Mr' Somphong Wanapha

1

• Mr. Somphong Wanapha
• Secretary General
• Thailand Board of Investment
• January 2003

2
Outline of Presentation

• Macroeconomic Overview
• FDI in 2002/2003
• Thailands Competitive Advantages
• Targeted Opportunities in Thailand

3
The Macroeconomic Picture in Statistics (1 of 2)
1998 1999 2000 2001e 2002e GDP Growth
() -9.4 4.4 4.6 1.8 4.9 GDP
(US Bil) 111.9 122.4 122.1 114.4
125.6 Inflation () 8.1 0.3 1.6 1.6
0.6 GDP Per Capita 1,820 1,980 1,957
1,830 1,990 (US) Fiscal Balance (US Bil)
-2.6 -3.0 -2.6 -2.5 -2.8
Sources Bank of Thailand
ThailandOutlook.com (January 10, 2003)


4
The Macroeconomic Picture in Statistics (2 of 2)
1998 1999 2000 2001e
2002e Foreign Reserves 29.5 34.8
32.7 33.0 38.7/ (US Bil.) Export
Growth () -6.6 7.4 19.5 -6.9
1.7 Value of Exports 54.5 56.8
67.9 63.2 64.3 (US Bil.) Current
Account 12.6 10.1 7.6
5.3 3.6 ( of GDP) MPI 96.5
108.6 112.1 113.5 130.1 (Manufacturi
ng Production Index)
Sources Bank of Thailand
ThailandOutlook.com (January 10, 2003)
As of January 3, 2003
5
Government Stimulus

• Restructuring Farm Debts
• Providing Million Baht Grants to all 70,000
  villages
• Thailand Asset Management Corporation
• Supporting SMEs via State Banks

6
Board of Investment Approved Foreign Investment
by Country
2000 2001 2002
Number Value of Number
Value of Number Value of
of Investment of
Investment of
Investment Projects (mil. US)
Projects (mil. US)
Projects (mil. US)
Total 1,116 6,967 820 5,987 721
3,775 Foreign 761 5,295 575 4,713 483
2,316 By Country Japan 282 2,674 257
1,874 215 892 U.S.A. 73 944
40 902 37 258 Taiwan 120
439 50 153 41 63 Hong Kong
31 155 20 218 5
37 Singapore 84 495 51 202
40 305 E.U. 144 776 79 518
65 378
Note 1 Investment projects with foreign equity
participation from more than one country are
reported in the figures for each country Note 2
2000 US40.16 baht 2001 US44.48 baht 2002
US43.00 baht
7
Investment from the US

• Approved projects in 2002
• Honeywell US12 million to produce plated
  thermal spreaders
• Cargill US5 million in agriculture (chicken)
• Johnson Controls US8.5 million for automotive
  seats
• An International Procurement Office from 3M
• Regional Operating Headquarters from ExxonMobil

8
Regional Operating Headquarters (ROH)

• In August, the Government Established Regulations
  Covering Regional Operating Headquarters
• Companies must be incorporated under Thai law and
  have paid-up minimum capital of 10 million baht
• They must service branches or affiliates in at
  least 3 countries
• Income must come from managerial, administrative,
  technical, or other prescribed supporting
  services for branches/associated companies

9
ROH

• Benefits
• Corporate income tax at 10 for
• Qualified services
• Royalties from ROH in Thailand
• Interest income on loans made to ROH
  branches/associated enterprises
• Tax exemption for dividends from ROH
  branches/associated enterprises
• Expats working for ROH are taxed at 15 for 1st 2
  years, instead of on sliding scale

10
FDI in 2003

• Targeting Same Level of Investment as 2002
• Quality is More Important Than Quantity
• We are Looking for Projects to
• Enhance the competitiveness of Thai industry
• Upgrade human capital (i.e. human resource
  development)
• Help develop and transfer skills and technology
• Nurture Thai talent

11
FDI in 2003

• Objectives Include
• Encouraging Cluster Development
• Particularly in automotive and petrochemicals
  (Eastern Seaboard)
• Targeting investment
• By region and by industry
• We have established 5 target industries and will
  develop industry-specific measure to support them
• Non-target industries
• No changes in policy, no backtracking

12
Competitive Advantages

• ASEAN and AFTA
• Progressively being implemented
• Location and Social Stability
• Peaceful Buddhist country
• Free from social unrest
• Well-developed infrastructure
• Political System
• Stable democracy
• Reform-oriented government
• Workforce
• Trainable and adaptable

