FEATURE STORY: Thailand — Nuanced Nation, One-Stop Shop

Amata City Industrial Estate offers 5,692 acres and 40,000 employees in Thailand’s Rayong Province. (Photo: Thailand Board of Investment.)

By Bill Trüb
From the May/June 2013 issue

Thoughts of Thailand evoke mystique and intrigue: A vibrant, far-flung kingdom in Southeast Asia draped in exoticism and lore, never colonized, famous for its flavorful dishes and awe-inspiring temples. The land once called Siam intrigues outsiders with its own unique alphabet and its intense affection for its ailing, respected king.

Its capital, Bangkok, is a metropolitan blur of massage parlors on every corner, tuk tuks motoring through traffic as street and floating river markets trade everything from vegetables to electronics. From Ratchaprasong to Khao San Road, city streets are a consumer’s galore of souvenir T-shirts and handsomely tailored suits, keychains and precious gems. Hollywood films sell Thailand as a swatch of glorious beach by day and hedonistic indulgence by night, a lesson in exuberance. Ornate, golden statues of Buddha are found down the road from pulsating nightclubs which are a quick BTS Skytrain trip from austere monasteries and Muay Thai boxing venues. A land of contrasts, we are told.

The tsunami of 2004 also comes to mind when we think of Thailand. The 9.0 magnitude underwater earthquake on December 26th pushed walls of water into the shores of fourteen countries, eliminating entire villages and killing more than a quarter of a million people. Thailand was one of the hardest hit locales and this enduring image of destruction still haunts many today.

The “Red Shirt” political protests of 2010, which I witnessed firsthand in Bangkok, presented to the world yet another wrinkle in Thailand’s multifaceted image. During a tumultuous time from March to May, the historically stable constitutional monarchy had to deal with massive demonstrations by native Thais, who wore red shirts and occupied large swatches of Bangkok voicing dissent against the government. As the conflict intensified, I flew to Krabi, in the south of Thailand, as respite. There, limestone cliffs jut out of the turquoise gulf as long-tail boats drift from island to island. Songkran, the country’s New Year celebration in April, was in full effect, celebrated by dousing street revelers with water. The contrast between the unusual political turmoil I had just seen in Bangkok and the joyous festivities and laid-back beach vibe of Krabi was striking. I found myself marveling at the complexity of the kingdom.

You can find all of these depictions and more in this expansive nation, both lavish and humble at once. Thailand is a richly nuanced country that draws tourists from every part of the globe but it offers even more than culture, relaxation and nightlife. Many site selectors are surprised to learn the country is an economic leader in Asia and a top-shelf business destination.


In March, I flew to Thailand as part of an American Media Delegation organized by the Thailand Board of Investment (BOI). Our four-day tour was brimming with meetings, interviews and factory tours based in and around Bangkok and the seaside destination, Pattaya. The productive and insightful business component of the trip was balanced with the pleasures of Thailand’s fine cuisine and its generous hospitality industry. What I found most impressive was how organized and prepared the Thai and American owned companies were. Everyone I met, from high-ranking government officials and CEOs to front desk receptionists and chauffeurs, was courteous and professional, but moreover, adept. Their readiness to speak frankly about their business operations was refreshing. Simply put, they were expecting us. They displayed the effort necessary to ensure our meetings were informative. Many businesspeople have experienced the frustration of making a long journey only to be disappointed by a lack of preparation or care by those with whom you have appointments. This never occurred during my time in Thailand which is a credit to the work ethic, pride and proficiency of the nation’s people and its established, friendly business climate.

Thailand is the second largest economy within the Association of Southeast Asian Nations. In 2012, its GDP ($345 billion USD) experienced a 5.7 percent growth supported by its robust export industry, and it is on track to meet its 5 percent target for 2013. As the world’s 28th largest exporter, Thailand’s primary focus is the automotive sector (valued at more than $17 billion USD), followed by computers and jewelry, according to the Ministry of Commerce’s May 2012 statistics. Thailand leads the world in exporting natural rubber.

