Thailand, the second largest economy in the Association of Southeast Asian Nations (ASEAN), is an upper middle-income country with pro-investment policies and well-developed infrastructure. General Prayut Chan-o-cha was elected by Parliament as Prime Minister on June 5, 2019. Thailand celebrated the coronation of King Maha Vajiralongkorn May 4-6, 2019, formally returning a King to the Head of State of Thailand’s constitutional monarchy. Despite some political uncertainty, Thailand continues to encourage foreign direct investment as a means of promoting economic development, employment, and technology transfer. In recent decades, Thailand has been a major destination for foreign direct investment, and hundreds of U.S. companies have invested in Thailand successfully. Thailand continues to encourage investment from all countries and seeks to avoid dependence on any one country as a source of investment.
The Foreign Business Act (FBA) of 1999 governs most investment activity by non-Thai nationals. Many U.S. businesses also enjoy investment benefits through the U.S.-Thai Treaty of Amity and Economic Relations, signed in 1833 and updated in 1966. The Treaty allows U.S. citizens and U.S. majority-owned businesses incorporated in the United States or Thailand to maintain a majority shareholding or to wholly own a company, branch office, or representative office located in Thailand, and engage in business on the same basis as Thai companies (national treatment). The Treaty exempts such U.S.-owned businesses from most FBA restrictions on foreign investment, although the Treaty excludes some types of business. Notwithstanding their Treaty rights, many U.S. investors choose to form joint ventures with Thai partners who hold a majority stake in the company, leveraging their partner’s knowledge of the Thai economy and local regulations.
The Thai government maintains a regulatory framework that broadly encourages investment. Some investors have nonetheless expressed views that the framework is overly restrictive, with a lack of consistency and transparency in rule-making and interpretation of law and regulations.
The Board of Investment (BOI), Thailand’s principal investment promotion authority, acts as a primary conduit for investors. BOI offers businesses assistance in navigating Thai regulations and provides investment incentives to qualified domestic and foreign investors through straightforward application procedures. Investment incentives include both tax and non-tax privileges.
The Thai government in 2019 passed new laws and regulations on cybersecurity and personal data protection that have raised concerns about Thai authorities’ broad power to potentially demand confidential and sensitive information, introducing new uncertainties in the technology sector. IT operators and analysts have expressed concern with private companies’ legal protections, ability to appeal, or ability to limit such access. As of March 2020, the government is still in the process of considering and implementing regulations to enforce laws on Cyber Security and Personal Data Protection.
Gratuity payments to civil servants responsible for regulatory oversight and enforcement remain a common practice. Firms that refuse to make such payments can be placed at a competitive disadvantage to other firms that do engage in such practices. The government launched its Eastern Economic Corridor (EEC) development plan in 2017. The EEC is a part of the “Thailand 4.0” economic development strategy introduced in 2016. Many planned infrastructure projects, including a high-speed train linking three airports, U-Tapao Airport commercialization, and Laem Chabang Port expansion, could provide opportunities for investments and sales of U.S. goods and services. In support of its “Thailand 4.0” strategy, the government offers incentives for investments in twelve targeted industries: next-generation automotive; intelligent electronics; advanced agriculture and biotechnology; food processing; tourism; advanced robotics and automation; digital technology; integrated aviation; medical hub and total healthcare services; biofuels/biochemical; defense manufacturing; and human resource development.
|TI Corruption Perceptions Index||2019||36/ 101||http://www.transparency.org/
|World Bank’s Doing Business Report||2019||21 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2019||43 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, stock positions)||2018||USD 17,667||http://www.bea.gov/intl-trade-investment/
|World Bank GNI per capita||2018||USD 6,610||http://data.worldbank.org/
3. Legal Regime
Transparency of the Regulatory System
Generally, Thai regulations are readily available to the public. Foreign investors have, on occasion, expressed frustration that draft regulations are not made public until they are finalized. Comments stakeholders submit on draft regulations are not always taken into consideration. Non-governmental organizations report, however, the Thai government actively consults them on policy, especially in the health sector and on intellectual property issues. In other areas, such as digital and cybersecurity laws, the Thai government has taken stakeholders’ comments into account and amended draft laws accordingly.
U.S. businesses have repeatedly expressed concerns about Thailand’s customs regime. Complaints center on lack of transparency, the significant discretionary authority exercised by Customs Department officials, and a system of giving rewards to officials and non-officials for seized goods based on a percentage of their sales price. Specifically, the U.S. government and private sector have expressed concern about inconsistent application of Thailand’s transaction valuation methodology and the Customs Department’s repeated use of arbitrary values. Thailand’s latest Customs Act, which entered into force on November 13, 2017, is a moderate step forward. The Act removed the Customs Department Director General’s discretion to increase the Customs value of imports. It also reduced the percentage of remuneration awarded to officials and non-officials from 55 percent to 40 percent of the sale price of seized goods (or of the fine amount). While a welcome development, reduction of this remuneration is insufficient to remove the personal incentives given Customs officials to seize goods nor to address the conflicts of interest the system entails.
Consistent and predictable enforcement of government regulations remains problematic. In 2017, the Thai government launched a “regulatory guillotine” initiative to cut down on red tape, licenses, and permits. The policy focused on reducing and amending outdated regulations in order to improve Thailand’s ranking on the World Bank “Ease of Doing Business” report. The regulatory guillotine project has helped improve Thailand’s ranking and is still underway.
Gratuity payments to civil servants responsible for regulatory oversight and enforcement remain a common practice. Firms that refuse to make such payments can be placed at a competitive disadvantage to other firms that do engage in such practices.
