Doing Business in Thailand

The key to success when doing business in Thailand will be “understanding”, and you cannot arrive in Thailand and immediately jump into the fray because you will inevitably fail.

The first thing to do will be to learn to understand Thailand. I’m not saying that you must immerge yourself into Thai culture but the simple fact that you understand that Thailand has a different culture, different values than your own will certainly help you to achieve success on the long term. Understanding Thailand includes learning about Thailand legal framework and especially about regulation applicable to foreign direct investment (Foreign Business Act, Board of Investment).

The second thing will be to try to understand the local market. A business concept that is successful in ones country may not necessarily suitable for Thailand. I have seen a few business concepts that were highly successful overseas that failed miserably when implemented here.

The third thing is to understand that being a foreign investor is somewhat more a handicap than a benefit especially if you are starting an SME type of investment (multinational companies because of their sizes are generally able to overcome the being foreigner handicap).

If you look at what is actually happening you will notice that most foreign owned businesses such as restaurants, bars, hotels, legal consultants, accounting companies, insurance brokers, construction companies’, architecture companies are mostly doing business with other foreigners or foreign owned business. Somewhat the foreign community is doing business in close circuit and very few foreign owed SME are able to tap into the Thai market. I have seen over the years a few examples of foreign investors failing for no other reasons that they were foreigners and had their business concept been implemented by a Thai businessmen instead it would have been highly successful.

The fourth thing is not to underestimate Thai businessmen; they are smart and generally knowledgeable in their sector of activity. In addition they will have the “local team” advantage

Be careful of whom you are doing business with. Be wary of foreign long terms residents offering you the deal of a lifetime.  I have seen more foreign investors cheated by their fellow countryman than by Thais.

As to Thais, most of them are honest and easy to deal with but there is always the possibility to fall on a bad apple.  So do not give your trust too easily.

One thing to understand about Thai people is that they are very informal. When talking about a business deal with a Thai counterpart you will often have the feeling that the deal you are about to enter will be easy to implement and that there are no legal issues attached to it while the truth may be that you are about to engage in a business which is in a sector prohibited to foreign investor and heavily regulated. Therefore before to enter into deals have a lawyer clarify for you the legal issues pertaining to your business project.  

While it is important to understand that there is a cultural gap between you and your Thai partner do not let cultural issues blind you. I have seen a few cases where foreign investors were so sensitive about the cultural issues that they somewhat lose sight of the business issues that mattered. When you negotiate a deal with a Thai partner put all the issues on the table. Do not be afraid to discuss certain issues simply because of the cultural gap.

A good contract should cover every issue including a clause that regulates possible conflict between the partners and an exit strategy.  In addition a good contract should be simple, easy to read and should not include terms that may changes at unspecified times or circumstances in the future, or subjected to future conditions that may never happen. When negotiating objectives, strict tables should be determined. Parties should avoid clause subjective sales objectives to the “best efforts” of your counterpart.

Finally the contract should contain a dispute resolution clause. The best option is to choose Arbitration for example under the rules of the Thai Arbitration Institute of the Ministry of Justice. I know by experience that the TAI is an efficient institute.

About the Author:

Rene Philippe Dubout, is an accomplished swiss attorney with a background in international business, transactional law, arbitration and an authority in real estate. For more than 10 years, Rene Philippe has been living and working in Thailand were he founded Rene Philippe & Partners Ltd in 2002. A leader in his field Rene Philippe has been acknowledged as “the real-estate veteran” (Bangkok Post 29.05.09) and “real estate finance expert and author” (Herald Sun [Australia] 28.06.09).

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 2010-02-01 00:33:01.

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