The Report: Thailand 2017

Despite considerable geopolitical volatility, Thailand’s economy remains well diversified, stable and poised for expansion in 2017.


On October 13, 2016 His Majesty King Bhumibol Adulyadej passed away at the age of 88. He was the world’s longest-serving head of state and the longest-serving monarch in Thailand’s history. His passing was mourned by many. His Majesty had been monarch since 1946, and had presided over his country during a period of enormous change. In late 2016 King Maha Vajiralongkorn said, “No matter what problems we may face in our country, we believe that if we work together, we can overcome and alleviate any situation.” He now sits on the throne at this time of great change, with the need for reform and reconciliation at the forefront.

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Country Profile

Following the death of His Majesty King Bhumibol Adulyadej in October 2016, a major chapter in the history and politics of this ancient kingdom closed and another opened.The year ahead looks to be one of transition, as the new king takes over and a new constitution is implemented. Efforts for national reconciliation look set to continue, although to what degree they will include all segments of Thai society remains unclear. The role of the king may also be expanded, while the military seems likely to continue to exercise a powerful presence within any new constitutional framework. The National Council for Peace and Order promises stability, a quality that many Thais may continue to wish for as the nation moves into the period of change ahead. This chapter contains interviews with Prime Minister Prayut Chan-o-cha; and Don Pramudwinai, Minister of Foreign Affairs.

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Thailand has benefitted from decades of rapid industrial development to become an upper middle-income economy, with GDP growth averaging more than 7% from the 1950s to the 1990s. However, more recent decades have been marked by an ongoing struggle to escape the middle-income trap. Growth sank in 2014 following a military coup, although political stability and solid macroeconomic fundamentals saw the country’s economic recovery continue in 2016, as GDP growth rose to a three-year high and export receipts increased for the first time since 2012. This chapter contains interviews with Somkid Jatusripitak, Deputy Prime Minister; Porametee Vimolsiri, Secretary-General, National Economic and Social Development Board; and Yol Phokasub, President, Central Group.

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Trade & Investment

Benefitting from an export-oriented, industrialised economy and an ideal geographic position with proximity to Japan, China and high-growth ASEAN members, trade and investment in Thailand has expanded steadily in recent years on the strengths of its agricultural, automotive, electronics and textiles exporters. The country is more economically liberalised than some of its larger ASEAN neighbours, and although foreign direct investment inflows have trended downward after hitting an all-time high in 2013, the government has implemented several reforms reducing taxes and incentivising investment in high-priority industries. These efforts fit into the broader Thailand 4.0 and Cluster Policy economic development strategies, which seek to promote manufacturing along the country’s Eastern Economic Corridor. This chapter contains interviews with Apiradi Tantraporn, Minister of Commerce; Hiroshige Seko, Minister of Economy, Trade and Industry of Japan; Lim Hng Kiang, Singapore Minister for Trade and Industry (Trade); and Kalin Sarasin, Chairman, The Thai Chamber of Commerce and Board of Trade of Thailand.

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Although stable, liquid and profitable, Thailand’s banking sector saw growth moderate in 2016 as rising defaults in the highly leveraged consumer and small business segments weighed on lending growth. Large corporate lenders have increasingly turned to alternative financing channels, most notably the short-term bond market, further impacting loan growth in 2016. Non-performing loans are expected to peak in 2017, while rising bond yields and regulatory changes to bill of exchange issuance should see larger corporates return to conventional bank financing. Although efforts to digitise the Thai economy will impact fee-based income in the near term, the long-term benefits to the sector and the wider Thai economy should easily offset any losses. As such, the sector’s mid-term outlook remains positive, bolstered by new expansion opportunities in the ASEAN market. This chapter contains interviews with Veerathai Santiprabhob, Governor, Bank of Thailand; Chartsiri Sophonpanich, President, Bangkok Bank; and Darren Buckley, Country Head, Citibank.

