Embassy of India
Bangkok
Annual Economic and Commercial Report 2013
BAN/COM/202/3 /2014 4th April, 2014
Thailand’s Economic Outlook
In the year 2013, Thai economy expanded 2.9 percent, moderating from the previous year, mainly due to weakening domestic demand and sluggish recovery in exports of goods notwithstanding improvement in the global outlook. During the first half of the year, the economy expanded on the back of the government’s measures to stimulate consumption along with supporting factors, including high employment, income, and confidence. Businesses continued to invest. The economy slowed down in the second half of the year due to contraction in domestic demand as government’s stimulus measures expired. Delay in public investment and heightening economic and political uncertainties led to more cautious spending by households, postponement of investment projects by businesses, and tightening of credit standards by financial institutions. Meanwhile, exports of goods did not fully benefit from broad improvement in foreign demand, as the latter was concentrated in certain goods that were not Thailand’s main export products. As a result, Thailand’s export value in 2013 declined by 0.2 percent from the year 2012. Some industries also faced production constraints.
In the fiscal year 2013, a 300 billion baht budget deficit, equivalent to 2.5 percent of GDP, was announced. Headline and core inflation in 2013 averaged 2.18 and 1 percent, respectively. Gross international reserves stood at 167.2 billion US Dollars at the end of December 2013, decreasing by 14.4 billion US Dollars from the end of year 2012. Thai baht depreciated 6.8 percent in comparison with the end of previous year against US Dollars and reached 32.86 at the end of year 2013.
Overall economic stability was well maintained. The buoyant tourism sector was an important engine of growth for the economy in 2013. In 2013, a record 26.7 million tourists arrived in Thailand. Inflation continued to be low in line with global inflation due to moderating costs of factors of production such as oil and commodity prices. Inflation pass-through was also limited due to a slowdown in domestic demand despite a minimum wage hike to 300 baht per day nationwide at the beginning of the year and a gradual increase in prices of LPG for households towards the end of the year.
In 2014, the export sector is expected to play a more prominent role in supporting economicgrowth while inflation is projected to increase compared to 2013.The Thai economy in 2014 is expected to be driven by exports due toimprovement in trading partners’ economies, particularly major advanced economies whoserecovery continued to gain traction. Meanwhile, recovery in domestic demand would hingeon the evolving political situation. Continued political uncertainty can further dampenprivate confidence, thus prolonging moderation in consumption and investment. Publicinvestment expenditure would also likely be delayed further by continued political uncertainty.Overall inflationary pressure both Headline and Core is expected to edge up from 2013 in tandem with uptrend cost pressure.
Investment outlook
According to the Thai Board of Investment, Thailand approved 2016 projects in the year 2013 with a total investment of 1027.3 billion baht. Out of 2016 projects, 808 were 100% foreign investment, 531 JVs and 677 were 100% Thai investment. In the year, 2013, Foreign Direct Investment also showed a similar positive trend with 1224 applications with investment value of 478.93 billion Baht being approved. However, there was a decrease in applications by 9.81 percent ( from 1357 applications during 2012) and decrease in value by 12.76 percent (from 548.954 billion Baht during 2012). Out of total 1224 approved applications, 808 are 100% foreign investment. Japan remained largest foreign investor in Thailand with investment of 290.491 billion Baht and the second was Hong Kong with 38.610 billion baht. The Netherlands was third with 33.147 billion Baht.
