We all know what Thailand is.
Thailand is this fascinating country where economy is dynamic. Invest in Thailand means more customers and growth for your company.
However, an investment in Thailand means that you have to learn a new culture and new business rules. Moreover, you’ll have to deal with a political crisis, far different from the political crisis we use to know in France.
Why you should invest in Thailand
Here are 7 reasons I’ve assessed:
1. Thai government considers foreign investments as a great opportunity.
Traditional Thai economy was based on agricultural exports. Recently, industries usually located in Bangkok or in the surrounding areas and services started to play a significant role. Moreover, Thai government is creating investment promotion zones throughout the country. Thai state promotes foreign investments that help to develop innovation and technology.
Any industrial investment is welcome, specifically R&D. Simply because 1 job in R&D generates 4 or 5 jobs.
2. Thailand has an excellent infrastructure: modern transportation facilities and communications
Thailand enjoys more than 4000 km rail tracks and a road network of almost 200 000 km, 450 km freeway and more than 50 000 highway included.
Thai people commonly travel by plan. They travel for professional matters or leisure through national and regional companies. Low-cost companies are available as well.
Thailand was the third Asian country to access to the Internet. In 2012, one-third of the population regularly connected to the Internet, often through ADSL technology though the Internet is not always available in small villages. Regarding mobile phone, 63% of Thai people use a mobile phone.
Eventually, you’ll find international schools and world-class hospitals.
3. Thai legislation provides protection for brands
Thailand recognized international rules: the Paris Convention, The Patent Co-operation Treaty, the World Intellectual Property Organization Model Law, the Harmonization Treaty and the Draft Agreement on TRIPs, including Trade in Counterfeit Goods.
As a result, global brands registered in Thailand are protected.
Contact intellectual property advisers to protect your brand. Thai people are respectful about this.
4. It is easy to trade with China from Thailand
Though China and Thailand established diplomatic relations only in 1975, trade volume relations developed between the two countries. Among other goods, Thailand export computer components, refined oil wood products or food. The two countries signed many agreements that help to develop commercial cooperation.
In any case, Thai market has different targets in terms of sales because economic models are different. China is based on low-cost production economy, Thailand isn’t. Don’t forget Thailand is the gateway for ASEAN.
5. A great opportunity to access a population of more than 500 million people
The Association of Southeast Asian Nations is a trade and social alliance between Thailand, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore and Vietnam. It aimed to create a joint market to attract foreign business and investment. ASEAN worked to create a single market. By 2015, movements of goods, services, investment, capital, and skilled labor will be free.
Thailand is one of the most industrial countries of that association.
6. Thai workforce is skilled and cost-effective
Over the past years, the level of education has dramatically increased. In 1999, 70% of the Thai workers had a primary or lower education level. It decreased to 56% in 2009.
The minimum of salaries in Thailand represents 9000 baht that is 225 euros, and you can quickly find an employee with a master of technology from 25 000 baht per month, bonus not included easily.
7. Thai industrial production is diversified both regarding long established industries or emerging industries.
Thailand has still the 16th worlds’ agricultural output. Nevertheless new industries are doing well: Thailand is the 1st world’s producer of hard disk drivers and a prominent manufacturer of integrated circuits and white goods.
No surprise then that Thailand attracts foreign investors even if may ask about the political risks.
Don’t be surprised to go through industrial zones during 100 kilometers even if the country size is more or less as big as France (514 000 km2 for Thailand Versus 550 000 for France).
Although Thailand seems alike an attractive place to invest, you should consider geopolitical risks… Very recently, you’ve probably heard about a military coup that took place in May 2014. The Military Junta that called itself the National Council for Peace and Order (NCPO) is currently revising the Thai Constitution. A large majority of people approved NCPO, and the business restarted without any difficulties.
Never forget that Thailand is a Constitutional monarchy and that the current monarch of Thailand Bhumibol Adulyadej is unanimously respected.
In any case, if some people ask you about politics, never go on that way because Thailand is a whole country with a long and complicated history.
Keys to invest in Thailand
Starting a business in Thailand
A juristic entity that is registered in Thailand is defined as a foreign entity if the foreign shareholding is equal or more than 50% of the registered capital.
As a foreign entity, you can start a business in Thailand only in certain industries. Remember that the law regulates 3 types of industries:
- You will not be able to engage in some business because they are prohibited for foreigners (for instance newspaper business, trade and auction sales of antiques…)
- Some businesses require approvals or licenses. (for example, legal services, engineering, architecture, tourism)
- Some businesses do not require any approvals at all.
Though 100% foreign-owned business are permitted (except in restricted categories), a Thai shareholding will make things easier.
