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Thailand Board of Investment
Thailand

The Problem

Solution and Key Benefits

 What is the initiative about? (the solution)
The Office of the Board of Investment (BOI) was established forty years ago with a mandate to attract and stimulate foreign investment in Thailand. In the intervening years the BOI has successfully stood at the helm of the country’s economic growth and development, as Thailand has emerged to become both a world manufacturing and agriculture leader.

A reflection of that success, supported by the investment promotion incentives of the BOI, Thailand is set to become one of the global top ten auto manufacturers within the next four years, and is already ranked number fourteen.

Likewise, BOI assistance and tax incentives have also played an important role in attracting investments for the manufacture of electronics. As a result, Thailand in 2005 became the world’s number one manufacturer of Hard Disk Drives, and is a leading manufacturer of electronics products.

The BOI incentive program is also contributing to advances in the petrochemical industry, which is now undergoing expansion, and in many other industries, as well as human resources development under the STI program.

The Board of Investment has been successful in meeting its goals because of the incentives and non-fiscal services that it offers to businesses in targeted sectors of the economy over the lifetime of an investment.

This success is measured in impressive investment figures, and in the contribution the BOI has made to overall national development by making it profitable for businesses to locate in provincial areas with higher rates of unemployment and underdevelopment.

Incentive packages are crafted to provide benefits for locating in more remote provinces, thus contributing to a broad-based national development through enhanced employment opportunities which tend to benefit women who are often unable to travel distances away from family.

It should also be noted that a large measure of BOI’s success stems from its ability to rapidly transition itself to respond to changing global conditions. In the early 1990s the BOI began to emerge not only as a provider of various incentive packages, but it became a world class investment services center. To accomplish this, the BOI began to not only attract business, but assist businesses long after investment decisions have been finalized.

BOI is also keen to receive and react to advice from its investors on how to improve services, and it was this level of responsiveness that resulted in the establishment of a “One Stop Shop” for visas and work permits, where applications are processed in three hours or less.

Additionally, the willingness to provide investors with service has resulted in the formation of a “parts and components sourcing unit”. This unit works with companies to identify their needs and parts specifications that can be met locally, thereby reducing costs.

In addition to being proactive in seeking out investments with establishment of regional offices, BOI has advanced, with advances in information technology, to offer online applications and information in seven different languages.

Actors and Stakeholders

 Who proposed the solution, who implemented it and who were the stakeholders?
1966: the Board of Investment was granted a mandate to attract and stimulate foreign investment in Thailand.

1977: the adoption of the Investment Promotion Act of 1977 broadens the powers of the Board of Investment promotion regime, enabling it to offer fiscal and non-fiscal incentives to investors.

1992: BOI unit for industrial linkage development (BUILD) was established. Its overall goal is to identify the needs of manufacturing assemblers and match those with local suppliers of parts and services who meet specified production standards. BUILD was named the best business linkage program by the World Association of Investment Promotion Agencies in 2004.

1993: Investors Club established.

1997: in an effort to improve services, the One Stop Shop for visas and work permits was established.

2002 BOI established an Investment Facilitation Unit, which acts as a troubleshooting and problem solving mechanism for investors.

(a) Strategies

 Describe how and when the initiative was implemented by answering these questions
 a.      What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
The Board of Investment of Thailand was formally established 21 July 1966 as the premier government body to attract and stimulate investment into the Kingdom.

While its origins can be traced back to the Investment Promotion for Industrial Development Promotion Act of 1954, it is really only with the establishment of the Board of Investment Promotion for Industrial Development in 1960, under the chairmanship of the prime minister, that the bureaucratic structure of the BOI took shape.

The Board of Investment Promotion for Industrial Development had no permanent administrative staff and was forced to rely on the cooperation of other government agencies in the exercise of its mandate. Two years later this was remedied when the Office of the Industrial Board of Development was established within the Office of the Prime Minister, a further evolution towards the final establishment of the Board of Investment.

These new structures were being established throughout implementation of Thailand’s first Economic Development Plan, 1960-1966, which marked the beginning of a transition from direct government intervention in the economy, with state monopolies on imports and exports in many industries, towards greater promotion of private investment as the engine of growth.

It was during the early 1960s that the country began implementation of an import substitution policy. It should also be noted that in 1960 agriculture accounted for roughly 40 percent of national income and manufacturing only about 13 percent. Those figures were to dramatically change in the decade after the BOI was established. This was not due to a decrease in agricultural output, which continued to rise annually and diversify commodities, making Thailand even today one of a few net exporters of food, but more as a result of rapid industrialization and increasing manufacturing output.

Whereas this first development plan succeeded in raising living standards in the country through economic development, the adoption of the second Economic Development Plan, 1967 to 1971, following BOI’s establishment, worked more in support of private sector investment in national development.

Just as with its predecessors, the Board of Investment operates under the chairmanship of the prime minister, with the minister of industry at the lead and a secretary general in charge of the board’s activities.

A decision was made in 1966 to create the Board of Investment, and much of the previous structure was maintained. Consequently, the BOI continues to this day to operate with the prime minister as chairman of the board. Alternately over the years, the BOI has been placed within the Office of the Prime Minister or within the Ministry of Industry. A secretary general is appointed by board members to oversee the operation and successful functioning of the BOI.

