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The Report: Thailand 2018

In its April 2018 Economic Monitor for Thailand, the World Bank reported that GDP growth accelerated to 3.9% in 2017, from 0.91% in 2014, 2.94% in 2015 and 3.23% in 2016. This was the fastest expansion since the 7.24% recorded in 2012, and was driven by strong global growth, increased export revenue and a modest recovery in private consumption.

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Sections

  • Country Profile
  • Economy
  • Trade & Investment
  • Banking
  • Capital Markets
  • Insurance
  • Energy
  • Industry & Retail
  • Tourism
  • ICT
  • Transport
  • Construction & Real Estate
  • Education & Health
  • Tax
  • Legal Framework
  • The Guide
  • Table of Contents

Country Profile

Following the death of His Majesty King Bhumibol Adulyadej in October 2016, a major chapter in the history of the kingdom closed and another opened, with His Majesty King Maha Vajiralongkorn Bodindradebayavarangkun now on the throne. Meanwhile, the government of the National Council for Peace and Order (NCPO), led by Prime Minister Prayut Chan-o-cha, continues to rule following its removal of the civilian government in May 2014. The year ahead is shaping up to be one of transition, with the Thai electorate and international partners eager for the delayed elections to take place. The NCPO has promised stability and economic progress, something many citizens hope for as they await the opportunity to vote. This chapter contains a viewpoint from Prime Minister Prayut Chan-o-cha; and interviews with Nguyen Xuan Phuc, Prime Minister of the Socialist Republic of Vietnam; and Shamshad Akhtar, Former Under-Secretary-General, UN; and Executive Secretary, UN Economic and Social Commission for Asia and the Pacific.

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Economy

Macroeconomic recovery in Thailand gained momentum in 2017, with GDP growth hitting a five-year high on the back of a positive performance in exports, tourism and financial services, as well as a moderate uptick in private consumption. Meanwhile, the main index of the Stock Exchange of Thailand hit an all-time high on the first day of trading in 2018, returning to levels not seen since the 1997-98 Asian financial crisis. Under the auspices of new economic development strategies such as Thailand 4.0 and the Eastern Economic Corridor, infrastructure investment should further support expansion in 2018, with public spending on key transport projects set to surge, even as the government seeks private partners to help deliver billions of dollars of planned initiatives. This chapter contains interviews with Kanit Sangsubhan, Secretary-General, Eastern Economic Corridor Office of Thailand; Nishita Shah Federbush, Group Managing Director, GP Group; and Kalin Sarasin, Chairman, The Thai Chamber of Commerce and Board of Trade of Thailand.

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Trade & Investment

With a robust export economy dominated by the manufacturing industry, Thailand has long benefitted from foreign investment in key sectors, such as automotive and electronics, while its agriculture and agro-food base has pushed it to the forefront in global rubber, rice and seafood production. Trade and investment have been under pressure in recent years, and a number of factors have contributed to foreign direct investment gradually falling in recent years. Combined with an ageing population and a shrinking low-cost labour force, Thailand is struggling to compete regionally. Government plans to attract new investment in special economic zones located on the border have not come to fruition, and the country is being outpaced by its ASEAN neighbours in terms of investment growth. This chapter contains interviews with Sontirat Sontijirawong, Minister of Commerce; Duangjai Asawachintachit, Secretary General, Board of Investment; and Hiroyuki Ishige, Chairman and CEO, Japan External Trade Organisation; and a viewpoint from Steven Ciobo, Minister for Trade, Tourism and Investment of Australia.

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Banking

The banking sector experienced mixed results in 2017. Although bank loans and asset quality benefitted from the country’s ongoing economic recovery – with operating profits rising as a result – high provisioning costs and preparations for the new accounting standards that take effect in 2019 saw net profits decline for many larger commercial banks. The sector is resilient, well capitalised and liquid, but non-performing loans remain high, particularly for smaller businesses. According to S&P, 2018 is set to be a turning point for the sector, with macroeconomic expansion, stabilising asset quality and an anticipated increase in public investment likely to end the credit down cycle. Banks will experience gains in earnings as provisioning costs drop and loan growth recovers, with rising infrastructure investment expected to support broader industry expansion. This chapter contains an interview with Prasarn Trairatvorakul, Former Governor, Bank of Thailand; a dialogue with Predee Daochai, Chairman, Thai Bankers’ Association; and President, Kasikornbank; and Piti Tantakasem, CEO, TMB; and an interview with Antoine Gustin, CEO, BNP Paribas Thailand; and Chairman, Association of International Banks.

