Thailand Country Profile

An Expert's View about Business Administration in Thailand

Posted on: 7 Jun 2012

Thailand Country Profile

 

Thailand with Bangkok as its capital city is located in the center of the Indochina peninsula in Southeast Asia. With its emerging economy, it can be considered as a newly industrialized country.
Nevertheless, the country has had to contend with some serious floods in 2011 –the worst flood crisis ever for the country- which has put the automotive, agriculture and electronics sector on hold. It cost the lives of 815 people, with 13.6 million people being directly affected and as a result their economy faced some serious setbacks.

Remarkably, only 28% of the Thai population reaches the secondary level of school and this is why it is hard to find a large labour force that is skilled enough to perform their tasks, at least for some sectors.  The educational system of Thailand is comparable with the rest of the world. Their basic education consists of 12 years, and afterwards tertiary education starts. The second language taught at schools nationally is English, but due to the low percentage of children who reach secondary school grades, it is hard to find English speaking people in Thailand.

 

Economy
Thailand has the second largest economy of Southeast Asia and is the fourth richest country when looking at the GDP per capita. During the fall in 2011 the enormous floods in Thailand negatively affected the economy to a growth of only 1.5% for that year, when they expected an actual growth of 3.5-4%. Because of the heavy floods, programs have been launched to support affected businesses and homes and the infrastructure for water supply.
To support the economy, Prime Minister Yinluck Shinawatra wants to implement measures such as a rise of the minimum wage, the offer of preferential credit to farmers, an improvement to the quality of free healthcare in the provinces and to lower the interest rate of the central bank. Lastly, the government planned a decrease on business taxes. As Thailand is too dependent on its exports, it is important to increase the domestic demand by broadening its production range. The country’s GDP in 2011 grew by 6.31%, and in 2012 the government expects a growth of 11.71%.
The government is also planning on creating 1.5 million jobs to stimulate private consumption.
The International Monetary Fund expects an economic growth of 5.5% in 2012 and a growth of 7.5% in 2013 due to the efforts of reconstruction.

The agricultural sector employs about 40% of the entire population and contributes 12.4% to the GDP. The main export products are rubber, rice, sugar, corn and cotton. Thailand is also well known for the major exports of farmed shrimps. During recent years, the contribution of the agricultural sector to the GDP has declined, whereas the contributions of goods and services to the GDP have increased.
The manufacturing sector contributes up to 44.7% to the country’s GDP. It consists mainly of the production of electronics, steel and automotives. The contribution is almost the equivalent to the services sector which consists of tourism and financial services.
As Thailand’s export accounts for more than two-thirds of their GDP, their openness to international trade is very high. China, Japan and the United States are their main export trade partners.

 

Foreign Direct Investment
Foreign Direct Investment has been of great influence when looking at Thailand’s process of economic development. Of recent years, it has developed a high demand in terms of investing in the country.
In 2009 the FDI inward flow dropped by 41.76% because of the financial crisis, whereas in 2010 this increased again by 16.82%.
The levels reached a record during the first 10 months of 2011, but dropped quickly after the floods and because of the effects of the euro zone crisis.  The continued difficulties the United States are currently encountering also plays a role in the drop of investments.

Thailand’s Board of Investment (BOI) promotes the country and especially FDI. They offer a series of incentives in six industrialized sectors. Projects that already took advantage of the privileges of the BOI, and those who are already subject to a tax exemption, are to receive another exemption for 8 full years.
Also a double deduction from transportation costs and a deduction of 25% on net profits for establishment- and construction costs are part of the incentives of the BOI.

Thailand is rich in opportunities for foreigners, however be careful with the sectors you wish to invest and operate in. As the country is located in the heart of Asia, it has a very strong strategic position and it has a cost effective workforce in some sectors. A drawback however is the political uncertainty which was the main reason in which people withheld from investing in Thailand of recent years.


Posted: 07 June 2012

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