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BOI hints at new incentive policy

Under the new policy, the BOI will no longer support businesses that provide low added value, apply low technology or have low complexity of production processes, including those that have low linkage with other industries and those that are labour- intensive and environmentally unfriendly

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The Board of Investment (BoI) has announced a new trend in its investment promotion policy. Changes to its investment incentive policy are part of Thailand’s preparations for the future Asean Economic Community (AEC) coming at the end of 2015.

The Thailand Board of Investment (BOI) aims to promote 10 groups of target industries and stop promoting labour-intensive businesses or those causing adverse environmental impact. The BoI’s plan is also to propel Thailand into a new stage of economic development — one that will help the country to overcome the “middle income trap”.

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Incentives would be phased out for heavy industries, low-value-added industries, factories that cause environmental problems

Under the new policy, the BOI will no longer support businesses that provide low added value, apply low technology or have low complexity of production processes, including those that have low linkage with other industries and those that are labour- intensive and environmentally unfriendly, those that consume high energy, and those that have a monopoly in concession-type of business activities

According to the BoI, there needs to be change, as there are many problems with our current economic path which include:

  • • low competitiveness;
  • • low investment in research and development;
  • • growing labour shortages, both for skilled and unskilled workers;
  • • increasing restrictions on heavy industry — with less land available and tougher regulations;
  • • potential problems in energy security.

The BoI’s alternative recipe, Thailand 4.0, aims to help Thailand become a high value economy and a regional hub.

The key ingredients include more research and development, a focus on services and high-value industries, better care for the environment, and cross-border regional clusters.

In order to move Thailand in this direction, the BoI plans to scrap the current emphasis on geographic zones. These would be replaced by new regional clusters that promote a concentration of investment, plus one-stop services.

Incentives would be phased out for heavy industries, low-value-added industries, factories that cause environmental problems or consume a lot of energy, and concession and monopoly industries such as telecoms and concession roads.

A New Investment Promotion Strategy to Drive Thailand’s Sustainable Growth

The BOI aims to restructure the Thai economy for sustainable development and to overcome the middle income trap through competitiveness development and value creation in the industrial sector and also by promoting new industrial clusters in the regions to create new investment concentration and improving of facilitations for investors, including both inward and outward investment.

Under the new policy, the BOI is to focus on promoting 10 industries, which are

1.) Basic infrastructure and logistics (e.g. industrial zone, power generation from natural gas, tap water or water resources for industrial purposes, transportation and mass transit, commercial airport and logistics center);

2.) Basic industries (e.g. steel, petrochemicals, pulp and paper, machinery);

3.) Medical device and scientific equipment (e.g. medical services, medicine, medical food, scientific equipment);

4.) Alternative energy and environmental services (e.g. power generation from renewable energy sources, bio-fuel, recycling, wastewater treatment and industrial waste disposal services, Energy Services Companies: ESCO);

5.) Services that support the industrial sector (e.g. R&D, HRD, engineering design, software, calibration services, ROH, trade and investment support office);

6.) Advanced core technology (e.g. biotechnology, nanotechnology, advanced material technology);

7.) Food and agricultural processing industry (e.g. processed food, food additives, herbal extracts, plant propagation and development, products from natural rubber);

8.) Hospitality & wellness (e.g. tourism and sports promotion activities, Thai motion picture production and related supporting services, dedicated health centers, retirement homes and care centers);

9.) Automotive and other transportation equipment (e.g. cars, motorcycles, trains, electric trains, aircraft, shipbuilding and maintenance);

10.) Electronic and electrical appliances (e.g. electronic design, organics & printed electronics, HDD & SSD and parts, solar cells, white goods)

The 10 focus industrial sectors cover around 130 industries, of which about 100 types of target businesses will enjoy exemption from corporate income tax. Another 30 types of business will get the tax exemption on import duties on machinery and raw material imports, as well as other non-tax-related incentives such as permits to own land and permits to bring into the kingdom skilled workers and experts to work in investment-promoted activities.

Bangkok Correspondent for Siam News Network. Editor at Thailand Business News

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