1

Current Situation and BOI Promotion Policy of

Mr. Seksan Ruangwohan

E&E Industry in Thailand

Director

Investment Promotion Bureau 3

Thailand Board of Investment

May 2012

Presentation Outline• Current World Economy and Current Situation of

E&E Industry in Thailand

• Why Thailand

• BOI E&E Investment Policies

• Investment Promotion Policy for Sustainable Development (Hi-Tech Industry)

• New Measures for affected by flood projects

• BOI and BOI Services

• Investment Opportunities

Current World Economics and Current Current World Economics and Current Situation of E&E Industry in ThailandSituation of E&E Industry in Thailand

World Economy Status

GDP GROWTH (%)

2012 2013(p)

2014(p)

Advanced economies 1.3 1.4 2.2

Emerging and

developing economies

5.1 5.5 5.9

THAILAND 5.5 4.6 5.3

World GDP : 3.5% in 2013(p)

GDP GROWTH (%)

2012 2013(p)

2014(p)

United States 2.2 2.0 3.0

Germany 0.9 0.6 1.4

Japan 2.0 1.2 0.7

Brazil 1.0 3.5 4.0

Russia 3.6 3.7 3.8

India 4.5 5.9 6.4

China 7.8 8.2 8.5

Source: IMF, Jan 2013

Source: IMF, Jan 2013

Overall Thailand GDP Growth

19992001

20032005

20072009

2011

Q2,11 Q3,11 Q1,12Q4,11 Q2,12

GDP growth from 1999 - 2011 QGDP 2001 – Q1, 2012

Adapted from: NESDB (2012) and Index Mundi (2012)

EXPORTING STATUS of E&E Goods of the ASEAN-5

Source: GTIS, Oct 2012

World Electrical and Electronics industrial statusTop 15 country based on the export in 2011

RANKING COUNTRY EXPORTING VALUE in 2011 (Million US Dollars)

1 China 669,618

2 Hong Kong 244,259

3 United States 218,501

4 Germany 181,799

5 Japan 170,165

6 Singapore 152,631

7 South Korea 137,265

8 Netherlands 123,982

9 Taiwan 114,361

10 Mexico 93,879

11 Malaysia 80,358

12 France 55,753

13 Thailand 53,21914 Italy 45,897

15 Czech Republic 43,291

In 2011, Thailand ranked#13 in the WORLD for export in E&E market

The 3th country in ASEAN

Second to Singapore (6th) and Malaysia (11th)

Source: Global Trade Atlas, April 2012

Thailand E&E Export & Import 2008-2012

Source: EEI, Feb, 2013

Projected E&E export-import in 2013

Source: IEE, FEB, 2013

Top E&E ExportElectrical Products1. Air-conditioner2. Circuit breaker, switches, plugs3. VDO camera4. Refrigerator5. Color TV

Electronics1. Computer parts2. IC3. PCB, PCBA4. Diode, transistors, semiconductors.5. Equipments used for telephone or telegraphs

Top E&E ImportElectrical Products1. Circuit breakers,switches, plugs2. VDO tape, CD, DVD3. TV parts, components4. Wiring harness5. VDO cameras

Electronics1. IC2. Computer parts3. Mobile phones4. Computers, notebook,

Palm5. Printed circuitSource: IEE, Thailand

Thailand’s Markets for E&E Export2012

Source: IEE, FEB, 2013

Source: IEE, Feb, 2013

Thailand E&E Production Index

Net BOI Application for E&E Projects

0

50

100

150

200

250

300

0

20

40

60

80

100

120

Pro

jects

Billio

n B

ah

t

Investment Projects

Current E&E export and BOI net application investment Status

GROWTH 2011 -> 2012

BOI INVESTMENT +94.5%

E&E EXPORT +2%

Foreign Direct Investment (BOI Project) in Thailand

+63.8%

WHY THAILANDWHY THAILAND

Importance of the Manufacturing Sector

Share GDP by Sector Share Export Value by Sector

We Have Something to Boast About• Ease of Doing Business -

#17 in the world, #3 in Asia

• Most Attractive FDI Locations - #11 in the World

• Most Efficient in Public Sector - #3 in the Asia

• Corporate Governance - #4 in the Asia

• Thailand is the world largest producer of HDDs

Source: World Bank Study, 2011 / World investment Prospects Survey, 2010-2012 / JBIC Survey Result, 2010

