1996
Forecast Forecast
Cotton
(Thousand Metric Tons)
Total market size 360 330 350
Total local production 6 6 7
Total exports 6 6 6
Total imports 351 290 330
Total imports from U.S. 61 196 200
* Market Year Aug - July
* Total Market Size = total consumption
Though U.S. exports of cotton to Thailand declined dramatically in 1993
due to abundant, cheap supplies from competitors, U.S. exports during
1994 rebounded sharply. China, Pakistan, and India are all experiencing
severe production problems associated with various pests opening a
window for U.S. exports.
1994 1995 1996
Forecast Forecast
Wheat
(Thousand Metric Tons)
Total market size 630 700 780
Total local production 0 0 0
Total exports 0 0 0
Total imports 740 700 760
Total imports from U.S. 345 350 400
* Market Year July - Jun
* Total Market Size = total consumption
Thailand's rapid growth in wheat consumption makes it a promising market
for wheat exporters. Though the United States is the major supplier of
wheat to Thailand, it faces competition from Canada, Australia, and
Saudi Arabia. Price and quality are the main factors determining
competitiveness of U.S. wheat in Thailand. However, indications are
that U.S. wheat may become more competitive as Saudi Arabia phases out
its price support program for wheat.
1994 1995 1996
Forecast Forecast
Temperate Hardwood Lumber
(Thousand Cubic Meters)
Total market size 749 850 n/a
Total local production 0 0 n/a
Total exports 0 0 n/a
Total imports 749 850 n/a
Total imports from U.S. 467 470 n/a
* Market Year is the Calendar Year
* Total Market Size = total consumption
Thailand's imports of temperate hardwood lumber have more than tripled
each year during the last three years. Though most of this wood is
sourced from U.S. suppliers, Europe has been able to meet a portion of
Thailand's import needs. Tropical hardwoods have traditionally been the
wood of preference in Thailand. However, diminished supplies have
created tremendous potential for temperate hardwoods.
1994 1995 1996
Forecast Forecast
Soybean Meal
(Thousand Metric Tons)
Total market size 943 1190 1103
Total local production 343 359 363
Total exports 0 0 0
Total imports 600 831 550
Total imports from U.S. 30 38 40
* Market Year Sept - Aug
* Total Market Size = total consumption
Continued growth in the poultry and swine sectors, although at a slower
rate than in recent years, should increase soybean meal consumption in
1995. Brazil replaced India as Thailand's largest supplier of soybean
meal, followed by India, China, and the U.S. Some 37,800 tons of high-
protein U.S. soybean meal were imported during the first quarter of
1995. The United States still has trouble competing consistently with
India and China because of freight costs and Thailand's preference for
smaller cargoes. U.S. soybean meal prices are currently competitive
with Brazil. As a result of the Uruguay Round, Thailand replaced the
surcharge on soybean meal with a tariff-rate-quota of 20 percent. The
out-of-quota tariff will be 148 percent in 1995, and will be reduced to
133 percent over 10 years.
Processed Foods
One of the fastest growing import sectors is processed food products.
The value of these imports increased more than 12 percent last year.
Processed food products with good retail potential include breakfast
cereals, snack foods, canned vegetable and fruit juices, processed
fruits and vegetables, dried fruit, processed nuts (almonds, pistachios,
macadamias, walnuts), bakery mixes, chocolate and confectionery, health
foods, cheeses, condiments, soft drinks, and soup bases.
Wine
Wine is one of the latest trends in Thailand's effort to modernize by
embracing the West. Wine imports increased 40 percent in 1994 to over
two million liters, and total sales are estimated at $40 million.
Although originally imported to satisfy the limited demand of
expatriates, wine is currently a fad among the wealthy and educated Thai
upper class. With its growing popularity, the leading English-language
newspaper introduced a weekly "Why Wine?" column last year to teach the
finer points of wine consumption. As a symbol of wealth and status,
wine is gradually replacing whiskey as the gift of choice. In the
longer term, opportunities exist among the rising middle class, for whom
wine -- particularly white wines from California or Australia -- can be
a light, healthy and affordable alternative to spirits.
Fresh Citrus Fruits
The United States has recently established protocols with Thailand which
allow the import of fresh citrus products from the U.S. These protocols
give the U.S. citrus industry a significant advantage over competitors.
Only U.S. fresh citrus is allowed in at this time, giving U.S. suppliers
an opportunity to become entrenched in the market. However, this
advantage may be short-lived as competitors work hard to satisfy
Thailand's rigorous phythosanitary requirements. Once these
requirements are met, though, competitors such as Australia will enjoy
the advantage of proximity. Industry sources estimate market potential
at $40 million, though this goal will probably not be reached in the
near future.
2. Best Prospects for U.S. Industrial Exports to Thailand
Computer Software
Rank of Sector: 1
Name of Sector: Computer Software
ITA Industry Code: CSF
Narrative:
The computer software industry is forecasted to grow rapidly in the next
few years. Thai public agencies have plans to increase spending on
upgrades of existing software packages. Large companies, banks and
financial firms are also expected to invest heavily in new software. In
the personal computer software market, applications software currently
represents 73 percent of the market while systems software accounts for
the remaining 27 percent.
The Intellectual Property Rights Law became effective on March 21, 1995.
If legal enforcement efforts succeed, the Thai computer software market
is expected to double in size in the near future. Many foreign software
companies are in the process of establishing representative offices in
Thailand. More competition will lead to lower prices. Many Thai public
and private agencies are expected to switch from bootlegged to legal
software.
U.S. manufactured computer software will continue to dominate the Thai
software market.
The most promising subsectors are:
- Operating system software
- CAD/CAM/CAE software
- Database management software
- Internet
- Multimedia software
- Re-engineering software
Data Table:
1994 1995 1996
a. Total Market Size 180 275 406
b. Total Local Production 30 50 68
c. Total Exports 0 0 0
d. Total Imports 150 225 338
e. Imports from U.S. 100 130 163
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Telecommunications Equipment
Rank of Sector: 2
Name of Sector: Telecommunications Equipment
ITA Industry Code: TEL
Narrative:
The market for telecommunications equipment in Thailand totaled about
$2.3 billion in 1994. Rapid annual growth of more than 20 percent can
be attributed to the accelerated installation of three million telephone
lines, the construction of a satellite earth station, the expansion of
cellular phone and pager networks, and the installation of fiber optic
cables. This expansion of Thailand's telecommunications infrastructure,
which will include several new cable television stations, looks very
promising for new investment activities.
The United States has about 20 percent of the market. Key competitors
include Japan, Germany, Sweden, Finland, Taiwan, and South Korea.
The most promising subsectors are:
- Telephone switching equipment
- Optical fiber cables
- Mobile telephone equipment
- Paging systems
- Private automatic branch exchanges (PABXs)
- Facsimile machines
- Cable TV broadcasting network equipment
- Satellite signal receiving equipment
Data Table:
1994 1995 1996
a. Total Market Size 2345 2920 3650
b. Total Local Production 2198 2420 2660
c. Total Exports 1539 1690 1860
d. Total Imports 1686 2190 2850
e. Imports from the U.S. 353 460 600
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Electric Power Systems
Rank of Sector: 3
Name of Sector: Electric Power Systems
ITA Industry Code: ELP
Narrative:
Capital investment in new power plants should zoom ahead to $5.4 billion
per year during 1997-2001. To lessen the burden of investing in new
generating units, EGAT has begun to purchase electricity from small
power producers (SPPs), has concluded an agreement to purchase 1,610 MW
of electricity from Laos, and is calling for proposals to supply 3,800
MWs of electricity during the years 2000-2002 from independent power
producers (IPPs).
Demand for electricity is expected to have increased by about 10.2
percent per year from 1992 to 1996 (Seventh Plan), and should continue
to rise by about 7.8 percent from 1997 to the year 2001 (Eighth Plan),
and by 6.1 percent from the year 2002 to the year 2006 (Ninth Plan).
The Electricity Generating Authority of Thailand (EGAT) estimates that
demand for electricity in Thailand will increase to 13,075 megawatts
(MW) by 1996, to 19,000 MW by the year 2001, and to 25,515 MW by the
year 2006.
The United States is the third largest supplier of electric power
systems to Thailand. Japan is the largest, followed by France.
The most promising subsectors are:
- Steam generating plant equipment
- Turbine generator plant equipment
- Boilers
- 230/69 kV substations
- 22 kV portable switch stations
- 115 kV and 230 kV power transformers
- 12.5 MVA, 50 MVA and 200 MVA power transformers
- 230 kV circuit breakers
- Pole and transmission line hardware
- Noncurrent-carrying wiring devices
- Burner retrofits
- Compression connectors
- Insulators
- Instrumentation and control equipment
- Construction services
- Engineering consulting services
Data Table:
1994 1995 1996
a. Total Market Size 1165 1230 1290
b. Total Local Production 220 240 260
c. Total Exports 525 550 580
d. Total Imports 1470 1540 1610
e. Imports from the U.S. 207 217 228
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Airport/Ground Support Equipment
Rank of Sector: 4
Name of Sector: Airport/Ground Support Equipment
ITA Industry Code: APG
Narrative:
The Royal Thai Government (RTG), under its Seventh National Development
Plan, plans to develop Thailand as a regional communications and
aviation center. The Airport Authority of Thailand (AAT) is expanding
the passenger capacity of Bangkok International Airport (BIA) from 19 to
25 million per year, and is upgrading three other international
airports. The RTG is also moving ahead with the long delayed Second
Bangkok International Airport (SBIA) at Nong Ngu Hao.
