Doing Business in Thailand: Understanding Thai Administration

January 22 2010 Categories: Thailand Business, Understanding Thailand No comments yet

Why it is necessary to understand the system?

The first thing you will hear when coming to Thailand is foreigners complaining about the workings of the Thai Administration. I used to work with a foreign lawyer who had what I call the “colonial state of mind”. This lawyer was so full of his own superiority and so sure that his country’s administrative system was superior to Thailand’s that he never understood the system here, which is a mistake.

If you want to do business in a new country, you must try to understand its system and its bureaucracy. Because once you understand how the system works you will be able to work in it and take advantage of the opportunities that it can provide. Unfortunately a lot of foreigners simply never understand this.

Is Thai Administration helpful?

Surprisingly yes: Swiss people have one of the most helpful administrations in the world especially the federal administration. When I was a lawyer in Geneva, I often received questions that requested me to call one of the federal departments in Berne. Not sure, whether I was lucky but I was always able to find a government officer ready to take the time to answer my queries. Surprisingly, the Thai administration is also like this.

Thai government officers are knowledgeable and helpful and they will generally take the time to answer any questions you have. In addition, when you want to do something that is not legally possible the Thai officer will not only tell you that you cannot do it but he will also take the time to explain what other options are available.

I don’t need to tell you how patient they are when dealing with people who can barely speak English. In the end they can only do what they can, so do not blame the administration for all your problems. Try to understand that the administration cannot do more than the law allows.

Why do government forms refer to nationality, race or religion?

Do not be surprised, but many of the government forms you will have to fill over the years will request you to specify your race, ethnicity and religion. Deep down, I believe that these kinds of questions are more about the need of the Thai bureaucracy to classify everything and everyone in particular categories than a willingness of doing racial profiling.

Because while Thai are proud of being Thai, while they are proud of their King and are a little bit chauvinist the fact is that this nationalistic feeling is not aggressive. It is interesting actually; because nationalistic societies tend to reject those who are different, but in Thailand, nationalism and openness to others are not mutually exclusive and foreigners are overall fairly treated in Thailand.

Do you need to translate all documents you will use in Thailand?

The Thai authorities accept documents in Thai or English. Documents in any other language need to be translated into Thai and the translation to be certified as correct by a Thai Embassy. It is easier to wait to be in Thailand to have your documents translated. In some cases the translation by the translator is enough but in others translated documents will need to be certified by the Thai Ministry of Foreign Affairs.

Is there a lot of waiting when dealing with Thai administration?

You will not be obliged to go in person to every administrative formality. Your lawyer will be able to handle them on your behalf most of the time. However, from time to time, you will have to go in person. In general you will be requested to pick up a ticket and then you will simply have to sit (sometimes in an air conditioned room) and wait to be called. Average waiting times at the immigration is around 2 hours.

Water Coolers and free drinking water is available in most of the Thai administrative buildings and there are always small booths close by where you can buy some food and drink. So yes you will have to do some waiting but it could be a lot worse than this, I mean that you could be dealing with French administration.

My friend Christophe has a wife who is a citizen from the Philippines. While in France he had to accompany her once a year to renew her visa. It took him an average of 3 days to do so. The first day they arrived at 08.30. The line was so long that by the time the French administration closed down they barely made it inside the building. The second day they came at 06.00 o’clock and waited outside in the rain. They nearly made it this time round. Fortunately they were luckier on their third attempt. There will always be complaints about the slowness of the Thai administrative processes but overall, consider yourselves lucky not to have to deal with the French one.

Is there a lot of red tape in Thailand?

When you start your business in Thailand the first thing you will notice is that your lawyer will frequently request you to sign bundles of papers. Whether it is to set up your company, to apply for your work permit or your one year visa, at every step of your investment you will have to sign a bunch of documents.

Foreign investors often call this Red Tape. Red tape is a derisive term used in relation to needless time consuming procedures, excessive regulation and rigid conformity to rules. Whilst it is true that to do business and live in Thailand you have to subject yourself to the bureaucracy and a lot of procedure, this is not red tape per se but simply a by-product of Thainess.

When you are dealing with Thai administration you also have to understand the concept of Thainess. Thainess is a concept that provides for the respect of order in a hierarchical society. A hierarchical society can simply not survive without bureaucracy which is why there are these formalities and why you will need to sign all those documents. If you want to do business or live in Thailand you will simply have to learn to live with this.

Are some of the documents you sign redundant?

Thai authorities do not produce all these forms for the simple joy of it or to keep Thai printers in business. Each document you will be requested to sign over the years has its usefulness. The best examples are the documents you will be requested to sign when applying or renewing your one year visa. In order to be able to obtain or renew your one year visa you will have to fulfill a predetermined set of conditions.

