Thailand is an upper middle-income country with a half-trillion-dollar economy, generally 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 or branch 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 businesses. 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 rulemaking 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 is actively pursuing foreign investment related to clean energy, electric vehicles, and related industries. Thailand is currently developing a National Energy Plan that will supersede the current Alternative Energy Development Plan that sets a 20 percent target for renewable energy by 2037. Revised plans are expected to increase clean energy targets in line with the Prime Minister’s November 2021 announcement during COP26 that Thailand will increase its climate change targets, as well as domestic policies focused on sustainability, including the “Bio-Circular Green Economy” model.
The government passed laws on cybersecurity and personal data protection in 2019; as of March 2022, the cybersecurity law has been enforced while the personal data protection law is still in the process of drafting implementing regulations. The government unveiled in January 2021 a Made in Thailand (MiT) initiative that will set aside 60 percent of state procurement budget for locally made products. As of March 2022, Federation of Thai Industry registered 31,131 products that should benefits from the MiT initiative.
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 and Mab Ta Phut 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.
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Thailand continues to generally welcome investment from all countries and seeks to avoid dependence on any one country as a source of investment. However, the Foreign Business Act (FBA) prescribes a wide range of business that may not be conducted by foreigners without additional licenses or exemptions. The term “foreigner” includes Thai-registered companies in which half or more of the capital is held by non-Thai individuals and foreign-registered companies. Although the FBA prohibits majority foreign ownership in many sectors, U.S. investors registered under the United States-Thailand Treaty of Amity and Economic Relations (AER) are exempt. Nevertheless, the AER’s privileges do not extend to U.S. investments in the following areas: communications; transportation; fiduciary functions; banking involving depository functions; the exploitation of land or other natural resources; domestic trade in indigenous agricultural products; and the practice of professions reserved for Thai nationals.
The Board of Investment (BOI) assists Thai and foreign investors to establish and conduct businesses in targeted economic sectors by offering both tax and non-tax incentives. In recent years, Thailand has taken steps to reform its business regulations and has improved processes and reduced time required to start a business from 29 days to 6 days. Thailand has steadily improved its ranking in the World Bank’s Doing Business Report in the last several years and was 21 out of 190 countries in the 2020 ranking, trailing only Singapore (2) and Malaysia (12) in the ASEAN bloc. Thai officials routinely make themselves available to investors through discussions with foreign chambers of commerce.
U.S. entities planning to invest in Thailand are advised to obtain qualified legal advice. Thai business regulations are governed predominantly by criminal, not civil, law. Foreigners are rarely jailed for improper business activities, yet violations of business regulations can carry heavy criminal penalties. Thailand has an independent judiciary and government authorities are generally not permitted to interfere in the court system once a case is in process.
Limits on Foreign Control and Right to Private Ownership and Establishment
Various Thai laws set forth foreign-ownership restrictions in certain sectors. These restrictions primarily concern services such as banking, insurance, and telecommunications. The FBA details the types of business activities reserved for Thai nationals. Foreign investment in those businesses must comprise less than 50 percent of share capital, unless specially permitted or otherwise exempt.
The following three lists detail FBA-restricted businesses for foreigners.
List 1. This contains activities non-nationals are prohibited from engaging in, including newspaper and radio broadcasting stations and businesses; agricultural businesses; forestry and timber processing from a natural forest; fishery in Thai territorial waters and specific economic zones; extraction of Thai medicinal herbs; trading and auctioning of antique objects or objects of historical value from Thailand; making or casting of Buddha images and monk alms bowls; and land trading.
List 2. This contains activities related to national safety or security, arts and culture, traditional industries, folk handicrafts, natural resources, and the environment. Restrictions apply to the production, distribution and maintenance of firearms and armaments; domestic transportation by land, water, and air; trading of Thai antiques or art objects; mining, including rock blasting and rock crushing; and timber processing for production of furniture and utensils. A foreign majority-owned company can engage in List 2 activities if Thai nationals or legal persons hold not less than 40 percent of the total shares and the number of Thai directors is not less than two-fifths of the total number of directors. Foreign companies also require prior approval and a license from the Council of Ministers (Cabinet).