International Regulatory Considerations
Thailand is a member of the World Trade Organization (WTO) and notifies most draft technical regulations to the Technical Barriers to Trade (TBT) Committee and the Sanitary and Phytosanitary Measures Committee. However, Thailand does not always follow WTO and other international standard-setting norms or guidance, butprefers to set its own standards in many cases. In October 2015, the country ratified the WTO Trade Facilitation Agreement, which came into effect in February 2017.
Legal System and Judicial Independence
Thailand has a civil code, commercial code, and a bankruptcy law. Thailand has an independent judiciary that is generally effective in enforcing property and contractual rights. The legal process is slow in practice, and litigants or third parties sometimes influence judgments through extra-legal means. Monetary judgments are calculated at the market exchange rate. Decisions of foreign courts are not accepted or enforceable in Thai courts. Disputes such as the enforcement of property or contract rights have generally been resolved in Thai courts.
There are three levels to the judicial system in Thailand: The Court of First Instance, which handles most matters at inception; the Court of Appeals; and the Supreme Court. There are also specialized courts, such as the Labor Court, Family Court, Tax Court, the Central Intellectual Property and International Trade Court, and the Bankruptcy Court.
The Specialized Appeal Court handles appeals from specialized courts. The Supreme Court has discretion whether to take a case that has been decided by the Specialized Appeal Court. If the Supreme Court decides not to take up a case, the Specialized Appeal Court decision stands.
Laws and Regulations on Foreign Direct Investment
The Foreign Business Act (described in detail above) governs most investment activity by non-Thai nationals. Other key laws governing foreign investment are the Alien Employment Act (1978) and the Investment Promotion Act (1977). However, as explained above, many U.S. businesses enjoy investment benefits through the U.S.-Thailand Treaty of Amity and Economic Relations (often referred to as the ‘Treaty of Amity’), which was established to promote friendly relations between the two nations. Pursuant to the Treaty, American nationals are entitled to certain exceptions to the FBA restrictions.
Pertaining to the services sector, the 2007 Financial Institutions Business Act unified the legal framework and strengthened the Bank of Thailand’s (the country’s central bank) supervisory and enforcement powers. The Act allows the Bank of Thailand to raise foreign ownership limits for existing local banks from 25 percent to 49 percent on a case-by-case basis. The Minister of Finance can authorize foreign ownership exceeding 49 percent if recommended by the central bank. Details are available at .
Apart from acquiring shares of existing (traditional) local banks, foreign banks can enter the Thai banking system by obtaining new licenses. The Ministry of Finance issues such licenses, following a consultation process with the Bank of Thailand. The Thai central bank is currently studying new licenses for digital-only banks, a tool meant to enhance financial inclusion and keep pace with consumer needs in the digital age. Digital-only banks can operate at a lower cost and offer different services than traditional banks.
The 2008 Life Insurance Act and the 2008 Non-Life Insurance Act apply a 25 percent cap on foreign ownership of insurance companies. Foreign boards of directors’ membership is also limited to 25 percent. However, in January 2016 the Office of the Insurance Commission (OIC), the primary insurance industry regulator, notified that Thai life or non-life insurance companies wishing to exceed these limits may apply to the OIC for approval. Any foreign national wishing to hold more than 10 percent of the voting shares in an insurance company must seek OIC approval. With approval, a foreign national can acquire up to 49 percent of the voting shares. Finally, the Finance Minister, with OIC’s positive recommendation, has discretion to permit greater than 49 percent foreign ownership and/or a majority of foreign directors, when the operation of the insurance company may cause loss to insured parties or to the public.
The Board of Investment offers qualified investors several benefits and provides information to facilitate a smoother investment process in Thailand. Information on the BOI’s “One Start One Stop” investment center can be found at . A physical office is located on the 18th floor of Chamchuri Square on Rama 4/Phayathai Road in Bangkok.
Competition and Anti-Trust Laws
Thailand updated the Trade Competition Act on October 5, 2017. The updated Act covers all business activities, except: state-owned enterprises exempted by law or cabinet resolution; specific activities related to national security, public benefit, common interest and public utility; cooperatives, agricultural and cooperative groups; government agencies; and other enterprises exempted by the law. The Act broadens the definition of a business operator to include affiliates and group companies, and broadens the liability of directors and management, subjecting them to criminal and administrative sanctions if their actions (or omissions) resulted in violations. The Act also provides details about penalties in cases involving administrative court or criminal court actions. The amended Act has been noted as an improvement over the prior legislation and a step towards Thailand’s adoption of international standards in this area.
The Office of Trade Competition Commission (OTCC) is an independent agency and the main enforcer of the Trade Competition Act B.E. 2560 (2018). The OTCC is comprised of seven members nominated by a selection committee and endorsed by the Cabinet. The Commission has the following responsibilities: advises the government on issuance of relevant regulations; ensures fair and free trade practices; investigates cases and complaints of unfair trade; and pursues criminal and disciplinary actions against those found guilty of unfair trade practices stipulated in the law. The law focuses on the following areas: unlawful exercise of market dominance; mergers or collusion that could lead to monopoly; unfair competition and restricting competition; and unfair trade practices.
The government has authority to control the price of specific products and services under the Price of Goods and Services Act. The MOC’s Department of Internal Trade administers the law and interacts with affected companies. The Committee on Prices of Goods and Services makes final decisions on products to add or remove from price controls. As of October 2019, the MOC decreased the number of controlled commodities and services to 52 from 54 the previous year. Examples of controlled products include automotive tires, agricultural fertilizer, and sugar. Raising prices of controlled products and services is prohibited without obtaining the Committee’s approval. The government uses its controlling stakes in major suppliers of products and services, such as Thai Airways and PTT Public Company Limited (the national petroleum company), to influence prices in the market.
