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Country Risk: Thailand

Flag of Thailand

Official Name: Kingdom of Thailand (The country was known as Siam until 1939.)

Internet Domain: .th
International Dialing Code: +66
Time Zone: UTC+7 (12 hours ahead of Washington, DC during Standard Time)


Table of Contents

Location and Size Credit and Collections
Government Risk Assessment
Legal System Business Climate
People Business Protocol
Economy Other Sources of Info
Economic Indicators

 

Location and Size

Area: 513,120 sq. km. (198,117 sq. mi.); equivalent to the size of France, or slightly smaller than Texas. Thailand is a country of mountains, tropical rainforests and flat plains.

Government

Thailand is a constitutional monarchy. Unlike other Southeast Asian countries, Thailand was never colonized. Its traditional founding date is 1238. Thailand adopted its current constitution following an August 19, 2007 referendum.

Its governmental branches include: Executive comprised of King WACHIRALONGKON (chief of state since 2016) and Prime Minister PRAYUT Chan-ocha (head of government since 2014); Legislative — bicameral, with a fully-elected House of Representatives and a partially-elected Senate; Judicial — composed of the Constitutional Tribunal, the Courts of Justice, and the Administrative Courts.

Legal System

Thailand’s legal system blends principles of traditional Thai and Western laws. Thai business regulations are governed by criminal law rather than civil law. Thailand does not recognize decisions by foreign courts. The judicial system runs at a comparatively slow pace when trying to enforce a contract. Therefore, bribing civil servants charged with overseeing regulations to speed up legal procedures is a common practice.

Thailand has not accepted compulsory International Court of Justice (ICJ) jurisdiction. (What does this mean?)

People

Thailand’s highly successful government-sponsored family planning program has resulted in a dramatic decline in population growth from 3.1% in 1960 to less than 1% today. Life expectancy also has risen. However, the AIDS epidemic has had a major impact on the Thai population. Today, over 500,000 Thais live with HIV or AIDS–approximately 1.4% of the adult population. Each year, 25-30,000 Thais die from AIDS-related causes. Ninety percent of them are aged 20-49, the most productive sector of the workforce. The situation could have been worse; an aggressive public education campaign in the early 1990s reduced the number of new HIV infections from over 100,000 annually to around 15,000 annually.

  • Population: 68,977,400 (July 2020 est.)
  • Population growth rate: 0.25%
  • Languages: Thai (official language); English is the second language of the elite; regional dialects
  • Literacy: 92.9%
  • Ethnic Make-up: Thai 97.5%, Burmese 1.3%, other 1.1%(2015 est.)
  • Religions: Buddhist 94.6%, Muslim 4.6%, Christian 0.7%, other 0.1% (2015 est.)

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Economy

With a relatively well-developed infrastructure, a free-enterprise economy, and generally pro-investment policies, Thailand is highly dependent on international trade, with exports accounting for about two thirds of GDP. Thailand’s exports include electronics, agricultural commodities, automobiles and parts, and processed foods. The industry and service sectors produce about 90% of GDP. The agricultural sector, comprised mostly of small-scale farms, contributes only 10% of GDP but employs about one third of the labor force. Thailand has attracted an estimated 3.0-4.5 million migrant workers, mostly from neighboring countries.

Over the last few decades, Thailand has reduced poverty substantially. In 2013, the Thai Government implemented a nationwide 300 baht (roughly $10) per day minimum wage policy and deployed new tax reforms designed to lower rates on middle-income earners.

Thailand’s economy is recovering from slow growth during the years since the 2014 coup. Thailand’s economic fundamentals are sound, with low inflation, low unemployment, and reasonable public and external debt levels. Tourism and government spending – mostly on infrastructure and short-term stimulus measures – have helped to boost the economy, and The Bank of Thailand has been supportive, with several interest rate reductions.

Over the longer-term, household debt levels, political uncertainty, and an aging population pose risks to growth.