List 3. Restricted businesses in this list include accounting, legal, architectural, and engineering services; retail and wholesale; advertising businesses; hotels; guided touring; selling food and beverages; and other service-sector businesses. A foreign company can engage in List 3 activities if a majority of the limited company’s shares are held by Thai nationals. Any company with a majority of foreign shareholders (more than 50 percent) cannot engage in List 3 activities unless it receives an exception from the Ministry of Commerce (MOC) under its Foreign Business License (FBL) application.
Aside from these general categories, Thailand does not maintain a national security screening mechanism for investment, and investors can receive additional incentives/privileges if they invest in priority areas, such as high-technology industries. Investors should contact the Board of Investment [https://www.boi.go.th/index.php?page=index] for the latest information on specific investment incentives.
The U.S.-Thai Treaty of Amity and Economic Relations allows approved businesses to engage in some FBA restricted sectors; however, the Treaty does not exempt U.S. investments from restrictions applicable to: owning land; fiduciary functions; banking involving depository functions; inland communications & transportation; exploitation of land and other natural resources; and domestic trade in agricultural products.
To operate restricted businesses as defined by the FBA’s List 2 and 3, non-Thai entities must obtain a foreign business license. These licenses are approved by the Council of Ministers (Cabinet) and/or Director-General of the MOC’s Department of Business Development, depending on the business category.
Every year, the MOC reviews business categories restricted by the FBA. In 2022, the MOC announced it plans to remove four additional businesses – banking, bank branches, life insurance and non-life insurance – from List 3 by the end of the year.
The U.S. Commercial Service, U.S. Embassy Bangkok is responsible for issuing a certification letter to confirm that a U.S. company is qualified to apply for benefits under the Treaty of Amity. The applicant must first obtain documents verifying that the company has been registered in compliance with Thai law. Upon receipt of the required documents, the U.S. Commercial Service office will then certify to the Foreign Administration Division, Department of Business Development, Ministry of Commerce (MOC) that the applicant is seeking to register an American-owned and managed company or that the applicant is an American citizen and is therefore entitled to national treatment under the provisions of the Treaty. For more information on how to apply for benefits under the Treaty of Amity, please e-mail email@example.com.
The MOC’s Department of Business Development (DBD) is generally responsible for business registration. Registration can be performed online or manually. Registration documentation must be submitted in the Thai language. Many foreign entities hire a local law firm or consulting firm to handle their applications. Firms engaging in production activities also must register with the Ministry of Industry and the Ministry of Labor (MOL).
A company is required to have registered capital of two million Thai baht per foreign employee in order to obtain work permits. Additionally, foreign companies may have no more than 20 percent foreign employees on staff. Companies that have obtained special BOI investment incentives may be exempted from this requirement. Foreign employees must enter Thailand on a non-immigrant visa and then submit work permit applications directly to the MOL’s Department of Employment. Work permit application processing takes approximately one week. For more information on Thailand visas, please refer to https://www.thaiembassy.com/thailand/work-permit-requirements
In February 2018, the Thai government launched a Smart Visa program for investors in targeted industries and foreigners with expertise in specialized technologies. Under this program, foreigners can be granted a maximum four-year visa to work in Thailand without having to obtain a work permit or re-entry permit. Other relaxed immigration rules include having visa holders report to the Bureau of Immigration just once per year (instead of every 90 days) and providing the visa holder’s spouse and children many of the same privileges as the primary visa holder. More information is available online at https://smart-visa.boi.go.th/home_detail/general_information.php.
Outward investment from Thailand has increased rapidly in recent years and Thailand has become one of the largest outward investors in ASEAN. During 2020 and 2021, Thai companies continued to expand and invest overseas despite the pandemic. These investments primarily target neighboring ASEAN countries, China, the United States, and Europe. A relatively stable domestic currency, rising cash holdings, and subdued domestic growth prospects are driving outward investment. Faced with the effects of the pandemic, the government may prioritize domestic investment to stimulate the economy.