These ongoing projects are creating demand for both new and replacement
airport and ground support equipment. Over 95 percent of total market
demand is met by imports, which rose seven percent to about $231.2
million. The projected annual growth rate is 10 percent for the near
future. The U.S. is the major supplier with about 50 percent of the
ground support import market, and is ranked second in airport equipment
with a 30 percent share. Under the SBIA Master Plan, the AAT plans to
invest about $640 million for the following airport and ground support
equipment:
- Fire/Rescue rolling stocks
- Meteorological facilities and equipment
- Navigational aids and radar systems
- Moving sidewalks/escalators
- Baggage handling/detection systems
- Loading bridges
- Aircraft fueling systems & rolling stock
- Fuel hydrant network
- Ground service equipment and maintenance facilities
Data Table:
1994 1995 1996
a. Total Market Size 218 240 264
b. Total Local Production 5 6 6
c. Total Exports 18 20 22
d. Total Imports 231 254 280
e. Imports from the U.S. 46 56 61
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Pumps, Valves/Compressors
Rank of Sector: 5
Name of Sector: Pumps, Valves/Compressors
ITA Industry Code: PVC
Narrative:
The market for pumps, valves and compressors in Thailand is expected to
grow at an average rate of 14 percent per year with imports fulfilling
most of demand. The construction of new oil refineries (by Shell and
Caltex), the laying of undersea and inland oil/gas pipelines, and the
construction of petrochemical plants on Thailand's Eastern Seaboard
offer good opportunities for the sale of pumps, valves, and compressors.
Liberalized laws relating to the establishment of new petrochemical
plants and retail gas stations, as well as increased exploration of
oil/gas fields, the development of tap water facilities, the
construction of wastewater treatment plants, and the future development
of new Southern Seaboard Development areas (from 1995 to 2005) will
create even more sales opportunities.
U.S. products are highly rated in Thailand for their quality and
dependability. U.S. suppliers enjoy about 21 percent of the market,
followed by Japan.
The most promising subsectors are:
- Centrifugal pumps
- Fuel dispensing pumps
- Automatic actuators
- Pressure reducing valves
- Gas compressors
- Compressors for refrigerating equipment
Data Table:
1994 1995 1996
a. Total Market Size 1031 1226 1457
b. Total Local Production 254 305 366
c. Total Exports 127 146 168
d. Total Imports 904 1067 1259
e. Imports from the U.S 190 228 274
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Computers/Peripherals
Rank of Sector: 6
Name of Sector: Computers/Peripherals
ITA Industry Code: CPT
Narrative:
Thailand's computer market is following global trends toward the merging
of computers, telecommunications and mass media into a broad new
industry. This is expected to lead to enormous commercial opportunities
in Thailand. The Association of Thai Computer Industries estimated that
the computer industry will grow by 45 percent this year. Hardware will
grow by 38 percent. Mainframes represent seven percent of total sales,
midranges six percent, minicomputers five percent, and workstations and
ATMs three percent each. Personal computers and peripherals account for
the remaining 76 percent of the market. Of total PC sales, notebook
computers account for 10 percent.
The Thai government strongly supports the development of the information
technology industry as a key in advancing the country both socially and
economically. Many computer projects have been initiated by the public
sector. An information superhighway project will be launched at the end
of 1995. This project will employ fiber optic lines to perform such
tasks as bringing education to remote rural areas.
The most promising subsectors are:
- Computer networking products
- Client server systems
- Multimedia products
- Personal computers & notebook computers
- Automated Teller Machines (ATMs)
- Point-of-Sale units
Data Table:
1994 1995 1996
a. Total Market Size 895 945 990
b. Total Local Production 1710 1845 1990
c. Total Exports 2600 2780 2975
d. Total Imports 1785 1880 1975
e. Imports from U.S. 400 430 465
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Process Control - Industrial
Rank of Sector: 7
Name of Sector: Process Control - Industrial
ITA Industry Code: PCI
Narrative:
Thailand's manufacturing sector has grown rapidly since 1987 with annual
growth rates between 10-14 percent. This growth is expected to continue
in the coming years. Six strategic industries were identified in the
Seventh National Development Plan (1992-1996) as areas of international
competitive advantage for Thailand: agro-industries and food processing;
textiles and garments; electronics; metal-working; petro-chemicals; and
iron and steel.
Government promotion of these sectors has significantly increased
requirements for process control instruments and equipment. More than
90 percent of local demand is met by imports. Thai manufacturers
continue to prefer U.S. process control products for their high quality
and reliability.
The most promising subsectors are:
- Control equipment
- Measuring equipment
- Testing equipment
- Support devices
Data Table:
1994 1995 1996
a. Total Market Size 630 704 787
b. Total Local Production 121 129 137
c. Total Exports 85 90 95
d. Total Imports 594 665 745
e. Imports from the U.S. 138 159 183
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Pollution Control Equipment
Rank of Sector: 8
Name of Sector: Pollution Control Equipment
ITA Industry Code: POL
Narrative:
Recent environmental legislation requires all hotels, hospitals, and
high rise buildings to have waste water treatment facilities that meet
strict effluent standards. Most highrise buildings have previously had
inadequate pollution control facilities which must now be upgraded. The
Bangkok Metropolitan Administration has also called for competitive
bidding on a turnkey wastewater collection and treatment facility and a
garbage incinerator. The Electricity Generating Authority of Thailand
has hired international engineering firms to install flue gas
desulfurization (FGD) equipment and will soon call for bids on more
installations of FGD equipment to retrofit old power generators. In
addition, more solid waste treatment plants and hazardous waste
treatment plants will be built.
U.S. pollution control equipment and technologies are highly rated in
Thailand. U.S. firms wishing to do business in Thailand should
establish good relationships with local partners and various regulatory
agencies.
The most promising subsectors are:
- Consulting & management services
- Design licensing
- Waste water treatment/water purifying equipment
- Lining membranes
- Incinerators
- Waste recycling process equipment
- Centrifugal pumps
- Gas filters
Data Table:
1994 1995 1996
a. Total Market Size 295 352 420
b. Total Local Production 30 32 34
c. Total Exports 15 16 17
d. Total Imports 280 336 403
e. Imports from U.S. 45 54 65
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Food Processing/Packaging Equipment
Rank of Sector: 9
Name of Sector: Food Processing/Packaging Equipment
ITA Industry Code: FPP
Narrative:
The food processing and packaging equipment market continues to grow
steadily at 15 percent per year as a large, educated middle class
creates a stronger local market for processed and packaged food. Local
production has expanded rapidly to cope with the increased demand.
Since domestically produced equipment tends to be rather
unsophisticated, imported equipment is still required. This is
particularly true in packaging, which is growing at an even faster pace
than processing.
German and Taiwanese manufacturers hold the largest market share,
followed by U.S. companies who hold 14 percent of the total. There is
generally good receptivity to U.S. products, but European and Asian
suppliers have been more aggressive in servicing and promoting to the
Thai market.
The most promising subsectors are:
- Integrated canning systems
- Bakery equipment
- Beverage packaging and equipment
- Seafood packaging equipment
Data Table:
1994 1995 1996
a. Total Market Size 1062 1171 1340
b. Total Local Production 120 138 155
c. Total Exports 43 50 60
d. Total Imports 985 1083 1245
e. Imports from U.S. 148 162 195
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Franchising
Rank of Sector: 10
Name of Sector: Franchising
ITA Industry Code: FRA
Narrative:
The franchising business in Thailand is currently dominated by U.S.
entrepreneurs, who account for about 90 percent of the market. Local
franchisers currently represent eight percent of the market. The
food/restaurant sector is by far the most popular means of franchising
in Thailand, followed by convenience stores. Newer types of franchising
services, such as business and educational aids, maintenance and
sanitation, and commercial printing and photo copying, are just
beginning to emerge.
There is good room for growth in franchising, especially in non-food
sectors. The buying power of the Thai middle class is increasing
rapidly in line with strong economic growth. The Thais are very
receptive to U.S.-brand products and services, which has facilitated the
acceptance of the franchising concept in Thailand.
The most promising subsectors are:
- Fast food restaurants
- Convenience stores
- Maintenance, cleaning and sanitation services
- Language schools and educational aids
- Printing and photo copying services
- Automotive maintenance services
- Mailing and packaging services
- Business aids
Data Table:
1994 1995 1996
a. Total Market Size 20 26 33.8
b. Total Local Production 1.6 2.0 2.7
c. Total Exports 0 0 0
d. Total Imports 18.4 24.0 31.1
e. Imports from the U.S. 17.8 23.3 30.2
1) Exchange rate US$1 = Baht 25.