13
Competitive Advantages

• Cost-effective Local Inputs
• Least expensive office space in Asia
• Vibrant supporting industries support
  subcontracting
• Canon sources 70 of all parts locally
• Toyota is looking to source 100 locally by 2006
• More and more manufacturers and assemblers
  acknowledge that Thai local inputs are key to
  global competitiveness

14
China

• Should You Put All Your Eggs in the China Basket?
• China has huge potential, but investment
  landscape is a bit uncertain

15
China

• JETRO Report Found That
• In 14 categories, Thailand was ranked better than
  China in 11, including
• Legal framework
• Transparency
• Infrastructure
• Development of parts industry
• For Global Markets, Even China Invests in Thailand

16
Target Industries

• We Have Identified 5 Groups of Target Industries
• Agro-Industry
• Automotive
• Fashion
• Electronics and ICT
• High-Value Services

17
Target Industries

• Specific Policies and Measures Will Be Developed
  for Each Target Industry, Based On
• Competitiveness
• Levels of technology
• Market potential
• Non-target Industries
• No change in policy
• No backtracking
• No reduction in incentives

18
Leading Agricultural Exports

• Export Value
• --------------------------------------------------
  ----------------------------------
• Rice 73,812
• Canned Seafood 65,957
• Shrimp 48,696
• Rubber 43,942
• Canned Tuna 21,886
• Chicken 21,796
• Canned Fruit 21,767
• Sugar 21,687
• Canned Pineapple 11,433

1 Exporter in the World
Unit Million Baht
19
Agricultural Priority Activities

• Under revised BOI policy (effective August 1,
  2000), 26 agricultural activities have been
  classified as priority activities, including 8
  newly-promoted categories

• Manufacturing of alcohol or fuel through plants
• Fertilizers produced through biotechnology
• Manufacturing of products through herbs
• Analysis of plant disease
• Analysis and certification of agricultural
  products
• Soil and water analysis for agriculture
• Agricultural Trading Centers
• Agricultural Processing Zones

20
Automotive Industry in 2001

• Assembly
• Market 297,052 units 13.3
• Export 175,299 units 14.7
• Production 459,418 units 11.6
• Total Component Industry US3.8 billion
• OEM US2.3 billion
• OESpare US0.5 billion
• REM US1.0 billion
• 500 Component Manufacturers
• Employing 100,000 Workers

21
Thai Automotive Markets
22
Auto Parts Components Manufactured in Thailand

• Engines
• Diesels, Motorcycles
• Engine Components
• Starters, Alternators, Pumps, Filters, Hoses,
  Gears, Flywheels
• Body Parts
• Chassis, Bumpers, Fenders, Hoods, Door Panels
• Brake Systems
• Master Cylinders, Drums, Discs, Pads, Linings,
• Steering Systems
• Steering Wheels, Gears, Columns, Pumps, Linkages

• Suspensions
• Shocks, Coils, Ball Joints
• Transmissions
• Gears, Casings, Rear Axles, Drive Shafts,
  Propellor Shafts
• Electrical/Electronics
• Alternators, Starters, Speedometers, Lamps,
  Motors, Flasher Relays
• Interiors/Exteriors
• Seats, Mats, Weather Strips, Console Boxes
• Others
• Windshields, Seat Belts, Radiators, Wheels,
  Compressors

23
Components Not Produced in Thailand

• Passenger Car Engines
• Fuel Injection Pumps
• Transmissions
• Differential Gears
• Final Gears
• Injection Nozzles
• Electronic Systems
• Electronic Control Units

24
Thai Automotive Trends

• Gradual Recovery of Automotive Market
• Expanding Exports
• Continued Investment in Parts Components
• Continued Investment in Assembly
• Thailand is Hub of Auto Industry in Region

25
Fashion

• Develop Thailand as Fashion Center for Southeast
  Asia
• Leather
• Opportunities lie in technical cooperation and
  quality improvement, particularly in design and
  branding
• Jewelry
• Thai gold, silver, and costume jewelry in high
  demand , due to Thai artisanship
• Opportunities to bring in high-tech equipment and
  to help with design
• Garments
• Provide training institute to produce
  international-standard fashion graduates
• Provide consistent supply of high-quality raw
  materials

26
High Value Added Services

• High-Value Services
• Regional Operating Headquarters
• Attractive package of tax incentives (comparable
  to any in the region)
• Non-tax incentives from the BOI
• Long-Stay Tourism
• Retirement homes
• Snowbirds
• ICT-Related Services
• E-Commerce Application Service Providers
• E-Commerce Users

