How Thailand is strategically positioned for international expansion.

How Thailand is strategically positioned for international expansion
Image of the post author Geetika Chhatwal

Located in the heart of mainland Southeast Asia, Thailand —officially called The Kingdom of Thailand —and formerly known as Siam, shares its borders with Liam and Combodia in the east, the Gulf of Thailand and Malaysia in the south, the Andaman Sea and Myanmar in the west; and Laos and Myanmar in the north.

The country is positioned for international market entry geographically and economically. Thailand ranks 21st out of 190 countries in the Word Bank’s 2020 Ease of Doing Business report and ranked number three according to the U.S. News & World Report on the best countries to start a business in 2022. This U.S. news and world report rankings are derived from a global survey of more than 17,000 people. They are based on respondents’ association of various countries with five particular attributes: affordable, bureaucratic, cheap manufacturing costs, connected to the rest of the world and providing easy access to capital.

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A Business-friendly economy

Thailand has a population of 69 million people with business-friendly policies and a growing economy. 

Thailand is well-known globally for stable economic growth, friendly international business relations, excellent incentives for foreign corporations, and a cost-effective local workforce. Owing to its proximity to some of the fastest-growing economies, like China and India, the country offers several lucrative trade opportunities with these two countries and many Asian nations. 

The standard corporate tax rate in Thailand is 20 percent —however, for companies and partnerships where paid-in capital is less than THB 5 million and income of less than THB 30 million, the first THB 300,000 in net profit is tax-free. The THB 300,000 to 3 million net profit is subject to 15 percent corporate tax. Any net profit over THB 3 million is subject to 20 percent corporate tax.

While foreigners generally can own no more than 49 percent of the shares in a Thai company, there are specific sectors where the government allows foreign companies to hold a more significant portion of the business.

Setting up a company in Thailand

Depending on your business activities, setting up a business in Thailand may require acquiring a license or permit. Certain business activities are more regulated by the Thai government, such as tourism, school, childcare, liquor, medical, and food and beverage industries. Setting up a company in these industries can be lengthy and complex. It is always a good idea to find a legal firm in Thailand to help with setting up a company in Thailand. 

Thailand is particularly suitable for manufacturing sectors. Foreign automobile brands, such as the Japan-based Toyota, Honda and Nissan and U.S.-based Ford Motors, have set up manufacturing plants in the country. These automobile brands have established their production base for exports to neighboring countries and the rest of the world. Nissan manufactures under the Siam Motors Nissan Company, and Isuzu has two plants making pick-up trucks in Thailand. These companies have set up their export operations in Thailand. Many other brands, like the U.K.-based Marks and Spencer and Bodyshop, have also expanded into Thailand due to the lucrative market and lower start-up costs it offers, along with sound trade policies and the country’s strategic location providing access to other Asian countries. 

Many new entrants enjoy access to the Greater Mekong sub-region, where emerging markets offer the tremendous prospect of setting up a company in Thailand.

Most recently, according to the Global COVID-19 Index (GCI) report, Thailand was ranked number one in the world among countries with the highest COVID-19 recovery rate.  

What do Thai consumers want from brands?

Consumers in Thailand are price-conscious and show a preference for local brands and low-priced imported goods from the west. There is a market for brands bringing in higher-priced items, but they need a different market strategy and should work with a local partner. 

About half of Thailand’s Most-Favored-Nation (MFN) tariff schedule comprises less than five percent of duties, and nearly 30 percent of tariff lines are free. In 2020, Thailand’s average MFN applied tariff rate was 10.2 percent. However, the tariff was significantly higher for agricultural products at 29.3 percent.

Like most other foreign markets, doing business in Thailand has its share of challenges, although when you look at the big picture, these are minuscule. One crucial challenge is the language barrier. While most middle and top management can communicate fluently in English, lower-tier workers are more likely comfortable speaking Thai. 

Many Thai retailers digitized their stores to enable online shopping using data analytics to understand better the latest trends and the shift in consumer behavior. 

The digitization began before the pandemic but accelerated during the lockdown as it imposed restrictions in 2020. This, along with increased internet and mobile phone use, improved logistics and online payment systems, resulted in spikes in B2C and B2B eCommerce. 

According to reports, revenue in Thailand’s eCommerce market is expected to show a Compound Annual Growth Rate (CAGR 2022-2027) of 14.99 percent, resulting in a projected market volume of USD 38.72 billion by 2027.

Rising smartphone penetration (about 40 percent) has led to the growth of M-commerce —online shopping using a smartphone. The mobile commerce market is expected to grow at a CAGR of 12 percent to reach USD 25 billion by 2023. 

The Thai government’s Thailand 4.0 policy aims at allocating a specific budget for constructing a broadband network in rural areas to help bridge the digital divide, giving an impetus to the already flourishing eCommerce market. 

According to JP Morgan, using debit or credit cards is still a popular method of e-commerce payments in Thailand, and most Thai people prefer debit over credit. While cash on delivery is widely available on Thai e-commerce platforms, it is on its way to declining. 

International or cross-border e-commerce comprises almost 30 percent of the overall e-commerce market in the country. The top five e-commerce platforms are Shopee, Lazada, Kaidee, AliExpress, and Amazon. 

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