2) 1995 and 1996 figures are estimated.
3) Figures are in $ millions.
Defense Industry Equipment
Rank of Sector: 11
Name of Sector: Defense Industry Equipment
ITA Industry Code: DFN
Narrative:
Thailand's defense spending was about $3.4 billion in 1994, up 8.2
percent. The defense budget as a percentage of Gross Domestic Product
has remained constant over the past three years at 2.5 percent. About
$800 million to $1.0 billion is spent per year for military hardware,
both to replace outdated items and for new programs.
Recently, the Royal Thai Army (RTA) created a plan to modernize its M113
series armored personnel carriers (APCs) to the M113A2 series. One
hundred units have been upgraded so far with another 100 being
rehabilitated. The RTA will also spend $48 million to remodel several
of its M113 APCs into armored infantry fighting vehicles (AIFVs) by
mounting 30 mm gun turrets on them. The RTA currently needs light- and
medium-weight tactical wheeled vehicles. It also plans to change
200,000 assault rifles used by rangers to a new generation model, and to
set up a Command, Control, Communications and Intelligence (C3I) System.
The cost for these two programs is about $160 million.
The Royal Thai Air Force has several major programs in their FY'96
budget/acquisition plan, including:
- A squadron of 8, 12 or 18 second generation aircraft
- A replacement aircraft trainer for the T-37 aircraft
- C-47 aircraft modification
- LANTRIN pods
- AMRAAM missiles
- Four to six C-130H aircraft
- A hypobaric chamber
The Royal Thai Navy is considering the following equipment/systems for
possible acquisition:
- Diesel electric submarines
- Mine countermeasure ships
- Airborne early warning systems
- Tactical data links for ships, aircraft, and shore sites
- Weapons systems and service life extension programs for
amphibious assault vehicles
- Naval dockyard construction and outfitting
- Small antisubmarine helicopters
Imports of defense equipment were up about $853.7 million in 1994, an
increase of 127 percent over 1993. This drastic increase resulted from
the import of $680.4 million worth of airplane and helicopter parts from
third countries. However, $347.6 million of the imported parts were for
re-export. The U.S. is still the leading supplier of other defense
equipment. Exports from the U.S. were about $25.3 million. France
ranked second with $19.3 million in exports. Since the U.S. has long
provided military assistance through the Military Aid Program (MAP) and
Foreign Military Sales (FMS) to the Thai military forces, U.S.-made
military hardware and technologies are well accepted in Thailand and
Thai weapons systems are based chiefly on U.S. military standards.
Data Table:
1994 1995 1996
a. Total Market Size 517 553 591
b. Total Local Production 11 12 12
c. Total Exports 348 372 398
d. Total Imports 913 977
e. Imports from the U.S. 25 28 31
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Note: Imports of aircraft and helicopter parts in 1994 accounted for
$680.4 million (79 percent) of the total imports
Medical Equipment
Rank of Sector: 12
Name of Sector: Medical Equipment
TA Industry Code: MED
Narrative:
The medical equipment market is one of the fastest growing industries in
Thailand. The government is aware of the urgent need for health care
services and facilities and is trying especially to improve peoples'
health in rural areas. This will be done through both the construction
of new health care facilities and the expansion of existing ones. This
will require much more medical equipment in the coming years.
The construction of hospitals in the Bangkok area has slowed somewhat as
projects have been completed to cope with current demand. Existing
hospital are competing aggressively in terms of services and diversity
of treatments offered. In rural areas, the construction of new
hospitals and medical units continues to expand rapidly.
Investments or joint ventures in the medical equipment industry are
encouraged by Thailand's Board of Investment (BOI), which offers various
incentives such as exemptions from corporate income tax and import
duties on capital investment and others.
The most promising subsectors are:
- Disposable products such as rubber gloves, syringes, and gowns
- HIV testing equipment
- High-tech diagnostic apparatus
- Incubators
Data Table:
1994 1995 1996
a. Total Market Size 320 370 450
b. Total Local Production 152 165 190
c. Total Exports 62 70 80
d. Total Import 230 275 340
e. Total Imports from U.S. 55 64 70
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Industrial Chemicals
Rank of Sector: 13
Name of Sector: Industrial Chemicals
ITA Industry Code: ICH
Narrative:
Thailand's demand for industrial chemicals is estimated to grow at an
annual rate of 9.5 percent over the next three years. Although Thailand
can produce ethylene, propylene, styrene, citric acid, and some basic
inorganic chemicals, the demand for other chemicals relies heavily on
imports.
U.S. industrial chemicals are well accepted locally due to their good
quality. The United States is the second largest supplier of industrial
chemicals to Thailand after Japan.
The most promising subsectors are:
- Water treatment chemicals
- Other specialty chemicals and chemical additives for textiles
- Electronics
- Pulp and paper
- Rubber
- Plastics
Data Table:
1994 1995 1996
a. Total Market Size 2722 2980 3264
b. Total Local Production 400 440 484
c. Total Exports 228 250 275
d. Total Imports 2550 2790 3055
e. Imports from the U.S. 390 460 550
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Travel/Tourism Services
Rank of Sector: 14
Name of Sector: Travel/Tourism Services
ITA or PS&D Code: TRA
Narrative:
Outbound travel from Thailand to the U.S. is steadily increasing and
will continue for the foreseeable future. Thailand is now a rapidly
emerging market that should not be ignored by U.S. travel and tourism
service suppliers.
Increasingly affluent Thai travelers are seeking more for their tourist
dollar and consider the U.S. an affordable and accessible market for a
seven- to 10-day vacation. Thai arrivals in the U.S. increased 10.3
percent in 1994, totaling 70,000 persons. The total number of Thais
leaving the country increased to 1.52 million in 1994 from 1.28 million
in 1993, an 18 percent rise. Sixty-five percent, or approximately one
million, are tourists with the remainder being business executives,
workers, and students. Traditionally a magnet for educated and wealthy
Thais, the U.S. is also a top destination for the growing numbers of
upwardly mobile professionals. Thai business executives combine
essential business trips with personal or family vacations. Students
also are traveling to U.S. in increasing numbers.
Over 100,000 Thais are expected to visit the United States in 1996. In
the first quarter of 1995, the number of tourist visas issued by the
American Embassy in Bangkok was up 34 percent over 1994. The average
age of Thai visitors to the U.S. is 36 and the average visitor spends
about US$2,000 each during a typical 10-day visit.
Data Table:
1994 1995 1996
a. Total Market Size: 1880 2068 2775
b. Total Local Production: N/A N/A N/A
(Total expenditures by Thai
travelers locally)
c. Total Exports: N/A N/A N/A
d. Total Imports: 1880 2068 2775
(Total expenditures by Thai
travelers overseas)
e. Imports from U.S.: 85 94 104
(Total expenditures by Thai
travelers in the U.S.)
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
* Please note that the data represent rough estimates for Thai
expenditures overseas which are categorized as services in the balance
of payments, and are not included in trade statistics.
Construction Equipment
Rank of Sector: 15
Name of Sector: Construction Equipment
ITA Code: CON
Narrative:
The construction equipment market grew by 10.2 percent in 1994, and
growth of 12-13 percent is expected in 1995. Equipment sales for public
works projects in the energy, petrochemical and transportation sectors
remain robust with above 20 percent growth expected. The six-year
project to widen 1,991 kilometers of roads began in 1994. The total
budget is US$5.7 billion. Several other projects, such as the US$1
billion third stage expressway, the US$1.2 billion double-track railway,
and the US$2.8 billion Second Bangkok International Airport are
underway.
Imports of construction equipment, which total more than 95 percent of
the market, reached US$1.8 billion in 1994. Development of local
production is hindered by technological limitations, and a lack of
economies of scale and capital investment. Excavators and tamping or
compacting machinery make up nearly half of this market. The used
equipment market, dominated by the Japanese, accounts for 40 percent of
the total market. Demand for new machines is expected to grow 10-15
percent annually over the next several years. High-technology
construction equipment is a particularly fast growing market segment.
The most promising subsectors are:
- Tamping/compacting machinery
- Cranes
- Maintenance equipment for construction machinery
- Labor replacing concrete mixing equipment
- Labor replacing hydraulic equipment
Data Table:
1994 1995 1996
a. Total Market Size 1813 1978 2218
b. Total Local Production 91 105 118
c. Total Exports 58 67 84
d. Total Imports 1780 1940 2183
e. Imports from U.S. 97 109 122
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Laboratory Scientific Instruments
Rank of Sector: 16
Name of Sector: Laboratory Scientific Instruments
ITA Industry Code: LAB
Narrative:
The Thai government is concerned with the development of human
resources, science and technology, and the utilization of natural
resources in order to sustain industrial growth. Financial outlays for
research and development are expected to increase to support the current
economic expansion.
