Top 10 challenges of doing business in Thailand
As one of the five founding members of ASEAN and the ASEAN Free Trade Area (AFTA), Thailand enjoys strong trade agreements with Singapore, Malaysia, Indonesia, the Philippines, Brunei, Cambodia, Laos, Myanmar and Vietnam. Together, the 10 nations constitute a Southeast Asian common market of 679.3 million consumers, making Thailand an ideal logistical hub for businesses looking to expand their presence in Asia.
Economically, Thailand’s 71 million plus population forms a healthy consumer base. Steady growth, strong exports, an abundance of natural resources and a skilled and cost-effective workforce help attract foreign investors and enable them to prosper and develop industry in Thailand. Sound infrastructure and a modern business environment also increase the country’s appeal to companies seeking international expansion opportunities. This article explores the key challenges of doing business in Thailand and emphasises the importance of having a strategic partner to help navigate legal, taxation and regulatory hurdles.
1. Foreign ownership considerations
Market entry planning will require a feasibility study focusing on foreign ownership. Like its neighbours, Thailand has limitations on business activities for foreign-owned companies. As an initial step in assessing project feasibility, investors must examine the various licences available, taking into account the intended business activity and desired shareholding structure.
2. Starting a business
Starting a business may take a month (or longer) in Thailand depending upon the licencing requirements; the process involves navigating multiple procedures. Start-ups are required to register a company name, deposit funds into a bank, obtain a corporate seal and complete the several steps required to register the company as a legal entity.
3. Opening a bank account
Opening a corporate bank account for a foreign subsidiary typically takes one to two weeks with a local bank. The process involves submitting standard documentation, such as company registration, board resolutions and identification documents. While straightforward, additional due diligence such as the requirement for a director to be physically present may extend the timeline.
4. Getting electricity
Where a business is set up on a standalone location, electrical connection is a relatively straightforward task, with the entire process being handled by the Metropolitan Electricity Authority (MEA). The government body gives an initial estimate, conducts external connection work, inspects the connection and installs the meter.
5. Getting credit
According to the World Bank's Financial Inclusion Index, Thailand scores relatively high in terms of access to financial services, including credit. 2021 data indicates that 82% of adults in Thailand have access to a formal account, which is a key factor in enabling access to credit.
6. Protecting investors
Investor protection is something that Thailand prides itself on, particularly given that the country is used as a ‘test centre’ for many products, meaning strong intellectual property rights are a key part of the country’s strategy. The Thailand Arbitration Center, recognised for resolving commercial disputes in English, provides an alternative to the courts.
7. Paying taxes
Fiscal obligations are by far the most laborious aspect of doing business in Thailand. Corporate income tax – flat rate of 20% – and VAT (now 7%), take the most time to complete, but other business-specific levies can result in 264 hours of tax work each year.
8. Trading across borders
Cross-border trade is inexpensive in Thailand, although it can be quite time-consuming and bureaucratic. It can take up to two weeks to export goods and roughly the same amount of time to import.
9. Enforcing contracts and resolving insolvency
Enforcing contracts takes 440 days and involves 36 procedures. Resolving insolvency can take around 2.7 years, with a low rate of recovery.
10. Culture
Thailand has a rich and diverse culture which has led to a complex way of thinking. It is a collectivist society which means the needs of the group are placed over those of the individual and subtle and indirect communications are valued during negotiations.
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TMF Group has the local knowledge and expertise required to help you efficiently navigate your expansion journey. Whether you’d like to set up a business in Thailand or streamline your Thai operations, talk to us today.
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