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Capital Markets

The Stock Exchange of Thailand has outperformed its regional peers in liquidity and initial public offering growth in recent years, rising to become the best-performing stock market in the Asia-Pacific region in 2016. The bond market has also been a standout performer, despite concerns over rising numbers of short-term bond defaults, with the segment witnessing an influx of foreign capital during the first months of 2017, following a year marked by significant geopolitical volatility and rising capital outflows. Listed companies remain profitable and derivatives market growth has also been positive, bolstered by rising trade in stock and gold futures. While foreign investment in the securities market is forecast to remain flat in 2017, investment in the bond market should continue to rise, with Thailand increasingly viewed as a safe haven from currency volatility. This chapter contains interviews with Kesara Manchusree, President, The Stock Exchange of Thailand; Rapee Sucharitakul, Secretary-General, Securities and Exchange Commission; and Pote Harinasuta, CEO, One Asset Management; and a viewpoint from Chaipatr Srivisarvacha, CEO, KT ZMICO Securities Company.

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Given its low penetration rates, ageing society and the trend towards increased liberalisation, the Thai insurance sector has significant potential and growth is expected to be steady in the coming years. Thais are becoming more interested in savings and wealth-related products, and over time it is also likely that they will have a better understanding of the need to cover risks. Together, these factors could mark a tipping point for the industry. Still, balancing the positive trends are several factors weighing on the sector. The nation’s relatively weak economy, which has made insurance less affordable, is leading to lower than normal premium growth. The sector is also somewhat mature in certain segments. Over the next decade, the Thai insurance market is expected to grow at a slower pace than in the past, but the rate is still comparatively high. This chapter contains interviews with Suthiphon Thaveechaiyagarn, Secretary-General, Office of Insurance Commission; and Michael Plaxton, CEO, FWD Life Insurance.

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Energy & Utilities

At the centre of Thailand’s economic growth, the energy sector is using progressively diverse means to meet the continually increasing demand for energy sources. The country’s growing industrial capacity, ongoing urbanisation and organic population growth are all contributing to rising domestic energy intensity – a trend that policymakers have addressed in a recently unveiled power development plan, which utilises a more varied primary energy mix and greater efficiency to bolster flagging self-sufficiency levels. The sector is working to expand its import and distribution infrastructure to meet growing domestic consumption. This chapter contains interviews with Anantaporn Kanjanarat, Minister of Energy; Piyasvasti Amranand, Chairman, PTT; and Areepong Bhoocha-oom, Chairman, Electricity Generating Authority of Thailand.

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Industry & Retail

Economic stability, comparatively well-developed infrastructure and competitive investment incentives have attracted a steady flow of financing to Thailand’s manufacturing sector from both foreign and domestic sources, resulting in one of the strongest manufacturing bases in the ASEAN region and the second-largest economy within the trade block. These investments – made initially in basic industrial areas such as auto manufacturing, simple electronics and food products – have laid the groundwork for future steps up the value chain, while also providing an export-driven stream of revenue for the government to provide further improvements to infrastructure and financial incentives. This chapter contains interviews with Kanit Sangsubhan, Secretary-General, Eastern Economic Corridor Office; Roongrote Rangsiyopash, President and CEO, SCG; and Markus Lorenzini, President and CEO Thailand, Siemens.

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Thailand’s rise to the forefront of economic development in South-east Asia over the past three decades was first fuelled by its agricultural prowess, which was then followed by its transition into a regional manufacturing powerhouse, before the more recent push to evolve into a knowledge- and service-based economy. Although numerous factors have aided the country’s achievements across disparate sectors, a common thread that runs through each of these industries has greatly improved their odds of success both internally and internationally: an increasingly modern, capable transportation network. This chapter contains interviews with Arkhom Termpittayapaisith, Minister of Transport; Sombat Kitjalaksana, Managing Director, Bangkok Expressway and Metro; and Usanee Sangsingkeo, Acting President, Thai Airways International.

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Construction & Real Estate

An important engine of growth for Thailand, the construction sector is acting as a hedge as many other sectors face challenges in the form of global economic weakness and tepid consumer demand. Together with tourism and, to an extent, finance, construction is keeping the slowdown from becoming too severe. The Thai real estate market is decidedly split. In general, buyers are increasingly constrained and finding it difficult to fund or finance purchases. However, in the centre of Bangkok and at the high end, the story is very different. Demand remains firm, new stock is being taken up nearly as fast as it is offered, and prices are rising to record levels. The market is bifurcated, with the lower end lagging and the upper end forging ahead. This chapter contains an interview with Naporn Sunthornchitcharoen, President, Land & Houses.

