Thailand’s Economic Growth: Past and Present

Company Formation in Thailand

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Thailand’s Economic Growth: Past and Present

The Asian Financial Crisis of 1997 affected several countries, including Thailand. The devaluation of the Thai Baht at that time have depreciated by 18%, which is 30THB to 1USD. But with bilateral and multilateral assistance, the country was able to recover from the crisis.

Today, the Thai government continues to enhance the country’s economy through various reforms and projects. This resulted in a positive and improving economic outlook. Growth is estimated at 3.9 per cent in 2017—the fastest pace on an annual basis since 2013 [IMF].

Despite enjoying the robust growth, due to its previous initiative in Thailand 3.0(where the manufacturing and the exporting of steel, automobiles, natural gases are at the centre of the country’s economic growth), there is an urgency not to over-rely on foreign technologies to drive its exports [UIH].

With the world getting increasingly competitive, there is now a serious need for Thailand 4.0 (The country’s vision to transform Thailand’s economy into an innovation-driven one) to materialize. So that Thailand can compete on the world stage.

Thailand’s Investment Policy for FDIs

With a burgeoning economy, Thailand also offers an abundance of resources and have a competent and cost-effective workforce for foreign investors. And, through agencies like the Board of Investment (BOI) and the Industrial Estate Authority of Thailand (IEAT) and its many bilateral agreements, it offers further numerous tax and non-tax incentives to support investors.

This shows Thailand’s commitment to having a robust investment policy framework that encourages liberalization and promotes free trade. International surveys such as the World Bank’s Ease of Doing Business report have recently ranked Thailand among the most attractive investment destinations in Southeast Asia. In 2018, Thailand ranked up to 26 from rank 46 in 2017, positioning the country among the top three investment destinations in ASEAN [Thailand Business News].

Determining the Right Business Model

The dedication of the Thai Government had seen positive growth of Foreign Investments.

The table below shows in 2018, foreign direct investments in Thailand increased by 44482.77 THB Million in May of 2018:

 

A foreign investor who is interested in venturing into Thailand has to carefully consider these few key points before choosing the right business model.

  • Restrictions on foreign ownership in different sectors, under various laws and policies;
  • Only Thai companies are eligible for promotion by the Board of Investment (BOI) under the Investment Promotion Act;
  • A foreign company is not liable for the functions performed by its subsidiary in Thailand but is liable for the functions performed by its branch office;
  • The laws of foreign jurisdictions may provide a tax credit or deduction for taxes paid by a branch or subsidiary in Thailand;
  • Thailand has double taxation treaties with more than 50 foreign countries, some of which provide a more favourable treatment of remittances than others.

*Source: ASEAN Briefing

Preferred Business Model – Limited Liability Companies (LLC)

LLC is usually the most preferred and popular course for setting up a business in Thailand. This is mainly attributed that it has a similar structure to corporations in other countries. LLC have directors, shareholders (both local and foreign), promoters, and limited liability.

Additionally, there are a few points to note why LLC is preferred:

  • The liability of the shareholders is limited to the registered capitalization of the company. This provides high-level security and protection for shareholders and investors.
  • Foreigners to own 100% of the shares of a company in Thailand if their activates fall under BOI
  • May apply for multiple work permits to accommodate foreign executives and staff members.

*Source: Interactive Thailand

Specifics on the Memorandum of Association for LLC Structure

After selecting the optimal legal structure, filing of the memorandum of association is a requirement in Thailand. This is the next step of the registration procedure, so it is important to prepare this document beforehand.

A memorandum of association is a special agreement between the promoters or founders of the company. Once the MOA is completed, it will be submitted by any promoter or attorney to the Ministry of Commerce.

Costs and Processes to File a MoA

Limited liability Company in Thailand can be divided into two: private and public limited company. A private limited company only requires a minimum of three shareholders whereas a public limited company requires a minimum of 15 promoters.

Here are the costs and procedure when filing a MoA for public and private limited companies:

Private Limited Company

The MoA of a private limited company should include the company should include the following:

* Company name

* Complete location of the head office

* Company objectives

* Registered capital must be divided into each share with the same value (each share’s value must be at least 5 Baht)

* Details and signature of the founders or promoters

* Name, age and address of two witnesses

To register a MoA, the fee is 50 Baht per 100,000 Baht of registered capital. A fraction of 100,000 is regarded as 100,000 Baht. Also, the minimum fee is 500 Baht and the maximum fee is 25,000 Baht.

Public Limited Company

For a public limited company, the articles included in the MoA is almost the same as a private limited company. The difference is that the purpose as to why the company will offer shares for sale to the public must be included. Additionally, the official registration fee is 1,000 Baht per 1million Baht of registered capital. The maximum fee is 25,000 Baht.

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References

World Bank Says It May Raise Thai Economic Growth Forecast, Bloomberg.com

Recovery from the Asian Crisis and the Role of the IMF, Imf.org

Understanding how to create a Limited Liability Company (LLC), Bizfilings.com

FDI Trends, Pull Factors and Policies in Thailand [PDF], Thesis.eur.nl

Foreign Direct Investment as a Driver of Economic Development in Thailand [PDF], Emuni.si

FDI in Thailand up 21% in 2013, Nationmultimedia.com

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