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US Business unfazed by political uncertainty

Thailand’s new government should look at improving the country’s already good infrastructure to make it difficult to resist for foreign investors, most of whom continue to have a positive long-term outlook despite political ups and downs.

Boris Sullivan

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Commenting at a recent forum held by the Bangkok Post, Peter Eliot, head of the American Chamber of Commerce in Thailand said the country was among the best in Asean region for doing business and that the political uncertainty was nothing unusual, with minimal impact on business.

Thailand’s new government should look at improving the country’s already good infrastructure to make it difficult to resist for foreign investors, most of whom continue to have a positive long-term outlook despite political ups and downs.

“What is needed is the development of infrastructure and long-term planning,” said Peter Eliot, head of the American Chamber of Commerce in Thailand and the country head of Citibank.

“If you go down Sukhumvit Road, so many hotels are being built. … In terms of long-term confidence in tourism industry the number of hotels being built is a good indicator,”

he said.

posters Bangkok elections

Despite political uncertainty, Thailand remains on the radar screens of multinationals, as it is the second largest economy in the Asean.

Tourism, he said, was healthy and short-term concerns should be looked at in a global context as even Europe was facing similar problems. Apart from Bangkok, hotels in places such as Phuket are also prospering.

In the broader picture, he said, Thailand was not going to fall off the radar screens of multinationals as it is the second largest economy in the Asean.

Peter Fleet, the president of Ford Asean, said that his company to date had invested $2.5 billion in Thailand with nearly 10,000 employees and another 30,000 employed by the supporting industries that followed the US automaker.

via Bangkok Post : Thailand’s appeal strong despite challenges.

Total investment in the first five months of this year has already surpassed Bt200 billion, with 725 new project applications with total investment value of Bt208 billion. This amount accounts for more than half of the total target for the entire year 2011 of Bt400 billion. Foreign investment grew by 64 per cent while investment by SMEs expanded by 525 per cent.

China is the second largest investor with Bt20.5 billion in investment value, accounting for 15 per cent of the total FDI. One of the major projects is a Bt19 billion car tire production project.

Investment in Thailand from the United States ranked third.

Despite its total value of only Bt3.373 billion during the first five months of the year, the US also invested Bt3.191billion in a mining equipment and machinery production project, and Bt4.372 billion in a backhoe production project, through Singaporean companies. The aggregated Bt10.936 billion investment value has placed the US third on the list.

In 2010, the Royal Thai Government continued to increase efforts on prevention and suppression of intellectual property violation. The profile of intellectual property has consistently been raised to a new plane as the administration led by Prime Minister Abhisit Vejjajiva commits itself to the vision of turning the country into a creative and knowledge driven economy.

Thailand’s implementation on intellectual property rights in 2010 up to the beginning of 2011, a compilation of initiatives, activities and successes of Thailand in combating intellectual property rights violations  is Thailand’s response to the comments by US industries submitted to the USTR regarding the intellectual property rights situation of the country in the past year.

Investment Climate in Thailand

Despite several major investment disputes in 2009, Thailand continues to maintain an open, market-oriented economy and encourages foreign direct investment as a means of promoting economic development, employment, and technology transfer. Thailand continues to welcome investment from all countries and seeks to avoid dependence on any one country as a source of investment.

In order to apply for a work permit, a foreigner must enter Thailand on a non-immigrant visa (issued at Thai embassies and consulates) for a stay of three months or, for foreigners with well-defined work or business plans, for a stay of one year.

Openness to Foreign Investment

In recent decades, Thailand has been a major destination for foreign direct investment, and hundreds of U.S. companies have invested here successfully. Thailand continues to welcome investment from all countries and seeks to avoid dependence on any one country as a source of investment.

In 2009, most investors remained cautiously hopeful that the political situation would become less tumultuous and allow the government to pursue more business-friendly policies. Unfortunately, the November 2008 closure of Bangkok’s airports, widely watched political protests in April, and the onset of the global economic crisis made it difficult for Prime Minister Abhisit to restore the business and investor confidence in Thailand’s economy after several years of political turmoil.

In the wake of the 1997-98 Asian Financial Crisis, Thailand embarked on an International Monetary Fund (IMF)-sponsored economic reform program designed in part to foster a more competitive and transparent climate for foreign investors. Legislation establishing a new bankruptcy court, reforming bankruptcy and foreclosure procedures, and allowing creditors to pursue payment from loan guarantors was enacted in 1999.

Other 1999 reforms include amendments to the Land Code, Condominium Act, and the Property Leasing Act, all of which liberalized restrictions on property ownership by non-Thais. The Foreign Business Act (FBA) of 1999 governs most investment activity by non-Thai nationals and opened limited additional business sectors to foreign investment. Nevertheless, foreign investment in most service sectors is limited to 49 percent ownership.

Many U.S. businesses, however, enjoy investment benefits through the U.S.-Thailand Treaty of Amity and Economic Relations (AER), originally signed in 1833. The 1966 iteration of the Treaty allows U.S. citizens and businesses incorporated in the U.S., or in Thailand that are majority-owned by U.S. citizens, to engage in business on the same basis as Thai companies, exempting them from most of the restrictions on foreign investment imposed by the Foreign Business Act.

Under the Treaty, Thailand restricts American investment only in the fields of communications, transport, fiduciary functions, banking involving depository functions, the exploitation of land or other natural resources, and domestic trade in agricultural products. Prospective U.S. investors who would like to benefit from the Treaty must first verify their nationality by obtaining a certified letter from the U.S. Embassy in Bangkok.

The investor must then present the letter to the Ministry of Commerce, along with an application form for a business operation certificate. This process typically takes less than one month. Notwithstanding their Treaty rights, many Americans choose to form joint ventures with Thai partners, allowing the Thai side to hold the majority stake because of the advantages that come from familiarity with the Thai economy and local regulations.

 

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