The Eastern Economic Corridor develops trade relations and investment opportunities in Thailand


Thailand is developing its EEC project to attract new foreign direct investment (FDI) inflows for next-generation manufacturing and production as part of the Thailand 4.0 initiative, which emphasises innovation, complex high-tech manufacturing and development of a highly skilled workforce. Investors in the EEC will benefit from an expansive package of incentives, including tax breaks and direct grants. The government has committed to major investment in the area’s infrastructure, with large-scale projects such as the construction of a high-speed rail line and a new airport terminal.

The EEC will also benefit from China’s plans to advance its Belt and Road strategy, which envisions a strengthened network of sea and land trade routes connecting East Asia to the Middle East, Europe and Africa. Recent announcements by Somkid Jatusripitak, the deputy prime minister, indicate that several major EEC infrastructure components could be included in the Belt and Road initiative. Combined with high government spending and an anticipated surge in FDI, these measures should see the EEC provide critical support for the ongoing transition into a high-income country.

Thailand 4.0

Thailand attained middle-income status in 2011 – when GNI per capita rose to $4210 – however the country has since struggled to avoid the middle-income trap, with annual GDP growth averaging 2.4% from 2013 to 2016.

The Board of Investment (BOI) splits the country’s industrial and economic development into four phases: Thailand 1.0, 2.0, 3.0 and 4.0. Thailand 1.0 focused on agricultural and basic industrialisation, while 2.0 emphasised domestic production and labour-intensive manufacturing activities. Thailand 3.0, the current model, highlights the expansion of complex industries and manufacturing, supported by foreign investment.

Thailand 4.0 will see the country transform its manufacturing base, shifting away from labour-intensive industries requiring a large, young workforce, and moving towards complex production of innovative products. Thailand 4.0 focuses on technological uptake and creativity playing a larger role in project development, supporting the long-term goal of shifting the production-based economy to a service-based one.

EEC Project

The government has already begun implementing policies to support Thailand 4.0 development, following the BOI’s adoption of the Cluster-based Special Economic Zones Development Policy in September 2015. EEC development is targeting a broad revitalisation of manufacturing activities within the 13,285-sq-km area, which stretches across the provinces of Chonburi, Rayong and Chachoengsao.

Benefitting from strong connectivity to neighbouring trade partners and established shipping routes, the EEC is already home to petrochemical, automobile and electronics manufacturers, with its manufacturing base set to diversify considerably over the next five years.

Thailand 4.0 identifies 10 targeted industries for expansion in the EEC, divided into two segments: existing industrial sectors, which will be improved through technological uptake to boost efficiency and value addition; and nascent high-tech industries slated to become significant long-term growth drivers.

The first group includes next-generation automotive and smart electronic manufacturing, high-income tourism, medical tourism, bio and agricultural technology, and food innovation. The second group includes automation and robotics, aerospace, bioenergy, biochemicals, digital technology, and advanced medical and health care activities. There are core areas to be developed in the EEC, including increased and improved infrastructure, business, industrial clusters and innovation hubs, tourism and the creation of new cities using advanced urban planning, according to an April 2017 report by law firm Dezan Shira & Associates.

The firm reports that the government of Thailand expects $43bn of investment will be channelled into the EEC by 2021, from state funds, FDI and through infrastructure development under a public-private partnership framework. An estimated 100,000 new jobs will be created as a result.

Legal Reforms

The government has enacted a number of recent legal reforms aimed at boosting investment in the EEC. In January 2017 the Investment Promotion Act of 1977, or the BOI Act, was amended to introduce new investor incentives such as import duty exemptions for research and development (R&D) activities; a 13-year corporate income tax exemption for projects undertaking R&D activities (exemptions outside of these segments are limited to eight years), and an investment tax allowance of up to 70% of the project’s investment value. The following month, the Cabinet approved a bill removing a 49% foreign ownership cap in aviation manufacturing, granting the Civil Aviation Board discretionary authority, which highlights Thailand’s sustained efforts to open high-tech manufacturing sectors to foreign investors.