Expropriation and Compensation
Thai laws provide guarantees regarding protection from expropriation without compensation and non-discrimination for some, but not all, investors. Thailand’s Constitution provides protection from expropriation without fair compensation and requires the government to pass a specific, tailored expropriation law if the expropriation is required for the purpose of public utilities, national defense, acquisition of national resources, or for other public interests. The Investment Promotion Act also guarantees the government shall not nationalize the operations and assets of BOI-promoted investors.
The Expropriation of Immovable Property Act (EIP), most recently amended in 2019, applies to all property owners, whether foreign or domestic nationals. The Act provides a framework and clear procedures for expropriation; sets forth detailed provision and measures for compensation of land owners, lessees and other persons that may be affected by an expropriation; and recognizes the right to appeal decisions to Thai courts. The 2019 EIP requires the government to return land that was expropriated but has not been used back to the original property owners. However, the EIP and Investment Promotion Act do not protect against indirect expropriation and do not distinguish between compensable and non-compensable forms of indirect expropriation.
Thailand has a well-established system for land rights that is generally upheld in practice, but the legislation governing land tenure still significantly restricts foreigners’ rights to acquire land.
ICSID Convention and New York Convention
Thailand is a signatory to the New York Convention, which means that investors can enforce arbitral awards in any other signatory country. Thailand signed the Convention on the Settlement of Investment Disputes in 1985 but has not ratified it. Therefore, most foreign investors covered under Thailand’s treaties with investor-state dispute settlement (ISDS) provisions that are limited to ICSID arbitration have not been able to bring ISDS claims against Thailand under these treaties.
Investor-State Dispute Settlement
Thailand is party to bilateral investment treaties with 46 nations. Two treaties — with the Netherlands and United States (Treaty of Amity) — do not include binding dispute resolution provisions. This means that investors covered under these treaties are unable to pursue international arbitration proceedings against the Thai government without first obtaining the government’s consent. There have been two notable cases of investor-state disputes in the last fifteen years, neither of which involved U.S. companies. The first case involved a concession agreement for a construction project filed under the Germany-Thailand bilateral investment treaty. In the second case, Thailand is engaged in a dispute over the government’s invocation of special powers to shut down a gold mine in early 2017.
International Commercial Arbitration and Foreign Courts
Thailand’s Arbitration Act of 2002, modeled in part after the UNCITRAL Model Law, governs domestic and international arbitration proceedings. The Act states that “in cases where an arbitral award was made in a foreign country, the award shall be enforced by the competent court only if it is subject to an international convention, treaty, or agreement to which Thailand is a party.” Any arbitral award between parties subject to the New York Convention should thus be enforced. The following organizations provide arbitration services in Thailand: the Thai Arbitration Institute of the Alternative Dispute Resolution Office; Office of the Judiciary; and the Office of the Arbitration Tribunal of the Board of Trade of Thailand. In addition, the semi-public Thai Arbitration Center offers mediation and arbitration for civil and commercial disputes. An amendment to the Arbitration Act that allows foreign arbitrators to take part in cases involving foreign parties came into force on April 15, 2019. Under very limited circumstances, a court can set aside an arbitration award.
Thailand’s bankruptcy law is modeled after that of the United States. The law authorizes restructuring proceedings that require trained judges who specialize in bankruptcy matters to preside. According to the law, bankruptcy is defined as a state in which courts permit the distribution of assets belonging to a debtor among the creditors within the parameters of the law. Thailand’s bankruptcy law allows for corporate restructuring similar to U.S. Chapter 11 and does not criminalize bankruptcy. The law also distinguishes between secured and unsecured claims, with the former prioritized. While bankruptcy is under consideration, creditors can request the following ex parte applications from the Bankruptcy Court: an examination by the receiver of all the debtor’s assets and/or that the debtor attend questioning on the existence of assets; a requirement that the debtor provide satisfactory security to the court; and immediate seizure of the debtor’s assets and/or evidence in order to prevent the loss or destruction of such items.
The law stipulates that all applications for repayment must be made within one month after the Bankruptcy Court publishes the appointment of an official receiver. If a creditor eligible for repayment does not apply within this period, the creditor forfeits his/her right to receive payment or the court may cancel the order to reorganize the business. If any person opposes a filing, the receiver shall investigate the matter and approve, partially approve, or dismiss the application. Any objections to the orders issued by the receiver may be filed with the court within 14 days after learning of the issued order.
Within bankruptcy proceedings, it is also possible to undertake a “composition” in order to avoid a long and protracted process. A composition takes place when a debtor expresses in writing a desire to settle his/her debts, either partially or in any other manner, within seven days of submitting an explanation of matters related to the bankruptcy or during a time period prescribed by the receiver. After the proposal for a composition has been submitted, the receiver calls for a meeting among creditors to consider whether or not to accept the proposal. If the proposal is accepted, the court will approve the composition in order to legally execute the proposal; however, it will only do so if the proposal includes clear provisions for the repayment of debts.
The National Credit Bureau of Thailand (NCB) provides the financial services industry with information on consumers and businesses. The NCB is required to provide the financial services sector with payment history information from utility companies, retailers and merchants, and trade creditors.
4. Industrial Policies
The Board of Investment:
The Board of Investment offers investment incentives to qualified domestic and foreign investors. To upgrade the country’s technological capacity, the BOI presently gives more weight to applications in high-tech, innovative, and sustainable industries. These include digital technology, “smart agriculture” and biotechnology, aviation and logistics, automation and robotics, medical and wellness tourism, and other high-value services.
The most significant privileges offered by the BOI for promoted projects include: corporate income tax exemptions; tariff reductions or exemptions on imports of machinery used in the investment; tariff-free treatment on imported raw materials used in production for export.