It was ultimately with the adoption of the Investment Promotion Act of 1977 that the powers of BOI’s investment promotion scheme were broadened to allow both fiscal and non-fiscal incentives. These included exemptions or reductions of corporate income taxes and import duties for machinery and raw materials, offered equally to all nationalities, without discrimination.

(b) Implementation

 b.      What were the key development and implementation steps and the chronology? No more than 500 words
The priorities and purposes of the Board of Investment have evolved since its original founding, just as the economic and social development needs of the country have changed over the intervening four decades. Essentially, however, the overarching goal of broad based national development through liberal market oriented growth has remained fairly constant.

In the early days of the organization, BOI acted more as a regulator of foreign investment, monitoring the activities of various manufacturers or other BOI sponsored companies, foreign or national. That role continued to hold importance, but as the country began to transition away from an import-substitution development policy and towards becoming a manufacturing and export economic base, BOI adopted a new direction. That purpose was facilitated with the adoption of the Investment Promotion Act of 1977, when BOI was granted authority to offer corporate tax incentives and non-fiscal incentives.

BOI is a proactive arm of the government, especially in times of crisis. Investment promotion laws are sometimes used to supplement or supersede government regulations.

Such was the case in 1997 during the Asian region’s financial crisis when Clause 36V of BOI was invoked in order to facilitate and take the edge off financial controls for import of raw material for match making, trouble shooting and short tem merger services.
We have found from experience the need for investment policies to be flexible and used as a tool in various economic stimulus situations such as: periods of import reward, export promotion, open-door investment promotion, restoration of self-confidence and increasing ability to be competitive.

Overall, BOI works hard to satisfactorily attract and serve investors within a regional and global competitive framework which leads to an increase in Thailand’s social and economic development.

BOI achieves this through “investment promotion” which is handled in three dimensions:

The First Dimension – emphasis is on attraction of investment from countries where transfer of technology and human services development skills can aid in national business development and increase in knowledge base;

The Second Dimension – which identifies promoted businesses in “clusters” so that informational networks can be developed along industrial lines which will hopefully facilitate stronger business knowledge and competitiveness internationally;

The Third Dimension – where investment promotion is according to economic value of the project. Projects from highly development economies receiving greater investment privileges.

(c) Overcoming Obstacles

 c.      What were the main obstacles encountered? How were they overcome? No more than 500 words
The BOI adopted the Thailand Standard Industrial Classification System for industry sectors, and restructured itself along those lines into a more decentralized body. This allowed for the various service departments within the Agency to attain a degree of proficiency in their respective sectors, such as the Agro-industry Division; Metals, Metal Products, Machinery and Transport Equipment Division; Electronics and Electrical Industries Division; Chemical, Paper, Plastic and Light Industries Division, and the Services and Public Utilities Division.

In addition, the BOI has expanded its overseas operations by opening offices in targeted regions such as Europe, North America, and Japan. These offices facilitate the ‘marketing’ of the BOI services, as well as provide assistance to national companies wishing to expand internationally.

In 1992 the BOI Unit for Industrial Linkage Development (BUILD) was established. This unit works in a similar fashion to the integrated capacity-building program of UNCTAD.

Its overall goal is to identify the needs of manufacturing assemblers and match those with local suppliers of parts, components and services who meet specified production standards. This unit acts as a one-stop shop for networking and partnering on a national and international level, and for standards compliance and capacity building.

As mentioned earlier, over the years, BOI promotion investment strategies have adapted to changing economic and governmental circumstances. For example, in 2003 as part of the government’s plan to transition the country into a knowledge based economy, the BOI established new goals and incentives to support skills, technology and innovation development (STI).

In 1996, the Board of Investment launched a Home Page on the World Wide Web as a new communications vehicle for investment promotion, and the initial output of this effort was a modest 20-page site that attracted both critical and popular attention.

As originally designed, the BOI Home Page contained extensive information about the Board of Investment, including FAQ (Frequently Asked Questions).

To better meet the needs of international investors, the site has been expanded by providing information from other government agencies (through the Thailand Information Database), by creating pages in foreign languages (French, German, Japanese, Chinese, and Korean), and by developing new content from within, and outside, the government.

The BOI website contains the latest BOI publications, and links to news stories regarding the investment environment. On-line application was added to the Home Page in 2004 to facilitate ease in submitting BOI applications.

In 1997, after receiving feedback from its investors concerning the lengthy and arduous process of obtaining visas and work permits, the BOI helped to establish the One Stop Service Center for Visas and Work Permits. This center comprises three government agencies in one location, namely, the Office of the Board of Investment (BOI), Immigration Bureau, and Office of Foreign Workers Administration Department of Employment.

The Center was established to facilitate investors in obtaining the documentation necessary to work in Thailand, without the necessity of leaving every three months to renew visas. The “One Stop Shop” processes visas and work permits within three hours, assuming all necessary-supporting documents are provided.