The need for laboratory and scientific instruments has been steadily
increasing for strategic industries such as food processing, textiles,
electronics, metal-working, petro-chemicals, and steel. Demand for
laboratory instruments is predicted to grow at an annual rate of 24
percent in the coming years. Most of the demand will be met by imports.
The United States and Japan are currently the two major suppliers in
this field. U.S. laboratory and scientific instruments are favorably
regarded for their superior technology.
The most promising subsectors are:
- Speed indicators
- Lenses, prisms, mirrors and other optical elements
- Chromatographs
- Electrochemical instruments
- Radiation measuring and controlling equipment
Data Table:
1994 1995 1996
a. Total Market Size 541 674 841
b. Total Local Production 149 163 178
c. Total Exports 104 114 125
d. Total Imports 496 625 788
e. Imports from the U.S. 49 54 60
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Cosmetics/Toiletries
Rank of Sector: 17
Name of Sector: Cosmetics/Toiletries
ITA Industry Code: COS
Narrative:
The cosmetics industry in Thailand has the fastest growth rate among
Asian countries except for Japan. The market for cosmetics and
toiletries will soon reach $850 million -- $400 million for the
cosmetics industry and $450 million for toiletries. Imports account for
30 percent of the total market.
After a moderate increase in 1996, imports are forecast to increase at
an average rate of 20 percent for several years because of more
disposable income among the growing middle class, as well as the recent
reduction on import duties from 60 to 40 percent. A further decline in
import duties to 20 percent is expected in 1997.
The most promising subsectors are:
- Specialized skin care products
- Anti-aging products
- All natural products
- Products for specific skin types
- Face whitening products
Data Table:
1994 1995 1996
a. Total Market Size 635 730 850
b. Total Local Production 476 550 670
c. Total Exports 68 80 98
d. Total Imports 227 260 278
e. Imports from the U.S. 53 58 67
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Automotive Parts/Service Equipment
Rank of Sector: 18
Name of Sector: Automotive Parts/Service Equipment
ITA Code: APS
Narrative:
The Thai auto industry is dominated by the Japanese. But American
vehicle manufacturers and parts producers are beginning to reenter the
market. Chrysler is currently building a Jeep plant and Ford is
investigating a pick-up truck assembly operation. Several major U.S.
vehicle component manufacturers are also building or expanding their
plants in Thailand.
Twelve auto manufacturers assemble vehicles in Thailand. Their total
output for 1994 was 434,001 units. Five of these assemblers were
Japanese, who control 76 percent of the passenger car market and 99
percent of the commercial vehicle market. Toyota (25.4 percent share),
Isuzu (17.8 percent), and Mitsubishi (16.5 percent) are the market
leaders.
Thailand is one of the fastest growing auto markets in the world. With
the total number of vehicles on the road fast approaching 10 million,
the auto industry is expected to grow at 8-10 percent annual rates for
the next three years. Several companies have established Thailand as
their assembly base for Southeast Asia. By the year 2000, Thailand is
expected to have a production capacity of 800,000 units. This rapid
expansion has created opportunities for US exports in the auto
components sector.
Another important factor bodes well for American firms. The rapid rise
in the Japanese yen and German mark has increased the cost of materials
imported from those countries. Thai assemblers are now interested in
making contact with U.S. companies supplying components to Japanese and
German transplants in the U.S. They are also looking for joint ventures
with U.S. vehicle and parts producers.
The most promising auto parts subsectors are:
- Diesel engine components
- Suspension and chassis parts
- Large injection molds and molded parts
- Press dies
- Jigs and fixtures
- Catalytic converters.
Thailand also offers good opportunities for the automotive
service/diagnostic equipment market, which is expected to grow at 10
percent for the next three years. Japanese equipment currently dominates
with a 53 percent market share, followed by the U.S. with 28 percent.
The most promising service/diagnostic subsectors are:
- Equipment for tire and brake centers
- Emission control testing equipment
- Pumps of all kinds
Data Table:
1994 1995 1996
a. Total Market Size 5521 6073 6680
b. Total Local Production 4690 5334 6162
c. Total Exports 1214 1518 1973
d. Total Imports 2045 2257 2491
e. Imports from U.S. 73 80 88
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Building Products
Rank of Sector: 19
Name of Sector: Building Products
ITA Code: BLD
Narrative:
The expansion in private construction activities will moderate somewhat
compared to the massive growth of the past. An average growth rate of
8-10 percent is expected in the coming years. Oversupply exists in
virtually all segments of the market, including hotels, retail & office
space, and houses and apartment buildings. However, with the continuing
robust growth of the Thai economy, and a large part of the Thai
population in the 25-44 age bracket, the private construction industry
is expected to remain a high growth sector.
The size of the building products market is well over US$4 billion.
Local manufacturers predominate for products such as ceramic tiles,
roofing tiles, paints, sanitary wares, plumbing fixtures, locks, and
hinges. Imports account for under 20 percent of the total market.
Demand for imports, however, is quite strong for high quality products
that exhibit superior performance or design. Specialty products for
high-rise buildings, including curtains and window/door hardware are
strong performers. With an increasingly affluent population, Thailand
is expected to have a greater appetite for upscale imported building
products. The recent reduction in tariffs has also increased the price
competitiveness of imports.
The most promising subsectors are:
- Curtains for commercial and residential buildings
- Window and door accessories
- Electrical grids and outlets
Data Table:
1994 1995 1996
a. Total Market Size 3887 4356 4660
b. Total Local Production 2927 3391 3713
c. Total Exports 305 427 598
d. Total Imports 1265 1392 1545
e. Imports from U.S. 100 115 132
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Architecture/Construction/Engineering Services
Rank of Sector: 20
Name of Sector: Architecture/Construction/Engineering Services
ITA Industry Code: ACE
Narrative:
Despite excess supply in the real estate industry, housing and
commercial construction continue to expand. In 1994, the construction
sector recorded nine percent growth. Future growth is projected at
about 10 percent.
The Seventh National Development Plan (1992-1996) earmarked about US$58
billion for the power, telecommunications, transport, and utilities
sectors. Recently, the Electrical Generating Authority of Thailand
launched an independent power producer program to partly privatize
state-controlled power utilities. The National Economic and Social
Development Board is studying a high speed train link between Bangkok
and Rayong on the Eastern Seaboard and the development of the country's
Southern Seaboard.
These major projects will generate ample need for architecture,
construction & engineering services. This market is estimated at around
US$400 million, of which 20 percent is handled by foreign firms. U.S.
firms currently hold about 15-20 percent of the total services performed
by international contractors. U.S. architectural services in the
petrochemical, environmental, and energy sectors are well accepted by
local end-users.
The most promising subsectors are:
- Oil/Petrochemical services
- Power generation and transmission services
- Waste water and solid waste management
- Telecommunication networks
Data Table:
1994 1995 1996
a. Total Market Size 352 394 429
b. Total Local Prod. 281 315 343
c. Total Exports NA NA NA
d. Total Imports 71 79 86
e. Imports from U.S. 16 18 20
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Machine Tools/Metalworking Equipment
Rank of Sector: 21
Name of Sector: Machine Tools/Metalworking Equipment
ITA Code: MTL
Narrative:
In its development into an industrialized country, Thailand continues to
depend heavily on imports of capital goods and technology. The metal
working and machine tools market is attractive and growing. In fact, it
grew by 250 percent between 1988 and 1992. More moderate growth in the
5-10 percent range lies ahead. Driven by increasing sophistication
within the industry, demand will shift toward higher quality and higher
precision machines and machine tools.
The most promising subsectors are:
- Electrical discharge machines
- Machining centers
- High-precision grinding machines
- Numerically-controlled lathes
- High-precision presses
- NC and CNC boring devices
Data Table:
1994 1995 1996
a. Total Market Size 548 592 639
b. Total Local Prod. 61 67 84
c. Total Exports 29 32 35
d. Total Imports 516 557 590
e. Imports from U.S. 38 41 44
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
Plastics Production Machinery
Rank of Sector: 22
Name of Sector: Plastics Production Machinery
ITA Industry Code: PME
Narrative:
Although manufacturers of plastics products are expected to face
shortages and high prices of raw materials and resins for plastics in
1995 and 1996, the Thai plastics industry is still expected to grow by
10 percent per year during the 1995-1997 period. Demand for plastics
production machinery is met mainly by imports.
U.S. plastics production machinery is well accepted locally for its
reliability, but U.S. firms have only a three percent market share.
This is due to the high prices of U.S. machines and a lack of market
promotional efforts. Japan is the main supplier (40 to 50 percent
market share) of plastics production machinery to Thailand, followed by
Germany, Taiwan, and China.
