Domestic political turbulence, rising inflation, plummeting domestic consumption and a global economic downturn leave Thailand’s export-orientated economy vulnerable, and threaten to dent foreign investor confidence in the country going forward. However, the value of investment projects approved by the Board of Investment rose 13% year-on-year in the first quarter of 2011. The following is an overview of the Thai economy, its challenges and opportunities and their implications for investors considering Thailand business formation.

Economic growth is hampered by the lack of freedom in Thailand’s economy. For example, it is ranked a poor 62nd place in the 2011 Index of Economic Freedom by the US-based Heritage Foundation. Furthermore, Thailand has a reputation for corruption in the private and public sector, tumbling to 78th in the 2010 Corruption Perceptions Index by Transparency International.

To encourage private investment, the Thai government announced in 2008 tax cuts for small and medium enterprises, and tax benefits for firms listed on the stock exchange. Thailand's Board of Investment (BoI) also offers incentives to encourage Thailand business formation, including allowing 100% foreign ownership in certain sectors including manufacturing.

On the positive side, several investors choosing Thailand business formation are surprised to learn of the country’s high 19th place ranking in the 2011 Doing Business Survey by the World Bank. The survey measures factors including business start up procedures, time, cost and minimum capital required to start a business. Because there are no official minimum capital requirements for Thailand business formation, it is a cost-effective jurisdiction in which to form a business. Despite Thailand’s apparent ease of doing business, language barriers remain and most entrepreneurs hire the services of a professional consulting Firm to handle business set up requirements.

When determining the suitability of a project for which investment incentives are requested, the BoI uses the following criteria:

i) For a project with investment capital (excluding cost of land and working capital) up to 500 million baht (US$16.5 million), the value added must be at least 20 percent of sales revenue, except projects that manufacture electronic products and parts or process agricultural produce;

ii) For a project with investment capital (excluding cost of land and working capital) exceeding 500 million baht, the above criteria shall be used and a feasibility study of the project, as prescribed by the Board, must be submitted;

iii) For a newly-established project, the ratio of liabilities to registered capital should not exceed 3 to 1.

For more information on Thailand Business Formation, purchase our Asia Business Setup book. Alternatively, contact email@healyconsultants.com or call us in Singapore (+65) 6735 0120.

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