(d) Use of Resources

 d.      What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
Changes resulting from BOI’s achievements can best be measured in the total investment applications that it receives each year. Just looking at the recent past, in 2003 this amounted to US $7.68 billion as compared against the US$17.49 billion two years later in 2005, or the US$10.55 billion registered from January to October of 2006.

On a national level, achievements of the Board of Investment have greatly contributed to overall social and economic development. Fiscal incentives offered by BOI vary according to the location of the investment in Thailand, with greater incentives offered to companies that locate in more remote provinces.

This has resulted in higher levels of employment in areas outside of Bangkok, and consequently facilitated a more broad based national development. It has also alleviated the strain on the infrastructure surrounding the capital and allowed more resources to be channeled by the government into every province.

The Eastern Seaboard of Thailand, particularly the areas around Rayong and Chonburi, provides a good example of industrial growth, enhanced infrastructure and high employment, with unemployment now runs less than 2%.

More importantly, this has provided significant employment opportunities for women, who traditionally have fewer employment possibilities but possess a near ninety-six percent literacy rate. Thailand also ranks high in the World Economic Forum’s measurement of women’s economic participation and advancement.

Within the Agency itself, a number of changes have occurred. “The One Stop Shop” for Visas and Work Permits has experienced quantifiable success and continues to work to improve on the services it offers.

Occasionally from monitored feedback, BOI develops reduction in processing timeframes of activities. For example in 2006:

1. Reduction in modified promotion certificate issuance from 4 procedures to 2 procedures and from 10 to 4 operational days. This is a 60% improvement.
2. Reduced procedures for import machinery clearance from 6 procedures to 2 procedures, and operational time from 7 working days to 2.47 hours. This represents a 95.95% improvement.
3. Reduced procedures for approval consideration of machinery exports from 6 procedures to 2 procedures, and the operational time from 15 working days to 2.115 hours. This is a 98.24% improvement.
4. Reduced procedures for approval consideration of machinery guarantees from 6 procedures to 2 procedures and the operational time from 3 working days to 2.54 hours. This is an improvement of 89.24%.

Sustainability and Transferability

  Is the initiative sustainable and transferable?
The activities of the Board of Investment have been sustained by its adaptability and evolution into a full investment services center. BOI is not content to attract investment into Thailand as an end in itself. There is an institutional understanding that to sustain the success we have achieved the BOI must be responsive to investors, our clients, during the lifetime of their investment. To that end, we assist investors in dealing with other government agencies and help them to the extent possible to reduce their exposure to bureaucracy and red tape, to find parts and components sourcing that meet an international standard, and in disseminating information to them that is both useful and timely.

The BOI investment promotion package is also not static, but something that is revised as circumstances in Thailand or globally warrant. In response to the upswing of global oil prices and the nation’s need to reduce dependence on fossil fuels, the BOI recently added investment promotion for the manufacture of an environmentally friendly, driver safe, fuel efficient and cost-effective automobile. In response to Thailand’s growing need to improve human resources, particularly as it moves away from a labor intensive economy to one that is knowledge based, the BOI has added a skills, technology and innovation program. Companies that bring with them some added-value human resources training or technology transfers will be eligible for additional benefits. The history of the Board of Investment is replete with examples of being able to rapidly respond and exploit emerging challenges.

Lessons Learned

 What are the impact of your initiative and the lessons learned?
In the course of its forty years of providing service to foreign and national investors, the BOI has learned the importance of creating certainty for the business community, to ensure them that their investments are secure, and to act in a non-political manner in transmitting accurate information. Additionally, the policies and procedures for investing in Thailand are set down in a straightforward, clear and consistent manner.

When a group of investors made their concerns known to BOI about the lengthy process of getting work permits and visas, requiring several visits to government agencies in different locations throughout the city, we worked with those agencies to establish the “One Stop Shop.”

Recognizing the difficulty that some investors had in dealing with the bureaucracy, such as environmental and local regulations, we established the Investor Facilitation Unit, to walk them through the process and explain what is required.

When misunderstandings arose as to timeframes for applications and other work to be processed, BOI began attaching schedules to investment applications, placing time limits on BOI departments to complete their work and allowing investors to monitor on-line, the progress of their application.

As the investor base began to widen, BOI was quick to recognize the importance of making information available in different languages and early on we adopted the use of ICT to expedite procedures and convey information.

BOI was also quick to recognize the importance of transparency and meeting international standards and in 1998, following the Asian financial crisis, we adopted ISO and were in fact the first government agency to be awarded ISO9001.

Other government agencies have begun to follow BOI’s lead on ISO.

BOI conducts its own customer satisfaction surveys twice a year.

Contact Information

Institution Name:   Thailand Board of Investment
Institution Type:   Government Agency  
Contact Person:   Chitra Kulvanich
Title:   Senior Investment Promotion Officer 8  
Telephone/ Fax:   (66) 2537 8111 ext 1104
Institution's / Project's Website:   (66) 2537 8177
E-mail:   head@boi.go.th  
Address:   555 Vibhavadi-Rangsit Road, Chatuchak
Postal Code:   10900
City:   Bangkok
State/Province:   Bangkok
Country:   Thailand

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