Government’s Schemes/Policies
- With the country facing political deadlock, rebuilding foreign investors' confidence would be one of the top priorities for the Board of Investment (BoI) in its action plan for the year 2014. Secretary-general of BOI, Mr. Udom Wongviwatchai said that foreign investors from Japan, the US and Europe, as well as high-potential countries including South Korea, Taiwan and Australia, would be the main focus for investment promotion. The 14 overseas BOI offices would also be responsible for promoting Thai investment overseas and informing investors about new policies, such as the second phase of the eco-car project and the BoI's new investment strategy that is expected to be in place in 2015. Unlike the previous strategy that covered all industrial sectors, the new strategy focuses on the following 10 sectors:
1) Basic infrastructure and logistics (e.g. industrial zone, power generation from natural gas, tap water or water resources for industrial purposes, transportation and mass transit, commercial airport and logistics center);
2.) Basic industries (e.g. steel, petrochemicals, pulp and paper, machinery);
3.) Medical device and scientific equipment (e.g. medical services, medicine, medical food, scientific equipment);
4.) Alternative energy and environmental services (e.g. power generation from renewable energy sources, bio-fuel, recycling, wastewater treatment and industrial waste disposal services, Energy Services Companies: ESCO);
5.) Services that support the industrial sector (e.g. R&D, HRD, engineering design, software, calibration services, ROH, trade and investment support office);
6.) Advanced core technology (e.g. biotechnology, nanotechnology, advanced material technology);
7.) Food and agricultural processing industry (e.g. processed food, food additives, herbal extracts, plant propagation and development, products from natural rubber);
8.) Hospitality & wellness (e.g. tourism and sports promotion activities, Thai motion picture production and related supporting services, dedicated health centers, retirement homes and care centers);
9.) Automotive and other transportation equipment (e.g. cars, motorcycles, trains, electric trains, aircraft, shipbuilding and maintenance); and
10.) Electronic and electrical appliances (e.g. electronic design, organics & printed electronics, HDD & SSD and parts, solar cells, white goods)
Road shows and seminars would be also conducted focusing on industrial sectors and in new countries such as China and India. Foreign Direct Investment (FDI) applications for the first 11 months of 2013 totalled 1,015 projects worth 386.67 billion baht, but down 22% from the same period last year. The top five investors were Japan, China, Malaysia, Hong Kong and Singapore. Metal products, machinery and transport industries accounted for 49% of FDI applications, followed by service and infrastructure at 18% and mining, ceramics and basic metals at 10%.
- The Board of Investment (BoI) has cut the number of SME business categories eligible for investment privileges to 39 from 57, mainly labour-intensive ones in which Thai businesses can no longer compete with neighbouring countries. Secretary General of BOI said that the change aimed to direct SME’s investments to be in line with the BOI’s new investment policy, which focuses on high technology and value-added products and services. The 39 categories of eligible SME businesses would be divided into four groups _ value-added farm production; industries that use manufacturing skills such as auto parts, machinery, electronics and electrical appliances, plastic products and printing; creative industry including clothes, textile, jewellery and ornaments, furniture, software and designs; and service and supporting businesses for tourism industry such as hotels, cultural centres, movie shooting. These businesses are entitled to exemptions from machinery import tax and corporate income tax for eight years without restrictions on zone or size of investment. The board also allowed existing SMEs which improve their machinery to enjoy a three-year waiver on machinery import tax and corporate income tax. Interested SMEs are required to submit applications by December 2014 and develop the projects within three years.
- Department of Business Development reported that thirty-five foreign enterprises have been approvedto set up new service businesses in Thailand under the Foreign Business Act in November, 2013, bringing Bt2.22 billion in initial investment capital. Those new firms are expected to create at least 681 jobs for Thais. In the first 11 months of 2013, a total of 365 foreign firms have been given approval to do business in Thailand, with combined initial investment capital worth Bt17.82 billion. Businesses that foreign investors are highly interested in include financial services, leasing and rental, retail and wholesale, partnership of state-owned enterprises, and consultancy.
- Thai government wants to set up special economic zones (SEZs) in 12 provinces along the border and other strategic locations. The move is aimed at promoting trade, markets, investment and employment with neighbouring countries. Interior Minister Charupong Ruangsuwan said that the National Economic and Social Development Board (NESDB) would study the proposal, which could take upto 300 days. The new SEZs are expected to be in Mae Sot in Tak; Mae Sai, Chiang Saen and Chiang Khong in Chiang Rai; Ban Phu Nam Ron in Kanchanaburi; Koh Samui; Suvarnabhumi airport; and the provinces of Sa Kaeo, Trat, Songkhla, Narathiwat, Nakhon Phanom, Nong Khai and Mukdahan. Each SEZ would facilitate activity along at least one of three economic corridors _ the East-West Corridor linking Vietnam, Laos, Thailand and Myanmar; the North-South Corridor linking northern Thailand and southern China; and the Southwest Corridor linking Cambodia, Thailand and Dawei, Myanmar. These SEZs may be managed by the private sector.