In February 2017 the National Competitive Enhancement Act for Targeted Industries (NCEA) entered into force, offering new incentives to investors in targeted high-tech industries such as biotechnology, advanced manufacturing, creative and digital industries, and advanced materials manufacturing, among others.

NCEA incentives comprise corporate income tax exemptions, non-tax benefits already on offer under the BOI Act and new subsidies to be rolled out by a BT10bn ($282m) seed fund called the Fund for Enhancement of Competitiveness for Targeted Industries. Those who invest in the three provinces of the EEC are now eligible for income tax holidays for up to 15 years, a reduced personal income tax rate of 17% and a 50% reduction in corporate income tax rates over five years, as well as existing BOI Act exemptions and benefits, such as access to long-term land leases, import duty exemptions and work visas.

The EEC Bill was agreed upon in principle in April 2017, and will amend or suspend over 100 laws that restrict foreign investment in the three EEC provinces.


One of the most important components of EEC development is improved connectivity, with the government focusing on the creation of sea routes linking EEC provinces to Myanmar’s Dawei deepsea port project, the Sihanoukville port in Cambodia, and Vung Tau port in Vietnam. Land links to China will also be strengthened via construction of a new high-speed railway from Bangkok to Kunming.

Thailand is actively expanding its Laem Chabang seaport in Chonburi, the largest port in the country, while aviation connectivity will benefit from a planned expansion of Rayong’s U-Tapao airport, which includes construction of a second passenger terminal, boosting annual capacity from 800,000 to 3m travellers.

Public expenditure is significant, with the 2017/18 budget allocating BT3.3bn ($93m) to the State Railway of Thailand for projects, including the construction of double-track lines linking the Laem Chabang, Map Ta Phut and Sattahip deepwater ports with nearby industrial zones, as well as BT1.08bn ($30.4m) to the Department of Rural Highways for roads upgrades.

Support From China

The EEC’s land connectivity will also improve considerably under plans to build a series of high-speed rail links, which could benefit from China’s efforts to advance its Belt and Road strategy, a long-term doctrine that envisions the development of a Chinese-led Eurasian economic and trading area to rival the US-dominated transatlantic area. Also known as One Belt, One Road, the plan would see China underwrite billions of dollars of infrastructure investment in countries located along the historic Silk Road trade route to Europe, as well as ports along the 21st Century Maritime Silk Road.

After launching the plan in 2013, China announced it would spend roughly $150bn annually in the 68 countries signed up to the scheme, which includes Thailand. In May 2017 Xi Jinping, President of China, hosted the Belt and Road Forum in Beijing, which was attended by 29 heads of government, the largest number of foreign dignitaries to visit the city at once since the 2008 Olympic Games. He announced plans to commit $125bn to the Belt and Road initiative in the near term, with its total budget estimated at $900bn.

Belt & Road Benefits

Thailand should benefit from some of this investment, with Somkid outlining a planned BT158bn ($4.5bn) high-speed rail network linking Bangkok to Rayong, the third phase of the BT88bn ($2.5bn) Laem Chabang port upgrade, and the BT200bn ($5.6bn) U-Tapao airport project. The EEC’s Bangkok-Rayon rail project is expected to form part of a Thailand-China rail development project linking Bangkok to Nakhon Ratchasima and Non Khai in Thailand, Vientiane in Laos and Kunming in China.

The Thai government could similarly seek Chinese investment for its proposed BT200bn ($5.6bn) smart city for EEC workers, as well as waste treatment and management projects, and road developments. Thailand is also planning to invest in a submarine cable linking Bangkok with Hong Kong and mainland China, which will further boost Thailand’s efforts towards becoming South-east Asia’s digital and financial hub.


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The Report: Thailand 2017

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