The most promising subsectors are:
- Injection molding machines
- Extruders
- Replacement parts
Data Table:
1994 1995 1996
a. Total Market Size 533 587 646
b. Total Local Production 67 74 81
c. Total Exports 40 44 48
d. Total Imports 506 557 613
e. Imports from the U.S. 17 19 21
1) Exchange rate US$1 = Baht 25
2) 1995 and 1996 figures are estimated
3) Figures are in $millions
VI. TRADE REGULATIONS AND STANDARDS
Trade Barriers
Thailand's present import policy is to maintain significant tariff
barriers on most products, with current duty rates in the zero to 60
percent range for a majority of the products on which duties are
collected. However, duty exemptions are routinely granted to firms with
investment promotion privileges, and rebates of import duties on raw
materials are granted upon export of the finished product.
In compliance with GATT Uruguay Round commitments, a simplified import
regime will result in a system of only six rates and a maximum duty for
almost all products of 30 percent. Duties on most types of machinery
were reduced from 30-40 percent to five percent in 1990. Duty
reductions were made on imported computers and parts to five and one
percent respectively. Duties were lowered on ferrous metals and
chemicals in January, 1993 and non-ferrous metals and many miscellaneous
items in January, 1994. In March, 1994 reductions were announced on 417
items (mechanical, electrical, and optical/measuring/medical
categories). The average duties on the items fell from 28 to 14
percent, and in some cases duties were almost totally eliminated (e.g.
medical equipment).
High tariffs remain major barriers to U.S. exports of value-added
agricultural products and apparel. At present, duties on most
agricultural products, notably processed food products, are at 60
percent ad valorem or at an equivalent or higher specific duty. High
tariffs on beef, turkey, fresh and dried fruits and nuts, fruit juice,
and processed food products currently present a substantial barrier to
U.S. agricultural exports to Thailand. A surcharge on soybean meal
imports is another significant restraint on U.S. agricultural exports to
Thailand. Duties on wine and spirits are the higher of an ad valorem
duty of 60 percent or a specific duty ranging from 10 to 110 Thai baht
(USD .40 to USD 4.40) per liter, depending on the variety. Imported
alcoholic beverages are also assessed a separate excise duty at rates
varying from 10 to 48 percent.
Separate excise duties are assessed on a number of other imported
products such as tobacco and some electrical and petroleum products.
Many textile and apparel products are currently subject to the higher of
an ad valorem or specific duty.
Customs Valuation
Arbitrary customs valuation procedures constitute an import barrier to
U.S. exports. The Customs Department keeps records of the highest
declared prices of products imported into Thailand from invoices of
previous shipments, and uses these "check prices" to assess tariffs on
subsequent shipments of similar products from the same country. Customs
may therefore disregard actual invoiced values in favor of the check
price, a practice which particularly affects agricultural products with
seasonally fluctuating prices. For products shipped from a country
other than the country of origin, the Customs Department reserves the
option to use the check price of either the country of origin or the
country of shipment, whichever is higher. These rules are applied to
imports from all nations. Thailand will conform to customs valuation
procedures agreed to in the Uruguay Round by the year 2000.
Import Licenses
The Thai Ministry of Commerce requires import licenses on certain raw
materials, petroleum, textiles, and industrial and agricultural
products. While licensing requirements have been dropped on a number of
items in recent years, licenses are still required for some 43
categories of items. In the food products area, licensing requirements
remain for powdered skim milk and fresh milk, potatoes, soy beans and
soy bean oil, and refined sugar, among others. Many of these licensing
requirements will be eliminated as Thailand completes the adjustments
necessary to conform to its Uruguay round commitments.
Food and pharmaceutical product importers are also required to apply for
import licenses from the Thai Food and Drug Administration. The
licensing process is time consuming and costly, and requires the
disclosure of proprietary information. Licenses cost $600 per item.
Products imported in bulk require laboratory analysis at a cost of $40
to $120 per item. Products imported in sealed containers (consumer-ready
packages) require laboratory analysis at a cost of $200 per item. Some
39 items must be registered as "specific controlled food items" at an
additional cost of $200. Although the Thai Food and Drug Administration
has made efforts to streamline the registration process, it usually
requires three months or more to complete.
Export Controls
Thailand maintains few restrictions on exports, except when related to
national security, environmental protection, and cultural concerns, or
pursuant to trade agreements (such as international commodity
agreements, agreements governing the textile and apparel trade,
agreements on subsidies and dumping, etc.) Thailand's quota program for
the export of textiles and apparel is administered by the Department of
Foreign Trade under the Ministry of Commerce.
Import/Export Documentation
Customs procedures require the submission of an export entry form or
import entry form, along with several other documents (invoice, packing
list, bill of lading, letter of credit, etc.) to the customs officer.
An advance entry system has been implemented to assist importers, in
which all documents may be submitted and processed prior to the arrival
of goods. Upon arrival, then, only assessed duty and port charges
remain to be paid. Imported food items must be registered with the Thai
Food and Drug Agency, which at times can be a difficult and time
consuming task.
Under the Cosmetic Act, B.E. 2517, of 1974, both a method of analysis
for that substance in final product form, as well as efficacy data
showing consumer benefit, for all substances included as a part of a
cosmetic product's labeling must be submitted to the Thai FDA for
approval.
Controlled cosmetics are also subject to product registration besides
normal licensing requirements. To secure an import permit, product
samples, quantitative formula, notarized/legalized letter guaranteeing
compliance with the Thai cosmetics regulations, and identification of
preservatives must be submitted to the Thai FDA. The following are
needed to register controlled products (in addition to those
requirements needed to secure a permanent import permit): method of
analysis for the controlled (active) substance, and compendia references
for all non-active ingredients.
U.S. medical equipment must have a "certification of products for
export" issued by the U.S. Food and Drug Administration, and duly
certified by the Royal Thai Embassy in Washington, D.C., or by the
American Embassy in Thailand.
Temporary Entry
Thailand has joined the ATA Carnet System. Therefore, products for
exhibitions or demonstrations can be imported for up to six months
without payment of custom duties and value added tax. Businesses must
obtain a bank guarantee for the value of the imports. If the product is
not re-exported within six months, the duties and tax will then be
levied.
Labeling, Marking Requirements
Labels must be registered with the Thai Food and Drug Administration and
affixed to imported food products. It is required that labels bear
information identifying the product name, its description, net weight or
volume, and manufacturing/expiration dates. If food is imported for
sale to restaurants, in addition to the above, labels must identify the
manufacturer or distributor's name and address, and the product/label
registration number. Labels must be printed in Thai (not required for
alcoholic beverages).
Prohibited Imports
Imports of only a few products, including aerosol mixtures of vinyl
chloride monomers (for health reasons) and products constituting
trademark infringement, are actually banned by Thailand. However, as
noted above, imports of a larger number of items require licenses from
various Thai ministries, and licenses to import some of these products
may not be routinely available.
Standards
Only 39 Thai companies are certified to be in compliance with ISO 9000
international standards for quality in design, production, installation
and servicing. Some of these companies are: Esso Standard Thailand
Limited, Shell Thailand Manufacturing Limited, Alphatec Electronics Co.,
Ltd., Union Plastics Limited, SONY Magnetic Products (Thailand) Co.,
Ltd., Thai Micro Systems Technology Corporation Limited, The Siam
Refractory Industry Co., Ltd., Fujitsu (Thailand) Co. Ltd., Filthai Co.,
Ltd., the Siam Cement Public Co. Ltd., and the Thai CRT Co., Ltd.
Thailand has its own national standards specifications, Thailand
Industrial Standard (TIS), to which most other companies operating in
Thailand adhere.
Free Trade Zones/Warehouses
Thailand has several Export Processing Zones (EPZs). Firms located in
EPZs are exempt from import duties and other taxes on factory
construction materials, machinery and equipment, and export
manufacturing inputs. Within EPZs, foreign investors are permitted to
own land and employ foreign technicians and experts. EPZs are generally
co-located with industrial estates developed either by the Thai
Industrial Estate Authority or by the private sector and therefore have
full infrastructure facilities and generally good access to
transportation.
The Customs Department allows larger firms engaged exclusively in
manufacturing for export to set up bonded warehouses and to import
(duty-free) inputs for their export production. Producers who receive
approval to establish bonded warehouses must submit guarantees for
duties which would otherwise be payable and to pay an annual fee.
Membership in Free Trade Arrangements
Thailand is a member of the Association of Southeast Asian Nations
(ASEAN). In 1992 leaders of ASEAN governments approved a Thai proposal
to establish the ASEAN Free Trade Area (AFTA), which aims to reduce
tariffs on most processed agricultural and industrial products traded
among ASEAN countries to 0-5 percent by the year 2007. The agreed date
for completing the implementation of AFTA has been moved up to the year
2003. Other ASEAN members are Brunei, Indonesia, Malaysia, the
Philippines, and Singapore. Together, ASEAN -- and AFTA -- make up a
market of over $400 billion that grew 7.8 percent in 1994. While
Thailand has begun a program of phased reductions to meet the tariff
reduction target, the extent of AFTA's coverage and the extent of
participation of each member country remains to be finalized. Thai
officials have said that they favor expanding AFTA to include other
countries in the region, and a possible linkage between AFTA and the
Australia-New Zealand free trade arrangement is being discussed.