27
Electronics Electrical Appliances in Thailand

• Consumer Electronics
• Computers Peripherals
• Telecom Office Equipment
• Electronic Components Parts
• Electrical Products Parts
• The Industry
• 750 Companies
• 300,000 350,000 Employees
• US17.2 Billion Investment
• Export US21 billion annually

28
Electronics Exports

• Consumer Electronics
• 2000 Exports US3.3 Billion (17)
• 2001 Exports US2.9 Billion (-12)
• Computers and Peripherals
• 2000 Exports US7.8 Billion (3)
• 2001 Exports US6.8 Billion (-12)
• Telecoms and Office Equipment
• 2000 Exports US1.2 Billion (10)
• 2001 Exports US1.0 Billion (-17)
• Electronic Components and Parts
• 2000 Exports US9.3 Billion (23)
• 2001 Exports US7.8 Billion (-15)
• Electrical Products and Parts
• 2000 Exports US1.9 Billion (17)
• 2001 Exports US2.1 Billion (11)

29
BOI on the Internethttp//www.boi.go.th
For the past two years, the BOI web site
was ranked 5 Investment Promotion Agency
website in the world by Corporate Location Email
head_at_boi.go.th

• Up-to-date Info on BOI Policies, Procedures,
  Incentives and Services
• Links to Business News About Thailand
• Whats New at the BOI
• Links to Important Business Sites
• Cost of Doing Business in Thailand

• Database of Promoted Companies
• Comprehensive Information From Other Government
  Agencies
• BOI Statistics
• Trade Statistics
• Demographic Data
• Industrial Estates

30

• EXTRA SLIDES

31
The Road Ahead

• Seven Key Strategies to Keep Thailand Competitive
• Remove obstacles to investment
• Proactive marketing of Thailand
• Improve overseas networking
• Improve competitiveness
• Market community enterprises
• Monitor global trends
• Cut through red tape

32
Removing Obstacles

• The BOI Wants to be Your Business Partner
• We constantly meet with investors to find out
  what we can do to improve investment climate
• We are committed to playing a coordinating role
  with other government agencies
• We have set up an investment facilitation unit to
  work with investors to help solve problems

33
Proactive Marketing

• Target Three Key Regions
• Europe (EU)
• Asia (Japan, China, Singapore, Hong Kong, Korea)
• North America (U.S. and Canada)
• Plans to Open New Offices in
• Shanghai
• San Francisco
• Osaka
• Promote Target Industries

34
Improve Networking

• Develop Linkages, Networks, Partnerships With
• Banks
• Investment Promotion Agencies
• Provincial Governments
• Develop Sister City/Sister Province Relationships
• Work With Chambers of Commerce
• Both in Thailand and overseas

35
Improving Thai Competitiveness

• Send a Wake-Up Call to Thai Industry,
  Particularly SMEs
• Inform them of changes in global marketplace
• Make them aware of need to adopt industry best
  practices and technology
• Help them coordinate skills transfer through
  training

36
Marketing Community Enterprises

• BOI Will Play a Coordinating Role With Thai SMEs
• Working with other Ministries to ensure SMEs
  receive maximum government support
• Encourage foreign SMEs to partner with Thai SMEs
  to provide
• Technical assistance
• Foreign market access
• Assistance in adapting Thai products for foreign
  markets

37
Monitoring International Investment Trends

• Separate Unit at BOI to Monitor Global Investment
  Environment
• Provide both the Thai government and the Thai
  investment community early warnings about
  legislative and procedural changes in the
  international investment arena

38
Improve the BOI

• The BOI is Always Looking to Improve the Way We
  Do Business
• Already ISO 9002 certified, ensuring all
  investors receive fair and transparent treatment
• We will continue to improve range of services
• We will look to streamline procedure to cut
  through red tape

39
The Board of Investment Organization Chart
Board of Investment
Office of the Prime Minister
Policy
Administrative
Office of the Board of Investment
40
Office of the Board of InvestmentSectoral
Divisions
41
MIDA
EDB
EDB
BOI
MIDA
EDB
EDB
MIDA
MIDA
EDB
EDB
MIDA
42
EDB
MIDA
MIDA
BOI
EDB
MIDA
EDB
EDB
BOI
MIDA
EDB
MIDA
43
BOI
EDB
MIDA
MIDA
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EDB
MIDA
MIDA
EDB
EDB
MIDA
44
BOI Policy Priority Activities
(1 of 2)

• Agriculture Backbone of the Country
• Technological and human resource development
• Infrastructure, public utilities and basic
  services
• Environmental protection/conservation
• Targeted Industries - such as
• Steel casting using induction furnace
• Forged steel parts
• Electronic design
• Software and software park