- corporate income tax exemptions; tariff reductions or exemptions on imports of machinery used in the investment; tariff-free treatment on imported raw materials used in production for export.
- permission to own land; permission to bring foreign experts; and visa and work permit facilitation.
Investment projects with a significant R&D, innovation, or human resource development component may be eligible for additional grants and incentives. Moreover, grants are provided to support targeted technology development under the Competitive Enhancement Act. BOI offers a one-stop service to expedite multiple business processes for investors.
For additional information, contact the Office of Board of Investment on 555 Vibhavadi-Rangsit Road, Chatuchak, Bangkok 10900 and telephone at +662-553-8111 or website at www.boi.go.th.
Office of the Eastern Economic Corridor:
Thailand’s flagship investment zone, the “Eastern Economic Corridor (EEC),” spans the provinces of Chachoengsao, Chonburi, and Rayong (5,129 square miles). The EEC leverages the developed infrastructure networks of the adjacent Eastern Seaboard industrial area, Thailand’s primary investment destination for more than 30 years. The Thai government foresees the EEC as a primary investment and infrastructure hub in ASEAN and a gateway to east and south Asia. Among the EEC development projects are: smart cities; an innovation district (EECi); a digital park (EECd); an aerotropolis (EEC-A); a medical hub (EECmd); and other state-of-the-art facilities. The EEC is targeting twelve key industries:
- Next-generation automotive
- Intelligent electronics
- Advanced agriculture and biotechnology
- Food processing
- Advance robotics and automation
- Integrated aviation industry
- Medical hub and total healthcare services
- Biofuels and biochemicals
- Digital technology
- Defense industry
- Human resource development
The EEC Act authorized investment incentives and privileges. Investors can obtain long-term land leases of 99 years (with an initial lease of up to 50 years and a renewal of up to 49 years). The EEC Act shortens the public-private partnership approval process to approximately nine months.
The BOI works in cooperation with the EEC Office. BOI offers corporate income tax exemptions of up to 13 years for strategic projects in the EEC area. Foreign executives and experts who work in targeted industries in the EEC are subject to a maximum personal income tax rate of 17 percent.
For additional information, contact the Eastern Economic Corridor Office at 25th floor, CAT Tower, 72 Soi Wat Maungkhae, Charoenkrung Road, Bangrak, Bangkok 10500, telephone at +662-033-8000 and website at https://eng.eeco.or.th/en.
Foreign Trade Zones/Free Ports/Trade Facilitation
The Industrial Estate Authority of Thailand (IEAT), a state-enterprise under the Ministry of Industry, develops suitable locations to accommodate industrial properties. IEAT has an established network of industrial estates in Thailand, including Laem Chabang Industrial Estate in Chonburi Province and Map Ta Phut Industrial Estate in Rayong Province in Thailand’s eastern seaboard region, a common location for foreign-owned factories due to its proximity to seaport facilities and Bangkok. Foreign-owned firms generally have the same investment opportunities in the industrial zones as Thai entities. While the IEAT Act requires that in the case of foreign-owned firms, the IEAT Committee must consider and approve the amount of space/land bought or leased in industrial estates, in practice, there is no record of disapproval for requested land. Private developers are heavily involved in the development of these estates.
The IEAT currently operates 14 estates, plus 45 more in conjunction with the private sector, in 16 provinces nationwide. Private-sector developers independently operate over 50 industrial estates, most of which have received promotion privileges from the Board of Investment. Amata Industrial Estate and WHA Industrial Development are Thailand’s leading private industrial estate developers. Most major foreign manufacturing investors, including U.S. manufacturers, are located in these two companies’ industrial estates and in the eastern seaboard region.
The IEAT has established 12 special IEAT “free trade zones” reserved for industries manufacturing exclusively for export. Businesses may import raw materials into, and export finished products from, these zones free of duty (including value added tax). These zones are located within industrial estates and many have customs facilities to speed processing. The free trade zones are located in Chonburi, Lampun, Pichit, Songkhla, Samut Prakarn, Bangkok (at Lad Krabang), Ayuddhya, and Chachoengsao. In addition to these zones, factory owners may apply for permission to establish a bonded warehouse within their premises to which raw materials, used exclusively in the production of products for export, may be imported duty-free.
The Thai government also established Special Economic Zones (SEZs) in ten provinces bordering neighboring countries: Tak, Nong Khai, Mukdahan, Sa Kaeo, Trad, Narathiwat, Chiang Rai, Nakhon Phanom, Songkhla, and Kanchanaburi. Business sectors and industries that can benefit from tax and non-tax incentives offered in the SEZs include logistics; warehouses near border areas; distribution; services; labor-intensive factories; and manufacturers using raw materials from neighboring countries. These SEZs support Thai government goals for closer economic ties with neighboring countries and allow investors to tap into abundant migrant labor; however, these SEZs have proven less attractive to overseas investors due to their remote locations far from Bangkok and other major cities.
In 2019, Thai Customs implemented three measures to improve trade and customs processing efficiency: Pre-Arrival Processing (PAP); an “e-Bill Payment” electronic payment system; and an e-Customs system that waives the use of paper customs declaration copies. The measures comply with the World Trade Organizations (WTO) Trade Facilitation Agreement (TFA), adopted in February 2016, which requires WTO members to adopt procedures for pre-arrival processing for imports and to authorize electronic submission of customs documents, where appropriate. The measures have also improved Thailand’s ranking in the World Bank’s “Doing Business: Trading Across Borders 2020” index.
