19 August 2019

Thailand country snapshot

Thailand’s economy will average annual growth of 3.1% in the coming years, restrained by weak private consumption growth, high levels of household debt and unremarkable real wage growth.

Thailand is involved in multiple free trade agreements (FTA), both bilaterally and as a member of the Association of Southeast Asian Nations (ASEAN). Most agreements are with Asian countries but there are pacts with- Peru and Chile as well. As the current ASEAN Chair, Thailand is pushing to conclude the Regional Comprehensive Economic Partnership (RCEP) this year, an agreement which includes the ten ASEAN members, plus China, India, Japan, South Korea, Australia and New Zealand. Its finalisation will be significant for Thailand as its trade with RCEP members made up almost two-thirds of its total trade in 2018.

Thanks to the implementation of the “Thailand 4.0” industrial policy, which includes the development of special economic zones, the country’s business environment is steadily improving, as seen in the latest EIU Business Environment Rankings. This initiative has also made Thailand more favourable to foreign investors, offering various incentives. If foreign companies avail, more robust private investment can be expected. This assumes, however, that government remains stable.

While the business environment has improved, Thailand’s standing in the EIU Technological Readiness Rankings, an assessment of how well prepared 82 economies globally are for technological change, has declined. With internet penetration at an estimated 37.1 internet users per 100 population in 2017, the viability of digital commerce and services is limited. In addition, Thailand’s level of commercial innovation is lacking in comparison to other countries in the region, in part because foreign companies prefer to conduct research and development elsewhere, despite having manufacturing operations in the country.

To address this gap, the Board of Investment has allowed duty exemptions on raw materials used in R&D to incentivise innovation in the private sector. Companies focused on certain areas such as advanced materials or digital technology can also qualify for up to 13 years of corporate income tax exemption if they co-operate with public research institutions.

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