BUSINESS OPPORTUNITIES IN THAILAND

Udom Wongviwatchai Secretary General

Thailand Board of Investment March 2013

TNCS’ TOP PROSPECTIVE HOST ECONOMIES FOR 2012–2014

(PERCENTAGE OF RESPONDENTS SELECTING ECONOMY AS A TOP DESTINATION)

1 China (1) 2 United States (2) 3 India (3) 4 Indonesia (6) 5 Brazil (4) 6 Australia (8) 6 United Kingdom (13) 8 Germany (8) 8 Russian Federation (5) 8 Thailand (12) 11 Viet Nam (11) 12 Mexico (10) 13 Japan (-) 14 Netherlands (-) 14 Poland (6) 14 South Africa (-) 17 Korea, Republic of (-) 17 Sweden (-) 19 France (19) 19 Italy (-) 19 Malaysia (19)

Developed economies

Developing and transition economies

Source: UNCTAD Top host economies for FDI 2012-2012 as of July 12, 2012

(x) = 2011 ranking

The World Bank Ranks Thailand among the easiest

places to do Business in Asia and 18th in the World

2013 2013

1 Singapore 11 Finland

2 Hong Kong 12 Malaysia

3 New Zealand 13 Sweden

4 United States 14 Iceland

5 Denmark 15 Ireland

6 Norway 16 Taiwan

7 United Kingdom 17 Canada

8 Korea, Rep 18 Thailand

9 Georgia 19 Mauritius

10 Australia 20 Germany

Source: Doing Business 2013, October 25, 2012

Value of Investment Promotion Applications By Industry, 2003 – 2012

0.9 1.3 1 1.5 1 1.8 1.7 1.8 2.4

4 3.30.7 0.7

0.5 0.7 0.81.5

0.5

0.30.4

0.5 0.4 0.2 0.3 0.41.1

1.5 3.6

1.4 1.9 1.4 1.73.3

6.4

2 1.7 2.1 1.6

2.2

4.2

1.5

3.12.7

3.81.3 0.6 1

2.2

6.1

1.4

4.14.4

3

4.3

4.1

9.4

4.2

6.2

15.3

1.10.5 0.80.3

4.31.5

2.22.1

1.7

1.9

3.2

0

5

10

15

20

25

30

35

40

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Euro billionAgro Minerals Fashion Auto E&E Chemical Services

7.98

16.42 17.63

12.82 15.88

11.17

15.97

11.20

Source: BOI, as of Jan 17, 2013

16.84

37.01

Exchange rate: €1 = Bt39.96 in 2012

ASEAN - EU Snapshot ASEAN’s Macro-Economy •  GDP (2011): US$2,112.4

Bn* (€1,643 bn) •  GDP per capita: US

$3,376 (€2,626 bn) •  GDP Growth: 5.7% and

6.4% in 2011-2012 •  Population: 600 million

EU’s Macro-Economy •  GDP (2011): € 12,650 bn •  GDP per capita: € 25,200 •  GDP Growth: 1.5% and -0.3% in

2011-2012 •  Population: 501 million

* IMF Forecast

Source: Tilleke and Gibbins & IMF Forecast as of Feb 27, 2013

Source: European Economic Forecast 2013 & Eurostat

Exchange rate: US$1=Bt31.08 and €1 = Bt39.96 in 2012

ASEAN Corporate Income Tax 2013

0%

5%

10%

15%

20%

25%

30%

Singapore Thailand Vietnam Malaysia Indonesia

Source: KPMG

Sectors of Opportunity

Target Industries

Agriculture and food processing

Automotive

Machinery

Mold & Die

Target Industries

Biotechnology

Alternative energy

E&E

Food Industry

“Thailand: Kitchen to the World”

THAILAND: 12th  in  total  food  exports

World’s # 6 Rice & Grains Exports

World’s # 1 Cassava Exports

2011 THAILAND’S TOP FOOD EXPORT CATEGORIES AND WORLD’S RANKING

Source:  Na+onal  Food  Ins+tute  2012  

World’s # 2 Sugar Exports

World’s Top 15 Fruit &Vegetable Exports

World’s $# 3 Fishery Exports

GMP and International Standard Good Manufacturing Practices is a

mandatory measure for 54 types of food products

Strengths of Thai Food Industry

Abundant Raw

Material

Skilled & hard working

Workforce

Good Quality & Safety

> 80% of raw materials used by the food industry are locally sourced at

low prices

Size of workforce now > 39.5 million Minimum Daily Wage Bt300 (€7.5)