Previously, food, agro-industry, energy, and chemical sectors accounted for the main share of outward flows. Purchasing shares, developing partnerships, and making acquisitions help Thai investors acquire technologies for parent companies and expand supply chains in international markets. Thai corporate laws allow outbound investments to be made by an independent affiliate (foreign company), a branch of a Thai legal entity, or by any Thai company in the case of financial investments abroad. BOI and the MOC’s Department of International Trade Promotion (DITP) share responsibility for promoting outward investment. BOI focuses on outward investment in ASEAN (especially Cambodia, Laos, Myanmar, and Vietnam) and emerging economies. DITP covers smaller markets.
2. Bilateral Investment and Taxation Treaties
The 1966 U.S.-Thai Treaty of Amity and Economic Relations allows U.S. citizens and U.S. majority-owned businesses to engage in business on the same basis as Thai companies (national treatment). The Treaty exempts qualified companies from most of the foreign investment restrictions imposed by Thailand’s Foreign Business Act (FBA). As described above, the Treaty does not exempt U.S. investments from restrictions applicable to owning land; fiduciary functions; banking involving depository functions; inland communications & transportation; exploitation of land and other natural resources; and domestic trade in agricultural products.
In October 2002, the United States and Thailand signed a bilateral Trade and Investment Framework Agreement (TIFA), which established a regular government-to-government forum to discuss bilateral trade and investment issues, including intellectual property rights, customs, market-access barriers, and other areas of mutual concern.
Thailand has bilateral investment treaties with Argentina, Bahrain, Bangladesh, Belgium-Luxembourg Economic Union, Bulgaria, Cambodia, Canada, China, Croatia, Czech Republic, Egypt, Finland, Germany, Hong Kong, Hungary, Indonesia, Israel, Jordan, Democratic People’s Republic of Korea, Republic of Korea, Lao People’s Democratic Republic, Myanmar, Netherlands, Peru, Philippines, Poland, Romania, Russian Federation (signed, not in force), Slovenia, Sri Lanka, Sweden, Switzerland, Taiwan, Tajikistan (signed, not in force), Turkey, United Arab Emirates, United Kingdom, Vietnam, and Zimbabwe (signed, not in force).
Thailand has free trade agreements (FTAs) with Australia, New Zealand, Japan, India, Peru, Chili. Thailand belongs to the 10-member Association of Southeast Asian Nations (ASEAN), a regional free-trade and economic bloc comprising a total population of 600 million. ASEAN has free trade agreements with Australia, New Zealand, China, India, Japan, South Korea, and Hong Kong. ASEAN also has a comprehensive economic partnership with Japan and is pursuing FTA discussions with the EU, Pakistan, and Canada.
Thailand has completed ratification of the Regional Comprehensive Economic Partnership (RCEP), a free-trade bloc of 15 Indo-Pacific nations which took effect in January 2022. Thailand has expressed interest in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which entered into force in 2018; however, as of March 2022, the government is still studying the cost and benefits of the CPTPP, particularly its potential impacts on agriculture, medicine, and alcoholic beverages.
Thailand and the United States concluded a bilateral tax treaty in 1996. The United States and Thailand signed an Intergovernmental Agreement (IGA) on the Foreign Account Tax Compliance Act (FATCA) in 2016. The IGA will enter into force once all steps have been completed by both sides for ratification.
3. Legal Regime
Transparency of the Regulatory System
Generally, Thai regulations are readily available for public review. Foreign investors have, on occasion, expressed frustration that some draft sub-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 the value of the goods. 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, was 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) with an overall limit of five million baht ($160,000). The 2017 changes, however, have not fully satisfied those concerned that Customs officials problematic incentives to manufacture violations under the system.
The Thai Constitution requires the government to assess the environmental impact of a wide range of undertakings, including by holding a public hearing of relevant stakeholders. The Ministry of Natural Resources and Environment (MONRE) is responsible for determining which projects, activities, or actions are required to have an environmental impact assessment report and for prescribing the regulations, methods, procedures, and guidelines in preparing an environmental impact assessment report. Additional information can be found here: http://www.onep.go.th/eia/.
Inconsistent and unpredictable 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 initiative 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 is still underway and making slow progress.
