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The EIU expects economic growth to average 4% for 2008, but drop to 1.9% for 2009. Some key risks for the Thai economy include:

i) A rise of tensions in the south of the country, which could derail efforts to boost foreign direct investment (FDI) in the country;

ii) A continued slowdown in global economic growth, which would inevitably reduce export growth, one of the key drivers of the Thai economy;

iii) Political tensions or instability, which may erode investor confidence, and

iv) High crude oil prices or a renewed hike, which would lead to high domestic retail oil prices and consequently spark higher inflation. 

Consumer price inflation is forecast to average 6.3% in 2008 due to high global food and fuel prices. In May 2008, inflation reached a decade-long peak of 7.6%.

The Thai government aims to attract investment in 6 key sectors that have been prioritised as key to the country's development. These include i) agriculture and agro-industry ii) alternative energy iii) automotive iv) electronics and ICT v) fashion and vi) value-added services (including entertainment, healthcare and tourism). Consequently, an increasing number of investors consider Thailand company formation to conduct these activities, which may be eligible for government incentives including tax breaks. Thailand Board of Investment (BoI) is the government body responsible for awarding incentives to encourage Thailand company formation.

The Thai economy is dominated by export-orientated industries. As a result, some investors choose Thailand company formation as a vehicle for an export-based manufacturing industry. Unfortunately, export revenue growth is expected to stall in 2008/2009, while demand for imports will increase. This will negatively affect Thailand’s current account position, which is expected to move in to deficit in 2009.

Manufacturing and the service sectors (including finance, education and tourism) are the two main contributors to Thailand’s GDP, at 39% and 37.9% respectively in 2007. However, trade and agriculture are still significant sectors. The majority of the GDP contribution is reliant on the export-oriented manufacturing of computers, electronics, vehicles and parts.

In 2007, foreign direct investment (FDI) flows reached US$15 billion. Despite political instability, the value of investment projects approved by the Board of Investment rose 10% year-on-year in the first four months of 2008. To encourage private investment, new laws were revealed in 2008, introducing tax cuts for small and medium enterprises, relief in property transactions and tax benefits for firms listed on the stock exchange. 

The challenges of Thailand company formation and doing business in Thailand are highlighted in the Heritage Organization’s 2010 Index of Economic Freedom, in which Thailand ranks just 66th in terms of economic freedom. That said, Thailand ranks a surprisingly healthy 12th in the world in the 2010 Doing Business Survey by the World Bank. The survey measures factors including business start up procedures, time, cost and minimum capital required to start a business. The majority of international entrepreneurs engage the services of a professional firm to handle all Thailand company formation formalities. The challenges facing Thailand is evident in its relatively poor ranking at 36th place on the World Economic Forum's Global Competitiveness Report 2009-2010, in comparison to its regional neighbors.

Refer to the following links to read more about Thailand company formation:

For more information on Thailand company formation, purchase our Asia Business Setup book. Alternatively, contact email@healyconsultants.com or call us in Singapore on (+65) 6735 0120.

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