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Investment agency steps up pitch for fund flows into economic zones

Nov 28. 2017
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By The Nation

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THE Board of Investment (BOI) is stepping up efforts to attract more Thai and foreign investors to do business in the 10 special economic zones set up near neighbouring countries, BOI secretary general Duangjai Asawachintachit said.

The zones are in Tak, Mukdahan, Sa Kaeo, Trat, Songkhla, Chiang Rai, Nong Khai, Nakorn Phanom, Kanchanaburi and Narathiwat. 

The government’s providing for the zones was launched in 2015 to capitalise on the potential of the targeted areas to connect with the neighbouring countries on the trade, economic and investment fronts.

The zones can benefit from large pools of labour available in border area.

The government has relaxed the rules on the use of foreign labour to support the zones.

Specific industries for each SEZ have been identified based on the zones’ geographical strengths and locally available resources. Most of the target industries are labour-intensive, including garments, agricultural and agricultural processing, fisheries, furniture making, logistics distribution centres, bonded warehouses and tourism.

In 2015, total investment in the zones was Bt280.1 million, soaring Bt8.31 billion in 2016. Operations in the zones also include the production of coconut oil , plastic bottles and bags and animal feed, as well as for ready-mix concrete, plastic fibre for fishing net production, rubber gloves, palm oil and metal parts.

Duangjai said the BOI intends to attract more investment projects. At a meeting this month, the board approved a new measure to encourage investors to build trading and product development centres within the zones.

Under this scheme, such centres located in any SEZ will be eligible for eight years of corporate income tax (CIT) exemption, with a 100 per cent cap of investment capital, excluding land and revolving capital, plus a 50 per cent tax reduction for a further five years at the end of the CIT exemption period.

 In the event of investors establishing a trading and product development centre outside an SEZ, the investors must also invest in at least one project inside the zone in parallel. In this case, the BOI will provide up to five years of CIT exemption (with a 100 per cent cap of investment capital on the investment in SEZ, excluding land and revolving capital). The condition is designed to encourage large investors to work with and help SMEs grow their businesses.

The new measure will allow SMEs to increase their distribution channels and expand their marketing activities, making use of the strategic location of the zones. At the same time, other businesses, especially small and medium sized enterprises outside the SEZs, will also reap the benefits from this measure. 

“SMEs and large investors are equally important,” said Duangjai. “SEZ promotion is among the many measures we have initiated to provide SMEs with greater opportunities to connect with new markets, distribution channels and new business opportunities. With a supporting environment for both large and small investors, we are building a stronger economy with inclusive growth.”

In the first nine months of 2017, statistics from the Department of Foreign Trade showed that the value of border trade (with Malaysia, Myanmar, Laos, and Cambodia) and goods crossing the borders (from Singapore-southern China and Vietnam) totalled Bt971.42 billion, an increase of 9.68 per cent from Bt885.71 billion for the same period in the previous year. Of this, border trade value was Bt800.52 billion, while the value of goods crossing the border was Bt170.90 billion, an increase of 25.5 per cent.

While cross border trade is growing, strong economic growth in those neighbouring countries is also significant. The World Bank’s East Asia and Pacific Economic Update forecast strong GDP growth in the so-called CLMV countries, with Cambodia leading the group with 6.8 per cent growth, followed by Laos 6.7 per cent, Malaysia 5.2 per cent and Thailand 3.5 per cent, according to BOI research.

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