Performance and Data Localization Requirements
The Thai government does not have specific laws or policies regarding performance or data localization requirements. Foreign investors are not required to use domestic content in goods or technology, but the Thai government has encouraged such an approach through domestic preferences in government procurement proceedings.
There are currently no requirements for foreign IT providers to localize their data, turn over source code, or provide access to surveillance. However, the Thai government in 2019 passed new laws and regulations on cybersecurity and personal data protection that have raised concerns about Thai authorities’ broad power to potentially demand confidential and sensitive information. IT operators and analysts have expressed concern with private companies’ legal protections, ability to appeal, or ability to limit such access. IT providers have expressed concern that the new laws might place unreasonable burdens on them and have introduced new uncertainties in the technology sector. As of March 2020, the government is still in the process of considering and implementing regulations to enforce laws on Cyber Security and Personal Data Protection.
Thailand has implemented a requirement that all debit transactions processed by a domestic debit card network must use a proprietary chip.
5. Protection of Property Rights
Property rights are guaranteed by the Constitution. While the government provides fair compensation in instances of expropriation, Thai policy generally does not permit foreigners to own land. There have been instances, however, of granting such permission to foreigners under certain laws or ministerial regulations for residential, business, or religious purposes. Foreign ownership of condominiums and buildings is permitted under certain laws. Foreigners can freely lease land. Relevant articles of the Civil and Commercial Codes do not distinguish between foreign and Thai nationals in the exercise of lease rights. Secured interests in property, such as mortgage and pledge, are recognized and enforced. Unoccupied property legally owned by foreigners or Thais may be subject to adverse possession by squatters who stay on that property for at least 10 years.
The National Committee on Intellectual Property Policy sets Thailand’s overall Intellectual Property (IP) policy. The National Committee is chaired by the Prime Minister with two Deputy Prime Ministers as vice chairs. Eighteen heads of government agencies serve as Committee members. In 2017, this Committee approved a 20-year IP Roadmap to reform the country’s IP system.
The Department of Intellectual Property (DIP) is responsible for IP-related administration, including registration and recording of IP rights and coordination of IP enforcement activities. DIP also acts as the secretary of the National Committee on Intellectual Property Policy.
Patents and Trademarks
Thailand is a member of the Patent Cooperation Treaty (PCT). Thailand’s patent regime generally provides protection for most new inventions. The process of patent examination through issuance of patents takes on average six to eight years. The patenting process may take longer for certain technology sectors such as pharmaceuticals and biotechnology. In order to address the long patent pendency and backlogs, DIP hired 91 patent and trademark examiners in recent years. While the patent backlogs decreased from prior years in 2018, volumes increased again in 2019. As of September 2019, approximately 19,000 patent applications were pending examination, according to DIP.
The Thai government is in the process of preparing two amendments to the Patent Act. The first amendment, which concerns streamlining of the patent examination process, is pending review by the Council of the State as of April 2020. This amendment is expected to be adopted by the Parliament by the end of 2020. A second amendment to the Patent Act will authorize Thailand’s accession to the “Hague Agreement Concerning the International Registration of Industrial Designs.” The draft of this second amendment is expected to be submitted to the Council of State after the Council completes its review of the first amendment.
Thailand protects trademarks, traditional marks, and sound marks. As a member of the “Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks” (Madrid Protocol). Thailand allows trademark owners to apply for trademark registrations in Thailand directly at DIP or through international applications under the Madrid Protocol. DIP historically takes 10 to 14 months to register a trademark. More than 46,000 trademark applications were pending examination at the end of 2019.
As Thailand is a member of the “Bern Convention,” copyright works are protected automatically. However, copyright owners may record their works with DIP to establish proof of ownership. Thailand joined the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled in January 2019. The Guidelines on Use of Copyright Works for the Benefits of Disabled Persons is available on the DIP website, Thai language only (http://www.ipthailand.go.th/th/dip-law-2/item/notificatioofmoc_disableperson2019.html).
In addition, Thailand is in the process of a two-phase amendment of the Copyright Act. The first phase will enhance protections of copyrights in the digital environment and prepare Thailand for accession to the WIPO Copyright Treaty. The second phase will prepare Thailand for accession to the WIPO Performances and Phonograms Treaty. The first-phase draft is undergoing a legal review by the Council of State, after which it will be submitted to the Parliament. The second amendment remains in the drafting process.
DIP recently adopted a new system of voluntary registration of copyright (collective management) agents to curb illegal activities of rogue agents. To register, an agent must meet certain qualifications and undergo prescribed training. The roster of registered agents along with associated licensed copyrights is available on the DIP website. The Thai government amended the Computer Crime Act in 2017 to add IPR infringement as a predicate offense under the Act’s Section 20. This enables IP rights-holders to file requests to either DIP or the Ministry of Digital Economy and Society for removal of online IPR-infringing content from computer systems or for disabling access.
Thailand’s Geographical Indications (GI) Act has been in force since April 2004. Thailand protects GIs, which identify goods by their specific geographical origins. The geographical origins identified by a GI must be directly attributable to the reputation, qualities, or characteristics of the good. In Thailand, a registered trademark does not prevent a similar geographical name to be registered as a GI.
Intellectual Property Rights
In 2017, Thailand was placed on the USTR Special 301 Watch List. Thailand has one physical market, Patpong Market in Bangkok, listed in the USTR’s 2019Review of Notorious Markets.
Thailand has taken the following steps recently to improve IP enforcement: provided ex-officio authority for border enforcement officials to inspect in-transit goods; set enforcement benchmarks; published monthly enforcement statistics online; and stepped up efforts to investigate IP cases. Thailand’s Central Intellectual Property and International Trade Court (CIPIT) is the first instance of a court having jurisdiction over both civil and criminal intellectual property cases and civil international trade cases for all of Thailand. The Court of Appeal for Specialized Cases hears appeals from the CIPIT, including administrative appeals from DIP that already received a first instance decision from the CIPIT.
