As the second-largest economy in ASEAN behind Indonesia, Thailand presents ample investment opportunities for foreign businesses. The country has experienced growing domestic consumption over the decades coupled with robust export-oriented manufacturing, resulting in the country gaining the status of an upper-middle income nation in 2011.
Further, Thailand is also benefitting from Sino-US trade tensions with several Chinese-based firms relocating part of their supply chain to Thailand, especially for electronics, chemicals, and automotive. The Board of Investment (BOI) announced in February 2022 that the combined value of foreign and local investment applications in 2021 totaled 643 billion baht (US$19.4 billion), an increase of 59 percent from the previous year.
Electricals and electronics topped the list of targeted sectors, attracting 104.5 billion baht (US$2.8 billion) followed by the medical sector (62.2 billion baht (US$1.6 billion)), petrochemicals (48.4 billion baht (US$1.3 billion)), agriculture (47.7 billion baht (US$1.3 billion)), and automotive and parts (24.6 billion baht (US$672 million)).
Despite the shift from an agrarian to an industrial economy, the bulk of the workforce remains in low-scale and low-productivity activities. Failure to upgrade to higher-value industries and improve competitiveness in services may constrain Thailand’s long-term growth potential.
Thailand’s economy is dependent on exports, which accounted for some 60 percent of GDP before the pandemic. As such, the country’s manufacturing sector plays an important role, contributing 27 percent of GDP in 2021; the sector’s success or failure often dictates the overall health of the economy.
Over the last fifty years, Thailand has built up a robust manufacturing sector. It is now keen to attract investments for mid/high-tech manufacturing, especially as regional rivals like Vietnam and Cambodia become new centers for low-cost production in the region.
The Thai government wants Thailand to evolve into a base for electric vehicle (EV) production. German luxury carmaker, Mercedes, chose Thailand as its first site in Southeast Asia to manufacture its electric EQS model with Toyota as well as Chinese car manufacturer Great Wall Motor signing up for a government incentive plan to produce EVs in Thailand.
The country’s emergence as an EV production hub in the region has been fast-tracked by generous incentives, such as 3-11 years of tax holidays and investment incentives for EV infrastructure.
Further, EV manufacturers are attracted by Thailand’s well-developed automotive supply chains, which have garnered its nickname ‘Detroit of Asia’. Before the pandemic, Thailand had the largest automotive industry in Southeast Asia and the 10th largest in the world.
Car exports to increase to over 1 million units
Car exports are expected to increase to over 1 million units for 2022 from the 956,530 units sold in 2021 and 704,626 units in 2020. The National EV Committee announced a goal to have at least 50 percent of locally made vehicles be EVs by 2030, and in February 2022, the government introduced exemptions for import duty and excise tax for a wide range of EV models.
Additionally, Thailand plans to attract 400 billion baht (US$12.08 billion) in investments over the coming years and support the production of 1.2 million EVs and 690 charging stations by 2036.
Electrical and electronics
The exports of electrical and electronics (E&E) products amounted to over US$42 billion in 2021, leading other major export groups, such as automotive, machinery, and food. Before the pandemic, Thailand’s electronics manufacturing sector was the 13th largest hub in the world, with most large-sized manufacturers focusing on the production of integrated circuits, hard disk drives, semiconductors, diodes, and capacitors.
According to Government Savings Bank (GSB), Thailand’s largest state-owned bank, the country is the world’s second-largest exporter of hard-disk drives, washing machines, and air conditioners, and ranks sixth for compressors and eighth for refrigerators — accounting for approximately 24 percent of exports and just over 10 percent of GDP. Thailand boasts an E&E supply chain covering more than 2,500 companies, which includes global giants like Samsung, Toshiba, Mitsubishi, Sony, LG, and Siemens, among others.
With increasing global demand for smart devices across the industrial and consumer landscape, Thailand can be a leading supplier of such devices, particularly for IoT devices as the 5G rollout continues worldwide. Moreover, this growing demand will spur the development of new products not just in the E&E sector but also in other industries that are digitally transforming, such as in the automotive industry where digital components are replacing analog equipment.
Read the complete article here : Promising Sectors for Investment in Thailand (aseanbriefing.com)
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