ThaiThaiLAND OF INVESTMENTLAND OF INVESTMENT

Pannee ChengsutthaDirector

Thailand Board of Investment, Paris Office

October 24, 2006, Vicenza, Italy

Suvarnabhumi International Airport

Key Data: Region: Southeast AsiaPopulation: 65 million Area Total: 514,000 km2

Area Land: 511,770 km2

Religion: Buddhism (94%)Capital: Bangkok

Thailand in GeneralThailand in General

Source: Bank of Thailand

2002 2003 2004 2005 2006f

GDP Growth (%) 5.4 6.8 7.1 4.5 4.25-5.251

GDP (US$ Bil) 126.3 133.2 165.7 176.4 194.84

Inflation (%) 0.7 1.8 2.7 4.5 4-51

GDP Per Capita 1,966 2,198 2,631 2,825 2,9964

(US$)

Foreign Reserves 38.9 42.1 43.0 52.1 57.22

(US$ Bil.)

The Macroeconomic The Macroeconomic Picture in StatisticsPicture in Statistics (1 of 2)(1 of 2)

Notes: 1=ThailandOutlook.com, 2=As of April 30, 3= avg. Jan-April, 4=NESDB

2002 2003 2004 2005 2006f

Export Growth (%) 5.8 14.0 22.0 15.0 11.0-13.01

Value of Exports 66.9 77.6 97.7 109.2 125.94

(US$ Bil.)

Current Account 5.5 5.6 3.1 -3.7 n.a.(% of GDP)

MPI 123.2 138.4 146.5 155.4 164.43

(Manufacturing Production Index)

Capacity Utilization 59.3 66.3 70.7 72.6 75.13

The Macroeconomic The Macroeconomic Picture in StatisticsPicture in Statistics (2 of 2)(2 of 2)

Source: Bank of Thailand

Notes: 1=ThailandOutlook.com, 2=As of April 30, 3= avg. Jan-April, 4=NESDB

Thailand is committed to increase opennessThailand is committed to increase openness

Gross FDIIndicators of Openness

… as indicated by increase external trade and FDI, tariff reforms, FTAs

Major Foreign Investors (2001-2005) Major Foreign Investors (2001-2005) (Applications for Investment Privileges)(Applications for Investment Privileges)

€1.5 Bn(THB74.8)

Japan EU USA0

100

300

€10.4 Bn(THB 514.6)

€2.4 Bn(THB117.7)

€2.9Bn (THB142.9)

Taiwan

400

200

Billion Euro with Thai Baht equivalent

TOP 3 : Japan , USA , EUTOP 3 : Japan , USA , EU

European Investments European Investments 5-Year Totals by Country 2001-2005 5-Year Totals by Country 2001-2005

CountryCountry ProjectsProjects € € MillionMillion

United KingdomUnited Kingdom 9090 963.6963.6

NetherlandsNetherlands 5656 798.7 798.7

SwitzerlandSwitzerland 5353 552.5552.5

GermanyGermany 8989 532.6532.6

BelgiumBelgium 2929 204.9 204.9

FranceFrance 5858 95.795.7

ItalyItaly 1919 48.248.2

TOTALTOTAL 239239 3,196.23,196.2

Total Investment

TOP 3 : NL, UK, GERTOP 3 : NL, UK, GER

No. of Projects

Ex Rate: €1 = 48.56 THB

Major Sources of EU Investment in ThailandMajor Sources of EU Investment in ThailandApplying for BOI Promotion in 2005-2006Applying for BOI Promotion in 2005-2006