Thailand in the leading Rank

In Asia

In the World

Overall Business Environment 1 17

Getting Electricity 1 9

Dealing with Construction 1 14

Trading Across Border 1 17

Enforcing Contracts 1 24

Registering Property 1 28

Protecting investors 2 13

• 7 international airports In 2011, 66 million passengers, 1.1 million

tons of cargoes Suvarnabhumi Airport – Capacity: 45

million passengers and 3 million tons of cargo per year

• Over 70,000 km Highway Systems• 6 Deep Sea Ports & 2 International River Ports

Capacity over 10 million TEUs Laem Chabang Sea Port – Capacity: 10.8

million TEUs, with additional 8 million TEUs expansion

e-Customs facilities• 4,346 km Rail links to Malaysia & Singapore• 60 Industrial Estates

2011 Cost of Living Survey

Cities CountryRankings

March 2008

March 2009

March 2010

March 2011

Tokyo Japan 2 1 2 2

Osaka Japan 11 2 6 6

Hong Kong Hong Kong 6 5 8 9

Singapore Singapore 13 10 11 8

Beijing China 20 9 16 20

Shanghai China 24 12 25 21

Taipei Taiwan 63 61 78 52

Jakarta Indonesia 82 106 94 69

Bangkok Thailand 105 98 121 88Kuala Lumpur Malaysia 106 96 138 124

Hanoi Vietnam 91 58 121 136Source: World Cost of Living Survey 2011, Mercer Human Resource Consulting as of Aug 29, 2011

(22)

Efficient Logistics NetworkSeaport - Land Transport – Airport

Laem Chabang Seaport

Donmuang

International

Airport

Suvarnabhumi

International

Airport

Map Ta Put Deep Seaport

Free Trade Agreement

Source: BOI International Affairs & www.thaifta.com, as of Feb 05, 2010

Note: ASEAN are Thailand, Malaysia, Indonesia, the Philippines, Singapore and Brunei only.

Entering into force AFTA AEC in 2015

Second Stimulus Package (2010-2012)

ProjectsBudget

(Billion USD)

1) Irrigation 5.95

2) Transportation & Logistics

14.27

3) Energy 5.14

4) Telecoms 3.87

5) Fundamental Tourism Infrastructure

0.50

6) Health Care 2.48

The cabinet approved an investment framework featuring 618 projects worth 35.74 billion USD for the second stimulus package, covering 2010-2012.

Source: Royal Thai Government, PDMO as of 2010

ProjectsBudget

(Billion USD)

7) Education 3.45

8) People’s Welfare 0.21

9) Science & Technology

0.30

10) Environment 0.13

11) Tourism Development

0.21

12) Creative Economy

0.44

13) Community Development

2.29

BOI E&E Investment PoliciesBOI E&E Investment Policies

Tax Incentives Import duty reductions or

exemptions on machinery and raw materials

Corporate income tax holidays up to 8 years

Additional 50% reductions of corporate income tax for 5 years

Double deduction of public utility costs

Deductions for infrastructure construction/installation costs

Non-Tax Incentives Land ownership rights

for foreign investors Permission to bring in

foreign experts and technicians

Work permit & visa facilitation• One-Stop-Shop: Visas

& Work Permits are issued in 3 hours3 hours

Basic BOI Privileges and Measures

Zone-Based

Incentives:

• Zone 1

• Zone 2

• Zone 3 Higher incentives

Lower incentives

BOI Zoning and E&E Basic Incentives

Zone

Inside

Industrial Estate

Outside Industrial

Estate

Zone 1 5 Years 5 Years

Zone 2 7 Years* 6 Years

Zone 3 8 Years 8 Years

Corporate Income Tax Exemption

* Laem Chabang IE and Rayong IE receive 8 years

• To enhance competitiveness of E&E industry

• To promote investments along the entire value

chain

• To attract high value long-term investments

• To encourage development of Skills, Technology

and Innovation (STI)

Objectives of E&E Investment Policies

E&E Investment Incentives

Investment projects are

categorized as

follows:

General Investment Projects

Priority Activity Projects

Special Priority Activity Projects

High Value Long-term E&E Investment Projects

Existing Projects

General Investment Projects (1/2)

1. General investment projects:

Incentives = Basic Incentives

+

STI Incentive (Optional)*Additional tax holidays

*No limit on tax exemptions

% of First Three Years’ Sales Additional tax holidays

1% or max. 150 million baht 1 year

2% or max. 300 million baht 2 years

3% or max. 450 million baht 3 years

Additional STI Incentives (Optional)

Investment and Expenditures on:• Research and development or design• Advanced technology training• Funding of educational and research institutes• Donation to Tech&HRD Fund

Note: Corporate income tax holiday may not exceed eight years.

