Thailand’s Special Economic Zone s: New Opportunity Arises
The Thai government’s recent plan to promote Special Economic Zones along the border has opened a new window of opportunity not only for investors who will receive maximum incentives plus permission to use unskilled foreign labor, but also, for the entire region to unite and grow.
The integration of the ASEAN Economic Community is scheduled to become effective in half a year. Thailand, strategically located in the center of the region, plays a key role in supporting such development in various ways. One of its strategies is the establishment of
10 Special Economic Zones (SEZ) along the border. The 10 SEZs include Tak and Kanchanaburi provinces which border Myanmar, Chiang Rai on the Thailand-Lao-Myanmar border, Mukdaharn, Nong Khai and Nakhon Phanom on Thailand-Laos border, Trat and Sa Kaew on the Thailand-Cambodia border, and Songkhla and Narathiwas in the southern part of Thailand which borders Malaysia.
Thailand sees this strategy as crucial to accelerating border trade, which currently accounts for 10% of the country’s total exports and is projected to grow by 20-25 per cent in 2015. The special investment incentives provided will attract more investment to the areas and promote effective economic wealth distribution. This will also provide for an enhancing investment atmosphere for investors who look for business opportunities in the region.
Under this policy, Thailand has identified 13 target industries for those Special Economic Zones. The 13 target industries are agriculture and fisheries; ceramics; garments, textiles and leather; furnishings and furniture; gems and jewellery; medical equipment, automobiles and parts; electrical appliances and electronics; plastics; pharmaceuticals; logistics; industrial estates and tourism-related.
Target industries for each Special Economic Zone vary according to specific geographical conditions, raw materials, and demand and supply. For example, Songkhla in the South is close to the sea and has rich forest areas, and therefore its target industries are agriculture and fisheries, furniture, garments, textiles and leather products, logistics, industrial estates and tourism.
In cases where a company operates any of the above 13 target business activities, they will be offered maximum incentives through the Thailand Board of Investment, including 8 year corporate income tax exemption, import duty exemption on machinery and raw materials, and an additional 50 per cent reduction on corporate income tax for 5 years.
Other incentives include double deductions from the costs of transportation, electricity and water supply for 10 years; an additional 25 per cent cost deduction for installation or construction of facilities and other non-tax incentives.
In addition to these incentives, the Thai government has provided other non-tax incentives and assistance. One-stop service centers will be provided to facilitate licensing and permission issuance procedures at an accelerated pace. Basic infrastructure and customs checkpoints and related services will be improved. Other than the aforementioned 13 target businesses, eligible investments under the BOI investment promotion list will also be offered additional incentives, depending on the type of industry, with the maximum of 3 years corporate income tax exemption.
Incentives for projects under BOI’s
Investment Promotion List
Incentives for projects under Target
|3 additional years of corporate income taxexemption but the total period must not exceed 8 years||8 years exemption on corporate incometax|
|Activities under group A1 and A2 which arealready granted 8 years corporate income tax exemption will be granted 5 additional years of 50% tax reduction||Additional 50% corporate income taxreduction for 5 years|
|– Double deduction on costs oftransportation, electricity and water supply for a period of 10 years- 25% deduction on costs of installation or construction of facilities- Exemption on import duty for machinery
– Exemption on import duty for raw materials and essential materials used in the production of products for export
– Permission to employ foreign unskilled workers
– Other non-tax incentives such as permission to own land and permission to employ foreign skilled workers
|Same as incentives granted for projects onBOI’s Investment Promotion List|
In response to the government’s policy, the Industrial Estate Authority of Thailand (IEAT) has also selected areas for the establishment of industrial estates. The agency hopes to complete the Environmental Impact Assessment within October 2015 and start construction in 2016 for space sales in 2019. In the first stage, the IEAT will invest in the development of industrial estates in Mae Sot in Tak province and Arunyaprathet in Sa Kaew Province
Ms. Hirunya Suchinai, acting Secretary General of the Board of Investment said, “The concerted effort among government agencies is clear proof of Thailand’s commitment to the growth of border trade and economy. Coupled with a good infrastructure and logistics system, these economic zones will become a key component in promoting not only the local economy, but also trade, cultural and social relations with our neighbouring countries. Good understanding and cooperation are very important for ASEAN to move forward. What we are doing here is providing investors who are considering Asia with the opportunity to start and grow their businesses in one of the world’s most active regions.”