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Capital Markets

Bolstered by improved political stability, positive growth and consumption outlooks, and rising investor confidence, market capitalisation in Thailand rose to pre-1997-98 Asian financial crisis levels for the first time in early 2018 as the Stock Exchange of Thailand (SET) Index hit an all-time high in January. Capital markets authorities have moved to position Thailand as the de facto regional trading centre in ASEAN, enacting reforms to SET’s settlement cycle and encouraging listed companies to register on domestic and international sustainability indices to improve investor confidence. This chapter contains an interview with Rapee Sucharitakul, Secretary-General, Securities and Exchange Commission.

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Insurance

Steadily improving macroeconomic growth and shifting demographics are creating favourable conditions for the expansion of Thailand’s insurance industry, with reforms aimed at boosting foreign participation supporting a bright outlook for the remainder of 2018. The life insurance segment continues to dominate the country’s insurance landscape, accounting for the bulk of premium and policyholders, benefitting from the ageing population and rising popularity of investment-linked products, which should keep it on a steady growth path in the coming years. The smaller non-life segment is also poised for steady expansion in the short to medium term, with low penetration and density, leaving room for growth. Although the sector remains overcrowded, the industry regulator Office of Insurance Commission (OIC) is increasingly pushing for consolidation. This chapter contains interviews with Vitai Ratanakorn, Secretary-General, Government Pension Fund; and Bryan Smith, President and CEO, Allianz Ayudhya.

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Energy

With roughly 7.1trn cu feet of natural gas at the end of 2017, down from 10.6trn cu feet in 2007, according to the 2018 “BP Statistical Review of World Energy”, Thailand’s reserves of this critical resource are depleting. As a result, the country is working to diversify its power mix with both conventional and alternative sources. The transition is going smoothly, and new technologies are being brought on-line far faster than expected. Scientific advances, supportive and flexible policies, overcapacity in solar manufacturing and gains in efficiency have made the environment for energy diversification and investment exceedingly attractive. The shift to alternative energy sources is happening so quickly that Thailand is becoming a recognised leader in the region, if not globally. This chapter contains interviews with Siri Jirapongphan, Minister of Energy; Piyasvasti Amranand, Former Chairman, PTT; Bundit Sapianchai, President and CEO, BCPG; and Preeyanart Soontornwata, President, B.Grimm Power.

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Industry & Retail

After a decade of external disruption – which saw the 2008 global financial crisis, floods in 2011 and a military coup in 2014 – Thai industry is getting back on track. According to the Ministry of Industry, the manufacturing production index grew by 2.5% in 2017, with stronger growth in the second half of the year. This trend continued in 2018, with January and February both seeing year-on-year growth of 4.7%. The government has also identified 10 priority investment sectors, evenly split into First S-Curve and New S-Curve industries. In terms of retail, general economic stability is having a positive impact on the sector, while years of targeted investment have also supported growth. Some uncertainty remains, however, with consumer debt still elevated. This chapter contains interviews with Kobchai Sungsitthisawad, Director-General, Department of Industrial Promotion; Christian Wiedmann, President, BMW Group Thailand; and Supaluck Umpujh, Chairwoman, The Mall Group.

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Tourism

Tourism remains one of the primary drivers of economic growth in Thailand. The sector’s positive performance can be partly attributed to a number of inherent pull factors, including a welcoming culture, abundant natural resources, biodiversity and relative affordability. However, infrastructure has struggled to keep up with the fast-paced growth in visitor numbers, a situation that has led to overcrowding at popular beaches and long lines at airports. To tackle these problems, officials have looked to upgrade transport links and diversify tourism offerings around the country. Recent years have also seen authorities working to reach more high-end travellers, and a number of initiatives have been introduced that aim to position Thailand as an upmarket tourism destination. This chapter contains interviews with Weerasak Kowsurat, Minister of Tourism and Sports; and Dillip Rajakarier, CEO, Minor Hotels; and COO, Minor International.