In a meeting with Ajarin Pattanapanchai, the Deputy Secretary General of BOI, she described Thailand’s economy as “market-oriented, democratic and liberal” and promoted her office as a “one-stop shop” for investors. The country’s open concept investment policy offers no restrictions on foreign currency remittances, no export requirement, no foreign equity restrictions in the manufacturing sector and no local content requirement. “Foreign owned and Thai owned companies receive the same treatment,” Pattanapanchai says. “In the past, BOI focused on job creation and promoting exports. As our economy grew stronger and we are no longer the lowest cost workforce in Asia, we focus now on sustainable development,” she says. The official BOI Investment Promotion Policy is “to promote sustainable development to enhance the country’s competitiveness in science and technology and encourage the improvement of manufacturing quality, as well as reduce environmental impact.” As such, eco-materials are a target sector.

To achieve its goal of attracting and retaining businesses, the BOI offers a variety of support services on the 18th floor of Chamchuri Square Building in Bangkok, dubbed the One Start One Stop Investment Center. It offers specific country desks with multilingual staff to cater to foreign investors and it liaises with ten in-house government ministries on behalf of investors to ensure continuity of service. The BOI even offers on-site visa and work permits, with most permits being issued in under three hours! I saw this facility in action and was impressed by its organization; clearly marked queues, attentive staff and a clean, bright space made the process of issuing visas and permits look calm and orderly.

A lucrative slate of incentives is also available to investors. The BOI offers corporate income tax holidays for up to eight years, import duty reductions or exemptions on machinery and raw materials, double deduction of public utility costs, and deductions for infrastructure construction and installation costs. Non-Thai investors are permitted to hire foreign experts and technicians and also may qualify for land ownership rights if they would prefer not to lease office space. Current rental rates for Bangkok average $29 USD per square foot per year, drastically lower than Tokyo ($173), Singapore ($105), Shanghai ($99) and Kuala Lumpur ($47), according to a CBRE Market View report from the third quarter of 2012.

These BOI incentives are available to a broad spectrum of sectors including agriculture, mining and metals, electronics, chemicals, and papers and plastics, to name a few. Projects applying for the investment promotion generally need to meet these criteria: value added of at least 20 percent of sales revenue; a debt/equity ratio of less than 3 to 1; utilization of modern production processes and new machinery; and adequate environmental protection systems. Projects with investments exceeding $17 million USD must submit a feasibility study to gain approval. The BOI has divided Thailand into three zones each with a different incentive package to accelerate development in disadvantaged regions.

Thailand also offers the second lowest corporate income tax rate, behind Singapore, in Asia. At the start of 2013, the taxable net profit rate is 20 percent, a reduction of 3 percent from the 2012 accounting year. This aggressive move puts Thailand in striking range of Singapore’s 17.5 percent.


On March 5, I had a fruitful discussion with Judy Benn, the executive director of The American Chamber of Commerce in Thailand. Currently, more than 700 US companies operate in Thailand with a total investment of approximately $45 billion USD. Oil and gas powerhouse Chevron contributes the bulk of that total with $25 billion, while Ford and General Motors stake $2.5 billion and $1.5 billion respectively. These two automotive heavyweights attract numerous first and second tier parts suppliers, most of which locate their facilities in one of Thailand’s 60 industrial parks nearby vehicle production sites to ease product shipments. Citibank is the largest American retail bank in Thailand while Western Digital, a computer hard drive manufacturer, is the largest employer of Thai nationals (approximately 25,000 people). Corporations from various industries, such as KPMG, General Electric, Coca-Cola, McDonald’s, and Johnson & Johnson, are found in Thailand.

General Motors operates a manufacturing plant in Thailand’s Rayong Province. (Photo: Thailand Board of Investment.)

