With global warming demanding rapid and far-reaching actions to reduce carbon emissions, many economies have galvanised their efforts to change towards clean energy and decarbonised living. In Thailand, action is being taken to fulfil the country’s commitment under the Paris Agreement to reduce its greenhouse gas (GHG) emissions by one-fifth from its business-as-usual level, while some major economies around the world have initiated even more drastic efforts to keep the global temperature below 2 or preferably 1.5 degrees Celsius higher than the pre-industrial level by 2030.
In mid-July, the European Union announced that it will be implementing its “Fit for 55” policy with the aim of cutting GHG emissions by 55% by 2030 and achieving carbon neutrality within two decades after that. One of the legislative changes under this policy involves the implementation of a Carbon Border Adjustment Mechanism that could affect trade counterparties. China has accelerated its ecosystem for the green economy with a target of achieving zero emissions by 2060, while Taiwan, South Korea and Japan are all planning to achieve a similar target by 2050. For its part, the United States has announced plans to halve its GHG emissions by 2030 from its 2005 level, in line with the Paris Agreement.
Reinforcing BCG to Accelerate Investment
Against this backdrop, the Thai government has announced the Bio-Circular-Green (BCG) Economy concept as part of the national agenda for the country’s development. It is hoped that the BCG model will steer the country’s economic recovery through the period of heightened uncertainty in the global economy by increasing investment in science and technology and activities that will create sustainable development and addressing global environmental concerns.
The Thai government’s BCG economy model focuses on four-pronged strategies, namely 1) enhancing economic value of agricultural and food products by applying biotechnology to create innovations and meet the needs of global consumers; 2) building technology and human capital in R&D of medical and pharmaceutical technology; 3) promoting bioenergy, biomaterials and biochemicals including renewable energy from waste, biomass and biogas as well as community-based power plants which will be connected through blockchain-enabled microgrids; and 4) linking tourism to the country’s intellectual capital to develop niches and promote tourism in less-visited cities.
The BCG concept has set out a framework for the government to identify the direction for investment and policy over the next six years.
The Thai government has targeted the total new investment in BCG sectors to be US$23 billion, doubling the amount of US$12 billion in 2026 from 2021, with investment by the private sector increasing to 30% from 20% during the period.
Through effective implementation of the BCG economy model, the investment by the private sector in the BCG sectors is projected to accelerate to 85% of US$30 billion in total new investment by 20302.
Under the scenario, the BCG economy is expected to boost the country’s gross domestic product by US$30 billion, or 6% per year, driven by investment growth from both the public and the private sector.
Concrete Measures to Drive the BCG Economy
The Thai government’s plan to promote investment to ensure the sustainability of natural resources; developing new skill sets for the workforce; applying biotechnology in farm and food products; and developing circular economy could shore up employment and quality of life of the Thai population while offering new business opportunities with inclusiveness in the post-pandemic recovery period.
The investment in BCG economy concepts would help Thailand maintain the competitiveness of local products and services in the world market, which sees consumers and investors increasingly influenced by Environment, Social and Corporate Governance (ESG) aspects, besides propelling the economic growth.
Appointed by the government to oversee the implementation of the BCG framework, the BCG Policy Board has outlined 13 measures which will be the direction for investment and policy over the next six years.
These are comprised of improving data-driven policymaking for the country’s resources; creating a more active carbon credit market; developing the economy in rural areas through modern agriculture, food processing, and tourism; increasing the economic value of farm products; enhancing food safety standards; building the capacity of biotechnology innovation in food, pharmaceuticals, biomaterials and biochemicals; boosting the market for local innovations and promoting BCG labels; promoting green and high-value tourism; applying the biotechnology, circular and green technology concept in development plans; promoting BCG- related skills in the workforce; ramping up investment in R&D and translational facilities; supporting local startups; and attracting global talents3.
BOI Offers Incentives for a Comprehensive BCG Ecosystem
The Thailand Board of Investment has offered a variety of investment incentives to promote the BCG Economy comprehensively based on three core business concepts, namely promoting the cost-effective use of natural resources, recycling materials as much as possible, and addressing environmental problems in line with global actions to tackle climate change4.
The BOI offers the following exemptions on Corporate Income Tax (CIT):
Agricultural and Food Industries
- 5-year CIT exemption for the manufacture of biofertilizer and the breeding of plants and animals; the manufacture of modified starch, plant and animal oil extracts; the manufacture of food and beverage preservatives and additives; trading centres for agricultural goods; and the manufacture of modern agricultural products and plant factories
- 8-year CIT exemption for the manufacture of natural extracts using advanced technology, the manufacture of active ingredients, the manufacture of natural rubber products, and the manufacture of active and intelligent packaging or packaging made from eco- friendly pulp and paper
- 5-year CIT exemption for the manufacture of biomass briquettes or pallets, the manufacture of eco-friendly polymers, and the manufacture of conventional medicine
- 8-year CIT exemption for R&D or the manufacture of products that adopt advanced biotechnology; the manufacture of fuel from farm products, waste or scraps; and the manufacture of eco-friendly chemicals or polymers
- 8-year CIT exemption for the manufacture of medical food and food supplements, active pharmaceutical ingredients and targeted medicines
- 5-year CIT exemption for the manufacture of pulp and paper
- 8-year CIT exemption for the manufacture of hygienic pulp and paper
Energy & Public Utilities
- 5-year CIT exemption for recycling and reuse of unwanted materials
- 8-year CIT exemption for power production from steam from garbage and renewable energy, waste treatment or disposal and energy service companies