VII. INVESTMENT CLIMATE
Openness To Foreign Investment
The Royal Thai Government maintains an open, market-oriented economy and
encourages foreign direct investment as a means of promoting economic
development, employment and technology transfer. Thailand welcomes
investment from all countries and seeks to avoid dependence on any one
country.
Laws Governing Foreign Ownership
The U.S.-Thai Treaty of Amity and Economic Relations of 1966 allows U.S.
citizens and businesses incorporated in the U.S. or in Thailand that are
majority-owned by U.S. citizens to engage in business on the same basis
as Thais, exempting them from most of the restrictions on foreign
investment imposed by the Alien Business Law of 1972. In return, Thais
are extended reciprocal rights to invest in the U.S. and Thai business
persons are eligible to receive U.S. visas as "treaty traders" and
"treaty investors." Under the Treaty, Thailand restricts American
investment only in the fields of communications, transport, fiduciary
functions, banking, the exploitation of land or other natural resources,
and domestic trade in agricultural products. Notwithstanding their
treaty rights, many Americans choose to form joint ventures with Thai
partners and allow them to hold the majority stake because of their
familiarity with the Thai economy and local regulations.
In the Uruguay Round negotiations, all parties agreed that the Treaty of
Amity would be exempted from "most favored nation" (MFN) requirements
for 10 years, beginning with the establishment of the World Trade
Organization in January, 1995. During the remainder of the 10 year
period, Thailand is expected to continue liberalizing its investment
regime, eventually granting to all foreigners substantially the same
privileges granted to American investors under the Treaty. There is no
need for early action on the Treaty. However, if the Thai government
moves to renegotiate or abrogate the Treaty, benefits currently enjoyed
by both Americans and Thais may be eliminated, adversely affecting the
investment climate.
Under the Alien Business Law of 1972 (National Executive Council
Announcement No. 281) non-Thais are permitted a maximum ownership stake
of up to 49 percent in firms operating in certain sectors, including
agricultural activities, certain manufacturing and food processing
activities (especially those based on agricultural resources indigenous
to Thailand), and most professional services. A revision of the Alien
Business Law is currently under consideration by the Thai government,
which aims to reduce the number of businesses reserved for Thai
nationals and to generally liberalize the law. It is not clear when a
revision of the Alien Business Law will pass Parliament, whose members
were elected on July 2, 1995. Other laws limit foreign ownership of
companies listed on the Stock Exchange of Thailand at various levels
between 15 and 65 per cent.
American citizens can enter Thailand without a visa for visits up to 30
days. In order to apply for a work permit, a foreigner must enter
Thailand on a non-immigrant visa which is issued at Thai embassies and
consulates for a stay of three months or, for foreigners with well-
defined work or business plans, for a stay of one year. Issuance of the
three-month visa is usually completed within two or three days; the one-
year visa requires approval from the Office of the Immigration Bureau of
the Royal Thai Police Department in Bangkok. Upon obtaining a work
permit, a holder of a three-month visa may apply for a one-year visa,
which can generally be extended every year. Foreigners who hold non-
immigrant visas and have lived in Thailand for at least three
consecutive years may apply for permanent residence in Thailand if they
meet strict criteria regarding investment or professional skills.
The Alien Occupation Law of 1972 (Decree No. 322) lists the occupations
reserved exclusively for Thais, which include professional services such
as accounting, architecture, law and engineering, the manufacture of
traditional Thai handicrafts, and manual labor. The law also states
that all non-Thais working in Thailand, with limited exceptions, must
possess a work permit issued at the discretion of the Ministry of Labor
and Social Welfare, although some foreigners already working in Thailand
were exempted through a "grandfather" clause. The factors that
influence the granting of work permits are the degree of specialization
required by the position, the size of the firm in terms of number of
employees and registered capitalization, and the ratio of Thai nationals
to foreigners employed by the firm. Foreigners working for the Royal
Thai Government or working for projects promoted by the Board of
Investment usually have little difficulty obtaining work permits. Work
permits in other areas are sometimes difficult to obtain, despite the
fact that senior managers and technical personnel are in short supply.
Any entity wishing to do business in Thailand must register with the
Department of Commercial Registration in the Ministry of Commerce.
Firms engaging in production activities need to register with the
Ministries of Industry and Labor.
Non-Thai businesses and citizens are not permitted to own land in
Thailand unless given permission by the Board of Investment or unless
the land is on government-approved industrial estates. Petroleum
concessionaires also may own land necessary for their activities. Many
foreign businesses instead sign long-term leases and then construct
buildings on the leased land. Non-Thais are allowed to own up to 40
percent of a condominium building, though other restrictions apply.
Qualified legal advice is recommended for Americans planning to invest
in Thailand. This is particularly important because Thai business
regulations are governed predominantly by criminal rather than civil
law. Violation of Thai business regulations can carry heavy criminal
penalties and criminal liability can be assessed under 52 different
laws.
The Board of Investment (BOI), established through the Investment
Promotion Act of 1977, is Thailand's central investment promotion
authority. The BOI lists seven categories of economic activities,
covering hundreds of types of businesses, that are eligible for
investment incentives. Some sectors, such as the manufacture of parts
for engines, machinery, and electrical and electronic products, are
eligible for all available incentives. Investment privileges have been
suspended in over 30 sectors in which the BOI believes there is no need
to encourage further investment, such as the production of canned tuna
for export. Generally, the most generous incentives are offered to
those economic activities that bring new technology to Thailand.
The BOI encourages investment in sectors and locations that help
Thailand achieve its economic development goals by awarding a wide range
of fiscal and other incentives to local and foreign investors.
Potential investors whose projects meet any or all of the following
criteria are eligible for BOI incentives: significantly strengthen
Thailand's balance of payments position, especially through production
for export; support the development of the country's resources;
substantially increase employment; locate operations in provinces
outside the Bangkok metropolitan area; conserve energy or replace
imported energy supplies; establish or develop industries which form the
base for further technological development; or are considered important
and necessary by the government.
In 1993 the BOI initiated a major shift in emphasis from export
orientation to industrial decentralization as its major policy goal.
This new policy is intended to spur development outside the Bangkok
metropolitan area in the countryside where the population is employed
primarily in the labor intensive agricultural sector, which accounted
for only 12 percent of Thailand's GDP in 1993. During the period 1991-
1994, BOI approved investment projects valued at $4.16 billion involving
American firms.
Board of Investment Incentives
Tax incentives: Exemption or 50 percent reduction of import duties on
imported machinery; reduction of import duties of up to 90 percent on
imported raw materials and components; exemption from corporate income
taxes for three to eight years and deduction (in case of loss) of annual
loss from net profits carried forward for up to five years; and
exclusion from taxable income of dividends derived from promoted
enterprises during the income tax holiday.
Permission: To bring in foreign nationals to undertake investment
feasibility studies; to bring in foreign technicians and experts to work
under promoted projects; to own land for carrying out promoted
activities.
Guarantees: Against nationalization; against competition by new state
enterprises; against state monopolization of the sale of products
similar to those produced by promoted firms; against price controls;
against tax exempt import by government agencies or state enterprises of
competitive products; and of permission to export.
BOI benefits that offer the greatest advantage over unpromoted
industries are the tax incentives, though their value has declined in
recent years with the general reduction of import duties and elimination
of the former business tax system. The value added tax (VAT) law, which
eliminated the business tax system, has no provision for the BOI to
offer VAT exemption or reduction.
There are certain restrictions on eligibility for BOI benefits that link
the minimum export level of a project to its minimum Thai shareholding
level. For projects manufacturing mainly for the domestic market, Thai
nationals must hold not less than 51 percent of the registered capital
for the project to be eligible for BOI benefits. When at least 50
percent of the output is to be exported, foreign investors may be
granted permission to hold a majority of the shares, and where 100
percent of production is to be exported, foreign investors may hold all
of the shares. Additionally, for projects based on local resources
(e.g., agriculture, animal husbandry, fisheries, mineral exploration and
mining), Thai nationals must hold at least 60 percent of the registered
capital.
Investors must submit an application form along with supporting
documentation to be considered for incentives. In most cases, the BOI
decides within 60 days whether or not a project is eligible for
investment privileges. Once a Promotion Certificate has been awarded,
an investor must start construction within six months, import all
machinery and equipment exempted from import duties within 24 months,
and complete construction within 30 months.
Conversion and Transfer Policies
Thailand has a stable currency, the baht, which fluctuates little from
its exchange rate of roughly 25.0 to the dollar, although the baht had
appreciated somewhat, to 24.56 to the dollar, as of April 1995.
Thailand has simplified reporting requirements and has removed most
restrictions on the amount of foreign exchange and Thai currency that
may be brought into the country. Repatriation of investment funds,
dividends and profits, as well as loan repayments and interest payments
thereon, may be made freely and promptly, net of all taxes. Foreign
exchange is easily available from commercial banks.
Expropriation and Compensation
Private property can be expropriated for public purposes in accordance
with Thai law, which provides for due process and compensation. In
general, U.S. firms have not had problems with expropriation in
Thailand.
