Trade and Investment in Thailand

Trade and Investment in Thailand article image

thailandThailand offers a plenty of trade and investment opportunities for Australian exporters. Located in the heart of South East Asia, the Thai capital, Bangkokis an urban sprawl of more than 8 million people housing Thailand's centre of political, economic, social and cultural activities. If you took a map of South East Asia and pointed to the city closest to its centre, you'd find the Thai capital Bangkok under your finger. It's an urban sprawl of more than 8 million people, housing Thailand's centre of political, economic, social and cultural activities and has a fair claim as the unofficial capital of South East Asia.

New exporters

When considering South East Asia, Thailand is an attractive choice for many exporters, especially if they have travelled there for leisure previously. "Thailand is a society that welcomes foreigners," says Duangjai Asawachintachit, director of the Marketing Bureau at the Thailand Board of Investment. She believes this willingness to work with and trade with other nations is a real plus, which means investors and exporters will find it easy to go there. The Thai market is increasing in affluence and it’s a growing market, says Maurine Lam, Austrade senior trade commissioner in Thailand. "Its proximity and close time difference means Australian exporters are more comfortable with exporting to Thailand," she adds. The fact that Thailand is a market of more than 65 million people is often overlooked in favour of its larger neighbours China and India, but Lam says this is an advantage. "People focus on those large markets and that means there's low competition for market entry into Thailand," she points out. Added to that is our five-year-old bilateral free trade agreement, which indicates our existing healthy economic relationship. Australia already has a strong brand presence there in a number of industries, so exporters in some sectors might find it easier to enter the Thai market if they have a product offering different from other Australian products, but in well regarded industries."Food and beverage is a popular industry for Australian exporters. Australian food has always been seen as healthy, high quality, clean and green and of nutritional value, so our fresh meat, dairy products, the full range is seen as quality products," says Lam. Much of Australia’s food forms part of the Thai supply chain. "The Thai processing sector is still doing quite well with regard to export, so they continue to demand quality raw materials."

Existing exporters

The real opportunity in Thailand lies in its ability to add value to your supply chain through investments such as manufacturing operations. The Thailand Board of Investment has a number of incentives for businesses to set up there, particularly in target sectors such as agriculture and agroprocessing, automotive, alternative energy and yacht building, names Asawachintachit. "In the agroprocessing industry, Thailand has abundant raw materials. We are the world's largest producer of many agricultural commodities, for example sugar, which is in high demand for food and biofuels, so Thailand is ideal for Australian companies that have expertise in agroprocessing and in biotechnology, because we're trying to move up the value-added ladder," she explains. Incentives range from tax holidays to relief from import duties. The incentives are provided on a sliding scale with the minimal incentives given to Zone 1-Bangkok and some of its surrounding provinces-due to a congestion of industry, and more for Zone 2 and Zone 3, away from the capital. "We use decentralisation as our theme in devising our incentives scheme," says Asawachintachit. The Board also encourages operations in industrial estates because it means the government "can have better environmental and infrastructure management and allocation of resources," she adds. Lam agrees that industrial estates provide a great attraction. "The Thai government has industrial estates on the eastern seaboard and provides incentives for manufacturing operations," she says. "We do have a lot of Australian companies establishing investments there, particularly the auto component industry. They're there for a particular reason, it's a cluster where there’s a synergy between companies set up there, and the government offers incentives such as lower land costs and utility costs for a manufacturing base. It also creates opportunities for improved efficiency of operations." The other thing she would like to pass onto existing exporters is to remember to maintain your relationships. "If you're already doing business in Thailand, it is important that you are able to demonstrate to your current customer base that you're committed to the market, in good times as well as bad times. Don't just walk away from a market when things are difficult," says Lam. "It's about what you do together with the customer to progress. It's very important in terms of opening that communication and doing things together to defend a particular position a business has."

Advanced exporters

For more established exporters, Lam sees good opportunities in franchising businesses. "When people come out of unfortunate situations, being made redundant, they may be looking for opportunities to do their own business and they'll be looking for lower cost of entry," she notes. Public private partnerships are also an emerging possibility considering the Thai government’s focus on infrastructure via a budget of almost 2 trillion baht for the next four years. "That will be in areas such as water supply management, utilities, logistics, information technology, mass transit, tourism, education, healthcare, food, alternative energy and green industry," lists Lam. "All of those are opportunities, particularly in the clean energy area. Thailand is so dependent on imported sources of energy, and the Australian government has made energy a priority, so if we could introduce our technology, it's an opportunity." Another interesting opportunity is in healthcare, specifically in medical tourism. "Thailand is the first developing country that has seen large numbers of people from developed countries come in for medical tourism. The Thai government is promoting that and, as economic times become more difficult, this becomes a more attractive option in terms of healthcare rather than the high health expenses in developed countries. That creates opportunities for medical equipment, advanced technology, health IT solutions," explains Lam. "Last year there were 1.4 million foreign visitors receiving medical care in Thailand. The healthcare industry in Thailand is growing at an average of 15-20 percent."