15

25

7

37 35

05

10152025303540

Fran

ce

Ger

man

y

Italy

Net

herl

ands U

K

Italy

Net

he

rlan

ds

UNIT MILLION €

14.33

72.05

6.15

421.58

148.55

0

50

100

150

200

250

300

350

400

450

Fra

nce

Ger

ma

ny

Ital

y UK

Italy

The Board of Investment Basic Incentives and Measures

• Guarantees and Permissions Guarantees against nationalization and price

controls Permission to own land and bring in foreign

experts• Tax Incentives

Tax exemption /reduction on imported machinery and input

Income tax exemption • Support services

Advisory and information provision Publications

Unit: Euro Billion 14.08

2002 2003 2004 2005

1 3.12

6.806.52

44% 25%

112%

Total investment applications

FDI increases62% to 9.97 billion

Value of Investments Increasing

Tax Incentives

• Corporate income tax

holidays up to 8 years

• Import duty reductions or

exemptions on machinery

and raw materials

Non-Tax Incentives

• Land ownership rights for

foreign investors

• Permission to bring in foreign

experts and technicians

• Work permit/visa facilitation

Basic BOI privileges and incentivesBasic BOI privileges and incentives

ZonesZones Sector Matrix:Incentives to strengthen

competitiveness

Strategic or Priority Industries

Maximum incentives regardless of zone or

locationExample : Software

Mould & DieZone-Based Incentives:Low HighZone 1 → Zone 2 → Zone 3

1 New Zealand 11 Ireland

2 Singapore 12 Iceland

3 United States 13 Finland

4 Canada 14 Sweden

5 Norway 15 Lithuania

6 Australia 16 Estonia

7 Hong Kong 17 Switzerland

8 Denmark 18 Belgium

9 United Kingdom 19 Germany

10 Japan 20 Thailand

Ease of Doing BusinessEase of Doing Business

Source: World Bank Study: Doing Business in 2006

Criteria

Starting a business

Hiring and firing workers

Enforcing contracts

Access to credit

Closing a business

Registering property

Dealing with licenses

Paying taxes

Trading across borders

Investor protection

Medium-Term (2005-2008)

Rank Country

1 China

#2 Thailand3 India

4 Vietnam

5 U.S.

6 Russia

7 Indonesia

8 Korea

9 Taiwan

10 Malaysia

Includes production, sales, R&D, outsourced operations

Promising Countries for Promising Countries for Overseas Business OperationsOverseas Business Operations

Long-Term

Rank Country

1 China

2 India

3 Thailand4 Vietnam

5 U.S.

6 Russia

7 Indonesia

8 Brazil

9 Korea

10 Taiwan

Includes production, sales, R&D, outsourced operations

Source: 16th Annual JBIC Survey: “Outlook for Japanese Foreign Direct Investment” , Nov. 2004

Key Factors Supporting Thailand’s Key Factors Supporting Thailand’s RankingsRankings

1. Market growth potential

2. Labor costs

3. Political and social stability

4. Supply base for assemblers

5. Base for exports

6. Developed local infrastructure

7. Tax incentives for investment

8. Industrial clusters

9. Domestic market size

10. Policies to attract foreign capital

Source: 16th Annual JBIC Survey: “Outlook for Japanese Foreign Direct Investment,” Nov. 2004

7 international airports: airports: 700,000 tons cargo. 25 million passengers per year

HighwayHighway system: 64,000 km connects all 76 provinces

8 deep sea ports

Rail system:Rail system: 4,000 km linking to Malaysia & Singapore

57 57 industrial estatesindustrial estates in 21 provinces

World-class Wi-FiWi-Fi and inexpensive broadband broadband widely available

Mobile phonesMobile phones growing 6 million/yr 24 million users in 2003.