Gratuity payments to civil servants responsible for regulatory oversight and enforcement remain a common practice despite stringent gift bans at some government agencies. Firms that refuse to make such payments can be placed at a competitive disadvantage to other firms that do engage in such practices.
The Royal Thai Government Gazette (www.ratchakitcha.soc.go.th) is Thailand’s public journal of the country’s centralized online location of laws, as well as regulation notifications.
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 (e.g., Codex Alimentarius maximum residue limits for pesticides on food) but prefers to set its own standards in some cases.
Legal System and Judicial Independence
Thailand’s legal system is primarily based on the civil law system with strong common law influence. Thailand has an independent judiciary that is generally effective in enforcing property and contractual rights. Most commercial and contractual disputes are generally governed by the Civil and Commercial Codes. The legal process is slow in practice and monetary compensation is based on actual damage that resulted directly from the wrongful act. Decisions of foreign courts are not accepted or enforceable in Thai courts. Most legal cases in Thailand will be under the jurisdiction of the Courts of Justice; however, there are also specialized courts that handle specific or technical problems: the Labor Court, the Intellectual Property and International Trade Court, the Bankruptcy Court, the Tax Court, and the Juvenile and Family Courts. Thailand also established the Criminal Court for Corruption and Misconduct Case to specifically handle corruption cases.
Laws and Regulations on Foreign Direct Investment
The Foreign Business Act or FBA (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 2008 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 (BOT) 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 https://www.bot.or.th/English/AboutBOT/LawsAndRegulations/SiteAssets/Law_E24_Institution_Sep2011.pdf.
In addition to 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 consultations with the BOT. The BOT is currently preparing rules for establishing virtual banks or digital-only banks (no physical branches), 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 guidelines are expected to be released by mid-2022.
The 2008 Life Insurance Act and the 2008 Non-Life Insurance Act apply a 25 percent cap on foreign ownership of insurance companies. Foreign membership on boards of directors is also limited to 25 percent. However, in January 2016 the Office of the Insurance Commission (OIC), the primary insurance industry regulator, announced that Thai life and non-life insurance companies wishing to exceed these limits could 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, if the operation of the insurance company may cause loss to insured parties or to the public. While OIC has not issued a new insurance license in the past 20 years, OIC is now contemplating issuing new virtual licenses for firms to sell insurance digitally without an intermediary. Full details have not yet been announced.
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 http://osos.boi.go.th.
Competition and Antitrust Laws
Thailand’s Trade Competition 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’s definition of a business operator includes affiliates and group companies, and subjects directors and management 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 Office of Trade Competition Commission (OTCC) is an independent agency and the main enforcer of the Trade Competition Act (2018). The Commission 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 Thai government, through the Ministry of Commerce’s Central Commission on Price of Goods and Services, has the legal authority to control prices or set de facto price ceilings for selected goods and services, including staple agricultural products and feed ingredients (such as, pork, cooking oil, wheat flour, feed wheat, distiller’s dried grains with solubles (DDGs), and feed quality barley), liquefied petroleum gas, medicines, and sound recordings. In 2022, there are 56 goods and services under the price-controlled products list, which can be found here. The controlled list is reviewed at least annually, but the price-control review mechanisms are non-transparent. In practice, Thailand’s government influences prices in the local market through its control of state monopoly suppliers of products and services, such as in the petroleum, oil, and gas industry sectors.
Expropriation and Compensation
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 landowners, lessees and other persons that may be affected by an expropriation; and recognizes the right to appeal decisions to Thai courts. 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 the United States. The Thai Bankruptcy Act (1940) authorizes restructuring proceedings that require trained judges who specialize in bankruptcy matters to preside. 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.
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. Despite these laws, some U.S. businesses complain that Thailand’s bankruptcy courts in practice can slow processes to the detriment of outside firms seeking to acquire assets liquidated in bankruptcy processes.
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 (BOI) offers investment incentives to qualified domestic and foreign investors. To upgrade Thailand’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.
permission to own land; permission to bring foreign experts; and visa and work permit facilitation.