- Thai cabinet approved a sharp increase of the alcohol beverage tax ceiling as proposed by the Finance Ministry. Under the proposal, which would be enforced under a ministerial regulation, the excise tax ceiling for both fermented beverages such as beers and wines, and distilled beverages such as whisky and brandy, increases to 2,000 baht per litre of 100% alcohol content. Under the current tax code, the Excise Department collects taxes on fermented beverages at a maximum rate of 100 baht per litre of 100% alcohol content or 60% of the product value, whichever is higher. It collects taxes on distilled beverages with a ceiling of 400 baht per litre of 100% alcohol content or 50% of the value, whichever is higher. The ministry also proposed to change the method of calculating excise tax for alcoholic beverages. It is proposed to use retail prices or wholesale prices at the last step in the supply chain as the basis for its calculation instead of current methods. Currently, the Excise Department calculates taxes for locally made alcohol beverages based on ex-factory prices and for imported beverages based on CIF (cost, insurance and freight) prices. It is expected that the change to retail prices to calculate the taxes would result in much higher tax collections.
Key strengths and sectors to look out for:
Agriculture sector: Agro-industry place a major role driving investment, with Thailand as one of the world’s largest exporters of rice, shrimp and canned tuna, natural and synthetic rubber and sugar. The country’s goal is to become the future market center for agricultural products and food so as to move towards the target of becoming a high quality “kitchen of the world”.
Electronic Industry: one of Thailand’s largest manufacturing sectors worth nearly $US 30 billion investment hubs in Asia. The country is now one of the largest producer of hard disk drives (HDD), Integrated Circuits (IC) and semiconductor and houses a major cluster of electronic production bases. Most hard disk drives used in computers areproduced in Thailand.
Auto industry: Thailand is a regional hub for automotive and parts production, with major global car producers locating their plants here. Pick-up truck and eco-cars will be the major models driving growth of the Thai automotive sector in the international market. Thailand is targeting the eco-car industry as the second product champion after the one-ton pickup truck.
Energy & petroleum: The government is promoting investment in energy infrastructure so as to develop Thailand as a regional energy centre. The country is promoting R&D of renewable energy and alternative fuel industries to attain the target of replacing 22% fossil fuels by 2022. Given the country’s abundance of biomass materials and agricultural products, bioplastic and biofuel industries from feedstocks such as rice, sugarcane, cassava, corn, palm etc. have good potential.
TOTAL THAILAND TRADE DURING 2013 COMPARED WITH THE PREVIOUS YEAR
(Amount in billion US$)
Year / Thai Import / Thai Export / Total Trade / Rate of Growth / Balance of trade2011 / 228.491 / 228.825 / 457.316 / 20.91% / 0.334
2012 / 247.59 / 229.52 / 477.11 / 5.71% / (-) 18.07
2013 / 250.72 / 228.53 / 479.25 / 0.01% / (-) 22.19
TOTAL TRADE IN US$ WITH TOP 10 COUNTRIES DURING 2013
(Amount in billion US$)
Sl. No. / Country / Thai imports / Thai exports / Total tradeChina / 37.73 / 27.24 / 64.97
Japan / 41.08 / 22.24 / 63.32
USA / 14.63 / 22.96 / 37.59
Malaysia / 13.25 / 13.01 / 26.26
United Arab Emirates / 17.29 / 3.08 / 20.37
Singapore / 8.23 / 11.24 / 19.47
Indonesia / 8.07 / 10.87 / 18.94
Australia / 5.48 / 10.35 / 15.83
Hong Kong / 0.48 / 13.19 / 13.67
South Korea / 9.06 / 4.59 / 13.65
15. / India / 3.50 / 5.19 / 8.69
Major Thai Exports: Motor cars, parts & accessories, Automatic data processing machines and parts thereof, Refine fuels,Precious stones and jewellery, Chemical products, Polymers of ethylene, propylene etc. in primary forms, Rubber products, Rubber, Electronic integrated circuits, Machinery and parts thereof, Iron and steel and their products, Prepared or preserved fish, crustaceans, mollusks, Air conditioning machine and parts thereofetc.
Major Thai Imports : Crude Oil, Machinery & Parts, Electrical machinery & parts,Chemicals, Iron, steel and products, Parts & accessories of vehicles,Electronic integrated circuits, Computers, parts and accessories, Other metal ores, metal waste scrap and products, Electrical house-hold appliances, Natural gas, Jewellery including silver bars & gold, Vegetables and vegetable products, Finished oils, Metal manufactures etc.
India-Thailand Bilateral
Economic and Commercial linkages form an important aspect of India’s partnership with Thailand. The past few years have seen a rapid intensification of these linkages between India and Thailand. FDIs, visit of business delegations to and from the two countries, exchange of high level visits by the two governments has increased considerably.