Currency: Baht (THB)

Leading Markets (2017): China 12.4%, US 11.2%, Japan 9.5%, Hong Kong 5.2%, Vietnam 4.9%, Australia 4.5%, Malaysia 4.4%

Leading Exports-commodities: automobiles and parts, computer and parts, jewelry and precious stones, polymers of ethylene in primary forms, refine fuels, electronic integrated circuits, chemical products, rice, fish products, rubber products, sugar, cassava, poultry, machinery and parts, iron and steel and their products

Leading Suppliers (2017): China 20%, Japan 14.5%, US 6.8%, Malaysia 5.4%

Leading Imports-commodities: machinery and parts, crude oil, electrical machinery and parts, chemicals, iron & steel and product, electronic integrated circuit, automobile’s parts, jewelry including silver bars and gold, computers and parts, electrical household appliances, soybean, soybean meal, wheat, cotton, dairy products

Top Industries: tourism, textiles and garments, agricultural processing, beverages, tobacco, cement, light manufacturing such as jewelry and electric appliances, computers and parts, integrated circuits, furniture, plastics, automobiles and automotive parts, agricultural machinery, air conditioning and refrigeration, ceramics, aluminum, chemical, environmental management, glass, granite and marble, leather, machinery and metal work, petrochemical, petroleum refining, pharmaceuticals, printing, pulp and paper, rubber, sugar, rice, fishing, cassava, world’s second-largest tungsten producer and third-largest tin producer

Top Agricultural Products: rice, cassava (manioc, tapioca), rubber, corn, sugarcane, coconuts, palm oil, pineapple, livestock, fish products

Comparative Economic Indicators – 2020

Thailand Vietnam Cambodia Laos Malaysia China
Population (millions) 68.69 98.7 16.9 7.4 32.6 1,394.0
Population growth (%) 0.25 0.84 1.4 1.4 1.3 0.3
GDP – PPP* **(USD billion) 1,1999.8 673.4 64.2 49.3 1,001.0 23,327.3
GDP per capita – PPP* ** (USD) 6,623.0 2,125.0 4,000.0 7,400 12,482 8,041
Economic growth* 2.6 6.8 6.9 6.9 4.3 6.14
Inflation* (%) 0.7 2.7 2.9 0.8 0.6 2.8
Unemployment rate* (%) 0.99 3.1 0.3 0.7 3.3 3.6
Exports (USD billions) 291.1 248.9 11.4 3.6 265.4 2,490.0
Imports (USD billions) 257.8 266.0 14.3 4.9 233.7 2,140.0
Foreign debt (% of GDP) 41.9 58.5 30.4 63.6 54.1 47.0
Currency Bhat
THB
Dong
VND
Riel
KHR
Kip
LAK
Ringgit
MYR
Yuan Renminbi
CNY
Exchange rates (per USD)
on 12/31/2020
29.93 23,070.00 4,011.41 9,261.44 4.02 6.54
Exchange rates (per EUR)
on 12/31/2020
36.76 28,332.27 4,927.00 11,373.97 4.94 8.02

* 2019 estimates
** PPP ” Purchasing Power Parity

Credit and Collections

Overseas Press & Consultants (OP&C) Evaluation:

  • Collection Experience: Fair-Good
  • Exchange Delays: 3 months
  • Preferred Credit Terms: Unconfirmed letter of credit
  • Minimum Credit Terms: open account

One-third of shipments to Thailand are on open account. One-sixth is paid for in advance; and one-sixth is covered with a letter of credit. Three-quarters of importers deposit payments locally within one month of due date. The banks process exchange transfers in three months.

ABC-Amega’s collection experience in Thailand

ABC-Amega does not get very concerned about military coups in Thailand and we have had almost no experience to suggest the country’s various coups have caused any real disruption in ongoing business relations.

Dispute Resolution

Decisions of foreign courts are not accepted or enforceable in Thai courts.

Thailand has an independent judiciary that generally is effective in enforcing property and contractual rights. The legal process is slow in practice, however, and litigants or third parties sometimes affect judgments through extra-legal means.

Thailand has a civil and commercial code, including a Bankruptcy Act. Monetary judgments are calculated at the market exchange rate.

Thailand has signed the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, but has not yet ratified that Convention. Thailand is a member of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NY Convention), however, and enacted its own rules on conciliation and arbitration in the Arbitration Act of 1987.

The Bankruptcy Court Act established a specialized court for bankruptcy cases. Today the Central Bankruptcy Court has jurisdiction over all bankruptcy cases, civil cases related to bankruptcy cases as well as criminal cases related to bankruptcy cases. Even though the law provides that Regional Bankruptcy Courts may be established, until today, there is only the Central Bankruptcy Court which has jurisdiction over cases related to bankruptcy. Therefore, civil courts in other provinces may transfer a case to the Central Bankruptcy Court if the case is related to bankruptcy.

