Since 2015, Thailand’s military government has been in the process of rigorously reforming the country’s investment policies. One of its main reforms has been to establish Special Economic Zones (SEZs) along the country’s borders. But despite government promises, these zones will ultimately fail to bring the country or the economy back on track.
The main objective of SEZs is to attract foreign direct investment. The idea is that an influx of foreign money will boost the country’s economy, spread prosperity to provincial areas, reduce inequality, and also improve the quality of life of people in the countryside.
Thailand’s existing SEZs cover ten border areas with neighboring countries, including Myanmar, Laos, Cambodia and Malaysia. There are at least two reasons for placing the zones at border areas. First, they aim to support Thailand’s small and medium-sized enterprises by providing them with continuous investment from neighboring countries. Second, the SEZs serve to organize the border areas, and also help resolve such issues as illegal labor and the smuggling of agricultural products from neighboring countries.
National and multinational corporations investing in the zones will receive generous governmental support from the Thai Board of Investment (BOI), including tax incentives and “One Stop Service” investment facilitation. For example, eligible companies will receive: an exemption from corporate income tax for eight years, with a possibility to extend for another five years; a double deduction in tax for transportation, electricity and water costs; and an exemption from import duties on machinery and raw materials involved in the manufacturing of products for export.
The SEZs aim to target 13 specific sectors: agricultural and fisheries, textiles, furniture, gems and jewelry, electronics, automotive and parts, logistics, industrial estates, tourism, ceramic industries, plastics, medicines, and medical equipment. These sectors are promoted differently in each SEZ. The total budget plan for the SEZs between 2015 and 2019 is about US $1 billion, of which infrastructure accounts for a significant share.
However, despite all these incentives, the SEZs are unlikely to succeed in driving new investments in Thailand.