Bilateral trade has multiplied more than eight times since 2000 to cross US$ 8.5 billion in 2013. In year 2012, total trade between two countries reached US$8.68 billion (Thai import : US$ 3.20 billion & Thai Export : US $5.68 billion) with total growth of 6% over previous year. During 2013, total trade between India and Thailand was US Dollars 8.69 billion [Import from India USD 3.50 billion, Export to India USD 5.19 billion].
TOTAL TRADE WITH INDIA
(Amount in billion US$)
Description / 2009 / 2010 / 2011 / 2012 / 2013Total Trade / 4.95 / 6.64 / 8.19 / 8.68 / 8.69
Thai Export / 3.22 / 4.39 / 5.18 / 5.48 / 5.19
Thai Import / 1.73 / 2.25 / 3.01 / 3.20 / 3.50
Trade Balance / 1.49 / 2.14 / 2.17 / 2.28 / 1.69
Growth Rate % / -17.13% / 34.23% / 23.29% / 5.77 / -2.12
Major items of Export/Import to/from India
Exports: Chemical products, Polymers of ethylene, Precious stones and jewellery, Iron and steel & their products, Spark ignition reciprocating internal combustion piston engines & parts thereof, Motor cars, parts & accessories, Machinery and parts thereof, Air-conditioning machines and parts thereof, Rubber, Automatic data processing machines and parts thereof etc.
Imports : Jewellery including silver bars & gold, Iron Steel and products, Machinery & Parts, Chemicals, parts & accessories of vehicles, Medicinal and pharmaceutical products, Metal Manufacturers,Fresh aquatic animals, chilled frozen processed and instant, Other metal ores, etc.metal waste scrap and products
Investments by Indian and Thai companies into each other’s’ countries are growing. Indian companies are present in Thailand in several sectors including steel automobiles, IT, petro chemical and pharmaceuticals. According to Department of Investment Policy Promotion of Government of India, Thailand has invested US$ 164.50 million in India (April 2000- December 2013). Thai investments are mainly in infrastructure, real estate, food processing sectors, chemicals, hotel and hospitality sector.
Indian FDI into Thailand is around US$2 billion since 1970s. In 2012, twenty seven (27) applications worth 18415 million baht (USD 592.88 million) were received, while twenty five (25) applications worth 6100 million baht (USD 196.39 million) were approved. In 2013, seventeen (17) applications worth 5296 million baht (USD 172.34 million) were received, while sixteen (16) applications worth 1621 million baht (USD 52.75 million) were approved. Major investments from India to Thailand were seen in the Agricultural products, Minerals & Ceramics, Light Industry, Metal Products and Machinery, Electric and Electronic products, Chemical & Paper and Textiles.
Market Access Initiatives by the Mission
The Mission actively supported various business delegations from India by way of facilitating buyer-seller meetings and business-to-business matchmaking, organizing/participating Seminars, Conferences, Exhibitions and responding to trade enquiries and trade disputes. The Mission also kept a close watch on the local trade policies and strategies to identify non-tariff barriers for India merchandises in Thailand and brought them to the attention of authorities in India, besides taking up with local authorities. Much needed market survey of two products- Marine and Fisheries Products and Herbal Products were carried out in financial year 2012-13. Reports were sent to concerned Export Promotion Councils to plan their exports.
Trade enquiries handled in 2013 : 53fromThailand 133 from India
Business visa issued in 2013 : 6787
Thailand’s Economic Fact Sheet
Structure of the GDP / 0 20101 20100 / 20 2011 20100 / 2012 / 20 2013202222213
GDP (billions US$) / 317.8 / 355.4 / 365 / 391
(forecast)
GDP growth (%) / 7.8 / 0.1 / 6.4 / 2.9
GDP per capita (US$ per year) / 4720.6 / 5257.9 / 5382.0 / 5727.0
(forecast)
Exports (billions US$) / 195.31 / 228.83 / 229.52 / 228.53
Exports growth (%) / 28.13 / 17.16 / 3.2 / (-) 0.31
Imports (billions US$) / 182.93 / 228.49 / 247.59 / 250.72
Imports growth (%) / 36.82 / 24.91 / 25.0 / 0.29
Trade balance (billions US$) / 12.38 / 0.334 / 8.3 / (-) 22.19
Current Account balance (billions US$) / 14.8 / 7.7 / 2.7 / -2.8
Gross International reserves (end of the year 2013) (billions US$) / 167.2
Corporate Income Tax / 10-20%
Withholding Tax / 0-15%
Value Added Tax / 7%10
(Naveen Saxena)
First Secretary (Economic &Commerce)
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