The Thai government is developing a National Energy Plan which will supersede the current Alternative Energy Development Plan that sets a 20 percent target for renewable energy by 2037 and has established a special committee, under supervision of the Deputy Prime Minister and Minister of Energy, to support increased investment in clean energy, electric vehicles, and related industries. In support of these policies, electricity producers can access tax and non-tax incentives from Thailand’s BOI. The tax incentives include a corporate income tax holiday of six or eight years, depending on the type of power production used in electricity generation. Tax incentives also include custom duty exemptions for the import of new equipment.
Thailand also has a feed-in-tariff (FiT) program and additional tax and investment incentives to meet the 20 percent renewable energy electricity supply target by 2037. The FiT program, launched in 2015, replaced the previously offered “adder” scheme. With declining investment costs across various renewable energy technologies, especially solar and onshore wind installation, in 2015, the government moved to competitive bidding with FiT set as the ceiling price.
In February 2022, Thailand joined the U.S.-led Clean Energy Demand Initiative, in which the Thai government agreed to pursue policies that will increase access to alternative energy for the private sector. Electric vehicles are another key focus area for the Thai government. In 2022, the Thai government approved a suite of measures to increase foreign investment in EVs, including a range of tax incentives, subsidies, and other mechanisms.
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 (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’s goal is to develop 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:
Advanced agriculture and biotechnology
Advance robotics and automation
Integrated aviation industry
Medical hub and total healthcare services
Biofuels and biochemicals
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 15-17 percent.
For additional information, contact the Eastern Economic Corridor Office (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. Although the IEAT is required to consider and approve the amount of space/land bought or leased by foreign-owned firms in industrial estates, there is no record of disapproval for requested land. Private developers are heavily involved in the development of these estates.
The IEAT currently operates 15 estates, plus 50 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.
Thailand Free Trade Zones have two main types – General Industrial Zone (either under private-sector or the IEAT) and Special Economic Zones. 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. In addition to these zones, factory owners can 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.
Thai Customs Act also allows the Customs Director General to grant permits for companies to establish “free zones” for industries and sectors deemed beneficial to the country. Goods imports and exports through free zones are exempt from customs duties, and import duties are also waived for machinery, equipment, tools, appliances, and components necessary for the operation of the business or assembly, installation, or operation of the equipment. To date, there are established free zones at Don Muang Airport, Suvarnabhumi Airport, U-Tapao Airport, Special Economic Development Zone, and in the Eastern Economic Corridor.
The Thai government also established Special Economic Zones (SEZs) in ten provinces bordering neighboring countries. 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.
Thai Customs implemented various measures to improve trade and customs processing: Pre-Arrival Processing (PAP); an “e-Bill Payment” electronic payment system; and an e-Customs system, National Single Window System (NSW) that reduces the use of paper and enhance single stop service in the custom process. The measures comply with the World Trade Organizations (WTO) Trade Facilitation Agreement (TFA), which requires WTO members to adopt procedures for pre-arrival processing for imports and to authorize electronic submission of customs documents, where appropriate. The NSW was also developed in conjunction with the ASEAN Single Window, which is a regional initiative that will connect and integrate NSW of ASEAN member States to expedite cargo clearance and enable electronic exchange of border-trade related documents. 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. In March 2021, Thailand announced the “Made in Thailand” initiative, which will direct government agencies to procure at least 60 percent of their goods from local producers.
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.
In 2021, the National Cybersecurity Agency (NCSA) published implementing regulations for the CSA that define critical information infrastructure (CII) and establish a national coordination center to monitor and resolve cyber threats. The seven sectors classified as CII are national security, essential government services, banking and finance, information technology and telecommunication, transportation and logistics, public utilities (electricity, petroleum and natural gas, water utilities), and health. Legal experts have raised concerns that the implementing regulations lack clear CII criteria and will grant sector regulators broad authority to classify additional essential services to be CII, creating uncertainty for businesses in those sectors. In addition, there are concerns that the law gives NCSA broad powers to enter premises and to monitor, test, freeze, or seize computers without sufficient protections or opportunities to appeal, and that cybersecurity awareness and systems to prevent cyberattacks at public sector organizations remain weak and outdated. While the laws on Personal Data Protection remain unaffected as the government is still in the process of considering the implementing regulations. 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 Thai 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.
