Sep 25, 2022
Should Your Business Expand to Thailand?
Know the Opportunities and Obstacles
Published Q4 2022
When Tesla filed in May 2022 to officially enter Thailand with its vehicles, battery products, and energy storage systems, this wasn’t surprising news.
Of course, this isn’t to say blindly follow where Tesla is going.
It just shouldn’t have to take a splash from this big fish to signal to the world that something was happening in Thailand.
What is driving expansion into Southeast Asia?
Expansion seems counter-intuitive after the pandemic, but we’ve learned that greater resilience in our business models is now more critical than ever.
This could mean exploring new verticals, markets, or joint ventures. Or, formulating a strategy for new revenue potentials and diversifying your supply chain to overcome future disruptions.
Even at a national level, the pandemic has certainly catalyzed governments to enhance resiliency across various high-tech sectors and pave the way towards a new digital age.
In the previous piece, we’ve discussed two ways to start the journey of breaking into Southeast Asia, either through trade agencies in your local country, or through special designated economic corridors. This article will discuss the second.
Several Southeast Asian countries are well-positioned to be hubs for multinationals as well as early-stage and late-stage ventures to extend their operations, especially where innovation corridors are concerned.
One such place is the Eastern Economic Corridor of Thailand.
What is the Eastern Economic Corridor (EEC)?
Synopsis, context, implications:
The Eastern Economic Corridor (EEC) is a 13,266 km² mega-development area consisting of 21 Promotional Zones for the purpose of expediting innovation in 12 high-tech industries which include robotics, next-gen automotive, aerospace, and the digital economy. EVs and energy storage are just one dimension.
For the next 30 years, these 12 areas will be built out:
- Next-Generation Automotive
- Intelligent Electronics
- Advanced Agriculture and Biotechnology
- Food for the Future
- High-Value and Medical Tourism
- Automation and Robotics
- Aviation and Logistics
- Medical and Comprehensive Healthcare
- Biofuel and Biochemical
- Digital
- Defense
In August 2022, the Thai cabinet approved the EEC to move forward as a Free Trade Zone. Further improvements in this area are expected.
Even before the pandemic, The Royal Thai Government (RTG) already had ambitious plans in place to expedite Thailand’s Industry 4.0 standard.
For example, Thailand aims to create 100 smart cities within the next 20 years, an audacious goal requiring the cooperation of both the private sector and the government across the local, regional, and national level. 5G investments have also been mandated to accelerate multilateral developments in medicine, and healthcare, as well as the Bio-Circular Green Economy (BCG).
Moreover, Thailand has already announced its plan to ensure that all car sales nationwide are electric by 2035, aiming to build 100 charging stations within this year, with another 100 planned for next year.
The EEC has already exceeded 1.8 trillion baht ($61.97 billion) in public and private investments. The new 2023–2027 new investment projections expect even more.
The RTG, through Thailand’s Board of Investment (BOI) continues to enhance a variety of investment incentives including extended tax exemptions, looser work visa requirements, and other measures to increase the ease of doing business in this region.
Since 2022, the Regional Comprehensive Economic Partnership (RCEP) — the world’s largest trade deal signed by 15 Asia Pacific countries — is expected to continue boosting the region’s post-pandemic economic recovery. The private sector is expected to lead the way and drive more foreign direct investment into these economies.
Based on Thailand’s Asia-Pacific Economic Cooperation (APEC) priorities, Thailand will continue the creation of foreign investment opportunities within the Bio-Circular-Green (BCG) model as the nation recovers its tourism industry, while strengthening its health, agriculture, and food security sectors.
Thailand will also host the 2022 APEC CEO Summit which will convene the most influential meeting of business and government leaders in the Asia Pacific. All 21 member APEC economies will be invited. The summit returns to an in-person format this year on 16–18 November 2022.
At the time of this writing, the RTG expects to declare Covid-19 endemic by October.
Trade tension between the US and China has also accelerated the involvement of foreign investors, prompting businesses to relocate their production bases and supply chains to the SE Asia.
So despite travel and tourism taking critical hits, many industries have only seen minimal delays and have been able to persevere with only temporary interruptions. The region’s growth and development moves forward — and with the pandemic on its way to becoming endemic — international businesses are already exploring ways to capitalize on these conditions.
Because the EEC is at the heart of the Thailand 4.0 industrial transformation policy and post-pandemic recovery, those 12 sectors will receive full support and special treatment in the foreseeable future.
Is the timing right to explore Thailand’s innovation corridor?
Is the timing ever right?
