International Trade in Thailand

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Business outline for Thailand

Main Industry Sectors

The Thai economy is heavily based on agriculture, which contributes around 10% of the GDP and employs almost 40% of the active population. The country is one of the leading producers and exporters of rice and also has rubber, sugar, corn, jute, cotton and tobacco as major crops. Fishing is an important activity as Thailand is a major exporter of farmed shrimp. However, agriculture's contribution to the GDP has relatively declined, while the exports of goods and services has increased.

The manufacturing sector accounts for just under half of the GDP and is well diversified. The main Thai industries are electronics, steel and automotive. Thailand is an assembly hub for international car brands. Electrical components and appliances, computers, cement production, furniture and plastic products are also important sectors. The textile sector employs around 25% of the active population but is no longer as dynamic as tourism which has become the main source of foreign exchange.

The tertiary sector, including tourism and financial services, contributes about half of the GDP.

Economic Overview

Thailand is Southeast Asia's second largest economy (behind Indonesia), and 4th richest nation, according to per capita GDP, after Singapore, Brunei and Malaysia. It functions as an anchor economy for the neighboring developing countries like Laos, Burma, and Cambodia. Due to its openness to foreign trade, the country was hit hard by the international financial crisis and entered into a recession in 2009 (-2.2%) for the first time since the Asian crisis of 1997-98. Estimated at 7.5%, there was a quick and dynamic growth in 2010, driven by the resumption of international trade, household incentives and investment projects (infrastructure).

With the recovery under way, the authorities will eliminate fiscal and monetary incentive measures adopted in order to combat the crisis. The country was also involved in a stimulus program called €śThailand: Investing for strength€?. This program will go on until 2012, with a budget of around 30 billion euros, which should allow for the creation of about 1.5 million jobs and stimulate private consumption. Mid-term, the government is looking to strengthen infrastructure and develop the finance sector, in order to ensure a dynamic and sustainable recovery.
Significant progress has been made in terms of development: poverty has decreased sharply during the last decades. In spite of the crisis' impact on the country, unemployment rate has remained low (1.4%).

FDI in Figures

Foreign direct investment has been an important element of Thailand's economic development process. The immense foreign currency influx after Thailand's financial liberalization in 1990, helped to increase the country's competitiveness. In the context of the recession and relatively slow recovery after the 1997 crisis, the FDI's role became even more crucial in helping re-capitalize failing industries, bring in new technologies, generate or save jobs, assist with policy reforms and play a role in addressing the poverty and social inequalities challenges.

Thailand is an important FDI destination. In terms of investment, the country offers an attractive and modern legal framework and its economy benefits form the regional dynamism. In 2009, Thailand ranked amongst the first destinations for FDI and was the second ASEAN (Association of the Nations of the Southeast Asia) country, after Singapore, in terms of FDI stock. However, due to the US financial turmoil and the slowing of the global economy, as well as the country's own political instability, the FDI influx dried up in 2008-2009. They should continue their recovery which began in 2010.

FDI Government Measures

The Thai Boad of Investment (BOI) offered a series of incentives in six industrial sectors in 2008-2009, namely eight years of tax exemptions for companies and 50% tax reduction for companies for 5 years, double transport, electricity and re-supply deductions as well as 25% deduction on net profits for establishment and construction costs. The 6 sectors are:
- Agriculture and food;
- Renewable and alternative energies;
- Automobile;
- Electronics, information and communication technologies (ICT);
- Fashion;
- High added value services (including  leisure, health and tourism).

The BOI will also implement measure aimed at contributing to the increase of company liquidity. Additionally, it can offer import tax exemption on raw materials required for production aimed at export.

Country Strong Points

The country's main strong points are:
- A skilled work force in a number of sectors;
- A strategic location at the heart of Asia: the country is an entryway to Southeast Asia and the Upper Mekong Basin region where the emerging markets have great economic potential;
- A governement policy which promotes investment and promoting free-trade: According to the World Bank, Thailand is the 4th Asian country and the 20th in the world where it is easy to do business;
- The existance of a number of government agencies to help investors;
- An investment regime in total harmony with WTO regulations: no restrictions in the manufacturing sector, no local requirements nor export conditions.

Country Weak Points

Other than economic factors, structural factors like the lack of infrastructure or sufficient skilled labor, could influence the level of investments and economic growth. A World Bank report, published in 2009, stresses on a key variable for recovery: political stability. Political uncertainty in Thailand was seen by companies as the main drawback to investment. The lack of improvement in the infrastructures and the shortage of skilled workers (linked to the quality of the education) have also limited investments.

Foreign Trade Overview

Thailand is an emerging economy, very dependent on exports, which account for more than two-thirds of the GDP. Thailand is very open to international trade (trade represented on average almost 140% of the GDP in 2007-2009) and is an active member of ASEAN. The country's three main export partners are: the United States, Japan and China. Main export commodities are electric and electronic equipment, machinery, vehicles, rubber, and plastics. The main import partners are: Japan, ASEAN, China, the EU and the United States. Thailand mainly imports electric and electronic equipment, mineral fuels and oil, machinery, iron and steel, and plastics. Thailand shows a trade surplus, a trend which should continue.