Intellectual Property Rights
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 while 18 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.
Thailand has a robust legal and enforcement regime for IP rights. 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 is slow, taking on average six to eight years. The patent approval process, particularly for non-pharmaceutical products, has been significantly reduced to one year from 5 to 6 years prior to 2020 as the DIP increased substantial number of patent examiners and streamlined the process. However, the patenting process may take longer for certain technology sectors such as pharmaceuticals and biotechnology.
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. As Thailand is a member of the “Berne 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. 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.
As of March 2022, Thailand remained in the process of amending its Patent Act to streamline the patent registration process, to reduce patent backlog and pendency, and to help prepare for accession to the Hague Agreement Concerning the International Registration of Industrial Designs. Furthermore, Thailand has increased the number of examiners to reduce the patent backlog. The February 2022 amendment of the Copyright Act will enhance mechanisms to protect copyrights in the digital environment and prepare Thailand for accession to the WIPO copyright treaty (WCT); it will enter into force on August 23. The amendment expanded the term of protection for photographic works, adopted liability exemptions for Internet Service Providers (ISPs), and added criminal offences for circumventing of technological protection measures (TPMs).
DIP adopted voluntary registration of copyright (collective management) agents and Code of Conduct (CoC) for Collective Management Organizations (CMOs) to curb illegal activities of rogue agents and fine-tune the regulations to conform with international standards. To register, an agent must meet certain qualifications and undergo prescribed training. The roster of registered agents along with associated licensed copyrights and a list of CMOs that comply with the COC are available on the DIP website. The Central Committee on Goods and Service also issued the new implementing regulation requiring the CMOs to update music and copyright fees (including song name, songwriter, right-owner, copyright fee, copyright expiration date) on its website. Thailand also organized an MOU in January 2021 between internet platforms, DIP, and rightsholders, to streamline the process of removing IP-infringing and counterfeit goods from the country’s most popular online marketplaces. Regular meetings with the signatories were held and signatory e-commerce platforms have set up channels for receiving reports on sales of IPR-infringing goods in accordance with the MOU.
Thailand maintains a database on seizures of counterfeit goods (https://www.ipthailand.go.th/en/ipr-enforcement-operation.html). In 2021, the Royal Thai Police conducted 1,381 raids and seized 854,716 items, the Department of Special Investigation conducted four raids on trademark violations resulting in 2,922,630 items being seized, and the Customs Department had 1,869 seizures that stopped 1,347,022 IP-infringing items from entering Thailand.
Thailand’s Central Intellectual Property and International Trade Court (CIPIT) is the court of first instance with jurisdiction over both civil and criminal intellectual property cases and the appeals from DIP administrative decisions. The Court of Appeal for Specialized Cases hears appeals from the CIPIT. According to data from Thailand’s Intellectual Property and International Trade Court, the number of IP criminal cases filed at the court significantly dropped compared to previous years while the IP civil cases slightly declined. This trend has encouraged rights-owners to file civil cases in addition to criminal cases, which is in line with the government’s data.
Thailand remained on the Special 301 Watch List in 2021. USTR highlights Thailand not being a party to major international IP treaties, the unauthorized activities of collective management organizations, online piracy from streaming devices and applications, the use of unauthorized software in the public and private sectors, and a continued backlog in pharmaceutical patent applications as the main challenges confronting the country’s protection of intellectual property rights.
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 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 2021, the gross non-performing loan rate was low (around 2.97 percent industry wide), and banks were well prepared to handle a forecast rise in the NPL rate in 2021 due to the pandemic. The ratio of capital funds/risk-weighted assets (capital adequacy) was high (19.9 percent). Thailand’s largest commercial bank is Bangkok Bank, with assets totaling USD 112 billion as of December 2021. The combined assets of the five largest commercial banks totaled USD 494 billion, or 71.9 percent of the total assets of the Thai banking system, at the end of 2021.
