Plant Manufacturing in Thailand
CLIENTS
Etienne BIROT
Antoine CAMELIO
Geoffrey DUC
Pierre-Olivier JARRIN
Romain MONS
Johann SEDIVY
Jerome TRAN
CONSULTANTS
Céline BÉZZINA
Marion CHAMPIGNY
Barkan COHEN
Anna MONTAUBAN
Cédric MARTINEZ
Laura MASERO
Maxime WASSELIN
Lennart Rudstrom – SKEMA Business School – March 2011

Etienne BIROT
Antoine CAMELIO
Geoffrey DUC
Pierre-Olivier JARRIN
Romain MONS
Johann SEDIVY
Jerome TRAN

Establish a manufacturing plant in Thailand

Establish a manufacturing plant in Thailand



6.a
• Government :
Imposes law taxations. Chambers of commerce: CCIFE, can help the creation of manufactures abroad
• Customers :
B2B. A lot of potential customers: computers manufacturers , video games and playstations companies, etc. Global business
• Suppliers :
Foxconn, Texas instrument, flextronics, Jabilcircuit, and all the famous electronic components manufacturers
• Employees and Trade Unions :
Have been existing since december 24th 2010. Not very powerful for the moment
• Investors :
Banks, GIE

6.b
Political instability since 2006.
High political tension in April and May
2010 (fear of civil war).
Business climate plagued by the continuing links between business and political circle.
According to the COFACE, Thailande is not a risky country but suffer from a large manufacturing concurrence with China.

Political
-Very strong political risks: military putsch, riots, and other tensions
-Increases every year, very touchy since 2009 and the last ritos
-Consequences: exportations blocking, strikes, losses =>
Bankruptcy
Legal
-Not possible to set up an individual society -> Limited company (7 associates max)
-Maximum foreign share part: 49%
For 1 foreign employee, 4 local workers
Economical
-Highest GDP growth in Asia in
2010 : 8 %
-2 nd largest economy in Southeast
Asia after Indonesia
-4 th richest nation according GDP per Capita
-Electronic industry is the first industry in Thailand with 15% of
GDP
-Thailand’s electronic industry faces competition from Malaysia and Singapore
-Thailand: member fondator of
ASEAN
Technological
-Easy access to new technologies:
Asia many IT companies which provide new technologies and innovation.
-Integration of new/existing technologies in hard disks, extensions of line products (Cloud computing (Iomega), Home Media, Smart experience/design/connections…)
Environmental
-Peripheral ITs very polluting => long recycling process but a key issue for air and water pollution
(-95% and -97%)
Ex: Recycling one hard drive saves enough energy to run your television for 102 hours
Social
-Working conditions and labour issues
-Time: An average working week is
48 hours, from monday to Saturday
-Salaries: average salary: 226 USD, overtime work paid *1,5 ->*3
-No retirement/pension system

8.a
High Low
High
High

8.b
High
High competitive market
Low
Saturated market
Medium
Development of servers, virtualization
High
Many customers
High

Céline BÉZZINA
Marion CHAMPIGNY
Barkan COHEN
Anna MONTAUBAN
Cédric MARTINEZ
Laura MASERO
Maxime WASSELIN

11
Constitutional monarchy
Many political actors
Demonstrations of Red skirts and Yellow skirts:
- Material damages
Religous confrontation
No decrease of foreign investments
Elections in 2011

12
• In Thailand, foreigners not permitted to own the land
• Foreigner shareholder : can’t hold more than 49%
=> a lot of restrictions to investors
• But there are… solutions :
– Purchase of land through a Thai spouse
– Long-term leasing in partnership with a Thai
– Becoming a resident in Thailand
• Interrogations : is Thailand the right place to create from scratch a hard-drive company?

13
The contracts employment is governed by The Labor
Protection Act 1998 (LPA)
Wages : around 7.730 THB (226 USD)
The employment of foreigners is governed by regulars to protect the domestic labor market working hours :
- limited at 8 hours per day or 48 hours per week
Many unions are recognized and there are many labor organizations

14

15
• Foreign investment is welcome:
– Various incentives through the Board of Investment (BOI) and the Industrial
Estate Authority of Thailand (IEAT)
• Investment incentives or guarantees :
– Value Added Tax (VAT) is applied at a rate of 0% to exported goods
– Import duty imposed can be refunded
– Import duty reduction/exemption on machinery and raw or essential materials corporate income tax exemption for one to eight years
– Double deduction from taxable income of transportation, electricity, and water costs
– Tax exemption for dividends paid out of the exempted profits during the tax exemption period
– Tax exemption for fees for goodwill, copyright, or other rights received from a promoted activity
• As an Industrial operators :
Facilities to obtain work permits for foreign technicians and
Facilities to take or remit foreign currency abroad
Concerning Investment Regulations, you will get lot of advantages in order to develop your activity

16 T
Joint venture
2 kinds
Sole proprieto rships
Private
Limited
Company
Structures for setting up a plant
Unlimited
Liability
Company
 Be careful about what kind of business you want set up.
Always refer to the Foreign
Business Act
1999.
Partnerships
3 kinds

O
: P
L
C

L
R
As a future high technology factory
• Refer to the Factory Act
• Be Careful ! Strong power of the government in manufacturing sectors (decides about the location, the size, the quantity of raw material, the origin of RM, the quality of the product you should produce, the type of energy you will use)
• Depending on your level of production, government may decide if it is destined to local use or export.
• Get your industrial licensing as earlier as possible
• As foreigners, you must have a Work Permit.

GO / NOGO