October 2024 / Thailand

On 22 October 2024, the Thai Cabinet approved the signing of a draft letter of commitment for Thailand to join the Multilateral Competent Authority Agreement on Automatic Exchange of Information pursuant to the Crypto-Asset Reporting Framework (CARF MCAA).

Through the letter of commitment, Thailand indicates it will prepare for implementation of the relevant domestic laws and procedures and intends to begin exchanging information under the CARF MCAA by 2028.

The CARF is an important component of the International Standards for Automatic Exchange of Information in Tax Matters, published by the OECD on 8 June 2023, which also includes amendments to the Common Reporting Standard.

Source: IBFD Tax Research Platform News

The Monetary Policy Committee (MPC) of the Bank of Thailand has voted 5 to 2 in favor of reducing the policy interest rate by 0.25%, lowering it from 2.50% to 2.25% per year, effective immediately.

The Thai economy is expected to grow in line with previous projections, while headline inflation is anticipated to gradually return to the target range by the end of 2024. The household debt-to-income ratio is also expected to continue its gradual decline.

The MPC concluded that the current neutral monetary policy stance remains suitable for the economic and inflation outlook. The majority of committee members supported the rate cut, viewing it as a way to ease debt burdens without hindering the ongoing reduction in the household debt-to-income ratio. They considered the current level of interest rates to be neutral and aligned with the economy’s potential, especially in light of slowing credit expansion.

However, two committee members voted to maintain the policy rate at its current level. They argued that the current rate remains appropriate for economic and inflation trends and stressed the importance of preserving long-term financial stability. They also highlighted the need to retain the capacity of monetary policy to address future uncertainties.

Thailand’s economy is projected to grow by 2.7% in 2024 and 2.9% in 2025, driven by tourism, private consumption, and improving exports, particularly in the electronics sector. However, the recovery remains uneven across industries.

Financial conditions have tightened slightly. The Thai baht has appreciated against the US dollar, reflecting both global monetary policies and domestic factors. Borrowing costs for the private sector through commercial banks and the bond market have remained stable, while overall credit growth has slowed, particularly in small and medium-sized enterprises (SMEs) facing structural challenges, as well as in the hire-purchase and credit card sectors.

Source: thailand.prd.go.th

The Thailand Board of Investment (BOI) said that applications for investment promotion in the first nine months of 2024 increased 42% on year in value to a combined 722.5 billion baht (ca. USD 21.7 billion), the highest level since 2015. Large projects in target sectors such as electrical appliances and electronics (E&E), and digital, mostly data centers, led rankings due to a significant afflux of foreign direct investments (FDI).

The number of applications for investment promotion during January to September increased 46% to 2,195 projects, from 1,501 projects in the same period of 2023. The adjusted investment value of the projects applied in the first nine months of 2023 was 509.4 billion baht.

Mr. Narit Therdsteerasukdi, Secretary General of the BOI said: "The investment applications in the first nine months clearly demonstrate the rising confidence of investors in key tech industries that Thailand is the strategically located, safe and resilient place that’s best for their business, Thailand’s robust digital infrastructure, clean energy resources, and strong government support are providing the right environment for data center and advanced technology investment, including wafer manufacturing."

FDI during the nine months increased 38% from the year earlier period to 546.6 billion baht.

The applications for projects in targeted industries accounted for 68% of the total investment value, led by the E&E sector with 291 projects worth a combined 183.4 billion baht, followed by the digital sector with 107 projects worth 94.2 billion baht, and the automotive and parts sector with 212 projects worth 67.8 billion baht. The agriculture and food processing sector saw 226 projects worth a combined value of 53 billion baht, while there were a total of 162 petrochemicals and chemicals projects with a combined value of 34.3 billion baht.

Singapore was the top source of FDI with applications worth 180.8 billion baht, more than twice the 79.7 billion seen in the year earlier period, mostly due to large investments in E&E and data centers by units of Chinese and American companies. China ranked second with 114.1 billion baht, up 18% from 96.5 billion baht a year earlier, and was followed by applications from companies based in Hong Kong (68.2 billion baht), Taiwan (44.6 billion baht), and Japan (35.5 billion baht).

E&E applications so far this year have included the 11.5 billion baht investment by FT1 Corporation, a Thailand-Hong Kong-Singapore wafer manufacturing joint venture between Hana Microelectronics and PTT Group that will start producing silicon carbide wafers as early as the first quarter of 2027. Several printed circuit board (PCB) applications were also filed this year, such as China-based Multi-Fineline Electronics’ project to invest 13.9 billion baht to manufacture multilayer PCBs and flexible PCBs in Thailand.

Electrical appliance project applications filed so far this year include China’s Haier Appliance Manufacturing’s 13.5 billion baht investment in a new smart air conditioners manufacturing facility, and Taipei-based Inventec Electronics’ investment of 11.8 billion baht for the manufacturing of smart electrical appliances and smart electronic devices , including PCBA, notebooks, docking stations.

As for the digital sector, most of the investment value came from applications to setup large data centers by units of large tech and cloud service companies such as Google (Alphabet) from the U.S., Australia’s NextDC, and India’s CtrlS Datacenters.

Automotive sector applications include Continental AG group’s Continental Tyres (Thailand) Co., Ltd. project to spend a total of 13.4 billion baht to expand its tire plant in Rayong Province and boost annual production by an additional 3 million high-performance radial tires, mostly for export, reaffirming Thailand’s status as the World’s second largest tire production base, and Southeast Asia’s automotive hub.

Source: boi.go.th