Thailand Board of Investment North America

(Source: Thailand Investment Review, September 2018)

Since the mid-1990s, government agencies, SMEs and multinationals across the globe have undergone a process of rapid digitalization. This process has fundamentally and irreversibly altered the way in which our modern society purchases goods, utilize services, conducts business, and even accesses healthcare. As digital transformation continues to spread, countries around the world – including Thailand - are witnessing an acute shift in processes, activities, and transactions across almost every sector. This has provided the space for businesses and governments to become more strategic and efficient in the way they operate, providing the foundation for increased economic growth and development for all.

Since May 2016, the Thai economy has been guided by the ‘Thailand 4.0’ policy. In addition to encouraging investment in new industries, the policy aims to develop Thailand into a country that is defined by innovative technologies and ways of doing business. Complementing the 2017-2021 National Economic and Social Development Plan and other reform agendas such as the Sustainable Development Goals (SDGs), the Thailand 4.0 policy aims to transform the economy into one that is driven by digital technologies and innovative business practices. Such an approach, it is envisaged, will achieve the core goal of moving Thailand towards a high-income nation that encourages financial and social equality, and ensures that all growth is environmentally sustainable.

According to research conducted by the Centre for Economic and Business Forecasting at the University of Thai Chamber of Commerce, the digital economy accounted for approximately 17% of Thailand’s Gross Domestic Product (GDP) in 2017. This figure is expected to rise to 19% by the end of 2018 and to an impressive 25% by the end of 2027.

A country in digital transition

Thailand’s significant digital growth to date has been driven in part by the country’s favorable digital landscape. For example, out of 68 million citizens, approximately 70% of the Thai population now own or have access to a smartphone. An estimated 67% of Thais also have access to the internet; many of whom maintain active social media accounts such as Facebook or LINE. Combine these statistics with an average of approximately 6 hours internet usage per person each day, and it is little wonder that Thailand’s business landscape is changing.

Interestingly, the high levels of smartphone and internet penetration within Thai society is also the primary reason behind Thailand’s prominent growth in e-commerce. This is confirmed by data from the Ministry of Digital Economy and Society that outlines that more than 40% of online purchases now occur via smartphone. As a result of the shift towards online shopping, Thailand has seen the value of the e-commerce industry rise from 64 billion USD in 2015-16 to a staggering 72 billion USD in 2016-17.

Government infrastructure for the new digital era

In order to develop and implement activities to support the growth of Thailand’s burgeoning digital industry, in September 2016, the Ministry of Digital Economy & Society was created. Formerly established in 2002 as the Ministry of Information and Communication Technology (MICT), the government body currently operates with a vision to “encourage all sectors to use digital technology to drive the country’s economy and society within 5 years”.  More specifically, the Ministry’s mandate also extends to developing national laws and policies, creating the necessary infrastructure, providing foreign investment opportunities, and improving government services.

One key element of the government’s digital infrastructure drive is the Digital Government Project (also known as the e-government project). Created in 2016, the project aims to increase the competitiveness of the Thai government by having more than 80% of government offices using e-documents for identification by 2021. In practical terms, this means that citizens will no longer have to provide duplicate forms of identification when accessing different government services. They will also have access to a range of other benefits such as simplified business registration, e-tax options, and a citizen portal.

To operationalize these government reforms, the Thai Government has implemented the Digital Economy and e-Government Development Plan (3 Year Plan: 2016-2018). Acting as a blueprint to revolutionize government operations and business practices, the plan contains a pathway for the integration of all government data and services. To guarantee the plan’s success, there also remains a key focus on developing citizen-centric services and creating fully integrated government systems.

Moving towards a cashless society

As more and more countries around the world move away from cash-based economies, people are becoming increasingly reliant on e-money transactions. In Sweden for instance, it is estimated that only 1% of all transactions are completed using cash. This significant reduction in cash usage has been praised by many as a momentous step in Sweden’s move towards a fully digital society.

In January 2017, the Bank of Thailand launched a Thailand specific e-payment initiative known as PromptPay. A notable development in Thailand’s e-payment system, PromptPay is an internet and mobile banking transfer service that links Thai national ID cards and mobile numbers to a personal bank account number. Utilized by most commercial banks and financial institutions, the system allows businesses to receive money faster and with less hassle than before. At present, it is estimated that nearly 20 million Thais have PromptPay accounts. In addition, it is estimated that PromptPay saves businesses and consumers more than 5.1 billion USD annually in transaction costs.

BOI’s support for the digital industry

To facilitate the growth in Thailand’s digital industry, the Thailand Board of Investment currently offers a range of tax and non-tax incentives for projects related to both the soft and hard infrastructure that align with national development objectives. Tax incentives include corporate income tax exemptions (dependent upon the activity). For example, projects in electronic design, embedded systems & software, cloud service, data center, software park, and science park are granted 8-year corporate income tax (CIT) exemptions. Projects on digital services and those that manufacture advanced technology electrical products with the capability of connecting with the internet network are granted 5-year CIT exemption. The exemptions of import duty on machinery and import duty on raw or essential materials used in manufacturing export products also apply to these activities.

Non-tax incentives are also provided in addition. These include the permission to own land, to acquire relevant visas/work permits for foreign staff, and to take/remit foreign currency abroad. These incentives, in conjunction with the policies and initiatives of the Thai government, will help Thailand continue its drive towards the development of one of the most attractive markets for the digital economy in Southeast Asia. 

© 2013 The Board of Investment of Thailand. All rights reserved.