Why Thailand?

Why Thailand?

Thailand has historically welcomed the world to its shores and over the past half century experienced a profound transformation that continues to this day. Often referred to as "The Land of Smiles", Thailand possesses a dynamic economy, a rich history, a maturing political system, a splendid culture, an energetic society, and an amiable people. The country is committed to a path of economic liberalization and free markets that has served Thailand and investors well.

There are several reasons why foreign businesses take a close look at Thailand and consider investing long-term in the country. Here is an overview of those factors that make Thailand a premier destination for foreign capital investment.

The Kingdom of Thailand is a constitutional monarchy and this feature continues to function as the cornerstone of the country's entire political system. Moreover, over the past twenty-five years Thailand has embarked upon a gradual transition that has strengthened and developed its brand of Asian-style democracy.

Prime Mi ni ster Yi ngl uck Shinawatra has been head of government since a resounding victory in a general election that took place in July 2011 and several outside observers, such as Freedom House, viewed the past election to have been free and fair but also the results to have been tallied in a transparent manner.

The Kingdom of Thailand is recognized as a respected member of the international community and is a founding member of the Association of South-East Asian Nations (ASEAN). Successive governments have shown commitment to free and fair trade and Thailand seeks more integration and involvement at the global level.

The country is recognized by the World Bank as "one of the great development success stories", ranked as an upper-middle income country. In fact, for the past several years the World Bank has ranked Thailand among the top-20 countries in the world for ease of doing business, 18th out of 185 economies in the 2013 ranking.

The Thai economy is dependent upon exports of goods and services which account for about 78% of its gross domestic product (GDP). Since recovering from the East Asian financial crisis of the late 1990s, GDP performance has averaged between 5 to 6% year-on-year. For 2012 Thailand's GDP grew by 6.4%. The government responded to the global recession and the 2011 flood with a stimulus package estimated to have contributed an increase to the country's GDP of 1.3% by spurring domestic consumption. The GDP per capita (PPP) of Thailand stands approximately at $8,700 (2012 est).

The diversified manufacturing sector in Thailand has greatly contributed to the country's continued economic success. A range of industries including computers and electronics, automotives and parts, processed food, plastic products, rubber products, gems and jewelry have catapulted the Thai economy to the top of global rankings.

Thailand's industrial base also is boosted by the export of high technology components like hard disk drives, integrated circuits, vehicles and sophisticated electrical appliances. Foreign direct investment (FDI) inward stock amounted to about US$140 billion in 2011, according to the UNCTAD World Investment Report 2012.

Further, UNCTAD has ranked Thailand 8th in the world as a prospective host economy for FDI. Moreover, the agricultural sector – crops, livestock, forestry,

fisheries – is Thailand's biggest employer. About 40% of the total Thai population is dependent upon agriculture. Indeed, Thailand is a major producer and exporter of cassava (#1 exporter), rubber (#1 exporter) sugar (#2 exporter), fishery exports (#3 exporter), rice and grains (#6 exporter), the 12th largest food exporting nation, and leading exporter of many other food products. It also leads the Asian region in exporting chicken meat and several other commodities.

In 1992, leaders of ASEAN governments approved a Thai proposal to establish the ASEAN Free Trade Area (AFTA), which aimed to reduce tariffs on most processed agricultural and industrial products traded among ASEAN countries. The scheduled tariff reductions have continued to be pushed forward; currently, over 90% of the tariffs on goods have been reduced to zero, and further reductions will be in place by the end of 2015 with the inauguration of the ASEAN Economic Community.

Likewise, ASEAN has expanded its commercial relationships with Australia, New Zealand, China, South Korea, India and Japan in the form of free trade agreements.

ASEAN, with a population of 550 million people, represents about 2.4% of the world's GDP and this figure increases considerably when its FTA with China is factored in, thereby creating a market of nearly 2 billion people. Still, it must be pointed out that Thailand is the second largest economy within the regional grouping.

Beyond its links with ASEAN, it is worth recalling that Thailand, a country with a 96% literacy rate, is the world's 31st largest economy and 24th by purchasing power, as well as being the 28th largest exporting country. Thailand also can boast claim to having the world's 35th largest services output, 17th largest manufacturing output and the 11th largest in agricultural output. Moreover, the country ranks 38th in the World Economic Forum (WEF) Global Competitiveness Report 2012-2013.