Dispute Settlement
Disputes such as the enforcement of property or contract rights have
generally been resolved through the Thai courts. In addition, companies
may establish their own arbitration agreement. At present, Thailand is
not a member of the International Center for the Settlement of
Investment Disputes. However, as a member of the New York Convention,
Thailand enacted the Arbitration Act of 1987 that set its own rules on
conciliation and arbitration. These are overseen by the Arbitration
Office of the Thai Ministry of Justice.
Political Violence
Thailand has a history of frequent changes in government, often via
military intervention onto the political scene. A military coup in
January, 1991 was followed by political unrest in early 1992,
culminating in a tragic confrontation in the streets of Bangkok in May,
1992 in which over 50 civilian demonstrators were killed. The "May
Events" were a real shock to the Thai political system, and seemed to
have stimulated a remarkable democratic recovery. The government of
Prime Minister Chuan, which left office in July, 1995, devoted much
effort to strengthening democratic institutions, including working with
the military -- long a force in Thai politics -- to adopt an appropriate
role in a post-Cold War world.
Despite the changes in governments over the years, Thai economic
policies have remained remarkably consistent, characterized by openness
to the outside world, fiscal conservatism, and a preference for letting
the private sector do what it does best. There is no significant
segment of the Thai political spectrum that disagrees with these policy
fundamentals. The new Banharn government is expected to pursue the same
primary goals as the Chuan government. For these reasons, Thailand's
economy, and the confidence of the domestic and foreign private sectors,
have shown consistent growth in recent years.
Performance Requirements/Incentives
As discussed earlier, the Board of Investment may establish certain
requirements in exchange for its incentives. These requirements may
include linking the minimum export level of a project to its minimum
Thai shareholding level or restricting investment to certain sectors or
certain locations.
As noted above, under the Treaty of Amity and Economic Relations,
Americans are restricted from being the majority shareholders in
investments in the fields of communications, transport, banking,
exploitation of land or other natural resources, and domestic trade in
agricultural products. In addition, under the Alien Business Law, non-
Thais are permitted a maximum ownership stake of not more than 49
percent in certain sectors, including agricultural activities, certain
manufacturing and food processing activities, and most professional
services. Foreign investors in most Thai companies in the financial
sector, including banks, finance and security companies, and insurance
companies, are limited to a 25 percent total foreign holding, although
several companies have been "grandfathered" and allowed to maintain
foreign participation well above this limit. Other laws also limit the
percentage of foreign ownership in specific business undertakings, such
as ownership of aircraft and vessels.
Right to Private Ownership and Establishment
Private entities may establish and own business enterprises. The
principal forms of business organization under Thai law are sole
proprietorships, partnerships, limited companies, and public limited
companies. In addition, branches of foreign corporations are recognized
and a "representative" or "liaison" office of a foreign company may
receive special recognition. Irrespective of the form of the business
entity, most businesses must apply for business registration.
Establishment of a business in certain sectors by a foreign entity may
be restricted by the Alien Business Law or may not benefit from the
Amity Treaty as discussed above.
A Thai private limited company is similar to a corporation in the United
States, and may be wholly owned by a foreigner unless the corporation is
involved in a business activity reserved for Thai nationals. A public
limited company is allowed to offer its shares to the public. Numerous
laws pertaining to individual industries limit foreign ownership of
companies listed on the Stock Exchange of Thailand to as little as 15
percent, though the limitation is generally higher. In a few cases,
majority foreign ownership of listed companies is allowed by law.
Protection of Property Rights
Although protection for copyrights, patents, and trademarks in Thailand
is improving, intellectual property protection remains a key bilateral
issue. The Thai Parliament passed a new copyright law in late 1994,
which became effective on March 21, 1995. This new law resolved many
concerns of American holders of intellectual property and resulted in
Thailand being removed from the "Priority Watch List" under Section 301
of the U.S. Trade Act. Other significant steps have included the
creation of an Intellectual Property Department within the Ministry of
Commerce, increased legal expertise in intellectual property matters
within the police and the Justice Ministry, and Cabinet approval of an
International Trade and Intellectual Property Court. This court will be
the first of its kind in Southeast Asia when it comes into operation,
probably in 1996.
Thailand is working on improved patent laws to protect plant varieties,
petty patents, and geographical indicators. The draft bills are due out
of the Intellectual Property Department and before the Parliament
sometime in 1995. These changes should solve shortcomings in earlier
patent legislation; Thai officials have promised administrative efforts
to remedy residual concerns.
The Copyright Act of 1994 extended copyright protection explicitly to
computer software and increased fines and penalties against all
infringers. Thailand is a member of the Berne Convention and a founding
member of the World Trade Organization. As such, the Royal Thai
Government is taking the steps necessary to be in compliance with both
groups -- the copyright law and the proposed revised patent laws should
ensure such compliance.
While Thailand's legal structure for the protection of property rights
is reaching world-class standards, enforcement continues to be a
problem. While the new copyright law provides increased authority for
the police to stage raids, other Thai laws require that the aggrieved
party take an active role in protecting its copyrights, trademarks, and
patents. There is no such thing as a blanket authorization for a raid,
so the police can respond only to a specific complaint. Once the
complaint is made, the complainant needs to take an active role in the
raid and prosecution, helping the police identify pirated or counterfeit
goods and supporting them throughout the prosecution. Increased fines
and penalties, from 100,000 baht to 800,000 baht ($4,000 to $32,000)
under the new copyright law, as well as continuing confiscations of
pirated goods, will raise the cost of piracy, perhaps even to a
prohibitive level.
Regulatory System: Laws and Procedures
In 1992, Thailand introduced a seven percent value-added tax (VAT),
replacing the previous multi-tier business tax that imposed 21 different
tax rates depending on the product. For companies with annual turnover
of between $24,000 and $48,000, the government instituted a 1.5 percent
turnover tax as an alternative. Companies with annual turnover of less
than $24,000 are exempt from the VAT. The VAT covers manufacturers, the
service sector, wholesalers and retailers, and most importers. Some
businesses will not be subject to the VAT but instead will pay a
specific business tax (about 2.5-3.0 percent in most cases) on their
revenues. These businesses include banking, finance, securities,
insurance, pawning and real estate. Companies selling securities on the
Stock Exchange of Thailand pay only at a 0.1 percent rate. Almost all
state enterprises are also subject to the VAT. Exporters are "zero-
rated" but must still file VAT returns to receive rebates. Exemptions
to the VAT include businesses involved in raw agricultural products
(except logs), animals, fertilizers, newspapers, educational services,
leased immovable properties, and domestic transportation.
The new tax measures also unified corporate tax rates at 30 percent of
net profits for all firms. Previously, firms not listed on the Stock
Exchange of Thailand paid a 35 percent marginal rate. The income tax
withholding rate on both the payment of dividends and the remittance of
after-tax profits was reduced to 10 percent. The tax rate on the
payment abroad of income for companies not officially established in
Thailand was reduced from 25 percent to 15 percent. The disposal of
profits abroad is now defined to include amounts set aside for the
payment or settling of a debt. It includes applications to convert or
transfer abroad foreign currencies arising from the profits of the
business.
The new measures favor companies which contribute to public welfare.
These companies can now deduct up to two percent of net profit for
contributions to authorized public charities, education and sports. In
addition, companies are authorized to revalue their assets, which must
still be depreciated at the same rate, but value increases will not be
considered additional company income.
Thailand reduced its highest marginal tax rate on personal income from
50 percent to 37 percent, effective January 1, 1992. In addition, the
regulations substantially increased the amount of personal deductions.
In recent years, Thai governments have reviewed and restructured customs
duties in some important areas. The import duty on machinery was
lowered from 20-40 percent to five percent in 1990. In 1991, Thailand
also reduced duties on new computer units from 20 percent to five
percent and computer parts to one percent. Duties on automobiles with
engines over 2400 cc were cut from 200 percent to 68.5 percent while
duties on cars with smaller engines fell from 100 to 42 percent.
Customs duties on automobile components for assembly in Thailand fell
from 112 to 20 percent.
Thailand also adjusted existing taxes and introduced new excise taxes to
partially offset the expected loss in revenue from reduced customs
duties and the implementation of the VAT. Products subject to the
excise tax include automobiles, yachts, perfumes, horse racing, tobacco,
and large air conditioners. The Thai government also equalized excise
taxes on imported and domestically-produced alcoholic beverages and
playing cards to conform with Thailand's GATT obligations.
Thailand has double taxation treaties with 26 countries including
Australia, Austria, Belgium, Canada, Denmark, Finland, France, and
Germany. Generally, these agreements eliminate double taxation on
income in Thailand and the home country and reduce tax liabilities for
non-residents and foreign companies operating or investing in Thailand.
Negotiations for a double taxation treaty with the U.S. are ongoing.
