The Thai government announced a series of new incentives and support mechanisms in late 2016 and early 2017, aimed at boosting foreign investment in key industries.
These new measures – many of which will be administered through the Board of Investment (BOI), the government’s investment promotion arm – are set to come into force in the first quarter of 2017.
Incentives will be made available to high-value and innovative activities in particular, officials said, with a focus on the network of special economic zones (SEZs) under development.
To encourage investment inflows the government introduced the National Competitiveness Enhancement Act (NCEA) for Targeted Industries in mid-February.
Known as BOI Plus – and part of the broader economic reform programme Thailand 4.0 – the legislative package includes measures to incentivise foreign investment from targeted industries that are either new to Thailand, or use new technology or leading know-how.
A total of 10 industries have been identified by the act, namely smart electronics; automotive and auto parts, including electric cars; medical and wellness tourism; agriculture and biotechnology; food; robotics for industry; logistics and aviation; biofuels and biochemical; digital; and medical services.
While many of the measures included in the new legislation mirror existing BOI incentives, the exemption from corporate income tax and withholding tax on dividends has been extended to 15 years.
In addition, the BOI Plus has established a government-supported competitiveness enhancement fund with an initial budget of BT10bn ($285m) to subsidise eligible projects.
Two committees have been created to implement the act and screen proposed projects: the Policy Committee and the Nomination and Negotiation Committee.
The former – to be overseen by the BOI – will be responsible for specifying strategically important industries, as well as setting guidelines for investor selection and qualification for incentives, while the latter will actively identify and negotiate with potential investors to provide said incentives.
Initial targets for the programme are investors from Japan, mainland China, Taiwan, the UK, Germany, France, the Netherlands, India and South Korea, with special emphasis on projects offering high value added and technological transfer, Suvit Maesincee, deputy minister of commerce, told local media in December.
These new measures come on the back of an announcement made last month by Hirunya Suchinai, secretary-general of the BOI, that the organisation had approved six projects with a total value of more than BT24.5bn ($699.3m).
The largest of the deals was made with domestic firm NokScoot Airlines, which plans to launch two air transport services for freight and cargo – domestically and internationally – at a total investment value of BT8.8bn ($251.2m).
The new projects look set to build on a solid investment growth trajectory recorded last year, with total investment reaching BT584bn ($15bn), a 196% increase on the 2015 figure. Foreign direct investment (FDI) accounted for BT301bn ($8.6bn) – a substantial increase on the BT93.8bn ($2.7bn) recorded the previous year – with Japan, Singapore, China, Hong Kong and the Netherlands among the biggest contributors, according to the BOI.
With the release of BOI Plus, government officials are looking to increase the investment value of new incentive applications further, to BT600bn ($17.2bn) in 2017, up from last year’s target of BT550bn ($15.8bn). Local media reports suggest as much as a third of the total could be directed towards petrochemicals and high-tech industry.
The Thai government is hoping that the 10 SEZs currently in development will play a central role in driving these investment gains.
Thailand has lagged behind some of its ASEAN counterparts in the development of the zones, which were approved by the authorities in 2014; Laos, for example, has already completed eight SEZs and is looking to add another 13 by 2020. However, with the incentive framework for the zones now in place – including exemptions on import duties for machinery and raw materials, and loans at low interest rates – activity is due to accelerate.
The Ministry of Commerce forecasts that cross-border trading, which currently accounts for around 10% of the country’s total trade by volume, will increase by 50% to reach BT1.5trn ($43bn) in the years ahead.
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