6. Financial Sector
Capital Markets and Portfolio Investment
The Thai government maintains a regulatory framework that broadly encourages and facilitates portfolio investment. The Stock Exchange of Thailand, the country’s national stock market, was established under the Securities Exchange of Thailand Act B.E. 2535 in 1992. There is sufficient liquidity in the markets to allow investors to enter and exit sizeable positions. Government policies generally do not restrict the free flow of financial resources to support product and factor markets. The Bank of Thailand, the country’s central bank, has respected IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.
Credit is generally allocated on market terms rather than by “direct lending.” Foreign investors are not restricted from borrowing on the local market. In theory, the private sector has access to a wide variety of credit instruments, ranging from fixed term lending to overdraft protection to bills of exchange and bonds. However, the private debt market is not well developed. Most corporate financing, whether for short-term working capital needs, trade financing, or project financing, requires borrowing from commercial banks or other financial institutions.
Money and Banking System
Thailand’s banking sector, with 15 domestic commercial banks, is sound and well-capitalized. As of December 2019, the non-performing loan rate was low (around 2.98 percent industry wide). The ratio of capital funds/risk-weighted assets (capital adequacy) was high (19.61 percent). Thailand’s largest commercial bank is Bangkok Bank, with assets totaling USD 100 billion as of December 2019. The combined assets of the five largest commercial banks totaled USD 450 billion, or 69.39 percent of the total assets of the Thai banking system, at the end of 2019.
In general, Thai commercial banks provide the following services: accepting deposits from the public; granting credit; buying and selling foreign currencies; and buying and selling bills of exchange (including discounting or re-discounting, accepting, and guaranteeing bills of exchange). Commercial banks also provide credit guarantees, payment, remittance and financial instruments for risk management. Such instruments include interest-rate derivatives and foreign-exchange derivatives. Additional business to support capital market development, such as debt and equity instruments, is allowed. A commercial bank may also provide other services, such as bank assurance and e-banking.
Thailand’s central bank is the Bank of Thailand (BOT), which is headed by a Governor appointed for a five-year term. The BOT serves the following functions: prints and issues banknotes and other security documents; promotes monetary stability and formulates monetary policies; manages the BOT’s assets; provides banking facilities to the government; acts as the registrar of government bonds; provides banking facilities for financial institutions; establishes or supports the payment system; supervises financial institutions manages the country’s foreign exchange rate under the foreign exchange system; and determines the makeup of assets in the foreign exchange reserve.
Apart from the 15 domestic commercial banks, there are currently 11 registered foreign bank branches, including three American banks (Citibank, Bank of America, and JP Morgan Chase), and four foreign bank subsidiaries operating in Thailand. To set up a bank branch or a subsidiary in Thailand, a foreign commercial bank must obtain approval from the Ministry of Finance and the BOT. Foreign commercial bank branches are limited to three service points (branches/ATMs) and foreign commercial bank subsidiaries are limited to 40 service points (branches and off-premise ATMs) per subsidiary. Newly established foreign bank branches are required to have minimum capital funds of 125 million baht (USD 4.03 million at end of 2019 exchange rates) invested in government or state enterprise securities, or directly deposited with the Bank of Thailand. The number of expatriate management personnel is limited to six people at full branches, although Thai authorities frequently grant exceptions on a case-by-case basis.
Non-residents can open and maintain foreign currency accounts without deposit and withdrawal ceilings. Non-residents can also open and maintain Thai baht accounts; however, in an effort to curb speculation, in July 2019 the Bank of Thailand capped non-resident Thai baht deposits to 200 million baht across all domestic bank accounts. Any deposit in Thai baht must be derived from conversion of foreign currencies, receipt of payment for goods and services, or capital transfers. Withdrawals are freely permitted. Since mid-2017, the BOT has allowed commercial banks and payment service providers to introduce new financial services technologies under its “Regulatory Sandbox” guidelines. Recently introduced technologies under this scheme include standardized QR codes for payments, blockchain funds transfers, electronic letters of guarantee, and biometrics.
Thailand’s alternative financial services include cooperatives, micro-saving groups, the state village funds, and informal money lenders. The latter provide basic but expensive financial services to households, mostly in rural areas. These alternative financial services, with the exception of informal money lenders, are regulated by the government.
Foreign Exchange and Remittances
There are no limitations placed on foreign investors for converting, transferring, or repatriating funds associated with an investment; however, supporting documentation is required. Any person who brings Thai baht currency or foreign currency in or out of Thailand in an aggregate amount exceeding USD 15,000 or the equivalent must declare the currency at a Customs checkpoint. Investment funds are allowed to be freely converted into any currency.
The exchange rate is generally determined by market fundamentals but is carefully scrutinized by the BOT under a managed float system. During periods of excessive capital inflows/outflows (i.e., exchange rate speculation), the central bank has stepped in to prevent extreme movements in the currency and to reduce the duration and extent of the exchange rate’s deviation from a targeted equilibrium.
Thailand imposes no limitations on the inflow or outflow of funds for remittances of profits or revenue for direct and portfolio investments. There are no time limitations on remittances.
Sovereign Wealth Funds
Thailand does not have a sovereign wealth fund and the Bank of Thailand is not pursuing the creation of such a fund. However, the International Monetary Fund has urged Thailand to create a sovereign wealth fund due to its large accumulated foreign exchange reserves (USD 224.3 billion as of December 2019).