The framework for addressing Thailand's massive environmental problems
on a national scale was established in 1992 with the passage of major
legislation affecting all aspects of Thai industry and trade. Among the
significant pieces of legislation passed were the Enhancement and
Conservation of National Environmental Quality Act (NEQA), the Hazardous
Substances Act and the Factories Act. While implementing legislation
and enforcement procedures are lagging in many areas, it is anticipated
that the current and future market for environmental goods and services
will be significant.
Thailand provided tax incentives to encourage the use of unleaded gas
when it was introduced in 1991. Unleaded now accounts for more than 40
percent of all premium gasoline sales. In addition, Thailand passed
regulations to reduce lead content in gasoline and ban leaded gas
entirely by 1996. The Thai government's requirement of catalytic
converters in all new automobiles was implemented in two stages
beginning in January 1993.
Capital Markets and Portfolio Investment
In recent years, the Thai government has taken steps to modernize and
deregulate Thailand's financial sector. Capital flows are increasing,
with net capital movement into Thailand amounting to $14.1 billion in
1994, about 10 percent of GDP. As the government's policy of
liberalizing financial markets continues, capital is increasingly
allocated according to market forces.
There are 15 domestic banks in Thailand and 14 foreign banks. Many
other foreign banks have representative offices. The Bank of Thailand
has issued 47 licenses to operate Bangkok International Banking Facility
(BIBF) offices, which are offshore banking operations. The private
sector has access to a variety of credit instruments through foreign and
domestic lenders.
Thailand has an active equities market, with issues traded on the Stock
Exchange of Thailand (SET). At the end of 1994, the SET had 389 quoted
companies. Market capitalization of the SET was $131 billion, about 90
percent of Thailand's annual GDP. A formal bond trading market was
established in 1994, but the secondary debt market in Thailand is not
well developed. The Thai government is encouraging the development of a
bond market through improved regulation, changes in tax policy and the
establishment of an independent rating agency. Businesses have
traditionally relied on loans from financial institutions, overdrafts
and the equity market for mobilizing funds.
Bilateral Investment Agreements
The U.S.-Thai Treaty of Amity and Economic Relations of 1966, discussed
above, allows U.S. citizens and businesses incorporated in the U.S. or
in Thailand that are majority owned by U.S. citizens to engage in
business on the same basis as Thais, exempting them from most of the
restrictions on foreign investment imposed by the Alien Business Decree
of 1972. Under the Treaty, Thailand is permitted to apply restrictions
to American investment only in the fields of communications, transport,
banking, the exploitation of land or other natural resources, and
domestic trade in agricultural products. Thailand also has bilateral
investment agreements with Germany, the Netherlands, the United Kingdom
and China. These agreements establish guidelines for expropriation
compensation and the repatriation of capital but do not include national
treatment provisions.
Labor
The Thai labor force totals 33.8 million out of a 1994 population of
59.1 million, according to government estimates. This figure includes
all Thais 13 years of age and older who are actively seeking work.
Approximately nine million Thais over the age of 13 -- students,
housewives, and retired or disabled persons -- are considered outside
the workforce. Unemployment in 1994 was estimated at 3.3 percent.
Despite rapid growth in the industrial and service sectors, the Thai
economy and the Thai workforce remain traditional to a large degree.
Official estimates show 59 percent of those employed are still engaged
in agriculture, either on a part-time or full-time basis. It is common
for rural laborers to take jobs off the farm during slack periods in the
planting and harvest cycle, or to carry on a small business in addition
to farm work. The shift of workers from the agricultural sector is
continuing; the proportion of those working the land continues to drop,
especially in the Northeast where agricultural productivity is marginal.
As a consequence, there is a constant flow of rural, generally unskilled
Thais seeking work in Bangkok and the more industrialized regions, both
as seasonal workers and on a permanent basis. This availability of
migrant labor has contributed to Thailand's rapid industrial growth,
particularly in the light manufacturing and construction sectors.
The labor market for those with at least a secondary education is
increasingly tight. Among highly-skilled and experienced engineers,
technicians and managers, labor shortages are severe. Many
multinational firms are bringing in expatriate professionals not to
oversee and control investments, but because qualified local personnel
are simply not available, even at high salaries. "Poaching" personnel
in the hotel management, financial, computer and engineering industries
is common.
Thailand's education system is still geared toward the needs of a
largely agrarian, traditional economy and society. The government has
made great progress over the last two decades in providing basic
education. Primary enrollment in Thailand is now about 95 per cent and
the adult literacy rate is reportedly one of the best in the region.
However, compulsory education is only through grade six; nine years
will be compulsory under the Eighth Economic and Social Development Plan
from 1997 to 2002. In 1993, Thailand had 725,000 students enrolled in
public and private colleges and universities, including those studying
in foreign countries, or about 8.5 percent of the 18-24 age group.
All employers must specify the terms of employment for their staff, and
employers with 10 or more employees are required to specify working
regulations. The normal work week is 54 hours for commercial workers
and 48 hours for industrial workers, with overtime payable at one and a
half times the wage rate for any work in excess of these limits. In
establishments where work is deemed dangerous or a risk to health or
personal safety, working hours may not exceed 42 hours a week. All
employees are entitled to a vacation of six work days a year, in
addition to the 13 holidays traditionally observed in Thailand. There
is a Workman's Compensation Fund covering injury, sickness and death to
which all businesses with 10 or more employees must contribute. The
employment of children under the age of 13 is prohibited and there are
restrictions on the employment of children and youths through the age of
18. Further, the Social Security Act, which has been in effect since
1990, requires employers with 10 or more employees to contribute 1.5
percent of the employees' wages for injury, sickness, disability, death
and maternity. Employer and employee contributions to provident funds
are encouraged. Employer contributions for old age pensions, family
allowances and unemployment compensation may be required in the next few
years.
The labor relations climate in Thailand is generally peaceful with
strikes relatively infrequent. Less than two percent of the total labor
force is unionized; about 10 percent of the industrial workforce is
organized. After the military coup in 1991, the new government enacted
the State Enterprise Labor Relations Act abolishing state enterprise
labor unions, which had been the backbone of the organized labor
movement. Largely as a result of this, the AFL-CIO filed a petition
with the U.S. Government to have Thailand's GSP privileges removed for
violations of worker rights. The AFL-CIO petition also cited violations
of workplace safety standards and abuse of child labor. A new State
Enterprise Labor Relations Act, which would restore many of the rights
of state enterprise employees, died when the lower house of Parliament
was dissolved in May, 1995. The petition was still under review as of
May, 1995.
Foreign Trade Zones/Free Ports
Thailand has 17 export processing zones in which businesses may import
raw materials and export finished products free of duty. In addition to
these zones, any factory may apply for permission to establish a bonded
warehouse within the factory to which raw materials, used exclusively in
the production of products for export, may be imported free of duty.
The Industrial Estate Authority of Thailand (IEAT) was responsible for
the establishment of the first industrial estates in Thailand, including
the major industrial estates of Laem Chabang Industrial Estate in
Chonburi Province and Map Ta Phut Industrial Estate in Rayong Province.
However, more recently the private sector has become involved in estate
planning. The IEAT runs three estates, plus 20 more in joint operations
with the private sector. The private sector operates 14 industrial
estates. Most of these estates have received promotional privileges
from the Board of Investment.
Capital Outflow Policy
Thai investment abroad is rising rapidly. Thai companies have been
generally investing in the U.S., Europe, Japan and some Asian countries.
For example, Siam Cement has started a joint venture with an Italian
firm to sell ceramic tiles in the U.S.; Saha Union Company took over a
thread-spinning mill in Georgia; and CP Group formed a joint venture
with Chinese state enterprises to produce motorcycles. In addition, to
obtain raw materials, Thailand has invested in China, Indonesia and the
three Indochinese countries. In 1993, Thailand established an Export-
Import Bank to finance credit for the sale of Thai products abroad.
The Ministry of Finance still requires that foreign exchange
transactions for the purchase of real estate or equities outside
Thailand receive prior permission.
Major Foreign Investors
Prior to the Plaza Accord in 1985 which had the effect of strengthening
the yen against the dollar, the U.S. was the leading foreign investor in
Thailand with approximately 30 percent of total investment. Japan
followed with approximately 25 percent of the investment. The high yen
forced Japanese manufacturers to re-locate production offshore, mainly
in Southeast Asia. During the period 1989-1993, the Japanese were the
major investors in Thailand in every year except 1992. A new wave of
Japanese investment is expected in the wake of the rapid appreciation of
the yen against the dollar in early 1995.
American investment in Thailand tends to be concentrated within the top
25 U.S. firms. These firms account for at least 80 percent of U.S.
investment in Thailand, which the Embassy estimated in 1994 to total
between $9 and $10 billion. Besides the U.S. and Japan, other major
investors in Thailand include Singapore, Taiwan and Hong Kong.
Embassy Support
The Embassy in Bangkok is prepared to assist U.S. businesses interested
in establishing commercial relations in Thailand. Business visitors to
Bangkok are welcome to discuss commercial interests with appropriate
Embassy personnel. The Embassy is located at 95 Wireless Road (tel