Developed InfrastructureDeveloped Infrastructure

Suvarnabhumi International Airport

World’s Newest Airport

World’s Biggest Single Terminal

Open September 28, 2006 in THAILAND

1st Phase: 76 flights/hour

45 million passengers/year

State-of-the-Art Cargo Systems

Low Rent Costs forLow Rent Costs forGrade-A Office Space in Asian CBDsGrade-A Office Space in Asian CBDs

05

101520253035404550

Bangkok

Singapore

Kuala Lumpur

Beijing

Shanghai

Ho Chi Minh City

Mumbai

New Delhi

Bangkok Central Business District: Bangkok Central Business District: €€10/sq. ft./year10/sq. ft./year

Source: Colliers International. 2Q 2004. Asia Pacific News

ThailandThailand Singapore China India Taiwan

Electricity cost for industry (Euro per kwh, 2004) 0.045 0.058 0.026

(2002)0.064 0.044

Corporate income tax rate (Jan 2004)

30% 20% 33% 35.9% 25%

Office costs (Euro/meter/year, Jan 2005)

33.36 Euro

80.40 Euro

95.76Euro

123.84Euro

88.56Euro

Sources: Electricity: IMDCorp. income tax: KPMGOffice costs: DTZ Ex Rate: €1= 50 THB

Comparative Business CostsComparative Business Costs

Lowest Cost of Living in Asian CitiesLowest Cost of Living in Asian Cities

Note:

New York is base city for index, with score of 100.0

Source: Mercer Human Resource Consulting, 2004

Global Rank City Index

1 Tokyo 130.7

5 Hong Kong 109.5

7 Seoul 104.1

11 Beijing 101.1

16 Shanghai 95.3

29 Hanoi 85.6

36 Ho Chi Minh City 84.5

45 Jakarta 83.9

46 Singapore 83.6

104 Kuala Lumpur 67.7

109 Mumbai 66.8

119119 BANGKOKBANGKOK 63.563.5

Double Taxation Agreement with 52 countries including Italy

Since 31 May 1980

AFTA

China

Australia

JapanUS

India

New Zealand

Peru

1/Oct/031/Sep/04

1/Jan/05

EFTA

29/Dec/02

Bahrain

EFTA

Strategic Location to World MarketsStrategic Location to World Markets

Investment Opportunities in ThailandInvestment Opportunities in Thailand

Auto parts

Machinery and parts

Fashion and Jewelry

Electronic and Electrical products

Value Added Services

Auto & Autoparts Industry

Geared for Excellence

ThailandThailand: : Automotive Hub of ASEANAutomotive Hub of ASEAN 2005 production ~ 1.125 million units

(World’s 14th largest) Export ~ 440,000 units Largest in Southeast Asia Capacity of 2.0 million units in 2008 World’s largest production of one-ton pickup

trucks

820,000 units in 2005

Automotive Industry in Thailand

($1,500)

($1,000)

($500)

$0

$500

$1,000

$1,500

$2,000

Mil US $

Thailand Export To Thailand Import From Balance Of Trade

Country

Country Australia Japan India Malaysia Indonesia USA China

Thailand Export To 632.80 636.90 79.30 253.40 477.20 330.80 36.30

Thailand Import From

7.20 1,929.20 2.10 65.80 115.90 50.90 25.80

Balance Of Trade 625.60 -1,292.30 77.20 187.60 361.30 279.90 10.50

Export Ranking 2 1 6 5 3 4 7

-1500-1250-1000

-750-500-250

0250500750

10001250150017502000

Mil

US

$

Country

Thailand Export To Thailand Import From Balance Of Trade

Thailand Automotive and Parts Trade BalanceUnit = Mil US $ < Current Rate :

1 US $ = 41 Bath

Source : The Customs Department of Thailand

As of Year, 2003

• Auto assembly for local and export markets

under AFTA and other FTA arrangements

• Auto part manufacturing to serve domestic

and export markets

• Potential small car hub -- low fuel

consumption

• NGV target: 120,000 NGVs by 2008

Investment Opportunities in Investment Opportunities in Automotive IndustriesAutomotive Industries

Fashion IndustryFashion IndustryDesigning the FutureDesigning the Future

Leather, Gems & Jewelry, Textiles & GarmentsLeather, Gems & Jewelry, Textiles & Garments

