Thailand

According to official figures provided by the Thai Bureau of the Budget, the proposed defence budget for 2017 is 214 billion baht (approximately USD 6 billion), slightly increased compared to 2016, when defence spending amounted to 207 billion baht (approximately USD 5.8 billion). This increase is the lowest since the government came into power following the military coup in May of 2014. Military cooperation with neighbouring countries, members of the Association of South-East Asian Nations (ASEAN) and with international organisations such as United Nations (UN) are the main priorities of Thai defence strategy.

After four decades of remarkable social and economic progress, Thailand has advanced to an upper-middle economy, in 2011. Today, it is the second largest economy in the Association of Southeast Asian Nations (ASEAN) (trailing only behind Indonesia), playing a major role in terms of regional cooperation and integration.

It is indicative that according to the 2015 World Bank report, Thailand is at the 3rd position of ASEAN countries for ‘ease of doing business’ (following Singapore and Malaysia), retaining its position among the top 50 economies globally.

Thailand had demonstrated a sustained strong growth for 40 years, before contracting to an average 3.4% growth of the GDP (year-on-year), over the period 2005-2015 (in comparison, over the period 1975-2004, the average year-on-year growth of the GDP was 6.41%). This decrease was a result of many factors, including the global economic crisis (starting from 2009), as well as the unprecedented floods in 2011 (leading to a decreased 0.8% growth of GDP for that year).

In 2015, the Gross Domestic Product amounted to US $395.28 billion, with a 2.8% growth (year-on-year). Projections for the short-term (2016-2018) foresee a stabilisation of the GDP growth rate, at around 2.7% as an average for the period.

Thailand’s key industries, include integrated circuits (IC), rubber and plastics products, apparels, chemicals and automobiles, petroleum, food and beverages and Hard Disk Drives (HDD).

Considering the latter, Thailand has become a renowned global provider of HDDs. However, consumers are turning away from HDDs to higher-tech products, such as SSDs (Solid-State Drives), indicating the need for Thai industry, to make structural changes so as to align with the changing needs and trends.

Other ASEAN countries (specifically Malaysia, Singapore, Indonesia, the Philippines and Brunei), are the main export destinations of Thai products. However, other significant trade partners of the country are China, the US, Europe and Japan.

Affected by internal and external factors, exports have decreased in the last couple of years (See following chart). However, in 2015, Thai Trade exhibited a surplus of US $11.7 billion. This can be attributed to an extent, to low oil prices and hence the reduced value of associated imports.

As exports contribute to 70% of Thailand’s GDP, the fact that the exporting rate has dropped in recent years (2014-2015)–as a result of Thai economic instability, global financial crisis, and more recently China’s economic slowdown-, make the Thai government extremely worried regarding its next steps. In addition, for 2016-2017, the dry weather is expected to hurt crops’ exports from the Southeast Asian country, reducing significantly its sugar exports.

In terms of imports, the main imported item, is crude oil, typically the main responsible for deficits in Thai trade balances (see period 2011-2014).

In December 2015, there were 38.87 million people employed in Thailand, the majority of which (about 25.3 million) were employed in Non-Agriculture sectors, while the rest were involved in agriculture activities.

Thailand’s unemployment is among the lowest in the world, falling below 1% since 2011. Despite an increase in 2015, it is estimated that unemployment will continue its decline in 2016.

However, a paradox seems to take place in Thailand, regarding the unemployment levels. A superficial analysis could excuse the low associated rates, as a consequence of the ageing population of the country. However, the respective unemployment rate figures are the result of the structural way in which the local statistics authority counts and analyses the data. It seems that even ‘informal’ jobs –that should not really be taken into account- contribute to an increase of the overall employment levels in Thailand.

Indicative is the fact that according to the National Statistical Office of Thailand 2015 data, only some 255,000 people appeared to be unemployed, with the majority of those being concentrated in the Central and South areas of the country. In addition, as expected, the smallest jobless rate, is to be found in the Thai capital, Bangkok.

Among the jobless people, there is a significantly higher proportion of young unemployed people (aged 15-24), when compared to the adult population (>25 years old), with unemployment rates of 2.5% and 0.4% respectively. Moreover, it is significant that the majority of the unemployed, are highly educated, i.e. of an upper secondary schooling and above.

Thailand has struggled in recent years to attract foreign direct investments, mainly as a result of political instability, and the cautious approach on the investors’ part, regarding the potential sectors to engage in. While investment on energy and telecommunications have increased significantly in recent times, others were refrained to low levels.

It is indicative that through investments and regional cooperation, significant improvements in electricity, highway and railway connectivity have been achieved in the country in recent years. It cannot be omitted to mention that by 2012, Thai FDI stock for transport, storage and telecommunications, stood at $15 billion. Indicatively, China Mobile Ltd. and Singapore Telecommunications Ltd. have become significant players in the mobile telecommunications sector of the country, through investments in the acquisition of stakes in local telecom operators in recent times. Likewise, in the past, ENGIE (formerly GDF Suez from France), has heavily invested in the acquisition of a majority share in the local Glow Group, specializing in generating and supplying electricity, steam, clarified, demineralized and chilled water, and with total sales of some US $2.1 billion, in 2013.

However the lack of major reforms –related to human capital development, equality, increase in competitiveness, limitation of bureaucracy and several regulatory facilitations-, and the political uncertainty in the country, have not helped in creating confidence in the country’s economy and hence in attracting investors.

It cannot be omitted that Thailand, as a founding member of the Association of South-East Asian Nations (ASEAN) and of the ASEAN Free Trade Area (AFTA), today enjoys tariff-free trade agreements with Singapore, Malaysia, Indonesia, Philippines, Brunei, Cambodia, Laos, Myanmar and Vietnam. Moreover, the country’s geostrategic position, as well as the steady economic growth, strong exports, abundance of natural resources and low-cost workforce, make Thailand by default, one of the most appealing destinations for foreign investment, especially for businesses looking to expand their presence (operations, exports etc.) in Asia.

Therefore, there are plenty of opportunities of growth; not only given the expansion and integration of Thai trade within the global network, but also through developments in various industries, such as that of energy – Thailand has already implemented renewable energy tariffs, as part of its incentives for the energy market.

In an attempt to further increase capital inflows, Thailand has already announced tax exemptions for 10-15 year terms (starting from 2017) for foreign experts operating in key fields, while income tax cuts will apply for foreign researchers and professionals working in key sectors which act as drivers of Thai growth, as those of smart cars and electronics, logistics, aviation, biofuels and industrial robotics.

Expectations though, indicate a strong improvement of the investment climate, will be achieved only after general elections take place, in 2017, when most of the incentives of above will have been implemented.