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 Home > About Thailand > Manufacturing > Open Investment Policy

Open Investment Policy

Since the end of 1986, Thailand has been a favourite location for foreign firms escaping appreciating currencies and escalating labour costs. The flow of foreign firms has been matched by local investors who, stimulated by lower interest rates and a booming economy, have also increased investment activities.

Manufacturing has been the longest recipient of FDI. Despite a decline in other sectors, FDI in manufacturing continues to expand, with the petroleum sector attracting the largest amount of FDI.

The government continues to take a very positive stance towards foreign direct investment in the manufacturing sector. The Thai government has consistently welcomed foreign investment, recognizing the important role played by foreign technology, management and marketing skills as dynamic forces contributing to Thailand's economic development. Investment is encouraged whether from domestic sources of abroad. The emphasis is on increasing the role of the private sector in Thailand's economic development.

Since 1990, the government has been exploring a variety of measures to promote the supporting industries. Sub-contracting activities are actively encouraged and a special incentive package has been implemented to promote their development to facilitate the growth of the electronics and other industries. As a result, Thailand's supporting industries have grown rapidly in the past five years.

The private sector has played (and will continue to play) a crucial role in the industrial development of Thailand, while the government has played a promotional role to construct and create the physical and institutional infrastructure and to design measures to support the growth in the industrial sector. However, the private sector needs to join with the government to co-operate in solving economic problems and tackling development problems.

Consequently, the Joint Public-Private Sector Consultative Committee was set up in 1981 to mobilize the private sector to work together with the government in addressing a wide range of economic and social issues.

The Board of Investment as a Business Partner

The Board of Investment is the government agency responsible for administering incentives and providing services with a view to encouraging investment in priority areas. It comprises two bodies: The Board itself and the Office of the Board of Investment.

Chaired by the Prime Minister, the Board is responsible for administering the investment promotion law and establishing overall policy guidelines. In response to the changing situation in the economy, the BOI has designated a range of select investment categories for promotional privileges and incentives under the Investment Promotion Act.

The general guidelines used by the BOI in granting approval are derived directly from national development priorities. Accordingly, the BOI gives special consideration to investment projects which are export oriented, support resource development, substantially increase employment, locate in the provinces, establish of develop industries which form the base for further stages of industrial and technological development. Projects which carry out significant R & F activities, or establish basic transportation, networks, public utilities and environmental protection systems are considered priority projects and are eligible for special incentives.

The BOI aims to supplement and strengthen the domestic resources by encouraging foreign businesses which allow technology transfer, encourage Thai participation in ownership and management, help upgrade the product quality of Thai suppliers and subcontractors. For those companies and industries enjoying promoted status, the basic incentives offered by the BOI include tax incentives such as corporate income tax holidays, exemption or reduction of import duties on imported items, and exclusion from taxable income of dividends during the tax holiday, etc...

To prevent unfair competition from imports, temporary tariff surcharges or bans may be imposed on imports. To ensure security of investment, the Investment Promotion Act also guarantees against nationalization, state competition, and state monopolization. Furthermore, the investor is granted permission for foreign ownership of land and for entry, employment of foreign nationals, and to remit foreign currency abroad.

In recent years the BOI has been shifting its emphasis towards a more services oriented role. The general activities time reduced by 40 percent. In addition, they provide investment information, investment opportunity surveys and identify potential joint venture partners. The BOI also assists promoted companies in obtaining the permits and licenses that are required for starting up operation and also facilitates work permits and visas for foreigners working on promoted projects or carrying out feasibility studies.

In order to support the governments decentralization policy, the BOI began overhauling the criteria for granting privileges on September 1, 1987, with the most recent revisions becoming effective on April 1, 1993. The new provisions grant promoted status to existing projects if they relocate to regional areas. Promoted projects receive privileges according to the Zone they are located in. Promoted projects which are located in Zone I receive the least benefits while those in Zone III obtain the maximum benefits.

These promotional privileges, however, are non-compulsory requirements for investment in Thailand. Investors may exercise the option of developing their projects on a non-promoted basis.

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