Thailand – Background
Formerly known as Siam, Thailand is situated at the centre of the Indochina Peninsula bordered in the North by Burma and Laos, to the east by Cambodia and Laos and Malaysia to the
Thailand, a constitutional monarchy is the 51st largest country in the world according to the area and, with a population of around 64 million; it is the world’s 20th most populous country.
Bangkok is Thailand’s capital, the biggest city and the country’s political, industrial and commercial hub and main business centre. The city and the surrounding areas are one of the
most prosperous in the country with the largely infertile land to the northeast of the country being the poorest.
Though Thailand went through a period of rapid economic growth between 1985 and 1996 and is a newly industrialised country, it is currently, technically, in recession following a
contraction in GDP in the first and second quarters of 2013.
The country’s economy is heavily dependent on exports which account for more than two thirds of its GDP with tourism also accounting a significant contributor. One of the major exports
of Thailand is automobiles, primarily those of Japanese manufacturers Toyota, Nissan and Isuzu and Thailand is now one of the world’s top exporters of cars.
Among the main imports to the country are integrated circuits, machinery and parts, oil, iron, steel and chemicals which are needed for the production of vehicles and high-tech products.
One concern for any potential investor in Thailand is the recent spate of floods the country has suffered. As well as the appalling effect on the homes and lives of the people of Thailand, the floods have had a major impact on businesses. Reuters reported in October 2013, flooding caused seventeen factories in a major Thai industrial area near to Bangkok to be closed, many of them foreign owned. Floods have hit 47 of Thailand’s provinces in the last year alone. In
2011, the worst floods occurred for 50 years causing huge disruption to businesses and caused a dive in the country’s growth to just 0.1 percent.
Thailand does however continue to open up for trade and is pursuing free trade agreements with other countries but foreign investment in some industries is restricted by the Thai government including agriculture, media, hotels, tourism, construction and professional services. Any foreign investments in companies trading in these areas are restricted to 49%.
Though not as formal as in some other eastern countries such as Japan or Korea, it is still wise to read up on Thai social and business etiquette before embarking on a business venture in
Thailand. For example, never show the soles of your feet to anyone as this is an insult and never touch the head of a statue of Buddha because it is considered sacred. Also remember that the royal family is revered so never tell jokes about or make light of royalty.
Thailand – Opportunities
Despite some of the issues already described, Thailand is one of the most dynamic economies in South East Asia and as the economy of the country recovers from the recent slump, Thailand does offer opportunities for investors and businesses.
Thailand’s open market economy is one of intense competition is one of intense competition. This competition, in most sectors, comes both from global companies as well as local entrepreneurs many of whom are second or third generation business owners,
well-educated and with practical experience of doing business in Thailand.
The mass market of Thailand is generally served by local suppliers and very price sensitive but, as Thailand’s population becomes more affluent, the demand for imported consumer
products will grow particularly in the more affluent areas in and around Bangkok.
The economic growth of the country has created opportunities for foreign businesses in a range of infrastructure sectors including telecommunications, renewable energy, and
electrical power and growing demand from consumers is opening up the markets for
educational services, food and food supplements, cosmetics and medical products.
As the Thai government continues to focus on the development its internal transport systems opportunities exist for firms with expertise in high speed rail transport and other major transportation projects such as subway systems and the on-going expansion of the Bangkok Sky Train.
There are several emerging markets becoming available to foreign investors in Thailand. As more and more supermarkets and convenience stores become more of a common sight on Thai streets, the demands for ready-to-eat products and the technologies to produce
and pack them is increasing and the country also has a growing ‘healthcare tourism’ industry which is creating demand for medical equipment and services.
Though English is widely spoken, the government of Thailand has expressed its wish for improved English language skills in a wider proportion the country’s population, creating
opportunities in the education sector.
In the manufacturing sector, Thailand has some very large and efficient industrial estates with good resources. Many being located near to ports, Thailand’s geographical position
makes it a good manufacturing and distribution hub for other nearby Asian countries. Though, as mentioned previously, some of these industrial areas have been prone to disruption from the recent floods.
On a more negative note though, piracy of intellectual property rights is widespread in the country and some reports suggest that corruption and a lack of transparency is still an
issue with government contracts.
Thailand – Setting up in Business
The business formats available in Thailand are very much the same as in other, western countries though the process of incorporation may take longer and the rules slightly more arduous.
The first option available for business looking to gain a presence in Thailand is a representative office. A representative office cannot trade its own right, i.e. not make profits, but it can be used as a base in the country to develop contacts, perform local
quality control, act as a local liaison office and provide market research.
Joint Ventures / Partnerships
Although mentioned on official websites, joint ventures have no legal recognition in the country as a separate legal entity so would need to be set up as partnerships; also an acceptable trading format or limited companies.
Limited companies in Thailand have very much the same characteristics as they do in western countries and the concept of both public and private companies exists. Here we will discuss the formation of a private limited company.
Limited Company Formation Procedure
1. Reserve Company Name
Reserve a company name on the website of the Thai Department of Business Development.
2. Obtain a Corporate Seal
Though not strictly a legal requirement on all documents, a seal is required for share certificates and is generally used in Thailand on other official company documents. A company seal can be obtained from private stationers.
3. Register the Company
The Thai Department of Business development operates a ‘one-stop-shop’ for company registration where all the relevant documents may be deposited for approval including those required under employment laws. Documents required for registration include:
For full and an up to date list of requirements, visit the website of the Thai Business Development Office or consult a local, legal practitioner.
If the company anticipates employing more than 10 regular employees then it must also submit a written employment policy document, written in Thai, that complies with the Labour Protection act.