One challenge will be language; although English is spoken widely in major cities, outside metropolitan areas you will need to brush up on your Thai, or a local dialect may be the common tongue. You also need to be aware of the precarious political situation in Thailand, which can potentially flare up at any time. To the north is Burma, with which Thailand has had rocky relationship with in the past. There is also trouble in the south, bordering Malaysia. Add to that relatively frequent political coups and Thailand is a hotbed of political action. Fortunately these trouble spots aren't in areas containing many businesses, says Asawachintachit, and changes in government don’t interrupt business. "There has not been a change in economic policies as a result of political change. Over the past many years, you don't see significant change regardless of the government. Life goes on," she says. She also says that contrary to a roaring trade in fake luxury goods, intellectual property protection is actually quite secure: "In the industrial sector we have never had any problems. Even in the fashion industry the government has stepped up a lot of efforts in trying to have better IP enforcement."

The Future

Although Australia already enjoys quite a few benefits through the existing Thailand-Australia Free Trade Agreement, the big news is that Australia and New Zealand have signed an FTA with 10 ASEAN countries (see box). Add to that the fact that the entire ASEAN region will effectively become one economic region in a few years and establishing your business in Thailand now could mean more opportunities in surrounding countries later on. Lam says to expect more from Thailand in the next decade. "Look out for opportunities with the government stimulus package, regional cooperation emerging out of the AANZFTA not just tariff reductions, but the fact that the ASEAN countries are looking at further regional cooperation," she advises. "The business services sector will be one that presents opportunities in the medium to long term."

Trade links

AusThai Connections: Australian Embassy in Thailand: Australian-Thai Chamber of Commerce: Royal Thai Embassy: Thai Trade Fair: Thailand Board of Investment: Thailand South Australia Business

Free trade with ASEAN

It's hard to go one better than Australia's five-year-old free trade agreement (FTA) with Thailand, unless you can get 10 countries on one FTA. On February 26, 2009, Australia and New Zealand did just that, entering into an FTA with 10 countries of the Association of South East Asian Nations (ASEAN)-Burma, Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, The Philippines, Singapore, Thailand and Vietnam-the AANZFTA. The most immediate benefit is a reduction in tariffs, says Rod Morehouse, Austrade's senior trade commissioner for ASEAN: "In the year 2020 we're down to about three percent of our exports being caught by tariffs, all the rest are duty free. That is a massive change within the ASEAN economy." However, Morehouse is also excited about how it may assist other political manoeuvring. "It creates a formal framework for the governments to meet and discuss behind the border issues like tariff quota, licensing, specification and accreditation issues, all those murky areas where governments have the ability to block sales. That happens fairly widely in ASEAN." The AANZFTA equips Australia well for the growth markets in South East Asia. Trade to ASEAN countries has increased about 10 percent per annum and the agreement could not have come at a better time, boosting the confidence of exporters worried about global economic downturn. Morehouse identifies agribusiness as one of the big winners, such as racehorses to Indonesia, goats to The Philippines and wheat and pulses to Vietnam. Food in general will receive benefits. "It ranges from nuts and seeds, margarine, biscuits, seafood, dairy products, confectionery, ice cream and covers a range of countries," he lists."In consumer products the big winner there was fashion, upmarket teenage wear, cocktail dresses in Indonesia, Malaysia and the Philippines. They are already important markets and this allows us to do more," he adds. In the services sector, Morehouse has high hopes for business services. "We can now increase our Australian equity; we can run them as we'd run them at home. We got major concessions from Indonesia and Malaysia," he says. Australia gained a lot from the FTA, largely because a lot of ASEAN countries were quite protectionist, while Australia already had quite an open economy. This played into the negotiations. "ASEAN didn't think we had a lot to offer in tariff concessions because we are a fairly open market. What they fed to us was 'you're looking for tariff concessions from us, we need competency assistance from you to help us grow our institutions'," explains Morehouse. "That's a nice neighbourly thing to do anyway."Australia can also take heart from the fact that the FTA was a complex multi-country signing, which will serve us well with the World Trade Organization's Doha Round negotiations. For the moment, a trillion-dollar market of more than 550 million people will have to do. "If you're already doing business there it's time to make sure your contacts are solid. If you're not doing business there already, there's plenty of scope to grow," Morehouse advises.


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