By Arno Maierbrugger/Gulf Times Correspondent/Bangkok

 

Thailand, under military rule, is seeking to boost its crippled economic growth by significantly changing regulations and incentives for domestic and foreign investors.

At a meeting on August 19, which was chaired by the country’s junta chief and newly appointed Prime Minister General Prayuth Chan-ocha, the Thai Board of Investment (BoI) approved a new investment strategy for the period from 2015 to 2021, which aims at pushing value-added manufacturing, high-tech and ecological projects together with a stronger focus on research and development, as well as on small and medium enterprises.

This means for investors that tax incentives and waivers of import duties on machinery and raw materials for certain assembling or processing industries will no longer be granted if the businesses do not fulfil the new criteria for what the BoI defines as “quality investment”.

Existing designated investment zones in the country will be scrapped and replaced by industrial “clusters” with a business focus depending on the region where they are being set up. While the seven sectors where investment is incentivised are remaining the same — agriculture and agro-industry; minerals and metal; light industry; machinery and transport equipment; electric and electronics equipment; chemicals; plastic and paper; as well as services, utilities as infrastructure —  the BoI has set certain criteria for businesses to be eligible for investment promotion that are linked to deploying advanced technology and/or replacing old machinery, setting up research and development facilities and using environmentally-friendly techniques.

According to BoI Secretary-General Udom Wongviwatchai, the new strategy will come into effect as early as at the beginning of 2015, “aiming to make Thailand a more attractive investment destination and lay the foundations for sustainable growth.”

Thailand’s economy is still suffering from the effects of a political impasse that began late last year and culminated in a military coup in May 2014. The country’s economy shrank in the first quarter of 2014 and could closely avoid recession in the second quarter. The junta is now trying to bring the economy back on track, having scrapped a number of projects initiated by the former government deemed unnecessary and introducing stimulus measures “to improve investor sentiment”.

However, despite improved political conditions in the sense that there are no more violent street protests, private investment remains weak as uncertainty about the future political direction Thailand will take is still prevalent, let alone about the martial law under which the country is currently governed.

As far as Middle Eastern investors are concerned, the new regulations could bring with them opportunities in the halal sector, a quickly growing global industry which Thailand increasingly aims to tap not just in the food sector, but also in innovative product niches such as halal pharmaceuticals, cosmetics, fashion products and hospitality services.

Increasing global demand for halal products and services has already prompted producers to make more investments in research and development in the sector, and related investments are certainly eligible for incentives through the BoI, particularly in the southern Muslim regions of Thailand where an investment promotion programme has been extended to create a production and trade hub for the Thai halal industry.