Thailand unveils 'relocation package' to draw firms hit by trade war

In a photo taken on July 22, 2019, a worker cleans the floor near a TV assembly line at a factory in Bangkok. PHOTO: REUTERS

BANGKOK (REUTERS) - Thailand announced a relocation package on Friday (Sept 6) to attract foreign companies looking to moved production due to intensifying US-China trade tensions, seeking to compete with Vietnam to lure manufacturers hit by tariffs.

The Thai government seeks to boost Southeast Asia's second-largest economy which grew at its weakest annual pace in nearly five years in the second quarter as exports tumbled.

The package, approved by the economic cabinet, includes tax incentives, special investment zones and changes in laws that would facilitate foreign investment, particularly from China, Japan, Taiwan and South Korea, the Board of Investment (BOI) said in a statement.

"We are confident that these incentives will definitely make us more competitive than Vietnam," Kobsak Pootrakool, secretary of the economic cabinet, told reporters.

"Our tax incentives are not less than theirs, but we need to work on free trade agreements," he said.

The new package will offer a 50 per cent corporate income tax reduction for another five years for firms with real investment of at least 1 billion baht (S$45 million) who apply for the incentive by 2020.

It will also offer a higher tax deduction on advanced technology training and for investment in automation.

Thailand already offers firms in the Eastern Economic Corridor (EEC) a corporate income tax (CIT) exemption of up to 13 years and a 50 per cent tax reduction of up to five years. The current CIT is 20 per cent.

Vietnam's standard corporate tax is 20 per cent, but targeted firms will be offered a 10 per cent tax for 15 years, a tax exemption for four years and a 50 per cent tax reduction for nine years. Some are offered more generous perks.

Charnon Boonnuch, economist of Nomura in Singapore, said the package is missing a "concrete implementation plan" and a tax incentive alone may not be able to promote an investment if the implementation of the EEC projects remains sluggish.


Thailand is already attracting some foreign firms looking to relocate production from China to escape US tariffs on Chinese goods.

But Vietnam appears to be the top destination for firms hit by the trade war, because of lower wages and land prices.

Thailand has been on the list of courtiers where foreign investors are looking to invest but its investment process and regulations have made investors go elsewhere, Kobsak said.

"We've always been a bridesmaid, never been a bride."

The government will set up a committee for "one stop service" to facilitate foreign investors and tackle their obstacles in order to drive investment and improve the country's ease of doing business, Kobsak said.

The commerce ministry will rush to finalise Thailand-EU free trade agreements and the country's participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), he said.

Duangjai Asawachintachit, head of the BOI, said the package would help the agency reach its target of 750 billion baht in overall investment pledges this year and help foreign investors make quick decisions.

The BOI is aiming to attract 100 companies, mostly Chinese firms.

Kobsak said the investment package plus a previously announced US$10 billion stimulus will help lift economic growth to 3 per cent this year, after last year's 4.1 per cent expansion.

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