Source: Thailand Food Industry Outlook, Commercial Section, Royal Danish Embassy Mar 2011

Automotive Industry “Thailand: Automotive Hub of Asia”

As of Feb 14, 2013

Thailand: 9th largest automobile producer in the world in

2012*

Target:

To manufacture 3,000,000

units in 2017

Output:

14 assemblers

with a combined production

of more than

2,000,000 in 2012

High local content :

80-90% for pick-up and 30-70% for passenger

car

Source: OICA and TAI

Thailand’s Automotive Industry Overview

2012 Thailand’s Automotive Industry VEHICLE MOTORCYCLE

December Jan.-Dec. Growth YOY %

Growth YTD % December Jan.-Dec. Growth

YOY % Growth YTD %

Production (Units) 221,353 2,453,717 123 68.32 183,384 2,606,161 21.30 27.56

Domestic Wholesale (Units)

144,676 1,436,335 161 80.71 152,894 2,130,067 24.94 6.11

Export (CBU) (Units)

86,297 1,026,671 146 39.56 85,959 856,935 -29 -24.37

Source: Thailand Automotive Institute as of Jan 28, 2013

2. Denso 4. Aisin Seiki 13.Yazaki 15.Sumitomo 16.Toyota Boshoku 18.CalsonicKansei 19.JTEKT 20.Hitachi 28.Toyoda Gosei 33.NTN 34.NSK 35.Mitsubishi 39.NHK Spring 40.Koito 41.TS Tech 43.Takata

46.Bridgestone 49.Tokai Rika 57.Showa 61.Mitsuba 66.Asahi Glass 72.Stanley 74. Akebono

Brake 82.Sanden 84. F-Tech 92.Alpine 94.Pioneer 98. Omron 28/29 Companies

1. Robert Bosch 3. Continental 6. Faurecia 7. Johnson

Control 8. ZF 11. TRW 12. Delphi 14. Lear 17. BASF 21. Valeo 22. Visteon 23. Autoliv 25. Mahle 27. Dana 31. BorgWarner 36.Teneco

44. Federal-Mogul 47. Michelin 50. GKN Driveline 52. Goodyear 56. Grupo Antolin 58. Bayer 59. TI Automotive 65. Draexlmaier 67.American Axle 73. Rieter Auto. 84. F-Tech 86. Hayes Lammerz 93. 3M 29/71 companies

Japanese Global Suppliers Other Global Suppliers

Top 100 Global Suppliers 2010 Present in Thailand

Renewable Energy

Thailand’s Energy Policy 1

• Enhancing energy related industries & business to be next generation value-creator.

2 • Securing country’s energy supply.

3 • Pricing energy right.

4 • Up-scaling RE mix to 25% in 10 years.

5 • Targeting energy intensity reduction by 25%

(based on 2010 level) within 20 years.

Source: DEDE (Renewable Energy Asia 2012), as of Sept 12, 2012.

Alternative Energy Development Plan (AEDP) 2012-2021

Renewable Energy ( 9,198 MW) Solar power 2,000 MW

Wind power 1,200 MW

Hydro power 1,608 MW

MSW 160 MW

Biomass 3,630 MW

Biogas 600 MW

New forms of RE (3 MW)

Geothermal energy

1 MW

Wave and Tides

2 MW

AEDP 2012-2021, targeting to replace 25% of total fossil-fuel consumption with RE at the end of 2021.

Source: Ministry of Energy, as of April 2012

Economic transition from labor intensive to

knowledge-based is creating great demand

As of Mar 4, 2013

•  Thailand continues to industrialize, but is dependent on foreign industrial machinery for immediate future.

