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More projects in the pipelineAn improving export outlook and other indicators have investors looking at Thailand in increasing numbers. The BoI, meanwhile, is tightening its rules to ensure more competitiveness CHATRUDEE THEPARAT
Signs of recovery first emerged late last year because of the improvement in he global economy, said Staporn Kavitanon, secretary-general of the Board of Investment. According to a report on 600 companies that held BoI promotional privileges, their capacity utilisation rate rose to 77% in the first quarter of this year from 74% in the fourth quarter of 1999. The rate is substantially higher than the 58% reported in the overall manufacturing sector. The value of exports by BoI-promoted companies grew by 16% in the first quarter. The agency has forecast a 15% growth rate for the year, compared with 10% for all manufacturing firms. Most government policymakers also agree that the growth in value of all Thailand's exports will outstrip an earlier projection of 6.5%. They cite figures for the first four months of the year, in which exports totalled US$21.93 billion, a 24.3% rise year-on-year. However, exports in April dropped by 13.7% from March to $5.03 billion, while imports fell by 6.4% to $4.42 billion. Employment overall increased by 2% year-on-year in February, the most recent month for which statistics were available, with employment in the manufacturing sector alone rising by 11%. The Labor Ministry has estimated the country's unemployment rate at 3.19% of the total workforce, down sharply from 4.2% last year. Employment on the rise The improved employment picture has been linked to the beginnings of an economic recovery after more than two years of difficulties following the July 1997 depreciation of the baht. The economic growth rate for the year is expected to be between four and 4.5%, with the agricultural sector growing by 2% and services and industry by 4.7%. Overall electricity consumption, which tends to move in line with economic growth, rose year-on-year by 8.8% in the first quarter. The figure for large industries was 14.5% The BoI said investment applications in the first four months increased by 52% to 364 compared with 238 projects in the same period last year. The amount of investment capital represented by the projects rose by 143% to 103.6 billion baht. But the total registered capital of the applicants remained unchanged at 14.4 billion baht. The registered capital of Thai-owned applicants totalled 7.2 billion baht, a rise from 3.2 billion baht, while that of foreign companies fell to 7.2 billion baht from 11.1 billion. BoI-promoted investment projects added 81,786 new jobs in the first four months this year compared with 42,784 in the same period last year. Japanese investors remained the leading BoI-promoted investors with 93 applications, up from 65. They were followed by investors from Europe with 53 projects, up from 35; Taiwan with 35 applications, up from 29; and the United States with 22, up from 15. Applications from Hong Kong-based investors rose to 13 from 11, and Singaporean investors submitted 32 applications compared with 22. The investment value of applications rose in most industrial sectors, with the exception of services and infrastructure which recorded a 20% decline (see chart). Applications of Thai-owned projects increased to 164 projects from 55, while those of purely foreign investors rose to 300 from 167. The number of joint-venture projects increased to 366 from 266. The number of export-oriented projects grew to 141 from 119. Chakramon Phasukvanich, the BoI's deputy secretary-general, said that among the many companies approaching the BoI for promotional privileges were several multinationals, particularly Singapore-based electronics ventures looking for a lower-cost environment in Thailand. Mr Chakramon also expressed optimism about the continuing revival of the automobile industry. He said the export forecast of 140,000 160,000 units, compared with 120,000 last year, appeared achievable, while domestic sales would be between 240,000-260,000 units this. By 2002, automobile sales are expected to return to the pre-crisis level of 600,000 units. Revised privileges Meanwhile, the BoI is revising some of its investment privileges, partly in line with World Trade Organisation agreements that emphasise a reduction in indirect subsidies. The new measures are scheduled to take effect on Aug 1. Under the new policy, the BoI plans to cancel import tax exemptions for companies that do not export, and shorten corporate income-tax holidays. The board would maintain tax privileges for five more years for existing plants located in industrial estates in Rayong province, but would not give similar privileges to new projects. To encourage local industries to improve their competitiveness, certification to international standards such as ISO 9000 would be mandatory. Promoted projects that failed to obtain certification within two years of starting operations would lose their BoI privileges. The existing three-zone system for promoted projects would be upheld with minor changes. Zone 1, which offers the fewest privileges, remains unchanged with six provinces: Bangkok, Samut Prakan, Samut Sakhon, Pathum Thani, Nonthaburi and Nakhon Pathom. The number of provinces in Zone 2 will increase to 12 from 10. The existing 10 are Samut Songkhram, Ratchaburi, Kanchanaburi, Suphan Buri, Ang Thong, Ayutthaya, Sara Buri, Nakhon Nayok, Chachoengsao and Chon Buri. Rayong and Phuket will be added. Zone 3 consists of the remaining 58 provinces plus the industrial estates in Rayong that had already obtained BoI promotion before the new policies took effect. Investors in Zone 1 will receive a 50% reduction on machinery import tariffs. But only projects in industrial estates will be granted a three-year corporate income-tax holiday. However, import tax exemptions on raw materials for exported-oriented production will be extended to three years from one. Investors in Zone 2 will also obtain a 50% machinery import-tax reduction. The three-year corporate tax exemption will remain unchanged for projects outside industrial estates, but the tax holiday for projects in industrial estates will be cut to five years from seven. As well, the import-tax exemption on raw materials for exported-oriented production will be lengthened to three years from one. Investors in Zone 3 will be fully exempt from imported tax on machinery, while the corporate tax holiday will remain unchanged at eight years. The tax exemption on imported raw materials for production supplied to the local market would be lifted in order to correct market distortions. Other existing conditions required for projects seeking promotion will remain unchanged. However, the value-added component of projects with investments of less than 500 million baht must be at least 20% of their revenue. This condition will not cover electronics, agro-industry and other high-yielding projects. For projects worth more than 500 million baht, feasibility studies would be required . In projects involving agriculture, fisheries, mining, exploration and services, at least 51% of the shares must be held by Thai citizens. The BoI also dropped 35 industries from its promotion list. They include abattoirs, drinking-water production, rubber sheets, drying and silos, hydroponic farming, marble and granite mining, steel rods, fishing nets, umbrellas, container shipyards and paints. Mr Chakramon said the new policies represented only minor changes that were unlikely to affect the investment outlook for the second half of the year. He said that promotional privileges alone were not the key factors in most investors' decision-making process. Other factors, he said, included labour quality and infrastructure. The BoI is also drafting amendments to the BoI Act to give the agency the authority to grant maximum privileges to special projects such as high-technology ventures. |
Thailand's investment outlook improved in the first half of the year, as reflected by several positive economic indicators such as rising capacity utilisation, better exports, easing unemployment and revived electricity consumption.© Copyright The Post Publishing Public Co., Ltd. 2000
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