7. State-Owned Enterprises
Thailand’s 56 state-owned enterprises (SOEs) have total assets of USD 422 billion and a combined net income of USD 8.3 billion (end of 2018 figures, latest available). They employ around 270,000 people, or 0.7 percent of the Thai labor force. Thailand’s SOEs operate primarily in-service delivery, in particular in the energy, telecommunications, transportation, and financial sectors. More information about SOEs is available at the website of the State Enterprise Policy Office (SEPO) under the Ministry of Finance at .
A 15-member State Enterprises Policy Commission, or “superboard,” oversees operations of the country’s 56 SOEs. In May 2019, the Development of Supervision and Management of State-Owned Enterprise Act B.E. 2562 (2019) went into effect. The law aims to reform SOEs and ensure transparent management decisions. The Thai government generally defines SOEs as special agencies established by law for a particular purpose that are 100 percent owned by the government (through the Ministry of Finance as a primary shareholder). The government recognizes a second category of “limited liability companies/public companies” in which the government owns 50 percent or more of the shares. Of the 56 total SOEs, 43 are wholly-owned and 13 are majority-owned. Twelve of these companies are classed as limited liability companies. Five are publicly listed on the Stock Exchange of Thailand: Thai Airways International Public Company Limited; Airports of Thailand Public Company Limited; PTT Public Company Limited; MCOT Public Company Limited; and Krung Thai Bank Public Company Limited. By regulation, at least one-third of SOE boards must be comprised of independent directors.
Private enterprises can compete with SOEs under the same terms and conditions with respect to market share, products/services, and incentives in most sectors, but there are some exceptions, such as fixed-line operations in the telecommunications sector.
While SEPO officials aspire to adhere to the OECD Guidelines on Corporate Governance for SOEsno level playing field exists between SOEs and private sector enterprises, which are often disadvantaged in competing with Thai SOEs for contracts.
Generally, SOE senior management reports directly to a line minister and to SEPO. Corporate board seats are typically allocated to senior government officials or politically-affiliated individuals. Privatization Program
The 1999 State Enterprise Corporatization Act provides a framework for conversion of SOEs into stock companies. Corporatization is viewed as an intermediate step toward eventual privatization. (Note: “corporatization” describes the process by which an SOE adjusts its internal structure to resemble a publicly-traded enterprise; “privatization” denotes that a majority of the SOE’s shares is sold to the public; and “partial privatization” refers to a situation in which less than half of a company’s shares are sold to the public.) Foreign investors are allowed to participate in privatizations, but restrictions are applied in certain sectors, as regulated by the FBA and the Act on Standards Qualifications for Directors and Employees of State Enterprises of 1975, as amended. However, privatizations have been on hold since 2006 largely due to strong opposition from labor unions.
A 15-member State Enterprises Policy Commission, or “superboard,” oversees operations of the country’s 56 SOEs. In May 2019, the Development of Supervision and Management of State-Owned Enterprise Act B.E. 2562 (2019) went into effect. The law aims to reform SOEs and ensure transparent management decisions; however, privatization is not part of this process.
Transparency International’s Corruption Perceptions Index ranked Thailand 101st out of 180 countries with a score of 36 out of 100 in 2019. According to some studies, a cultural propensity to forgive bribes as a normal part of doing business and to equate cash payments with finders’ fees or consultants’ charges, coupled with the relatively low salaries of civil servants, encourages officials to accept gifts and illegal inducements. U.S. executives with experience in Thailand often advise new-to-market companies that it is far easier to avoid corrupt transactions from the beginning than to stop such practices once a company has been identified as willing to operate in this fashion. American firms that comply with the strict guidelines of the Foreign Corrupt Practices Act (FCPA) are able to compete successfully in Thailand. U.S. businessmen say that publicly affirming the need to comply with the FCPA helps to shield their companies from pressure to pay bribes.
Thailand has a legal framework and a range of institutions to counter corruption. The Organic Law to Counter Corruption criminalizes corrupt practices of public officials and corporations, including active and passive bribery of public officials. The anti-corruption laws extend to family members of officials and to political parties.
Thai procurement regulations prohibit collusion amongst bidders. If an examination confirms allegations or suspicions of collusion among bidders, the names of those applicants must be removed from the list of competitors.
Thailand adopted its first national government procurement law in December 2016. Based on UNCITRAL model laws and the WTO Agreement on Government Procurement, the law applies to all government agencies, local authorities, and state-owned enterprises, and aims to improve transparency. Officials who violate the law are subject to 1-10 years imprisonment and/or a fine from Thai baht 20,000 (approximately USD 615) to Thai baht 200,000 (approximately USD 6,150).
Since 2010, the Thai Institute of Directors has built an anti-corruption coalition of Thailand’s largest businesses. Coalition members sign a Collective Action Against Corruption Declaration and pledge to take tangible, measurable steps to reduce corruption-related risks identified by third party certification. The Center for International Private Enterprise equipped the Thai Institute of Directors and its coalition partners with an array of tools for training and collective action.
Established in 2011, the Anti-Corruption Organization of Thailand (ACT) aims to encourage the government to create laws to combat corruption. ACT has 54 member organizations drawn from the private, public, and academic sectors. Their signature program is the “integrity pact.” Drafted by ACT and the Finance Ministry and based on a tool promoted by Transparency International, the pact forbids bribes from signatory members in bidding for government contacts. Member agencies and companies must adhere to strict transparency rules by disclosing and making easily available to the public all relevant bidding information, such as the terms of reference and the cost of the project.
Thailand is a party to the UN Anti-Corruption Convention, but not the OECD Anti-Bribery Convention.
Thailand’s Witness Protection Act offers protection (to include police protection) to witnesses, including NGO employees, who are eligible for special protection measures in anti-corruption cases.