•  High demand for: –  Food and farm machinery –  Alternative energy/energy conservation

machinery –  Textile machinery –  Automotive production machinery – Mould & Die Industry

Opportunities in Machinery

Investment Incentives: Metal Products &Parts Manufacturing General

•  50% reduction of machinery duty • Corporate income tax exemption: In IE-3 years

•  50% reduction of machinery duty •  Corporate income tax exemption: –  In IE-7 years –  Outside IE-3 years

•  Exempt from machinery Duty •  8 years corporate income tax exemption

Exempt from machinery import duties

Exempt from corporate income tax for 8 years

Examples: Sintered products, mold & die parts

Priority

Zone 1 Zone 2 Zone 3

As of Jan 31, 2013

Biodiversity in Thailand is ranked as the eighth most bio-diverse region in the world.

Thailand is the world’s highest biodiversity per unit area-hosting several forests types and aquatic habitats.

Thailand supports up to 10,000 species of plants, • 980 species of birds, • 300 species of mammals, • 490 species of reptiles and amphibians, • 2,800 species of fishes and • 150,000 species of microbes – accounting for

about 10% of all species of living organisms in the world.

Source: Thailand BIOTEC Guide 2011/2012 as of July 17, 2012

Biodiversity in Thailand

Seed & Plant R&D

Biopharmaceutical agents

Diagnostic kits for health, agriculture, food and environment

Biomolecule & bioactive compounds using microorganisms, plant cells and animal cells

Raw materials and/or essential materials used in molecular biological experiment

Biological substances analysis and/or synthesis services

Biotechnology

Source: A Guide to BOI 2010

Biotechnology: BoI Eligible Activities

Exemption of import duty on machinery

Exemption of 8-year-CIT without being subject to CIT exemption cap

50% reduction of CIT on the net profit generated from investment for 5 years after the exemption period

Double deductions for transportation, electricity and water costs for 10 years from the date of

first income derivation from promoted activity

Biotechnology

Deduction of infrastructure installation or construction costs from net profit in addition to normal depreciation of

not more than 25% of the project.

Note: Applications must be submitted to the BOI within Dec 31, 2012

Incentives for Biotechnology

As of Feb 18, 2013

Policy to Support Hi-Tech Industry

Tax Incentives •  Exemption of import duties on machinery •  Corporate income tax exemption 8 years with no cap •  50% reduction of corporate income tax for 5 years from the

expiry date •  Double deduction of public utility costs for 10 years •  Deduction from net profit of 25% of the investment in

infrastructure installation and construction cost in addition to normal capital depreciation for 10 years

Eligible •  Any Locations except Bangkok •  Applicable to designated activities only •  Application submission deadlines: Dec 31, 2012

Source: BoI Announcement No.2/2553, April 23, 2010.

Customized incentives for

Higher Value investment projects

Projects with investment value at least Bt 30 billion baht (excluding cost of land and working capital) will be eligible for a customized tax incentive package

Source: BOI E&E Industries Division as of Feb 5, 2010

Roles of the BOI •  Facilitating market entry—100% foreign ownership

in manufacturing and most services eligible for BOI promotion

•  Reducing initial investment costs through provision of tax incentives

•  Providing business-related services –  Information –  Site visits –  Subcontracting development

•  Facilitating business operations –  Right to own land –  Visas and work permits –  Help Desk

No restrictions on foreign currency

100% foreign ownership

No export requirements

No local content requirements

LIBERAL INVESTMENT REGIME

Thailand and the BOI offer:

•  Facilitating market entry—100% foreign ownership in manufacturing and most services eligible for BOI promotion

•  Reducing initial investment costs through provision of tax incentives

•  Providing business-related services –  Information –  Site visits –  Subcontracting development

•  Facilitating business operations –  Right to own land –  Visas and work permits –  Help Desk

Roles of the BOI

Tax Incentives

ü Corporate income tax holidays up to 8 yrs §  Additional 50% reductions of corporate income tax for 5 years