45
BOI Policy Priority Activities
(2 of 2)

• These five categories of priority activities are
  eligible for special incentives
• Import duty exemption on machinery
• Eight-year corporate income tax holiday,
  regardless of zone

46
Services of the BOI

• The BOI offers
• Investment Matchmaker Program
• Support around the world 4 overseas offices
  (New York, Paris, Frankfurt, Tokyo)
• One-Stop Shop for Visas and Work Permits Work
  Permits within 3 hours
• Services of BUILD Unit to promote industrial
  subcontracting Vendors Meet Customers Program
• ASEAN Supporting Industry Database (ASID)
• Comprehensive, world-class website
• Help with work and residency permits
• Interaction with other government agencies on
  behalf of investors

47
Asias Most Affordable Office Space
48
Big Mac Index
Source The Economist, April 2002
49
New Activities Eligible for Promotion

• E-Commerce Application Service Provider
• E-Commerce User
• Regional Headquarters
• International Distribution Centers
• International Procurement Offices
• Retirement Homes
• Dedicated Health Centers
• Waste Recycling

50
Supporting Industriesin ASEAN

• ASEAN Supporting Industry Database
• Expands the scope of ASEANs supporting
  industries by serving as the regions industrial
  yellow pages
• The ASID home page (www.asidnet.org) contains
  information about more than 11,000 supporting
  industry companies throughout ASEAN
• Provides communication links to facilitate
  electronic commerce between ASEAN suppliers and
  foreign purchasers.

51
Liberal Investment Regime

• No Export Requirements
• No Foreign Equity Restrictions in Manufacturing
  Sectors
• No Local-Content Requirements
• No Location Requirement in All But 6 Activities

52
BOI Policy Objectives

• Attract Investment to Speed Recovery
• Quality more important than quantity
• Continue Decentralization
• Maximum incentives for least developed provinces
• Strengthen Competitiveness
• Require international-standard certification
  (e.g. ISO 9002)
• Develop New Activities and Industries
• Good Governance
• Transparent policies
• Performance-based incentives

53
The Board of Investment Basic Incentives and
Measures

• Guarantees and Permissions
• Guarantees against nationalization and price
  controls
• Permission to own land and bring in foreign
  experts
• Tax Incentives
• Tax exemption /reduction on imported machinery
  and input
• Income tax exemption
• Support services
• Advisory and information provision
• Publications

54
The Board of Investment Basic Incentives and
Measures

• To reduce initial investment costs
• Tax exemption or reduction on imported machinery
• Tax exemption or reduction on imported inputs
• Exemptions from corporate income tax for 3-8 years

55
Zones of Opportunity
56
Import Duty on Machinery
57
Import Duty on Raw Materials
58
Corporate Income Tax Exemption
The Amount of a Projects Corporate Income Tax
Holiday is Capped at 100 of Investment Capital
59
Additional Zone 3 Incentives
60
Additional Zone 3 Incentives
61
Criteria and Conditions

• Criteria
• Value added
• D/E ratio
• Modern technology
• Environmental protection

• Conditions
• ISO 9000
• Performance based
• Cap on corporate income tax exemption (equal to
  investment capital)

62
Why Thailand?

• Reform-oriented Economic Policy
• Favorable Approach to the Private Sector
  Government As Supporter Not Regulator
• Consistently Positive Attitude Toward Foreign
  Investment
• Steady Moves to Liberalize Business Environment
  and Privatize State-owned Enterprises

63
Why Thailand?

• Resilient, Diversified Economy, Supporting
  Industries Growing
• Abundant Natural Resources
• Large and Highly-productive Labor Force
• Domestic Market of 63 Million
• Strategic Location at the Heart of Southeast Asia

64
Board of Investment Approved Foreign Investment
by Country
2000 2001 2002
(Jan.-Oct.) Number Value of
Number Value of Number
Value of of Investment of
Investment of
Investment Projects (mil. baht)
Projects (mil. baht)
Projects (mil. baht)
Total 1,116 279,800 820 266,300 604
144,000 Foreign 761 212,649 575 209,622 4
08 89,366 By Country Japan 282 107,382 25
7 83,369 177 32,574 U.S.A. 73
37,916 40 40,131 33 10,388 Taiwan
120 17,632 50 6,824 38
2,554 Hong Kong 31 6,241 20
9,710 4 1,518 Singapore 84 19,910
51 8,985 35 12,471 E.U. 144
31,175 79 23,019 57 15,389

Note Investment projects with foreign equity
participation from more than one country are
reported in the figures for each country