Don’t miss quota job: you need to employ Thai people: get the information quota required for your activity.
Branch or limited company?
Before starting a branch in Thailand, you need an alien business license from the Ministry of Commerce. Usually, companies prefer to operate through limited company.
Starting a business through a limited company
A limited company requires 3 shareholders. Once you have reserved your name with the Department of Business Development (DBD) and get the approval, you must register a Memorandum of Association within 30 days after the approval. You will have to give details of the business such as full name of the company, location, business objectives, registered capital, and personal details of the promoters. Though there is no minimum capital requirement, your capital must be sufficient to enable your company to operate. You’ll have to include the number of shares subscribed by each promoter. The cost of the registration is calculated in function of the capital.
You’ll have then to prepare a list of all subscribers to the capital. This list and the Articles of Association will have to be approved at a statutory meeting. You are then required to call for payment of at least 25% of each share’s value.
After the payment is made, you can then apply for registration within 3 months after the statutory meeting. Once again, registration fees will be calculated in function of registered capital inside a minimum and a maximum.
The company is now registered, but 2 more registrations are still required:
- You’ll have to require a taxpayer ID number and identity card from the Revenue Department
- You’ll have to register for Value Added Tax (VAT).
Foreign directors or board members
The Civil and Commercial Code (CCC) authorizes foreign directors or board members without any restriction. If a director works in Thailand, he must ask for a work permit.
If your company seeks BOI status (see below), you must apply before starting a business.
Accounting / Finance for foreign companies
Big companies practice International Financial Report Standards even if they are not fully adopted yet. The financial statements must be certified by an authorized auditor. You can prepare the financial statements in any language. Nevertheless, you must attach a Thai translation. My recommendation: prepare the financial statements in English that is commonly used for business matters. Work with an official translator who will certify the translation.
Thailand Board of Investment
A government agency, the Board of Investments, has been created to foster foreign investments. The BOI offers various incentives. Companies that receive the BOI approval will benefit from all non-tax incentives. Depending on the location, the nature of activities and also on the destination of goods and services (domestic or export), a company may benefit from tax incentives.
Takeaways: I work with local advisers who perfectly know the process. As in many areas, the cost will vary but don’t pay more than 150 000 baht (about 3750 €) to start a business legally in Thailand.
Five questions you must answer
1. Are you ready to deal with a different culture?
I was walking in the street, and it was lunch time. I stopped at a street shop that offered appetizing foods. I asked for more information:
– Is it spicy?
– For you or me? asked the old woman who ran the restaurant
Regarding foods, European people and Asian people don’t use the same referential. Mustard is too strong for them but chili pepper no!
That’s true for many matters as well:
For instance, A Thai person, as an Asian people, always agrees but you’ll have to understand what her assent means:
- He may do what you’re asking
- He may not have understood
- He may not want to do what you’re asking
For each case, a Thai employee will agree.
My recommendation: Go out, spend time with Thai people. You cannot work in a foreign country without understanding their culture.
2. Are you ready to face a different way of working?
Officially, Less than 1% of workers are unemployed. Though Thai people are respectful of their boss, they use to resign quickly, without any warning. Employees are cost effective, but you will need more people than you need in Europe.
My recommendation: hire people who understand what they can do for you and who have a particular interest for your company. There will be more involved. Don’t hesitate to organize parties. Work environment uses to be friendly.
3. How is your English?
As elsewhere, English is the business language. Your English must be fluent to deal with business in Thailand. However, Thai is the national language.
My recommendation: Don’t worry with your accent. It is easy to talk in English with Thai people. In General Thai are pleased to speak or help you in English, including to show you a spotlight.
4. Are you ready to learn Thai?
It’s a good idea to speak Thai if you want to work with Thai people. Nevertheless, you cannot learn Thai within a few weeks.
My recommendation: If you don’t intend to work yourself in Thailand, no need to learn Thai. However, if you want to spend time there, you’ll better to learn Thai. If you’ll have a French director or manager working for you there, be sure that he wants to be involved and that he is ready to learn Thai, even a few words.
My recommendation: A musical ear will help you to distinguish the 5 different possible tones for a single word; a tone equals a meaning.
5. Are you ready to deal with Thai Administration?
Do you think that French Administration is a nightmare? Well, Administration is Administration. Thai Administration is no exception.
Use advisers for any administration issue. You’ll save time.
My recommendation: Work on your project and make your company compliant with Thai laws.
So you’ve decided to invest in this friendly country, Thailand, Congratulations- that’s no small feat.
However, before you plan your next travel in Thailand, there’s just one issue – Now what?
I’d love to hear about your investment project in Thailand. Contact me and let’s talk