Focusing on the importance and utility of economic linkages in today's world, Thailand has signed a limited bilateral free trade agreement with China and has a partial agreement with India. An FTA with Australia was implemented on 1 January 2005 then later with New Zealand on 1 January 2010. Similarly, Thailand completed FTA negotiations with Japan and the agreement was signed in 2007. It must be mentioned that the country at this time is working towards an FTA with the European Union.

With a population of around 67 million people, with one-third living in urban areas, Thailand offers an interesting marketplace. The capital city of Bangkok, but even more so the country's secondary cities, such as Chiang Mai, Hat Yai, Khon Kean, Nakhon Ratchasima and Udon Thani, and smaller tertiary cities, boast thriving business communities and a vast consumer base. Plus, there exists a growing and increasingly affluent middle class that has intensified the demand for imported goods and services, thereby driving forward the process of trade liberalization and greater openness within the Thai economy.

Every year, thousands of Asian and Western expats move to Thailand. Some stay permanently, some stay for a few years, some for only a few months but most of them have good reasons why they decided to travel to Thailand. But what are their motivations? Why settle in Thailand? It appears that relocation to Thailand has become an appealing and viable alternative for many foreigners to explore, as the process of fast-track globalization facilitates the movement of people around the world. Some of the many other reasons for moving to this country include reasonably priced travel options; the friendliness and hospitality of the Thai people; and the country's beautiful weather/climate.

Other "magnets" that have led to a boom in Thailand's expat population (particularly of young professionals and families) are access to high-quality medical/health care; the existence of accredited international schools and/or programs; and the abundance of Western-style amenities. But these enticements are underpinned by the renowned Thai lifestyle that balances work with recreation, tradition with modernity, individualism with companionship. These social and cultural aspects are demonstrated openly during Thailand's numerous festivals and public holidays, like Songkran and Loy Krathong.

In fact, the Kingdom of Thailand is rated 9th among the top 22 destinations for world's best retirement destination in 2012, according to the International Living website. It can be argued that the country is so much more than an exotic vacation spot. For many expats, the country is a tropical paradise found. Moreover, both the quality of life and the standard of living are good, and the cost of living is very affordable for expats – working professionals and retirees.

With its modern infrastructure, the government has committed to spend 2.2 trillion baht on transportation improvement projects, and another 350 billion baht on a national water management plan. This will ensure that the country is fully prepared to meet the connectivity needs of an ASEAN market, and of the nation's growing position in the global supply chain.

Finally, another attractive feature is the Board of Investment. Operating under the Ministry of Industry, the BOI is an agency set-up by the Government of Thailand to provide incentives to foreign or local entrepreneurs that invest in a vast variety of economic sectors. Furthermore, the two main goals of the BOI are to decentralize Thailand's industrial base and to attract special types of investment, also known as priority activities. Additionally, the BOI provides guidelines and investment information and services to its customers. It also is tasked to act as the marketing arm of the Government of Thailand to actively promote the country across the globe as one of the best investment locations in Asia. Yet, more importantly, the BOI manages the working privileges given to foreign experts and skilled workers as stipulated by the Investment Promotion Act of 1977. Indeed, the Board of Investment functions as an indispensable local partner in opening the country to foreign businesses as well as to individual investors, thereby contributing to the growth of Thailand's economy.

Without doubt the Kingdom of Thailand is in a period of transition as the country advances its economic development to become more globally competitive, positions itself to take full advantage of the benefits of the forthcoming ASEAN Economic Community, and expands its emergent middle class. Thailand aims for sustainability and stability as well as progress and prosperity. It is a country endowed with bountiful human and natural resources along with a geographical setting that makes it immediately appealing to both foreign investors and businesses. Thailand lies at the heart of mainland Southeast Asia and over the years it has built an extensive and efficient infrastructure of roads, railways, airports, seaports, and communication hubs that permit it to integrate more closely into the global market economy. Logistics, medical services, information technology, and research and development are the new horizons. Indeed, the leadership of the country aspires to become a knowledge-based economy that benefits from the creativity, innovation and skill of its work force,

whether on the assembly line or in the office. As Thailand begins the shift away from low-cost, labor-intensive manufacturing to more value-added, technology-driven production, the Thai economy will move up the development ladder, thereby improving the quality of life and the standard of living of everyone in the country. The future promises many opportunities for investors in Thailand.