4 Main Factors That Still Make Thailand Suitable for Direct Foreign Investment

It must be admitted that in the past, Thailand has not been a main target for foreign investment. Several domestic factors made the country unconducive to investment: in particular, raising the minimum wage floor is a common and frequent tactic championed by multiple government administrations seeking to obtain votes. This significantly impacts operating costs, and has caused some operations to move their production bases to neighboring countries. Furthermore, matters of corporate taxes and other laws do not facilitate production processes, which prevents the nation from competing with others at the same level. Nevertheless, many factors exist in Thailand that cause investment groups to target their opportunities by choosing to invest in Thailand. Let’s see what these factors are:

4 Main Factors Causing Foreigners to Invest in Thailand

1. Laws Pending Revisions
At present, the private sector is urging the public sector to review and resolve up to 20 problematic laws related to investment, as these laws are obsolete and, furthermore, contain many steps that cause operational delays in businesses with high competition that cannot match their rivals with production bases in neighboring countries. Previously, the Yingluck administration adjusted the corporate income tax rate from 30% to 20%, and under the current government administration, Mr. Supattanapong Punmeechaow, who is the Deputy Prime Minister and Minister of Energy, and the leader of the Thai government’s economic team, revealed that the end of March 2021 will see new operational policies to attract foreign investment. What policies these will be, exactly, will require further monitoring, because past policies such as the 50/50 and “We Won” policies helped to stimulate the Thai economy well: while the World Bank forecasted that the Thai economy would face a deficit from 8.3% to values as bad as 10.4% from the impact of the pandemic, once operations had ended after all 4 quarters, it became apparent that the Thai economy received a deficit of only 6.1%.

2. Status as the ASEAN Center
With the topography and locale of the country being at the heart of the ASEAN region, with borders connecting to many neighboring countries, Thailand is a central point of the ASEAN region and can easily distribute products to various countries. In particular, land rail transport has developed significantly, subsequent to the signing of the Thailand-Laos-China High Speed Railway contract in 2018, and due to over 5 domestic railway systems that are anticipated to be completed by 2022. This will cause various transportation systems from China to Myanmar, India, Malaysia, Singapore, Indonesia, and Cambodia to pass through Thailand, and it is expected that a high volume of products that will be imported and exported will result. Thus, it can be seen that many international shipping companies have begun to invest in a high number of transportation systems, and furthermore, the areas surrounding the train stations are also receiving real estate development. 

3. Sufficient Raw Materials and Production Parts
One other factor that persuades foreign companies to maintain their production bases and increase investments is the sufficient quantity of raw materials and production parts. In particular, this is true for readymade factories that come prepared to commence operations in a timely manner. Furthermore, a wide selection of suppliers is available for use, as Thailand has historically been a production base for parts and products for companies throughout the world. Thus, upon entry, investors will not have to search for new suppliers or raw materials to produce their product parts. Rather, simply adapting the format and technologies associated with new production standards will immediately allow operations to commence.

4. Sufficient Overall Infrastructure
Out of all the ASEAN nations, Thailand is considered as the most prepared in the areas of public utilities available for consumption, whether in terms of water systems, electricity systems, banking systems, transportation and communications systems, or even in the medical field. Thus, entering into other countries that do not provide such a degree of readiness might result in a time cost associated with the required resolutions and improvements, which would create delays in business operations. This would not be in line with modern economic systems that, at present, experience high levels of competition. In particular, technology and communications are under constant development, while other global digital systems also contributing to the step into a true digital world.

With these various factors, Thailand still suits investment from foreign investors, and particularly investors seeking to start from “one” without starting from “zero.” This can be achieved by renting readymade factories, warehouses, and other facilities for the sake of operational agility and reduced costs, with a focus on profitable future production and marketing.