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The following is an overview of establishing a business in Thailand.
As in most countries, there are three kinds of business organizations in Thailand: Sole proprietorships, partnerships, and limited companies. The most popular form of business organization among foreign investors is the private limited company.
Private limited companies require a minimum of seven promoters and must file a memorandum of association, convene a statutory meeting, register the company, and obtain a company income tax identity card. They must also follow accounting procedures specified in the Civil and Commercial code,the Revenue Code and the Accounts Act. A balance sheet must be prepared once a year and filed with the Department of Revenue and Commercial Registration. In addition, companies are required to withhold income tax from the salary of all regular employees.
The Alien Occupation Law requires all foreigners working in Thailand to obtain a Work Permit prior to starting work in the Kingdom, except when they are applying under the Investment Promotion Law, in which case they have 30 days to apply.
Non-Immigrant visas provide the holder with eligibility to apply for a work permit, and allow the holder to work while the work permit application is being considered.
For the year 2008, the Thai economy decelerated from the previous year, particularly in the last quarter where global economic downturn and internal political unrest adversely affected manufacturing production and tourism. Nonetheless, farm income in Thailand still expanded well from higher major crop production and price compared to the previous year. On the demand side, private consumption and investment declined notably in the last quarter, despite falling inflation during the second half of the year in line with lower oil prices. Both export and import expanded satisfactorily during the first three quarters. However, during the last quarter, export contracted following trading partners’ economic slowdown while import decelerated markedly in line with export and domestic demand conditions.
Thailand is among the region’s more open economies, with exports accounting for around 65% of gross domestic product (GDP)
Lower provisioning requirements for nonperforming loan (NPL) stocks and impressive year-on-year loan growth, which was up 11% for the entire sector, drove those countercyclical gains. While extending new credits, the Thai financial system’s overall NPL rate fell from 9% of total outstanding loans in 2007 to 7% at the end of last year. Meanwhile Thai banks’ Tier 1 capital and capital adequacy ratios (the ratio of capital to risk-weighted assets) are now strong by international standards at 11% and 14% respectively.
It seems likely in the deteriorating global and local economic environment that Thai banks will relinquish some of those recent balance sheet gains. Analysts point to two particular areas of potential volatility, which if aggravated in the year ahead could raise questions about possible systemic risk: the first entails state-owned Krung Thai Bank’s low 40% loan loss coverage ratio for its NPLs; the other Thai Military Bank’s stubbornly high 16.4% NPL ratio.
New Prime Minister Abhisit Vejjajiva’s government has responded to the crisis with vigorous fiscal pump priming, including direct cash injections into the grass roots economy. With public debt at 23% of GDP, international reserves at US$110 billion, and 2008 balanced budget, the government arguably has plenty of fiscal room to maneuver.
In January the Cabinet approved a 117 billion baht supplementary budget, which included various measures aimed at buoying the economy, including cash 2,000 baht handouts to nine million civil servants and workers nationwide, job creation programs and community investment funds.