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, payments, remittances and financial instruments for risk management. Such instruments include interest-rate derivatives and foreign-exchange derivatives. Additional business activities to support capital market development, such as debt and equity instruments, are 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-premises ATMs) per subsidiary. Newly established foreign bank branches are required to have minimum capital funds of 125 million baht (USD 3.8 million at 2021 average 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 the strong baht, the Bank of Thailand capped non-resident Thai deposits at 200 million baht across all domestic bank accounts. However, in January 2021, the Bank of Thailand began allowing non-resident companies greater flexibility to conduct baht transactions with domestic financial institutions under the non-resident qualified company scheme. Participating non-financial firms that trade and invest directly in Thailand are allowed to manage currency risks related to the baht without having to provide proof of underlying baht holdings for each transaction. This will allow firms to manage baht liquidity more flexibly without being subject to the end-of-day outstanding limit of 200 million baht for non-resident accounts. 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. As of December 2021, Thailand had the world’s 14th largest foreign exchange reserves at USD 246 billion.
7. State-Owned Enterprises
Thailand’s 52 state-owned enterprises (SOEs) have total assets of USD 448 billion and a combined gross income of USD 131 billion (end of 2021 figures, latest available). In 2021, they employed 255,397 people, or 0.65 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 www.sepo.go.th.
A 15-member State Enterprises Policy Commission, or “superboard,” oversees operations of the country’s 52 SOEs. In May 2019, the Development of Supervision and Management of State-Owned Enterprise Act (2019) went into effect with the goal 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 52 total SOEs, 42 are wholly-owned and 10 are majority-owned. Three SOEs are publicly listed on the Stock Exchange of Thailand: Airports of Thailand Public Company Limited, PTT Public Company Limited, and MCOT 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 SOEs, there is not a level playing field 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 cabinet minister and to SEPO. Corporate board seats are typically allocated to senior government officials or politically affiliated individuals.
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” is when 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, privatization efforts have been on hold since 2006 largely due to strong opposition from labor unions.
Thailand is among the top 10 countries most vulnerable to climate change and the world’s 20th largest emitter of greenhouse gases. At the 2021 United Nations Climate Change Conference (COP 26), Prime Minister Prayut Chan-o-cha announced that the country will reduce greenhouse gas emissions by 40 percent in 2030, achieve carbon neutrality by 2050, and become greenhouse gas neutral by 2065. In line with these ambitious goals, Thailand is in the process of updating its Nationally Determined Contribution (NDC) and other related plans, which as of this writing are expected to be announced before COP 27 in November 2022.
Thailand is also drafting a new Climate Change Act that will help ensure stronger interagency coordination among authorities and solidify Thailand’s Climate Change Master Plan, which will be revised every five years. Other notable components of the draft law include establishment of a greenhouse gas emissions database, reporting requirements for government and private sector entities (along with penalties for non-compliance), and guidelines for use of the Thailand Environment Fund.
Clean energy technology is featured prominently in Thailand’s climate landscape, since the energy sector is currently the main source of greenhouse gas emissions. The Thai government is actively pursuing foreign investment related to clean energy, electric vehicles, and related industries. Thailand is currently developing a National Energy Plan that will further increase the 2037 target of renewable energy from 20 percent in order to meet the new climate goals and align energy production with the government’s “Bio-Circular Green Economy” model. Private sector investment is a key driver of success.
The Thai government has established a special committee, under supervision of the Deputy Prime Minister and Minister of Energy, to support increased investment in this area. In support of these policies, electricity producers can access tax and non-tax incentives from Thailand’s Board of Investment (BOI). The tax incentives include a corporate income tax holiday of six or eight years, depending on the type of power production used in electricity generation. Tax incentives also include custom duty exemptions for the import of new equipment. Thailand also has a feed-in-tariff (FiT) program and additional tax and investment incentives through the BOI. The FiT is designed to accelerate growth in renewable energy investment by offering a guaranteed, above-market price for long-term power purchase agreements (20 – 25 years). The FiT is currently offered for solar, solar with energy storage, wind, biomass, biogas, and waste-to-energy power production.