Thailand is Southeast Asia’s second largest economy and a gateway economy towards the rest of the Indo-Pacific.
Thailand will continue using the APEC initiatives to enhance the performance of its digital economy especially around tourism, health, agriculture and finance sectors.
This area could be a strategic point where new investments and revenue streams can be explored.
If you need fuel for continued expansion, Thailand’s EEC places you in proximity to ASEAN economies.
But that also means your competitors seek the same exact advantages. And it doesn’t matter who shows up at their door first.
Innovation Ore: Truly innovative ventures need creative and intellectual capital in the form of talent, partnerships, funding, and support of all kinds. Because all twelve advanced technology zones thrive near or within this area already, there is an untapped abundance of data sets, “hard problems”, advanced technologies, and research.
Greater breadth of capital: What their domestic market lacks in capital and creative financing, the EEC will have an ecosystem of partners who can facilitate new capital, options, and opportunities that they seek.
True collision economy: Cutting-edge high tech ventures must be situated in a collision ecosystem where there’s a cross-fertilization of R&D with likeminded entrepreneurial MNCs, SMEs, and startups.
For example, if you are a maritime venture working with subsea robotics or unmanned systems, a local presence gives you unprecendented access to energy, shipping, fisheries, aquaculture, mining, and tourism sectors.
Greater chance to diversify their revenue streams: By extending your business model to the EEC, anchoring here will help them assess locally, new diverse markets, as well as new partnerships, and customer segments.
Superior facilitites and technology parks to enhance your operations: Companies of the future will need to operate more better, faster, cheaper, and they will need the right technology and facilities must meet those demands.
This EEC continues to roll out infrastructure upgrades that includes digital parks, pilot test beds, and sandboxes. This includes smart cities, ultra-high-speed internet with 5G test beds, enhanced data security, with an emphasis on various high-tech sectors.
How to start?
We’ve painted a picture of the potentials here, but even with extensive experience in your domestic operations, overseas success can’t be guaranteed here if you have no strategy or knock on the door unprepared.
Based on my experience, and recent successes with my partners — these are my key recommendations for acquiring local partners right away.
Expansion strategies require local foresight and guidance.
With patience, persistence, and the right on-the-ground partners, the payoff can be great.
Market entry, partnership identification, and due diligence is still a process. Opening new channels, vetting, matchmaking, trust-building, and nurturing these relationships is a process that needs patience and persistence.
These mandated special zones are a constant work in progress and a challenge prevalent in all innovation corridors, not just the EEC. They are constantly iterating and enhancing the rules and it takes lots of coordination by the public and private sector.
You need to be as local and present as possible.
During the height of covid, travel restrictions made it impossible to move around. That is now changing.
Being local grants you exclusive opportunities to understand the sales process, the special rules of the EEC, and the adaptive changes that occur within the area, and informational advantages that you just can’t get anywhere else.
Being local also means you can learn about how the bureaucracy works, the processes, and accessing key individuals across government agencies/levels.
Businesses must also understand the nuances of the local markets, from supply chain considerations to talent acquisition, to a deeper understanding of the tax and regulatory systems that shape local economic growth.
Local partner to prototype new business models
From law basics and formal documentation and overall market awareness, success depends on other critical factors, such as choosing the right market niche, setting up long-term partnerships with dependable local businesses on the ground, establishing a positive presence within the community, and more.
Special economic frameworks are in place that will require companies to design new business models that will solve local challenges and enhance society, not just increase top-line revenue.
Expert guidance in this area can help make the road forward far smoother and easier to navigate.
Getting started
The right partner on the ground can guide investors and executives through these initial steps, while also enabling swift progress during business setup and later operations.
Local conditions play an important role in determining optimal business strategy, which in turn can influence which set of BOI incentives to pursue and approve you.
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Supporting Footnotes:
The following insights are based on my collaboration with partners within innovation corridors, especially in Thailand’s Eastern Economic Corridor (EEC). This synopsis is also based on my participation together with leaders during executive briefings led by various agencies like the USTDA, the US Commercial Service, and with dignitaries that included Deputy Prime Minister and Minister of Energy Supattanapong Punmeechaow and former U.S. Ambassador to the Kingdom of Thailand, Michael DeSombre.
Many emerging economies are pushing forward to become digital economies of the future, thus they are competing for the same outside attention and investments.
Current projections indicate a significant increase in business and investment activity over the next few years, as part of a wider push to re-center Asian manufacturing within ASEAN.
Supporting links:
Thailand prepares to host Apec event
Press Release: Countdown to the APEC CEO Summit 2022, the Forum for Asia
