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
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
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
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,
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
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.