Resources to Report Corruption
Contact at government agency or agencies responsible for combating corruption:
International Affairs Strategy Specialist
Office of the National Anti-Corruption Commission
361 Nonthaburi Road, Thasaai District, Amphur Muang Nonthaburi 11000, Thailand
Contact at “watchdog” organization:
Dr. Mana Nimitmongkol
Anti-Corruption Organization of Thailand (ACT)
44 Srijulsup Tower, 16th floor, Phatumwan, Bangkok 10330
10. Political and Security Environment
On March 24, 2019, Thailand held its first national election since the 2014 military coup that ousted democratically elected Prime Minister Yingluck Shinawatra. On June 5, the newly-seated Parliament elected coup leader General Prayut Chan-o-cha to continue in his role as Prime Minister.
Violence related to an ongoing ethno-nationalist insurgency in Thailand’s southernmost provinces has claimed more than 7,000 lives since 2004. Although the number of deaths and violent incidents has decreased year-over-year, efforts to end the insurgency have so far been unsuccessful. The government is currently engaged in confidence-building measures with the leading insurgent group. Almost all attacks have occurred in the three southernmost provinces of the country.
11. Labor Policies and Practices
In 2019, 38.18 million people were in Thailand’s formal labor pool, comprising 57 percent of the total population. Thailand’s official unemployment rates stood at 1.0 percent at the end of 2019, slightly less than 1.1 percent the previous year. Unemployment among youth (15-24 years old) is around 5.2 percent, while the rate is only 0.5 percent for adults over 25 years old. Well over half the labor force (54.3 percent) earns income in the informal sector, including through self-employment and family labor, which limits their access to social welfare programs. (Note: These statistics do not take into account the impact of the coronavirus pandemic, the long-term impact of which on the Thai labor force is difficult to ascertain. End note.)
The Thai government is actively seeking to address shortages of both skilled and unskilled workers through education reform and various worker-training incentive programs. Low birth rates, an aging population, and a skills mismatch, are exacerbating labor shortages in many sectors. Despite provision of 15 years of free universal education, Thailand continues to suffer from a skills mismatch that impedes innovation and economic growth. Thailand has a shortage of high-skill workers such as researchers, engineers, and managers, as well as technicians and vocational workers.
Regional income inequality and labor shortages, particularly in labor-intensive manufacturing, construction, hospitality and service sectors, have attracted millions of migrant workers, mostly from neighboring Burma, Cambodia, and Laos. In 2019, the International Organization for Migration estimated Thailand hosted 4.9 million migrant workers, or 13 percent of country’s labor force. Although an increasing number of migrant laborers are documented, many continue to work illegally. As of 2019, approximately 3.8 million formerly undocumented migrant workers had been regularized.
Employers may dismiss workers provided the employer pays severance. Where an employer temporarily suspends business, in part or in whole, the employer must pay the employee at least 75 percent of his or her daily wages throughout the suspension period.
Among wage and salary workers, 3.5 percent are unionized and only 34 out of 77 provinces have labor unions. Thai law allows private-sector workers to form and join trade unions of their choosing without prior authorization, to bargain collectively, and to conduct legal strikes, although these rights come with some restrictions. Noncitizen migrant workers, whether registered or undocumented, do not have the right to form unions or serve as union officials. Migrants can join unions organized and led by Thai citizens.
In 2019 the government issued a new regulation to ensure that seasonal employees in agriculture, fishing, forestry, and husbandry businesses have access to the government’s accident compensation fund. Additional information on migrant workers issues and rights can be found in the U.S. Trafficking in Persons Report, as well as the Labor Rights chapter of the U.S. Human Rights report.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
Under an agreement with the Thai government, the U.S. International Development Finance Corporation (DFC, formerly the Overseas Private Investment Corporation) can provide equity investments, debt financing, partial credit guarantees, political risk insurance, grants and private equity capital to support U.S. and other investors and their investments. DFC also can provide debt financing, in the form of direct loans and loan guarantees, of up to USD one billion per project for business investments, preferably with U.S. private sector participation, covering sectors as diverse as tourism, transportation, manufacturing, franchising, power, infrastructure, and others. DFC political risk insurance is also available for currency inconvertibility, expropriation, and political violence for U.S. and other investments including equity, loans and loan guarantees, technical assistance, leases, and consigned inventory or equipment. Grants, a new tool for DFC, are available for projects that are already reasonably developed but need additional, limited funding and specific work — for example technical, environmental and social-risk (E&S) screening, or legal advice — in order to be bankable and eligible for DFC financing or insurance. In addition, DFC supports twelve private equity funds that are eligible to invest in projects in Thailand. In all cases, DFC support is available only where sufficient or appropriate investment support is unavailable from local or other private sector financial institutions.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||$238,620||100%||Total Outward||$135,920||100%|
|Japan||$86,810||36.4%||China, P.R.: Hong Kong||$24,157||17.8%|
|China, P.R.: Hong Kong||$23,354||9.8%||Mauritius||$10,367||7.6%|
|“0” reflects amounts rounded to +/- USD 500,000.|
|Portfolio Investment Assets|
|Top Five Partners (Millions, US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||$56,517||100%||All Countries||$28,688||100%||All Countries||$27,829||100%|
|United States||$8,030||14%||United States||$5,772||20%||China, P.R. Mainland||$2,974||11%|
|China, P.R.: Mainland||3,306||6%||Singapore||$3,561||12%||United States||$2,258||8%|
|Singapore||$4,213||7%||China, P.R.: Hong Kong||$1,837||6%||China, P.R.: Hong Kong||$1,399||5%|
14. Contact for More Information
U.S. Embassy Bangkok