Bankruptcy procedures in Thailand can only be spearheaded by a creditor against a debtor who is regarded insolvent and owes more than 2 million Baht in the case of B2B, or more than 1 million Baht in the case of consumer. Bankruptcy procedures take place in the Central Bankruptcy Court, Court of First Instance. Appeals go to the Supreme Court. An appeal against a judgment or order of the Central Bankruptcy Court can be submitted to the Central Bankruptcy Court within one month after pronouncement. The Central Bankruptcy Court shall proceed and pronounce a decision in an expeditious manner. If a party is in default of appearing in court, special rules apply to the disadvantage of the absent party.

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Risk Assessment

Coface Country Risk Rating: A4 — Changes in generally good, but somewhat volatile political and economic environment, can affect corporate payment behavior. A basically secure business environment can nonetheless give rise to occasional difficulties for companies. Corporate default probability is quite acceptable on average.

Credendo Political Risk Rating: 2 – low risk
Credendo Commercial Risk Rating: C – highest risk

Business Climate

Since 2001, Thailand’s trade policy has focused on promoting free trade through regional, mainly bilateral, arrangements with China, Bahrain, India, Australia and New Zealand. Negotiations started with the US in 2004 remain suspended. Thailand is an active member of ASEAN.

Thailand is a member of the WTO and, politically, foreign investment in Thailand is seen as a means for the country to promote economic development, technology transfer and employment. Thailand is generally considered to be a business-friendly economy and has for several years been able to offer favorable investment incentives to foreign businesses (e.g. tax exemptions, especially if the investment includes new technology or is located in a less developed area) and good investment protection compared to many other countries in the region.

Conducting business in Thailand is in some respects comparatively easy. For instance, it takes an average of only 33 days and eight procedures to start a business in Thailand, as compared to 47 days on average in East and Southeast Asia. However, it is recommended that companies seek qualified legal advice when entering the Thai market, because Thai business regulations are governed by criminal law rather than civil law.

Thailand’s assets include: exceptional geographical situation, social stability, expanding and diversified industrial base, high-quality infrastructure, good transport links and a revamped legal system.

In recent years Thailand has faced competition from neighboring countries like China and Vietnam, having long capitalized on the low cost of Thai labor as the main comparative advantage. Now, the government is looking to attract high added value activities and companies as a way to meet the challenges that come from Thailand’s rise in the value chain as the country gains more economic power.

Customs Duties and Quotas: Thailand has gradually reduced import quotas under its WTO commitments, replacing them with tariff quotas and fairly high customs duties. The average rate of customs duty is currently 8.8 percent for industrial goods and 25 percent for foodstuffs. These average rates, however, veil relatively high levels of tariff protection.

Market Access: Market access in many sectors remains difficult and fairly restricted via high customs and excise duties (176% for wines), as well as technical, regulatory and administrative non-tariff barriers (mandatory import licenses for foodstuffs, cosmetics and drugs, sector restrictions on foreigners, limited protection of confidential data for pharmaceuticals, etc.).

Economic Freedom: Thailand’s economy is 69.4 percent free, according to 2020 Index of Economic Freedom, which makes it the world’s 43rd freest economy. Thailand is ranked 11th out of 42 countries in the Asia-Pacific region, and its overall score is higher than the regional average. Thailand enjoys high scores for business freedom, government size, and especially labor freedom. Thailand could do better in monetary freedom, investment freedom, and freedom from corruption.

Transparency of Regulatory System: Despite the good intentions of most regulatory regimes, consistent and predictable enforcement of government regulations remain problematic for investment in Thailand. Bribes to civil servants responsible for regulatory oversight and enforcement remains a common practice to expedite transactions. Firms that refuse to make such payments can be placed at a competitive disadvantage. However, most observers believe that the overall trend toward transparency in regulatory enforcement is positive, especially for foreign-owned businesses.

Protection of Property Rights: Property rights are guaranteed by the Constitution against condemnation or nationalization without fair compensation. Secured interests in property are recognized and enforced.