ü  Import duty reductions or exemptions on machinery and raw materials

ü Double deduction of public utility costs ü Deductions for infrastructure

construction/installation costs

BOI ZONING AND INCENTIVES

Zone: 1 2 3 Incentives: Lower Higher Import Duty

Privileges Outside I.E Inside I.E

Zone 1 50% Reduction

50% Reduction

Zone 2 50% Reduction Exempt

Zone 3 Exempt Exempt

Corporate Income Tax

Outside I.E

Inside I.E

Zone 1 No Privilege 3 years

Zone 2 3 years 7 years

Zone 3 8 years 8 years

Sector Matrix: Incentives to strengthen

competitiveness

Strategic or Priority Activities

•  Maximum incentives regardless of location

•  Customized packages

Zone-Based Incentives: •  Zone 1 •  Zone 2 •  Zone 3

From Zone-Based to Sectoral Approach

Investments and expenditures on: •  Research and development or design •  Advanced technology training •  Funding educational and research institutions •  Contribution to Science and Technology Development Fund

Criteria

STI Incentives (Optional)

Required STI Investment & Expenditures

Additional Year of Corporate Income Tax Exemption

Exemption of Import

Duties on Machinery

Removal of Corporate Income

Tax Exemption Cap

1% of the first 3 years’ sale or at least Bt150 million, whichever is less

1 ü ü

2% of the first 3 years’ sale or at least Bt300 million, whichever is less

2 ü

ü

3% of the first 3 years’ sale or at least Bt450 million, whichever is less

3 ü

ü

BOI SERVICES

Roles of the BOI •  Facilitating market entry—100% foreign ownership in

manufacturing and most services eligible for BOI promotion

•  Reducing initial investment costs through provision of tax incentives

•  Providing business-related services –  Information –  Site visits –  Sourcing

•  Facilitating business operations –  Right to own land –  Visas and work permits –  Help Desk

•  Information and profiles of companies in supporting industries and manufacturers of parts and components in 10 ASEAN countries

ASEAN SUPPORTING INDUSTRY DATABASE (ASID)

www.asidnet.org

38

18th Floor, Chamchuri Square Building 319 Phayathai Road, Pathumwan Domestic Call: 0 2209 1100, Inter. Call: (66 2) 209 1100 Email: osos@boi.go.th

More Convenience, less time, more efficiency!

One Start One Stop Investment Center

•  Facilitating market entry—100% foreign ownership in manufacturing and most services eligible for BOI promotion

•  Reducing initial investment costs through provision of tax incentives

•  Providing business-related services –  Information –  Site visits –  Subcontracting development

•  Facilitating business operations –  Right to own land –  Visas and work permits –  Help Desk

Roles of the BOI

Belgian Investment

Foreign Direct Investment Applications

0.6 0.30.6 0.8

0.20.03

9.9

4.9

1.21.3

9.4

16.2

0

4

8

12

16

20

Total Japan EU ASEAN USA. Australia

Eur

o B

illio

n

2011 2012+63.5%

Source: BOI, as of January 17, 2013

Exchange rate: €1 = Bt39.96 in 2012

Belgium applications in

2012: €11.9 million

Trend of Belgium Applications

2.4

94.3

127.8

1.5

60.3

12.4

59.4

8.1

116.8

0.1

11.92

8 8

4

6

5

11

6

7

2

9

0

30

60

90

120

150

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Euro

Mill

ion

0

3

6

9

12

No. o

f Pro

ject

s

ValueNo.of Projects

Source: BOI, as of Feb 28, 2013 Exchange rate: €1 = Bt39.96 in 2012

Belgium Investment Applications

Totals by Sector: 2002 – 2012

Sector Projects € Million Agricultural Products 7 25.0 Minerals and Ceramics 4 66.3 Light Industries/Textiles 16 18.2 Metal Products and Machinery 5 55.7 Electric and Electronic Products 11 0.9 Chemicals and Paper 8 217.2 Services 17 111.7 TOTAL 68 494.9

Source: BOI, as of Feb 28, 2013 Exchange rate: €1 = Bt39.96 in 2012

Belgium Investments in Thailand

45 45

Mr. Chanin Khaochan Director Thailand Board of Investment, Frankfurt Office Bethmannstrasse 58, 60311 Frankfurt am Main, Germany Tel.: +49 69 929 1230 Fax: +49 69 929 123 20 Email: fra@boi.go.th Website: www.boi.go.th

BOI OFFICE IN GERMANY