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ICT

Thailand has seen tremendous growth in its technology sector in recent years and is now increasingly regarded as one of the industry leaders in South-east Asia. The government recognises the benefits that a vibrant ICT sector can have for the wider economy and plans to push ahead with a series of ambitious legacy projects. The state’s objectives for the sector are based around its Thailand 4.0 programme, which incorporates interlinked initiatives such as the Eastern Economic Corridor, the establishment of 100 Smart Cities nationwide and the transition from 4G to 5G technology. While these initiatives present tremendous opportunities for both local and foreign companies, there remain challenges to overcome. This chapter contains interviews with Teeranun Srihong, Chairman of the Board of Commissioners, Digital Economy Promotion Agency; and Ariya Banomyong, Managing Director, LINE Thailand.

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Transport

After a few challenging years that saw air safety rating downgrades and delays in major infrastructure projects, Thailand’s transport sector is beginning to regain momentum. Significant progress has been achieved with the construction of rail and road networks, and issues around meeting international standards are being resolved as the country lays the groundwork to become a regional transport and logistics hub. Meanwhile, with the Asia-Pacific region set to be the fastest-growing market for commercial aviation over the next 20 years, Thailand is seeking to strengthen its aviation infrastructure, particularly its maintenance, repair and overhaul segment, targeting it as a high-value industry with significant growth potential. This chapter contains interviews with Arkhom Termpittayapaisith, Minister of Transport; Jin Liqun, President, Asian Infrastructure Investment Bank; and Pierre Jaffre, President, Airbus Asia Pacific.

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Construction & Real Estate

Although the construction industry contracted somewhat in 2017 following a strong performance in the previous two years, the prospects for the sector remain broadly positive. Work progressed on many fronts, despite a few projects not launching as planned. Commuter rail initiatives advanced, double tracking works on intercity lines began, high-speed rail track was laid, and plans for the transformational Eastern Economic Corridor were promoted. The real estate market in Thailand is becoming one of selective opportunity. In the residential segment, international investors are still active in the high-end market and healthy uptake is evident in the mid range. In all property categories, resilience is seen in assets that are located near related infrastructure, such as transportation routes and schools, as well as those that offer unique features. This chapter contains interviews with Anutin Charnvirakul, Former President, Sino-Thai Construction; and Visit Malaisirirat, CEO, Magnolia Quality Development Corporation.

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Education & Health

While Thailand has been successful in expanding access to education, the sector faces some challenges. The country is falling behind in the quality of provision, and policy has been slow to adapt to global labour market trends. Nevertheless, there are signs that this is changing: the government has set about pursuing an education strategy with clear goals, and efforts are under way to streamline administration and assessment. Thailand has been reaping the benefits of an expanding global health care industry, as its large number of internationally accredited hospitals and qualified practitioners continue to attract clientele from both developing and developed countries. At the same time, the universal coverage framework has succeeded in providing health care to nearly the entire population. This chapter contains interviews with Teerakiat Jareonsettasin, Minister of Education; Pailin Chuchottaworn, Former Chairman of the Council, Vidyasirimedhi Institute of Science and Technology; and Gordon Cameron, Vice-president, Asia-Pacific Area, Takeda Pharmaceuticals International.

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Tax

This chapter navigates Thailand’s tax regime, offering a guide to navigating tax laws relevant to businesses. It also explains key corporate duties and regulations as well as tax holidays and incentives on offer for investment. This chapter contains an interview with Andrew Jackomos and Paul Ashburn, Co-Managing Partners, BDO in Thailand.

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Legal Framework

This chapter examines Thailand’s legal framework, focusing on work done by the Board of Investment to promote various sectors. It also explains the policies outlined for non-citizens in the Foreign Business Act, tax and non-tax incentives for international companies and other key subject areas. This chapter contains a viewpoint from David Lyman, Chairman and Chief Values Officer, Tilleke & Gibbins.

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The Guide

This chapter contains hotel listings for business and leisure travelers, a directory of government ministries and agencies, and contact information for foreign embassies. It also offers useful information for new arrivals to the country.

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Table of Contents

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