If you look in parallel the list of conditions you have to fulfill and the documents you are requested to provide you will immediately notice that none of the documents you are requested to provide are pointless. To the contrary each of them serves to prove one of the conditions you have to fulfill to keep your visa.

Is someone reading all the documents you sign?

Yes, they read them all.

Here again the best example is Immigration. As stated above you will, each year, have to provide to the immigration a bundle of documents. When you have, as I have, been living in Thailand for more than 10 years your immigration file will have become as big as a house.

I can tell you as I’ve experienced it personally that if there is any mistake or discrepancy in these documents the government officer will find it. In my case, the discrepency was that I had paid in 2005 fewer income taxes than in 2002, 2003 and 2004. As salaries are supposed to increase every year the officer wanted to know why I paid in 2005 fewer taxes than the years before.

Thus we have to provide a letter explaining the reason for the discrepancy in my tax records. When a document is missing or incorrect the Thai authorities will, generally, not refuse the file but accept it and give you time to provide additional or missing documents or explanation.

What is the Thai administration doing with all those documents?

Occasionally, I have a curious client who asks me the question But what in hell are they doing with all these papers? The answer is simple, they save it for when they might need it. What I mean by this is that the Thai authorities will keep every paper and document you sign in Thailand which you have to be very careful what you sign.

From time to time you will hear that a foreign country has requested the extradition of one of its nationals that is living in Thailand and that they will request the Thai Government to keep the person under custody while awaiting the filing of the extradition papers. This is one of those cases when all those documents that we tend to deem not useful come in handy. In this situation the Thai Government will ask immigration and its Thai Embassies overseas to review the complete immigration file of the person targeted.

They will try to find the glitch that will permit them to detain the targeted person for administrative reasons (violation of visa regulations), i.e. the targeted person has produced a false letter of invitation from a Thai Company to support his visa B application. So before signing anything always remember that any scrap of paper you sign will end up in one of the files the Thai authorities keep on you and that one day this document might be used against you.

Is corruption a problem in Thailand?

When speaking of corruption we have to distinguish between two kinds of corruption; that is political corruption and administrative corruption. Political corruption is when a government officer or an elected official accepts to receive money for concessions to receive government contracts, a monopoly or a license that could otherwise not have been obtained. Administrative corruption is when a private citizen needs to pay under the table, or as we call it here tea money, in order to obtain something from the administration. Political corruption is played at high levels while administrative corruption is at a lower level. Hereinafter I will only discuss the matter of administrative corruption as it is the one that interest businessmen in the first place.

Is their a lot of Administrative Corruption?

Administrative corruption is not as common in Thailand as people tend to believe .

A foreign businessman that come here to do business within the framework of the law will generally be able to incorporate his company, apply for his foreign business license or BOI promotion, or for any licenses needed to exercise his business, apply for his work permit and his one year visa without having to pay one cent or satang in tea Money.

In addition, committees not individuals grant many licenses (for example the Foreign Business License, the Board of Investment License). In other words, the officer to whom you will present your application for a foreign business license does not have decision power, and there is no real reason to try to bribe an officer that does not decide.

When a bribe is paid, it is in general more a matter of speeding up the administrative formalities (jump the line) than to obtain a real privilege. To summarize Thailand is not free of corruption but the situation here is not as bad that some people believe.

What is the difference between Namjai and Corruption?

Namjai is another by-product of Thainess. Namjai means benevolence or to repay the favors that people do for you. There will be time when a businessman will feel that he has to give a tip to a government officer. This tip is in general freely given and not because it was requested by the officer.

To illustrate, one will give a tip to a government officer that comes to visit the office premises within the context of the application for a license or authorization or survey of a land. In the context of land surveys, the official geometer will not do his work differently whether he receives the tip or not.

For example, one of our clients had purchased land that was divided in 250 title deeds. To handle this transaction the local land department had to prepare thousands of pages of documents. All the employees of the Land Department had to work overnight for several days to make this transaction possible. Our client even had to send a car to another land department to pick up official forms as the local department did not have enough. Once the transaction was completed our client gave tips to all the officers that worked on this transaction simply because they deserved it.

Suppliers that do business with government hospitals are requested to pay an amount of 5% of the total value of the sales to the government hospitals as welfare payment. The money being not paid to an individual but the entity itself; this practice is known at the Ministry of Health and is not illegal.

It is also customary for law firms or companies that deal with the authorities to give Christmas gifts to the departments with which they have to work with (such as chocolates or groceries). All the examples discussed previously are cases of Namjai. While in several countries those payments could be considered corruption, in Thailand, they are considered benevolence.

How do you distinguish between a corruption payment and a ‘Namjai’ payment? The ‘Namjai’ payment is generally lower and is often not a condition to the rendering of an administrative service but an acknowledgment that the service has been well done.

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 2009-07-23 05:40:23.

Doing Business in Thailand