In February 2022, Thailand joined the U.S.-led Clean Energy Demand Initiative, in which the Thai government agreed to pursue policies that will increase access to alternative energy for the private sector. Electric vehicles are another key focus area for the Thai government and its “30@30” policy aims to have 30 percent of domestic vehicle production be electric vehicles by 2030. To achieve this, the Thai government in 2022 approved a suite of measures to increase foreign investment in electric vehicles, including a range of tax incentives, subsidies, and other mechanisms.
Transparency International’s Corruption Perceptions Index ranked Thailand 110th out of 180 countries with a score of 35 out of 100 in 2021 (zero is highly corrupt). Bribery and corruption are still problematic. Despite increased usage of electronic systems, government officers still wield discretion in the granting of licenses and other government approvals, which creates opportunities for corruption. U.S. executives with experience in Thailand often advise new-to-market companies to avoid corrupt transactions from the beginning rather 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. businesses 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.
As of February 2022, the Thai government is working on an Anti-SLAPP law (strategic lawsuit against public participation) proposed by the Thai National Anti-Corruption Commission. The new law provides a legal definition of SLAPP lawsuits as cases where the plaintiff intends to “suppress public participation in defense of the public interest in good faith” or has the purposed of intimidation, suppressing information, negotiating, or ending litigation” and empowers law enforcement to file Anti-SLAPP charges in court.
Thai procurement regulations prohibit collusion among 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. ACT’s signature program is the “Integrity Pact,” run in cooperation with the Comptroller General Department of the Ministry of Finance and based on a tool promoted by Transparency International. The program forbids bribes from signatory members in bidding for government contacts and assigns independent ACT observers to monitor public infrastructure projects for signs of collusion. 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
International Affairs Strategy Specialist
Office of the National Anti-Corruption Commission
361 Nonthaburi Road, Thasaai District, Amphur Muang Nonthaburi 11000, Thailand
Tel: +662-528-4800 Email: TACC@nacc.go.th
Dr. Mana Nimitmongkol
Anti-Corruption Organization of Thailand (ACT)
44 Srijulsup Tower, 16th floor, Phatumwan, Bangkok 10330
10. Political and Security Environment
Street clashes between anti-government protesters and police occurred regularly in a major Bangkok intersection in the early months of 2021. Several protesters were injured by rubber bullets, two of whom later died.
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 in recent years, efforts to end the insurgency have so far been unsuccessful. The government is currently engaged in preliminary talks with the leading insurgent group. Almost all attacks have occurred in the three southernmost provinces of the country.
11. Labor Policies and Practices
In 2021, 38.6 million people were in Thailand’s formal labor pool, comprising 66 percent of the total population. Thailand’s official unemployment rate stood at 1.6 percent at the end of 2021, interestingly, workers with university degrees have the highest unemployment rate compared with other groups. The working hours in the private sector are still below the pre-Covid era with the average working hours of 45.6 hours per week.
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 skill mismatch, are exacerbating labor shortage problems in many sectors. Despite provision of 15 years of free education for every child in Thailand, Thailand continues to suffer from a skills mismatch that impedes innovation and economic growth. Thailand also has a shortage of high-skill workers such as researchers, engineers, and managers, as well as technicians and vocational workers. The statistics from the Office of the National Economic and Social Development Board show that 49.3 percent of new graduates are in the fields of business and social science.
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. At the end of 2021, there were more than two million migrant workers registered with the Ministry of Labor.
Employers may dismiss workers provided the employer pays severance. When 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.
At the end of 2021, there were a total of 1,432 labor unions in Thailand with 364 of them located in Bangkok. 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 2020, the Department of Labor Protection and Welfare issued a ministerial regulation on occupational safety, health and working environment for diving work; the regulation sets a minimum age of 18. In March 2022, the Ministry of Labor issued a regulation regarding the Protection of Fishery Workers to provide additional protection for the workers’ rights in this industry. 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 or Development Finance Programs
The U.S. International Development Finance Corporation (DFC, formerly the Overseas Private Investment Corporation) prioritizes investments in low and lower-middle income countries but may consider investments in certain projects in upper-middle income countries that address key agency priorities. Thailand is considered an upper-middle income country.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source*
USG or international statistical source
USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($M USD)