Wednesday, 06 Nov 2013
Overseas Business Risk - Thailand
Political and Economic
A general election was held in Thailand on 3 July 2011. The election took place without serious incident but there remains some risk that political developments may lead to instability. We advise you with the FCO travel advice, monitor the local media, stay in touch with your travel company if you have one and avoid demonstrations.
The political situation in Thailand is unpredictable and sometimes volatile. Over recent years there have been instances of civil and political unrest resulting in large-scale demonstrations and, in some cases, violence. British nationals should exercise caution throughout Thailand and avoid demonstrations or large gatherings, which may turn violent.
Since January 2004, there have been almost daily attacks in the four southernmost provinces of Thailand. These include arson, bombings and shootings. Targets have included civilians and members of the security forces, government offices, tourist hotels, discotheques and bars, shops, marketplaces, supermarkets, schools, transport infrastructure and trains. Over 5000 people have been killed and several thousand more injured. No British nationals have been killed in these attacks, but some foreign citizens have been killed and injured.
Martial law remains in place in the provinces of Pattani, Yala, Narathiwat and Songkhla and we advise against all but essential travel to them.
2013 GDP is likely to grow by only 3.7%, markedly slower than the 5% growth rate expected, due to worse than expected performance from exports and a slowdown in consumer spending. Export revenues for the first 9 months achieved no growth as demand from both developed markets and regional trade partners were weak. This is also coupled by a fall in rice exports; market mechanisms continue to be distorted by an unsuccessful rice-price pledging programme that wound up as stagnant stockpiles.
The domestic economy, particularly consumer spending, dropped sharply after flood-related replacements and the government’s stimulus measures ended in 2012. Household debt among lower-income consumers have also ballooned, prohibiting further spending. Commercial banks have tightened credit card loans and mortgages, effectively dampening consumption.
Most components of Thailand’s macro-economic fundamentals remain sound such as corporate financial standing, stable currency, moderate inflation, low employment, healthy property market, public finances, public debt to GDP, capital markets, non-performing loans, and liquidity. Some deterioration seen in the aforementioned household debt levels, quality of loans on the books of state banks used to implement populist policies, and the potential losses stemming from the government’s rice-priced pledging scheme. On balance, most expect problems can be accommodated by the economy and 4% growth per annum going forwards is possible; Thailand pins hopes on 2.2 trillion Baht infrastructure spending over the next 7 years as new driver.
Long term, critics call for strengthening of new pillars for the economy as the two-decades old export-driven formula powered by foreign direct investment could eventually be vulnerable. Desirable reforms need to address political instability, corruption, the need for better soft infrastructure (laws and education), logistics infrastructure (logistics is 18% of GDP as opposed to 9-12% for developed nations), a clearer long-term economic vision, and investment in human resource development, R&D (investment in R&D is a mere 0.21% of GDP compared to 2-3% for developed nations), skills and competitiveness.
Key figures at a glance:
GDP: US$366bn (2012), 32nd globally
GDP per capita: US$5,116 (2012), approximately 82nd globally
2nd largest economy in Southeast Asia
Ranked 18th in World Bank's "Ease of Doing Business Survey 2014"
Among Top 20 most favoured FDI destination, UNCTAD World Investment Report 2010
Corruption Perceptions Index ranking: 88 out of 176 (Transparency International Corruption Perception Report 2012)
Business and Human Rights
There are few human rights concerns in relation to business and employment in Thailand. Trade unions are legal – although fairly inactive - and workers have the right to strike. Farmers also have access to banks, although generally opt not to use them. One area of concern, however, is the treatment of migrant workers. There are an estimated 2.5 million migrant workers in Thailand. Over 2 million are from Burma and the majority are unregistered. Most are employed in the construction and fishing industries or as domestic help. The Thai Government runs a verification process for migrants, but uptake has been low with the majority of migrants remaining illegal. As such they are denied access to healthcare or the minimum wage. There have been many reports of exploitation of illegal migrants and organised trafficking.
Bribery and Corruption
Corruption remains an issue in Thailand. Anyone doing business may well encounter or hear of corruption in one form or another. Practices including facilitation payments, bribes and the giving and receiving of expensive gifts in order to develop business relationships are still a problem in certain areas. UKTI and FCO advice to companies encountering corruption is simple – don’t get involved. Bribery is illegal. Companies should ensure that all their commercial activities in Thailand are compliant with the UK Bribery Act which came into force on 1 July, 2011.
The principal threat of terrorism in Thailand comes from the violent separatist insurgency which erupted in 2004 in the south of the country. There are almost daily attacks in the four southern provinces of Narathiwat, Songkhla, Pattani and Yala, near the Malaysian border. Incidents have included arson attacks on government property, placement of bombs in public areas near government offices and the killing of police and security forces personnel.
There is no indication that Westerners or Western businesses are deliberately targeted, but recent violence in the region has seen the targeting of public areas where foreigners may congregate or frequent. Attacks may be indiscriminate and foreigners risk becoming caught in the crossfire. Periodic violent incursions in the border regions with Burma and Cambodia also pose a threat to business operating or personnel travelling in the area.
Protective Security Advice
Man reading business newspaper
As a member of the World Trade Organisation (WTO), Thailand is committed, under the auspices of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, to provide the effective and appropriate enforcement of IPR. The Thai Government has been taking systematic measures to reduce IPR violations in every sphere of business activity, including producing, distributing, selling, importing and exporting.
Despite robust legislation being in place, counterfeit documents and goods (i.e. clothing, jewellery and pirated software, CDs /DVDs etc) are openly on sale. High profile raids and arrests by Thailand’s law enforcement agencies of producers and vendors of counterfeit goods do regularly take place, but these typically do not target the main source of the counterfeit items.