• Exemption from import tariffs on machinery without time limit

• For ICs, HDDs and parts, Material for Micro Electronics (Wafer or Thin Film Technology), upgraded existing machinery can be utilized in new investment projects

General Investment Projects (2/2)

Priority Activity Projects

Priority activity projects:

Manufacture of: Semiconductor , HDD and parts,

Telecom equipments and parts, Medical electronic parts,

Agritronics products and parts, Industrial automation

equipments, Automotive electronic parts, Flexible Printed

Circuit and multi-layer PCB

Incentives = 8 years corporate income tax exemption regardless of location

+STI Incentive (Optional)*No cap on tax exemptions

Priority Activity Projects

Special Priority Activity Projects

Special priority activity projects:

● Manufacture of: Solar cell and its raw materials,

Media/Platter for HDD, Flat panel display, Wafers and

thin film technology

(production process must be approved by the BOI)

● Electronic Design, Software

Incentives = 8 years corporate income tax exemption

without cap (regardless of location)

Special Priority Activity Projects

Incentives for Software Development

– Animation

– Cartoons and characters

– Computer-generated imagery

– Web-based applications

– Cloud Computing

– Interactive applications

– Games– Wireless location based service

content– Visual effects– Multimedia video conferencing

applications– E-learning content via broadband and

multimedia

1. Enterprise Software (transaction processing, business solutions)

2. Embedded Software (mobile phones, microchips)

3. Digital content, including:

Incentives: Duty-free machinery 8 years income tax exemption without cap

Software Group

1. Modeling

2. Requirement Analysis

3. Design

4. Implementation

5. Program and System Testing

6. Deployment

7. Configuration and Change Management

8. Professional Training

Specific Software Procedure

6262

PrivilegesPrivileges for high value long-term E&E Investment projects (15,000 M ฿)

Project 1Project 2

Final Project

Duration of Privileges (yrs)

Pro

ject

5 Yrs

Extended duration of corporate income tax holidays

Companies may

choose to consolidat

e into one

projector keep as separateprojects

8Yrs

Compulsory STI expenditures for high value long-term E&E investments

All high value long-term investment projects must meet the following STI criteria during operation of final project:

STIrequirements

Zone 1 Zone 2 Zone 3•R&D• Advanced Technolo

gy Training

•Funding educational/

research institutions

•2 % of total 1st

3-year sales or at least 500 million baht whichever is less

Required total STI expenditures are calculated from the first 3-year sales of the final project and previous projects combined.

•1.5% of total 1st3-year sales or at least 400 million baht whichever is less

•1% of total 1st

3-year sales or at least 300 million Baht whichever is less

6262

PrivilegesPrivileges for Higher value long-term E&E Investment projects (30,000 M ฿)

Project 1

Project 2

Final Project

Duration of Privileges (yrs)

Pro

ject

8 Yrs

Extended duration of corporate income tax holidays

Companies may

choose to consolidat

e into one

projector keep as separateprojects

8Yrs

• Existing projects can import machinery

and equipment with duty exemption in

order to enhance efficiency and

technological capabilities

Incentives for Existing projects

Investment Promotion Policy for Investment Promotion Policy for Sustainable DevelopmentSustainable Development

Policy to Support Hi-Tech Industry

Tax Incentives• Exemption of import Duties on machinery• Corporate Tax exemption 8 years with No Cap• 50% Reduction of corporate income tax for 5 years from

the expiry date• Double deduction of public utility costs for 10 years• Deduction from net profit of 25% of the investment in

infrastructure installation and construction cost in addition to normal capital depreciation for 10 years

Policy to Support Hi-Tech Industry

Eligibility

• Any Location except Bangkok

• Applicable to designated activities only

• Application submission deadline: Dec 31, 2012

Policy to Support Hi-Tech Industry

Hi-Tech E&E Products

• 5.4 Telecom Products, Industrial Automation Equipment

• 5.5 Semiconductor, Solar Cell, HDD & SSD & Parts, Telecom Parts, Flat Panel Display, Automotive Electronic Parts, Agritronic Parts, Medical Electronic Parts

• 5.6 Material for Micro Electronics

• 5.7 Electronic Design

New Measures for affected by flood New Measures for affected by flood projectsprojects