Fashion Industry Fashion Industry

Objective: Becoming SE Asia’s Fashion Center

– Gem & Jewelry Capital of Southeast Asia

• Renowned expertise in diamond cutting

– Bangkok Fashion City

• Major government push for the industry

– Many renowned - branded garments, produced in Thailand for USA & EU Markets

• Brunet, Triumph, Victoria Secret, Saint Michael, Marks & Spencer

Gems and JewelryGems and JewelryInvestment Opportunities in Investment Opportunities in

ThailandThailandBOI Incentives outside BOI Incentives outside GIE:GIE: • Imported Duty exemption/reduction on machinery & raw materials •Up to 8 years corporate income tax holiday•Addition incentives if locate in BOI Zone 3•Non-tax incentives

Incentives in GIE:Incentives in GIE: • Import Duty exemption/ reduction on machinery & raw materials • 5- 8 years tax holiday• VAT exemption on imported duty on Raw Material• VAT exemption on sales to BOI promoted companies and within GIE• Non-tax incentives

Textile Industry ClusterTextile Industry Cluster

1. Integrated Textile Industrial Zones/Estate Developers: – 8 years corporate income tax holiday

– Duty-free machinery

2. Textile-Related Activities:

BLEACHING & DYEING & FINISHING PROJECTS• Locating in Textile IE:

– 8 years corporate income tax holiday

– Duty-free machinery

• Locating outside Textile IE: Standard incentives according to zone

OTHER TEXTILE-RELATED PROJECTS locating on Textile IE• Duty-free machinery

• Corporate income tax exemptions:

– Zone 1: 5 years

– Zone 2: 7 years

– Zone 3: 8 years

Machinery and EquipmentMachinery and EquipmentToward Regional Manufacturing and Toward Regional Manufacturing and

Distribution Hub in the RegionDistribution Hub in the Region

• Thailand continues to industrialize, but is dependent on foreign

industrial machinery for immediate future.

• Industries in Thailand developed over the past decade with

parallel increases in demand for machinery imports.

• High demand for:

– Food and farm machinery

– Alternative energy/energy conservation machinery

– Textile machinery

– Automotive machinery

Opportunities in MachineryOpportunities in Machinery

• Machine tools

• Plastic injection machinery

• Plastic extrusion machinery

• Packaging machinery

• Material handling equipment

• Robotics and factory automation equipment

• Specialized/process machinery or equipment for specific industries

Machinery and EquipmentMachinery and EquipmentInvestment Opportunities in Investment Opportunities in

ThailandThailand

Machinery & Tooling

Zone 1 Zone 2 Zone 3

Manufacturers:

General

Machinery Duty: 50% reduction

Machinery Duty: 50% reduction & Exemption in IE.

Machinery Duty: Exemption

Corporate income tax exemption: In IE - 3 years

Corporate income tax exemption: In IE - 7years, Outside IE. - 3 year

Corporate income tax exemption: 8 years

Targeted Products

Exempt from machinery import duties

Exempt from corporate income tax for 8 years

Examples: CNC Machines as in BOI Lists, Farm and Food Processing Machine.

Recent Political Incident

Peaceful Political change

More stable than in recent months

No Real Negative Impact on investment

Business as normal

IMF, World Bank have confidence

on Thai economy after the incident

BOI’s Policy has never changed

BOI and SIMESTBOI and SIMEST

Memorandum of Understanding signed in 2005

Promotes cooperation in investment, organizing

investment promotion activities, exchange of

information

Auto parts, Machinery and parts, Jewelry and

Textile

BOI on the Internet : www.boi.go.th

* Royal Thai Embassy, Rome

* BOI Office in Paris Address: Ambassade Royale de Address: Ambassade Royale de

ThaïlandeThaïlande 8, Rue Greuze, 75116 8, Rue Greuze, 75116

Paris, FranceParis, France Tel:Tel: +33 1 5690 2600 +33 1 5690 2600 Fax:Fax: +33 1 5690 2602 +33 1 5690 2602 E-mail: E-mail: par@boi.go.thpar@boi.go.th

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