Bank of Thailand (BoT) Governor Prasarn Trairatvorakul on Tuesday affirmed that the central bank’s perspective on the policy interest rate increase remained unchanged although the Thai economy experienced higher risks from economic volatilities and political uncertainties both at home at abroad.
Doing business in Thailand
Many U.S. businesses, 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. International reserves stood at US$106 billion in early December 2008 compared to US$87.5 billion at end-2007. This is due to the large capital inflows in the first quarter of the year and again in the last quarter of the year.
External debt is low at around US$66 billion or 30 percent of GDP, of which two-fifths are short-term debt.Three quarters of the short term debt are trade credits and inter-company loans. Public external debt (government and state-owned enterprises) make up one-fifth of total external debt and less than 1 percent of it is short-term.
Overall, external debt service ratios are manageable at 6.1 percent of exports. In support of this shift in emphasis, the Board of Investment adopted its sustainable development policy, and provides attractive investment incentives for such related industries as alternative energy, high technology, including medical food and equipment and the environment. The Bank has rightly noted that Thailand’s ability to provide higher value added to its manufacturing sector would improve its ability to compete in “the increasingly globalized and knowledge- based economy.
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