• Existing projects with existing capacity corporate tax exemption of the investment

• Existing projects with existing non-capacity corporate tax exemption of the investment

New measure for affected by flood projects (2012)

Investing in the same affected province

Treated as if new project with 8 years corporate tax exemption (150% Cap of new investment + Existing Cap)

Investing in another province

8 years corporate tax exemption (100% Cap of new investment + Existing Cap)

Existing Corp Tax exemption years Additional Corp Tax exemption years

Less than or equals to 5 years 3 additional years tax exemption

More than 5 years – 6 years2 additional years tax exemption + 50% tax deduction for 2 years

More than 6 years – 7 years1 additional year Corp Tax exemption + 50% tax deduction for 4 years

More than 7 years – 8 years 50% tax deduction for 5 years

• New projects to be invested in the affected by flood provinces

• Exemption from importing duty on new and less than 10 year-old machineries

• Projects eligible for sustainable development still receives the same incentives

• Application submission deadline is December 31, 2012

New measure for affected by flood projects (2012)

Investing province Normal Incentives New Incentives

Industrial areas in Pathumthani

5 years Corp tax exemption with 100% Cap

8 years Corp tax exemption with 150% Cap

Industrial areas in Phra Nakhon Si Ayutthaya

7 years Corp tax exemption with 100% Cap

8 years Corp tax exemption with 150% Cap + 3 years 50% Corp tax deduction

BOI & BOI ServicesBOI & BOI Services

Liberal Investment Policy

• No foreign equity restrictions in manufacturing sectors

• 100% foreign ownership possible in many services

• No restrictions on foreign currency remittances

• No export requirement

• No local content requirement

Sectional divisions to guide you through the process

Overseas offices

Country desks

1-Stop for visas & work permits:work permits in 3 hours

Interaction with other govt. agencies on behalf of investors

Industrial Subcontracting Services Vendors meet customers program

(BUILD Unit)

Investment Matchmaker Program

ASEAN Supporting Industry Database

BOI Support Services

– Staff from relevant agencies will also be available for consultations on a range of topics.

– Help investors with applications to make sure investors know what is required to:• Register a company• Apply for investment promotion privileges• Obtain a foreign business license• Tax registration• Complete an environmental impact assessment• Obtain utilities, etc.

– OSOS staff will also accept applications for things such as corporate name registration, corporate tax ID numbers, VAT registration, foreign business licenses, investment promotion incentives, etc.

Represented Agencies at OSOS

Investor

Ministry of CommerceBusiness Development

Department

Ministry of FinanceRevenue DepartmentCustoms DepartmentExcise Department

Ministry of EnergyEnergy Business Dept.

Mineral Fuels Dept.Ministry of Industry

Office of the Board of InvestmentDepartment of Industrial Work

Department of Mining and Primary IndustriesIndustrial Estate

Authority of Thailand

Ministry of Public HealthFood and Drug Administration

Ministry of Tourism and SportsMinistry of Transport

Ministry of Labor and Social Welfare

Social Security OfficeLabor Welfare and

Protection Department

Ministry of InteriorDepartment of Lands

Department of Public Works and Town and Country Planning

Provincial Electricity AuthorityMetropolitan Waterworks Authority

Provincial Waterworks Authority

Ministry of Natural Resources and Environment

Natural Resource andEnvironment Planning and

Policy Office

One Start One Stop Investment Center18th Floor, Chamchuri Square Building

319 Phayathai Road, PathumwanBangkok 10330, Thailand

Tel: 66(0)2 209 1100Email: osos@boi.go.th

Investment OpportunitiesInvestment Opportunities

Midstream

HIGH

LOW

Upstream Downstream

Ind

us

tria

l Va

lue

-Ad

ded

Industries

IC

PCB

Telecom PC CE

IC Design

Missing Links

Thailand imported E&E parts and

products for US$ 43 billion in 2011

Missing L

inks

Opportunity in the Missing LinksOpportunity in the Missing Links

Wafer

Components

Targeted E&E Products

Products Countries

EMS USA, Canada, Singapore, Taiwan, China, Hong Kong, Germany, Sweden, Belgium, Finland, France, Hungary, Norway, Switzerland, UK, Netherlands, Luxembourg

Solar Cell Japan, USA, Germany, UK, Taiwan

Embedded Software Japan, USA, Europe

IC & Electronic Design USA, Taiwan

Media/Substrate Japan, USA

Wafer USA

Thank you