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Doing Business in Thailand



Market Overview

  • Thailand is the 27th largest export destination for the United States. Two-way trade in goods and services in 2013 was about $40 billion, with $26.1 billion in Thai goods exports to the U.S. and $11.8 billion in U.S. goods exports to Thailand. U.S. exports to Thailand increased by 8.6 percent from 2013, while US imports from Thailand remained essentially flat. In Asia, Thailand ranks as the United States’ 9th largest export destination after China, Japan, Hong Kong, South Korea, Singapore, Taiwan, India, and Malaysia.
  • Thailand, the second largest economy in ASEAN after Indonesia, is an upper middle income country with an open economy and a gross domestic product (GDP) of $375 billion in 2013. Thailand’s GDP expanded 2.9% from 2012, when the economy grew 6.4%. Thailand’s economic prospects have been hampered by dampened consumer spending, higher household debt, and lingering political instability.
  • An export-dependent economy, Thailand exported a total of $ 219 billion worth of goods in 2013, accounting for 58% percent of its GDP. Exports in 2013 fell 2.4 percent, compared to a 14.3 rise in 2013. The contraction was due to soft global demand and low commodities prices. Together, China, Japan and the United States accounted for 31.7 percent of the market for Thai exports in 2013.
  • Industrial production accounts for the second largest share of Thailand’s GDP at around 39%. Next is services (52%). Agriculture, long associated with Thailand, stands at 8%. Manufactured products are usually the top export, accounting for 86% of all exports in 2013. Electronics/electrical appliances and automobiles made up around one-third of total export value in 2012. Tourism, which is also vital to the Thai economy at roughly 6% of GDP, is suffering somewhat due to the protracted political conflict in the country.
  • Private consumption and investment, the primary components of domestic demand, the primary drivers of growth in 2012, weakened in 2013. This was due to falling commodity prices, the ending of consumer-friendly government programs, and rising household debt. The political situation has also negatively impacted confidence and constrained government spending. Tourism, which traditionally plays an important role in the Thai economy, has also been hampered by political tension; particularly in Bangkok.

Market Challenges

  • Thailand’s markets are full of intense competition from both global and domestic suppliers. Many domestic companies are family businesses that span generations, and are now led by second and third generation businessmen who are highly educated and possess deep knowledge of their industry. Thailand’s mass market is price conscious and is generally served by local suppliers and/or low-priced imports. U.S. exporters with products that are competitive for reasons other than price should plan to work with their local partner to undertake an extensive marketing strategy.
  • Thailand’s average applied MFN tariff rate was 9.8 percent in 2011. The country’s agricultural tariffs are at an average of 39.9 percent ad valorem, compared with its average applied MFN tariff on agricultural products of 22 percent. MFN duties on imported processed food products typically range from 30 percent to 50 percent. These particularly high rates bring price pressures for U.S. exporters hoping to succeed in the market. Furthermore, Thailand has preferential trade agreements with such countries as Japan, Australia, New Zealand, China and India. U.S. firms with direct competitors from those countries could face additional price pressures.
  • Corruption and lack of transparency in government procurement tenders, as well as widespread piracy of intellectual property rights, are still major concerns for U.S. companies.

Market Opportunities

  • Thailand’s economic growth has created opportunities for U.S. companies in a number of infrastructure sectors including electrical power, telecommunications, and renewable energy. Thai consumers are creating opportunities for new sales of U.S. medical products, cosmetics, automotive accessories, food supplements and educational services. Thailand also continues to look for U.S. suppliers of defense equipment, broadcast equipment, food processing and packaging equipment, and environmental technology.
  • Thais highly value a foreign education. The United States’ higher education system is known throughout the world for its excellence, and Thailand is no exception in this respect. Many students wish to study in the United States, and as Thai incomes grow study abroad is becoming more feasible. There are many promising opportunities for colleges, universities, and private educational institutions such as language and technical schools.

Market Entry Strategy

  • Obtaining a local partner, such as an agent or distributor, is still the preferred means of entering the Thai market, as it is one of the most efficient and effective ways to reach Thai buyers. The agent or distributor can facilitate and expedite market entry with their extensive market knowledge and established networks. Within the business culture of Thailand, interpersonal relationships are a vital factor underpinning successful business transactions.
  • The Commercial Service in Bangkok provides series of services customized to assist U.S. firms planning to enter the market. Please refer to Chapter 10 of this guide for further information on our services.


FCPA


The U.S. Foreign Corrupt Practices Act (FCPA) is an important anti-corruption tool designed to discourage corrupt business practices in favor of free and fair markets. The FCPA prohibits promising, offering, giving or authorizing giving anything of value to a foreign government official where the purpose is to obtain or retain business. These prohibitions apply to U.S. persons, both individuals and companies, and companies that are listed on U.S. exchanges. The statute also requires companies publicly traded in the U.S. to keep accurate books and records and implement appropriate internal controls. More information on the FCPA can be found here.

A party to a transaction seeking to know whether a proposed course of conduct would violate the FCPA can take advantage of the opinion procedure established by the statue. Within 30 days of receiving a description of a proposed course of conduct in writing, the Attorney General will provide the party with a written opinion on whether the proposed conduct would violate the FCPA. Not only do opinions provide the requesting party with a rebuttable presumption that the conduct does not violate the FCPA, but DOJ publishes past opinions which can provide guidance for other companies facing similar situations.

More information on the DOJ opinion procedure can be found here.

FCPA Guidance in pdf. Format can be downloaded at http://www.justice.gov/criminal/fraud/fcpa/guide.pdf

The U.S. Department of Justice (DOJ) and the Securities and Exchange Commission released a Resource Guide to the U.S. Foreign Corrupt Practices Act. The Guide is an excellent resource on the FCPA for U.S. companies with questions about the statute and its enforcement. The Guide explains the statute in detail and contains hypothetical, examples of actual enforcement actions, and summaries of FCPA case law and DOJ opinion releases. For this and other useful resources visit the DOJ webpage: http://www.justice.gov/criminal/fraud/fcpa/guidance/


Market Overview
Country Commercial Guide
Local Service Provider
Thailand Map_2