Thailand faces tougher competition for high-tech foreign investments as election jitters mount

The BYD Atto 3 EV car displayed in Bangkok. At stake is the chance to tap into the investment exodus from China. PHOTO: REUTERS

BALI – In the run-up to Thailand’s elections in May, the new head of the country’s board of investment has vowed to stay the course on policies geared towards attracting high-tech industries.

Thailand is offering tax holidays of as long as 13 years for investments in biotechnology and electric vehicles (EVs) in its attempt to woo higher-paying jobs and innovation, Mr Narit Therdsteerasukdi, secretary-general of the Board of Investment (BOI), told The Straits Times in an interview last week.

He noted that the country’s investment policy and “investor-friendly” attitudes to business hardly wavered during his nearly 30 years at the BOI, during which there were no fewer than two military coups, months of mass protests and a new king.

“When we have an election or a new government, the investment policy of Thailand is still consistent. It still welcomes investors,” said Mr Therdsteerasukdi, who took over as head of the agency in October.

“I believe that every government, every party will continue to promote foreign investment in Thailand.”

Investment Exodus

At stake is the chance to tap into the investment exodus from China, where three years of escalating Covid-19 lockdowns – only recently reversed – have spooked investors.

In October, for instance, the Chinese authorities shut down Foxconn’s Apple iPhone factory in Zhengzhou, central China, the company’s biggest such facility, owing to Covid-19 measures.

By the time work resumed there in December, the Taiwanese electronics assembler said it would spend US$500 million (S$657 million) to expand its only iPhone factory in Chennai, India, which it had opened three months previously.

India’s improving transport infrastructure and political stability owing to the dominance of the ruling Bharatiya Janata Party will make it more attractive to investors, vis-a-vis South-east Asia, the Economist Intelligence Unit said in a report in January.

For Thailand, foreign direct investment (FDI) inflows have yet to recover to their heady levels before the military seized power in 2014 to install Mr Prayut Chan-o-cha, the country’s Prime Minister.

FDI during the first nine months of 2022 tallied nearly US$50 billion, putting it on track to match the US$64.5 billion that flowed into Thai banks from overseas investors in 2021. Even so, that is a far cry from the US$92 billion foreign investors poured into the country in 2013.

Any political instability surrounding its elections in May will add to Thailand’s headaches, ANZ economist Khoon Goh told ST.

“It will have an impact on companies planning on undertaking major long-term investment – especially when it comes to considering relocation from China,” Mr Khoon said, referring to any election-related turmoil.

“Other countries in the region have been actively courting FDI, particularly India.”


As well as offering lengthy tax holidays, Thailand is aiming to replace 30 per cent of all cars on the road with EVs by 2030. It is offering subsidies and tax breaks to consumers of up to 150,000 baht (S$6,000) per vehicle, including imports. A programme to install 9,000 recharging stations across the country is nearing the halfway mark.

In an effort to attract the scientists, professionals, designers and other skilled labour that can support the country’s emerging high-tech economy, Thailand introduced decade-long visas that cap income tax rates at 17 per cent for the holder. The government hopes to attract one million highly skilled expatriates over the next five years.

“This investment is very important to our economy,” Mr Therdsteerasukdi said.

“We would like to move up the value chain to an economy that is more technology-based and innovation-driven.”

The incentives aim to cultivate a domestic market for electric vehicles, attracting parts and service providers, which in turn draws exporters.

Foxconn, for instance, is a partner in a joint venture, Horizon Plus, that plans to invest between US$1 billion and US$2 billion to open an electric vehicle assembly plant that will eventually churn out 150,000 to 200,000 cars a year.

Last September, China’s BYD Auto announced it would build its first overseas electric vehicle assembly plant in Thailand’s eastern province of Rayong, a 17.9-billion-baht-factory to make a similar number of EVs.

While still less than 1 per cent of Thailand’s overall vehicle market, sales of EVs jumped fourfold to 21,000 units in 2022.

“Decisive Factor”

For BYD, the rapidly expanding charging infrastructure and incentives, coupled with Asean’s biggest automotive production base, helped tip the scales in Thailand’s favour, the company’s local general manager told ST.

“Thailand’s development environment for electric vehicles was a decisive factor,” said Mr Ke Yubin, BYD’s general manager for Thailand.

“The Thai government is taking the time to develop charging infrastructure, build a smart grid and adopt a number of policies such as tax breaks for electric vehicles.”

The government is also targeting investment in food processing, biofuel, bioplastics, biotechnology, renewable energy and recycling. Dubbed the biocircular green economy, Thailand expects the space to make up a quarter of the country’s gross domestic product.

Last August, Austrian textile giant Lenzing opened its new €400 million (S$571.5 million) factory in Prachinburi, Thailand – the world’s largest production plant for lyocell, a semi-synthetic fibre used as a substitute for cotton or silk.

Thailand is not the only South-east Asian country to be facing political uncertainty in 2023, Mr Marco Forster, head of Asean Advisory at business services consultancy Dezan Shira and Associates, told ST.

Vietnam’s leadership is in upheaval following the resignation on Jan 17 of its president, Mr Nguyen Xuan Phuc, and four deputy prime ministers earlier in the month. New governments have also taken power in both the Philippines and in Malaysia.

In Indonesia, no obvious successor has emerged to take over from President Joko Widodo, who is constitutionally required to leave office in 2024 owing to term limits.

“Many investors stay in Thailand because the past coups and uncertainties haven’t affected business too much,” Mr Forster said. He added that “Thailand’s neighbours don’t exactly embody political stability”.

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