Doing Business in Thailand

According to the yearly study of the World Bank “Doing Business 2010″ Thailand ranks 12th out of 183 friendly countries to do business. As a professional which role is to assist foreign investors doing business in Thailand I should welcome any such survey. I mean the friendlier Thailand looks to foreign investor the better it is for my business.

Note that tomorrow I will conclude with my “Buying a Business” posts series

Thailand 55th/183 ease of starting a business

Number 12^th is Thailand overall ranking. Now if you look at the survey in details you may notice that Thailand is actually ranking worth than last year as to ease of starting a business falling from the 46 ranks to the 55^th.

It may have to do with:

1)     The facts that a foreign investor may not anymore obtain a work permit as long as his/her company does not employ 4 Thai employees. In other word this foreign investor will be working illegally from the time he/she becomes a director of his/her company up to the time when he/she finally is able to hire four Thai employees. Indeed, the definition of work is “exercising any intellectual or physical activity with or without remuneration”. Hence a foreign investor that become a director of a company and that in the initial investment period hire contractors and suppliers to start his business, sign agreements, paid bills for the fitting of his/her offices will be working illegally; or

2)     The facts that in many districts a company with foreign directors may not anymore register Thai employees to the social security without having to go through a lengthy interview process, or

3)     The facts that a newly incorporated company may not anymore be used to support one year visas for its foreign employees because the waiving of the requirement of an audited balance sheet for company newly registered has been suppressed. In other words a new investor will have during the first year of his investment to leave Thailand every 90 days to apply for new visas but if he qualifies for another type of visas, or

4)     The facts that there are still too many activities where Thai are now ready to compete with foreigners which access is restricted to foreign investors, or

5)     The facts that the requirements to obtain a Foreign Business License are so complexes and that the chances to obtain said licenses are so remote that most foreign investors do not even bother to apply for said license preferring instead to structure their investments differently. Since 1999 (and not included Representative Offices) I only oversee one foreign business license application and the client withdraw his license application in the middle of the process and went to do business in Malaysia instead, or

6)     The facts that while foreign investors may in theory hold 49% of the shares of any business that are prohibited or restricted to them pursuant to the Foreign Business Act additional requirement have been added for the registration of any company that has foreign shareholders holding more than 40% of the shares or has a foreign authorized director, and I could continue my list with more examples….

Thailand 6^th ranking as to ease of registering a property

As to Thailand 6^th ranking as to ease of registering a property transaction, yes it is true that it is very easy to register a transfer of property in Thailand if you are Thai. If you are a foreign investor you may easily purchase a condominium freehold providing however that this condominium is not a property which attracts foreign investors. If it does, as most Pattaya or Phuket condominium properties do then you will be able to purchase only if condominiums units are available in the 49% foreign quota. If not then you will have to look for another property.

As to leasing a land and house for residential purpose, yes the formalities are straightforward providing that you can live with the fact that the lease period is limited to 30 years and that there are no legal guarantees that your lease will be renewed after the 30 years period even if the landowner promised you to do so.

Thailand 71/183 ease of getting credit

Finally, Thailand is ranking 71^st out of 183 as to ease of getting credit. I’m not sure how they arrive to this ranking. Because as a matter of fact foreign owned business may not obtain credits and the only loan that foreign investors may obtain in Thailand are credit cards and loan for personal consumption such as leasing to buy a car or a TV.

Overall, the Nation newspaper may think that the new deserve the front page but the fact is that doing business in Thailand is not as easy as Thailand’s overall 12^th / 183 ranking would led you to believe. I furthermore believe that these kinds of survey are not helping because Thai authorities will be tempted to use the overall good survey ranking to avoid to deal with the improvements that are needed to make foreign investors feel more welcome.

About the Author:

The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.

http//:www.renephilippe.com

© Copyrights 2009 – Rene Philippe Dubout – This article may be reprinted if information about the author, the websites, and the URLs remain intact

Originally posted 2009-09-10 03:28:25.

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1. Doing Business in Thailand: Thailand Ranking in World Bank Ease of Doing Business Survey
2. Thailand Bank: Borrowing Thai Baht from a Thai Bank
3. Thailand Bank: Opening a Bank Account
4. Starting a Business: The One Start One Stop Investment Center
5. Investing in Thailand: Nominees Issue, the witch hunt?
6. Thailand Bank: Foreign Exchange Control Regulations
7. Doing Business in Thailand: Thai PLC and Nominees definition
8. Doing Business in Thailand: Living in a state of sin