Benn spoke frankly about the advantages and challenges experienced by American Chamber companies operating in Thailand. “The location is number one,” she said, “as Thailand is a springboard into Laos and Myanmar.” While BOI incentives are a positive factor, so is the nation’s solid transportation infrastructure. With seven international airports, Bangkok’s Suvarnabhumi Airport is the largest, flying 45 million passengers plus a 3-million ton cargo capacity per year. Of Thailand’s nearly 200,000 kilometers of roadway, 70,000 kilometers constitute a vast highway network. And the country’s rail system is burgeoning, currently covering more than 4,346 kilometers, including tracks to Malaysia and Singapore. “Plans are in place to continue growing our rail links. We want to be more like Europe,” added Pattanapanchai. As for waterways, Thailand offers six deep sea and two international river ports to solidify its role as a major player in the global import/export marketplace.

Benn also cites relative political stability as a reason so many companies choose and remain in Thailand. “The 2010 protests didn’t really effect business,” she said. “Business here continues despite what goes on with government,” which certainly is not true in all corners of the globe.

Labor force in Thailand presents a quandary, according to Benn. “Here we have the lowest unemployment rate in the world [0.6 percent as of February 2013]. The number one challenge facing US companies is the inability to find enough skilled and unskilled laborers.” Compounding this issue of scarcity is the government’s controversial minimum wage hike implemented at the start of this year. Employers are now required to pay all employees at least 300 baht ($10 USD) per day and they face jail time or a 100,000 baht fine for non-compliance. Because neighboring countries offer a much lower minimum wage ($2 per day in Cambodia, 58 cents in Myanmar), some experts worry companies in Thailand may turn to informal labor from foreign migrant workers, which could increase poverty levels and cost of living within the kingdom. In sum, Benn called Thailand’s labor laws “problematic”. She also believes Thailand must grow its service sector in order to support its growing economy. All in all, however, the American Chamber of Commerce in Thailand is going strong.


Did you know half of the world’s computer hard drives are manufactured in Thailand? Fifty-year-old computer hard-disk drive manufacturer, Western Digital (WD), entered the Thai market in 2002 and has since taken it over (with 45 percent of market share) alongside competitor Seagate Technology. In March 2012, WD merged with Hitachi, a move that WD Thailand’s Senior Vice President of Hard-Disk Drive Operations Joe Bunya jokingly called, “a marriage without spending time in the same bedroom.”

In January, California-based WD CEO Timothy Martin Leyden announced a $200-million USD expansion for its operations in Thailand’s BangPa-in Industrial Estate in Ayutthaya Province, which I visited on March 5th. These allocated funds will introduce new, preciser robots and machinery in anticipation of future electronic goods shrinking in size. This year, WD projects it will produce 735 million hard drives in Thailand, most of which will be exported to China.

But Western Digital’s expensive Thai operations were jeopardized in October 2011 when severe flooding inundated much of the land to the north of Bangkok. Seven feet of water surged through the industrial estate and did not recede for 46 days. The company’s employees rallied together to literally save their business and their own livelihoods, many rowing boats to work during the flood to save electronics, minimize damages, clean up and reopen as soon as possible.

In response to this natural disaster, the company enacted a four-pronged flood prevention program which involved relocating key equipment to the second floor, relocating some manufacturing to Malaysia, building dykes at the industrial estate and adhering to the Thai government’s Flood Mitigation Plan. WD also spent $20 million USD to construct a flood wall around the perimeter of its facility. The ground floor is now used only for shipping, with product testing on the second floor and assembly on the third, complete with cleanrooms and labs.

Before the 2011 flood, WD employed 38,000 workers in Thailand but now that number is down to 25,000 as a result of moving some operations to Malaysia to diversify risk. Of those 25,000 workers, 2,000 are university graduates working as engineers and office support staff. Bunya understands the partial corporate shift into Malaysia but notes that because Thais are a homogenous people, they are easier to manage. Malaysia has three main ethnic groups with different cultures, languages and traditions that sometimes encumbers communication, he believes. He also agrees that the government minimum wage hike in Thailand has a huge affect on his labor-based operations.

“Many of our suppliers are in Singapore, Malaysia and China which causes more inventory, longer pipelines and results in a higher price of product,” says Bunya. But WD learned from the flood and relishes the security of having facilities in different parts of Asia. “It’s like the flood washed away all of our sins,” he says, “and let us start over.”


