In recent years Thailand has enacted a number of legal reforms to improve the regulatory environment for foreign investors and augment corporate governance. These measures have positioned Thailand as an example of an emerging Asian economy that has developed comprehensive corporate and criminal legal frameworks to encourage trade and investment. The benefits of these reforms are clear: Thailand is increasingly recognised as an investment hub for the ASEAN region, and Cambodia, Laos, Myanmar and Vietnam in particular. Enhanced investor confidence, nurtured by strong investor protection rights, has facilitated this trend.
Such improvements to the country’s legal framework have in part been driven by the growing presence of the private sector. Fuelled by local business expansion and international investment, vibrant hubs of commerce and industry have arisen, adding to the need for a transparent and efficient legal structure capable of handling diverse business interests. Yet the vision of successive government administrations, who have long recognised the importance of foreign investment, has also played a role in forging the kind of robust legal structure enjoyed by Thailand’s business community today.
As a feature of this progress, the Board of Investment (BOI) and Industrial Estates Authority of Thailand (IEAT) have been important instruments in fostering a supportive business and legal environment in the kingdom. In the case of the BOI, the agency has worked to deregulate aspects of foreign majority ownership as they pertain to the Foreign Business Act, while also offering a range of financial incentives that have provided considerable scope for new players to enter the Thai market. Moreover, the BOI has worked tirelessly to improve other aspects of the commercial operating environment, from liberalising work permits to developing new opportunities that will allow advanced and high-technology sectors to flourish in Thailand.
In a similar vein, the IEAT has, in addition, developed a niche yet comprehensive framework of tax and non-tax incentives that are designed to support the legal and business environment for foreign investors. Under the IEAT Act, the distinction between General Industrial Zones and Export Processing Zones has enacted sufficient structural support to allow export-led foreign investment to develop processing and manufacturing capabilities in the country.
While the growth of these agencies has been a feature on the landscape of Thailand’s recent economic development, progress on specific legal and regulatory codes has also gathered momentum. The harmonisation of corporate laws falling under the Civil and Commercial Code has minimised some of the more onerous procedural requirements for businesses operating in Thailand, as well as streamlined the obligations for establishing a new enterprise. While more work is required, particularly with respect to land ownership and property development, the kingdom has clearly prioritised foreign direct investment as a crucial driver of long-term growth and prosperity.
These measures have been largely successful at creating the kind of business- and investor-friendly legal structure needed in today’s global economy. Yet, while much has been achieved in recent years, political and economic changes on the horizon will require swifter progress from the authorities on the march towards liberalisation. The impending formation of the ASEAN Economic Community will provide Thailand with a fresh opportunity to cement its place as a regional hub for business, logistics, manufacturing and investment. Yet this enhanced integration will usher in a new set of challenges, including greater competition, which will demand that Thailand accelerate its current course towards a more pro-business, investor-friendly regional hub.
Despite a climate of some political uncertainty, investors can remain confident and undeterred that the rule of law as it pertains to business and investment is stable. For the past decade, investment law has been on a steady path of improvement, and the government and its respective authorities, regardless of who is at the reins, remains investor-friendly and proactive.
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