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Thailand is quickly going from being a secondary player in the world of technology to a regional, if not global, leader. The relevant sectors are rapidly beginning to take off with the introduction of 4G and the build-out of fixed-line assets. Greater bandwidth, higher speeds, lower latency and increased consumer demand have led to a burst of activity. The country is now arguably the centre of ICT in ASEAN, with a significant percentage of regional traffic and the most active smartphone users. Meanwhile, the government is supporting technology with official policies and programmes. Its goal is to transform not only specific sectors, but also the economy and the country as a whole. This chapter contains an interview with Sanpachai Huvanandana, President, CAT Telecom.

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Tourism remains one of the primary drivers of economic growth in Thailand. While manufacturing and exports are sluggish and consumer demand weak, visitor numbers were up in 2016 and are expected to hit new records in 2017. After a slight dip in 2014, the upward trend seems to have been re-established. Looking ahead, tourism will remain an important part of the Thai economy and is expected to become an increasingly large component of GDP. Thailand is an attractive destination drawing guests from a diverse range of countries. Chinese and Russian tourists continue to come in great numbers, but at the same time more visitors are coming from ASEAN member states. Flows from the US and Europe are holding steady. Thailand’s government remains highly supportive of the sector, making visits easier, investing in infrastructure and, importantly, choosing policies to encourage inflows. This chapter contains interviews with Weerasak Kowsurat, Chairman, Thailand Convention & Exhibition Bureau; and Leanne Harwood, Vice-President of Operations for South-east Asia and Korea, InterContinental Hotels Group.

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Education & Health

Selected headline numbers generated by the Thai education sector have been encouraging. The country has a high rate of literacy, an increasing number of top-rated universities, long school-life expectancy, a strong history of education and a large education budget. Globally and regionally, it compares well by these measures. The country also has ambitions to become a major educational centre, undertaking cutting edge research and attracting students from ASEAN and beyond. Meanwhile, Thailand delivers health care effectively, fairly and at a relatively low cost. Its Universal Coverage Scheme, together with two other national programmes provide good basic benefits to all Thais, and now to most residents of the county. Because of its success Thailand is sometimes regarded as a health care model in the developing world. This chapter contains interviews with Teerakiat Jareonsettasin, Minister of Education; Worsak Kanok-Nukulchai, President, Asian Institute of Technology; Dipak Jain, Former Director, Sasin Graduate Institute of Business Administration; and Virapatna Thakolsri, Managing Director, Biopharm Chemicals.

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Although Thailand in recent years has focused on creating a more forward-thinking, modern economy, ranking second only to Singapore in financial clout within the ASEAN block, the country’s agricultural sector still remains a crucial cog in the engine driving the country forward. It continues to capitalise on its long-standing farming tradition and favourable climate as it retains its enviable position as a key exporter of products – including widely consumed agricultural commodities such as rice, sugar and rubber – around the world. Agriculture, particularly rice, is still the dominant economic activity in many of the rural regions of the country, in places where other economic development efforts have not yet made a significant impact. This chapter contains an interview Chatchai Sarikulya, Minister of Agriculture and Cooperatives.

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This chapter examines Thailand’s tax laws relevant to businesses. It explains key corporate tax rates and regulations, tax holidays and incentives, and other important areas.

It also contains a viewpoint from Andrew Jackomos and Paul Ashburn, Co-Managing Partners, BDO.

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Legal Framework

This chapter examines Thailand’s legal system, focusing on incentives available to encourage export activities, analysis of company law and details of permits required for foreign companies. It also contains a viewpoint from David Lyman, Chairman and Chief Values Officer, Tilleke & Gibbins.

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The Guide

This chapter contains listings of leading hotels for business or leisure, numbers for ministries, foreign missions and other institutions and useful information for first-time visitors. It also contains a feature piece about Thailand’s long-standing film industry.

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