During my media tour, I visited two industrial parks in Rayong Province: the Eastern Seaboard Industrial Estate (Hemaraj) and Amata City Industrial Estate.

Hemaraj operates seven industrial estates across 14,500 acres in Thailand and its Rayong location is known as “Detroit of the East” due to its heavy automotive manufacturing presence. One hundred and seventy four of its 555 distinct clients (approximately 32 percent) work in the automotive sector followed by petrochemical companies which comprise one-tenth. Listed on the Thai Stock Exchange, Hemaraj has been in business for 25 years and has a consumer investment valued at $25 billion USD. Thirty-eight percent of its clients are Japanese-owned companies, 21 percent Thai, 11 percent European, 10 percent American, 5 percent Australian and 2 percent Chinese, among other regions.

Ford Motor Company operates its manufacturing facility at Hermaraj’s Eastern Seaboard Industrial Estate in Rayong Province, Thailand. (Photo: Thailand Board of Investment.)

Hemaraj’s Rayong site boasts major auto players such as Ford, Mazda, General Motors and Suzuki, making it the largest auto cluster in Thailand. This location alone will produce and export 800,000 vehicles per year through 2015. Ford is the largest investor ($500 million USD) and will produce 150,000 units per year, primarily its popular car, the Focus. General Motors manufactures 160,000 vehicles per year, most of which are pickup trucks. Suppliers of all types have flocked to Hemaraj’s industrial estates to remain in close proximity to the automotive giants. Everything from driveshafts to wheel parts, brake systems to interior console panels, engines and transmissions to electrical systems are manufactured within the ever-expanding borders of Hemaraj. Fifteen of the world’s 25 largest auto suppliers can be found in this Eastern Seaboard cluster. During my visit, I toured American Axle & Manufacturing’s facility and was impressed by its spotless assembly plant and safety-oriented approach to employee well-being. American Axle is a $3.2 billion USD company with manufacturing facilities in 29 countries.

The second industrial estate I toured was Amata City’s Rayong location (it also operates a second site called Amata Nakorn in Chonburi). This business park focuses on the eastern seaboard of Thailand and Vietnam; the Rayong estate offers 5,692 acres and hosts 40,000 employees of various companies. Located 99 kilometers from Suvarnabhumi Airport and 27 kilometers from Thailand’s biggest industrial seaport, Laem Chabang, Amata City’s prime location to shipping routes makes it an appealing destination for many global brands. Japan is its largest tenant, occupying 29 percent of investment in Amata City, but 27 nations are present, creating an international climate on the premises. Among its 213 clients are BMW, Sony Mobile, Pepsi-Cola, Toyota, Colgate Palmolive, Bridgestone, Sumitomo Rubber and Triumph Aviation.

The American media delegation, including BF correspondent Bill Trüb (second from left), visited Thailand in March.

Established in 1989 and listed on the Thai Stock Exchange in 1997, Amata City offers BOI Zone 3 investment privileges. The BOI heavily incentivizes eco-car parts in an attempt to lower production costs for manufacturers. The five BOI-promoted companies for eco-car manufacturing are the Nissan March, the Honda Brio, the Suzuki Swift, the Mitsubishi Mirage and a Toyota model to be launched this year.

It’s no surprise that Thailand and its industrial estates are rigorously capitalizing on its leading export sector: automotives. With 690 Tier 1 auto parts suppliers and 1,700 Tier 2 and 3 suppliers, the industry has seen a substantial boom since the Thai government drastically deregulated the sector following Asia’s financial crisis of 1997. Some wonder how much longer Thailand can be a regional automotive leader. But according to a Boston Consulting Group study referenced in April on The Economist online, Thailand outranks nearby rival Indonesia on important metrics such as competitiveness, infrastructure, business environment, tax incentives, and labor costs. I think it is safe to say Thailand’s auto industry is a safe bet for the foreseeable future.