Intellectual Property Protection: Counterfeiting and piracy continue to plague intellectual property rights owners in Thailand. Particularly problematic sectors include optical media piracy of films, music, and software, end user computer software piracy, cable and satellite television piracy, textbook piracy, and counterfeiting of pharmaceuticals, apparel and luxury goods. The lack of sustained and coordinated enforcement and prosecution are key problems.

Foreign Exchange: From the onset of the Asian crisis in 1997, the baht has been floating against the dollar. Anxious to maintain the local currency’s stability, the central bank intervenes only on an ad hoc basis to cushion sharp fluctuations, and limit off-shore transactions, of the baht.

Conversion and Transfer Policies: Thai nationals are subject to quantitative limits on the amount of foreign currency that can be remitted abroad without specific permission of the Bank of Thailand. The limits vary depending upon the purpose of the transaction.

Corruption: Thailand has laws to combat corruption and is a signatory to the U.N. Convention against Corruption, but has delayed ratification pending a review of legal issues. According to Transparency International’s 2020 Corruption Perceptions Index, Thailand scored 36 out of 100; with zero being the most corrupt and 100 the least. Globally, Thailand ranks in as the 104th least corrupt nation out of 180 counties. Thailand has gone down two points since the 2018 index.

The main source of corruption in Thailand is ‘money politics’, a term that refers to the flow of money within the political scene. The close personal connections between politicians, civil servants, and businessmen are the backbone of networks of corruption that reach from the central government down to local governments.

American executives with long experience in Thailand advise new-to-market companies that it is far easier to avoid getting started with corrupt transactions than to stop such practices once a company has been identified as willing to operate in this fashion. American firms that comply with the strict guidelines of the US Department of Justice Foreign Corrupt Practices Act are able to compete successfully in Thailand.

Political Violence and International Disputes: The government has suffered a number of primarily bloodless military coups. It is currently embroiled in a tense military stand-off with Cambodia along a section of their common border.

For more detailed information on these topics, visit the 2020 Investment Climate Statement: Thailand, of the U.S. Department of State or the Thailand Corruption Report in the Risk and Compliance Portal.

Business Protocol

The Wai: The wai is the common form of greeting in Thailand and requires adherence to strict rules of protocol. The standard form involves raising both hands, palms joined with the fingers pointing upwards as if in prayer, then lightly touching the body somewhere between the chest and the forehead, The wai is both a sign of respect as well as a greeting and can be done while sitting, walking, or standing. Respect and courtesy are demonstrated by the height at which the hands are held and how low the head comes down to meet the thumbs of both hands. The person who is junior in age or status is the first one to offer the wai. The senior person returns the wai, generally with their hands raised to somewhere around their chest. If there is a great social distance between two people, the wai will not be returned.

Business Cards: Business cards are given out after the initial handshake and greeting. In theory, you should give your card to the most senior person first. It is advisable to have one side of your business card translated into Thai. Use your right hand to deliver your business card with the Thai side facing the recipient.

Business Attire: Business attire is conservative. Men should wear dark colored conservative business suits. Women should wear conservative business suits or dresses. Since Thai’s judge you on your clothing and accessories, ensure that your shoes are always highly polished.

Names and Titles: Thais generally use first rather than surnames, with the honorific title Khun before the name. Khun is an all-purpose form of address that is appropriate for both men and women.

Conversation: Thai communication is formal and non-verbal communication is often more important than verbal communication. It is difficult for most Thais to say no, so you must be cognizant of their non- verbal communication. Watch your body language and facial expressions, as these will be believed over your words.

Meetings and Negotiations: Thais prefer doing business with people they respect. Relationships develop slowly and do not flourish after one meeting; it may take several meetings.

Sources for further information on doing business in Thailand

American Chamber of Commerce in Thailand

Business Guideline: Thailand, Business-in-Asia.com

Doing Business, Thailand – World Bank Group

Embassy of the United States in Bangkok, Thailand

Royal Thai Embassy in Washington, DC

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Thailand. For further information, contact [email protected].

This report represents a compilation of information from a wide variety of reputable sources.

Economic Indicators: Variety of sources including the CIA World Factbook, Coface Country Rating, Economist Country Briefings, Federation of International Trade Associations (FITA) Country Profiles.

Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Credendo

Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA’s Report on “Managing Credit, Receivables & Collections,” August 2008.

Historical Exchange Rates: OANDA.com The Currency Site.