“Opportunities and Challenges Facing Businesses Investing or Trading in Thailand” Asia House May 1, 2008

“Opportunities and Challenges Facing Businesses Investing or Trading in Thailand” Rodney Bain, Chairman, British Chamber of Commerce Thailand

Rodney Bain 23 years in Thailand 8 years with Esso, Dunlop, UN/ESCAP Founded Market-Edge Asia Ltd Marketing database company – Automotive, Insurance, Hospitality, Property, Services British Chamber of Commerce Thailand 8 years on BCCT Board 2006 Vice Chairman Chairman

Investment Scorecard Thailand 2008 Political Situation Economy Investment Doing Business Conclusion

Politics Return to democratically elected government 480 seats - PPP 233; 5 Coalition Partners 83; Opposition Democrats 164 PM Samak Sundaravej – Survivor, loyal to monarch & military, Bangkok support, outspoken, extensive experience PPP reincarnation of TRT - populist policies; village investment funds, health care, farm debt suspension, low cost housing (40 bn Baht pumped into rural economy) Invest In Thailand Year 2008/9

Politics - Plusses New pro-business, investor friendly government International acceptance Willing to listen and consult Receptive to recommendations from foreign business community Stated goal to be the most investor friendly country in the region

Politics – Minuses Coalition; return of the old guard and/or their relatives Democrats failure to convert the rural majority Upcountry elects governments, and Bangkok unseats them 3 coalition parties facing possible dissolution Early election ?

Economy “The main problem facing the economy actually is the feeling that politics will remain an obstacle to growth.” H.E. Dr. Surapong Suebwonglee, Deputy PM and Minister of Finance, April 2008

Economy – Plusses Projected growth 6% (2008); 4.8% (2007) Only country in region with higher growth in 2008 Key Drivers Infrastructure mega projects programme bn baht Bangkok Transport Fiscal stimulus package to stimulate domestic consumption Increased consumer confidence (index last 5 months) Lifting capital controls and talk of easing List 3 GDP 5.1% (2006); 4.8% (2007); 6-6.5% ? (2008) Relatively insulated from direct sub-prime fall-out Exports somewhat protected by market diversification Vehicle exports grew nearly 35% in Q (£2bn)

Economy – Minuses Confidence Inflation 4.7% (2006); 2.3% (2007); 5% (2008) Externals High energy prices (Thailand net importer) Thai baht appreciation (good & bad) 6.7% in 2007 US economic recession (Major export market) Labour, skilled/unskilled shortages Current account surplus to fall 6% (2007); 3% (2008)

Investment Target 3 trillion Baht (₤48 bn) Key areas Automotive Electronics Tourism Software Food Health "We are opening up for more foreign investment,” PM Samak Sundaravej, April 28, 2008

Investment – Plusses Goal - Be the most investor friendly country in the region More promising outlook – investment growth:10.6 (2005), 3.8% (2006); 1.4% (2007); 6.7% (2008) Private investment growth 0.5% (2007) projected 7% (2008) – public investment also to recover Increased consumer confidence Shelving or amending anti-foreign investment legislation Eliminate red-tape & streamline licensing procedures Open investment environment, e.g. BOI One-Stop-Shop Overhaul of tax structure Ease regulations to promote Thailand’s competitiveness as an investment destination.

Investment – Minuses Not a level playing field, e.g. FTA’s, Treaty of Amity, minority ownership Archaic restrictive legislation, e.g. FBA Bureaucracy - visas AND work permits Regional competition BOI primarily focussed on manufacturing amd selected sectors Land and property (max 30 year lease) for non-BOI companies

Doing Business - Plusses BOI maintained transparent consistent policies Right to own land Majority or 100% foreign shareholding Duty exemptions and reductions Income tax exemptions and reductions One Stop Shop Well-developed physical infrastructure Excellent reliability & distribution of power/water Communications availability at reasonable cost

Doing Business - Minuses Minor annoyances – bureaucracy and unnecessary red-tape, visas, work- permits Non BOI companies – land and property (max 30 year lease) Customs Department – non transparent duty classification; failure to issue receipts VAT refunds

Conclusion 2007–The Lost Year – competitive disadvantage Regaining the momentum Talk is cheap but very encouraging Government initiatives in first 3 months Consultation with foreign business community Difference between appointed/elected govts Major concern on externals Business runs the country not the government Thailand has been & remains a very good place to invest