Thursday, 06 Dec 2012
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.
On-going reforms since the 1997 Asian Financial Crisis have put Thailand’s economic fundamentals on a more stable footing. Attitudes towards risk-taking have been more measured since these reforms. Corporate and household debt levels remain moderate, financial institutions are stable, the property-market is not overheating, public finances are sound (public debt/GDP is moderate at 41% and mostly funded from long-term sources), and governance has improved. Ample foreign reserves and a robust currency add stability. Financial sector exposure to Euro banks are minimal as well.
2012 GDP growth is expected to be quite high at 5-6% underpinned by manufacturing activity given the backlog from the devastating floods in late 2011 which crippled electronics and automobile manufacturing for months. From a demand and supply perspective, recovery from the floods is taking shape well. The concerns for business operators in 2012 have shifted towards economic reforms being rolled out by the government, namely large hikes in the minimum wage, starting salaries, phasing out of fuel subsidies, as well as the end of monetary easing by the central bank (rates poised to rise from 3Q onwards).
While macro fundamentals are low-risk, many hope to see more progress on issues that matter to Thailand over the long term. These include areas such as 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$344bn (2011), 32nd largest in the world,
GDP Per capita: approx US$8,072 (world ranking: 82th)
2nd largest economy in Southeast Asia
Ranked 19th in World Bank's "Ease of Doing Business Survey 2011"
Among Top 20 most favoured FDI destination, UNCTAD World Investment Report 2010
Corruption Perceptions Index ranking: 80 out of 183 (Transparency International Corruption Perception Report 2011)
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.