10 Industries Targeted For Investment Study Reveals Extended Fall in Private Projects
The Bangkok Post has reported government plans to introduce more measures to tempt investment in 10 targeted industries after the Finance Ministry’s latest study found private investment in Thailand had receded continuously over the past 10 years.
The industries are next-generation cars; smart electronics; affluent, medical and wellness tourism; agriculture and biotechnology; food; robotics for industry; logistics and aviation; biofuels and biochemicals; digital and medical. The specific nature of these industries remains unclear, for example ‘affluent’ could be interpreted in many different ways and may mystify our readers. The study reported that if Thailand seriously promoted the 10 industries, GDP growth could reach 5-6% a year based on private investment, which is expected to increase by 10% in 2016. The cabinet yesterday instructed the ministry to propose new investment measures to the cabinet for approval soon. They are expected to include the establishment of funds to support private investment, corporate income tax exemption for 10-15 years and reduction or exemption from personal income tax for researchers or experts. “Thailand may need to offer special privileges to each company if the government really wants to attract them to invest in 10 targeted industries,” the study said.
The study also suggested Thailand support other incentives such as a corporate income tax limit of not more than 15%, a personal income tax limit for foreign experts of not more than 15% and facilitation of their work permits. Foreign investors should also be allowed to hold 100% of the first stage of research and development (R&D) projects and the leasehold for land plots for 99 years before selling them back to the government once due.
According to the study, Thailand’s private investment showed robust growth of 9% a year from 2000-05, when economic growth averaged 5.3% a year. Private investment averaged only 2% a year from 2006-14, with economic growth of only 3.4%. Industry Minister Atchaka Sibunruang said the Board of Investment (BoI) investment law that offered corporate income tax exemption for a maximum of eight years was not sufficient to attract foreign investors.
The government has set up a special negotiation panel chaired by Deputy Prime Minister Somkid Jatusripitak to handle direct talks with foreign investors wanting to locate their businesses in Thailand, she said. Government spokesman Sansern Kaewkamnerd said the cabinet had approved a Finance Ministry proposal to waive import tariffs, excise tax and value-added tax for cars that were used in R&D or the automotive testing centre. Vallop Vitanakorn, vice-chairman of the Federation of Thai Industries, said even though the government had tried all means to stimulate foreign investment, momentum remained lacklustre.
The business sector attributes inactive foreign investment to uncontrollable external factors, especially the global economic outlook that has not yet fully recovered, prompting potential investors to rethink their plans. Mr Vallop said the government’s stimulus package would help to boost foreign investment but noted other factors remained that investors must take into account before making final decisions. “Most investments are for the long term, so investors need to consider several factors and circumstances and whether it is the right time for them to invest,” he said. The BoI said applications for investment privileges in the first nine months of this year covered 758 projects with a combined investment of 155 billion baht.
In the same period, the BoI approved 1,769 projects with a combined investment of 665 billion baht. Porametee Vomolsiri, secretary-general of the National Economic and Social Development Board (NESDB), on Monday suggested the government focus more on investment promotion next year. Private investment should be a particular concern, as the private sector still lacks confidence, he said. This year private investment will contract by an estimated 1.3%, recovering with a 4.7% rise next year. The NESDB has revised up its 2015 GDP forecast to 2.9% growth.