Doing Business in Thailand

One question that many investors are asking is whether it is expensive to do business in Thailand? The answer is mixed. On the positive side, Bangkok is according to a CB Richard Elis survey ranking 151^st out of 179 markets in terms of office rental costs. Average rental costs in Bangkok for prime grade office are around 694 THB per square meter/per month (or 21 USD).

Firstly let me start by disappointing those of my readers that expect me to tell them how much it cost to invest in Thailand. It is not possible to give average investment costs sector by sector. A investment into a restaurant may be anything between 500,000 to 30,000,000 THB, and investment into a hotel may be anything between 5,000,000 THB up to billions baht. For those of you to get a better idea of what you are getting into send me an email with the details of your project at contact@renephilippe.com and I will try to give you n median bracket of the cost of your investment. This being said Thailand is still a good place to invest providing that you know what you are doing.

The cost of labor is also within acceptable range. According to quarterly BOI survey median cost of labor per month are between 100,000 THB for a Managing Director, 75,000 THB for a Financial Controller, 55,000 for managers, 27,000 THB for an executive secretary, 18,000 THB for an accountant or an engineer, 15,000 THB for sales staff, 10,000 THB for Office Clerk and between 10,000 to 8,000 THB for skilled labor.

Costs to incorporate a business are also reasonable. Professional legal fees for incorporation a company range from 30,000 THB to 100,000 THB depending of the service provider, for a work permit and visas average legal fees are 38,000 THB (WP) and 30,000 THB (visas extension or renewal). While they have been increased government fees are still reasonable. For a one year work permit the fee is still 3,000 THB, for a one year visa it is 1,900 THB and for a one year re-entry permit it is 3,800 THB. Costs of incorporation of a company are still unchanged at 5,500 THB per million THB of paid up capital.

Overall doing business in Thailand is still inexpensive by comparisons to many country. If it is so why did I say in the introduction that my answer is mixed? Because there are always the unexpected expenses which mostly are a consequence of the inexperience of investors.

For example we have seen many investors purchasing land ending up with unexpected expenses which could have been avoided if the investor had be more careful. In one case the investor purchased a cheap land near a village. He did not worry about electricity connection as the land was next to a village which was connected to the network of the Electricity Authority of Thailand. Once the investor, started the construction of his resort and applied for electricity connection to his land he was informed that the electrical line connecting the village were not enough to fulfill the electricity needs of his resort and that the Electricity of Thailand did not have a budget to upgrade the village electricity connection so he would have either to wait or to finance the upgrade on his own which he did at a cost of several million.

Another case is the case of an investor which purchased land without knowing that it was located in an area which is often flooded. The cost of filling the land in order to develop makes it so that the purchase price was not such a bargain anymore.

Then there is the case of this investor that rented a land and built a factory without checking the zoning of the land he rented to discover later on that he would never able to obtain a factory license in this area.

I could continue with many other examples of “bargain” investment that ended up costing the investors more than they ever intended to invest. The additional cost may materialize itself immediately or manifest itself later. For example, in my “Starting up a Business in Thailand: The Bar Business” post I mentioned the story of these two investors that purchased a bar for 5,000,000 THB without checking the lease agreement and who 6 months later found themselves having to pay the owner a 6,000,000 THB key money to extend their lease agreement for another 3 years. I have seen a restaurant owner who have invested 6,000,000 THB in a restaurant based on a 1 year lease without a proper renewal clause who had to move out of the leased premises after the expiration of the 1^st year lease term.

The point I’m trying to make here is that, yes Thailand is a country were investment costs are generally inexpensive but this remain true only as long as the investor act with reasonable prudence. If you do not be warned that your carelessness or lack of attention to details that matters may end up costing you more than you ever bargained for.

Note: This post is an excerpt of Rene Philippe Dubout next book: “How to Invest Safely Into Thailand” to be published in January 2010

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

Originally posted 2009-12-11 06:52:35.

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