The Board of Investment (BoI) has announced plans to make major changes to its investment incentive policy as part of Thailand’s preparations for the introduction of the Asean Economic Community (AEC) at the end of 2015.
The BoI’s plan is to use incentives to propel Thailand into a new stage of economic development — one that will help the country to overcome the “middle income trap”.
According to the BoI, there needs to be change, as there are many problems with our current economic path which include:
• low competitiveness;
• low investment in research and development;
• growing labour shortages, both for skilled and unskilled workers;
• increasing restrictions on heavy industry — with less land available and tougher regulations;
• potential problems in energy security.
The BoI’s alternative recipe — which it calls Thailand 4.0 — aims to help Thailand become a high value economy and a regional hub. The key ingredients include more research and development, a focus on services and high-value industries, better care for the environment, and cross-border regional clusters.
In order to move Thailand in this direction, the BoI plans to scrap the current emphasis on geographic zones. These would be replaced by new regional clusters that promote a concentration of investment, plus one-stop services.
There would also be a strong emphasis on border areas, with companies based in Thailand encouraged to build cross-border supply chains and develop regional clusters with our neighbours.
Incentives would be phased out for heavy industries, low-value-added industries, factories that cause environmental problems or consume a lot of energy, and concession and monopoly industries such as telecoms and concession roads.
Meanwhile, investments in the service sector, product champions and R&D would be given preferential treatment by the BoI. Examples of high priority sectors are: hospitality and healthcare, the creative economy, green industry and alternative energy. Companies with good records of meaningful corporate social responsibility will also be favoured.
At the moment the BoI is holding meetings around the country to consult with the public about its planned change of direction and concerns are being aired. Thai and foreign investors are worried about the loss of promotional privileges such as tax incentives for economic zones, and individual businesses are worried about the loss of tax benefits in certain industries such as hydroponic farming, reforestation and long-stay tourism.
Whatever the outcome, one thing is clear: change is coming to Thailand and this will bring both benefits and disadvantages. This is a time of opportunity, and the new BoI is a signpost to where these opportunities may lie.
Virasak Sutanthavibul is an Senior Executive Vice-President with Bangkok Bank. Meeting the Challenges appears every two weeks. Questions, comments or suggestions can be sent to asiafocus@bangkokpost.co.th. For more in this series please visit www.bangkokbank.com