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Bentleys National
17 Offices
Brisbane
58 Directors
520 Staff
Perth
National Ranking 18
Sydney
Adelaide
Each office an SME Family business
Melbourne
Tasmania
Agribusiness one of our 5 key industry groups
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Practical Insights:
Assessing Opportunities and Gearing Up for
Success in Thailand – An Australian
Advisor’s Perspective
Ross Prosper, Director Taxation & Business
Services, Bentleys Perth
25 February 2016
www.Bentleys.com.au
Issues to Consider
Strategy
Doing Your Homework
Economic Climate
Execution
Working with Advisors & Resourcing
Attracting Investors
Financial Considerations and Managing Risk
Tax Considerations and Choosing Your Structure
Government Incentives
Management
Working with locals and managing change
Do you have the right leadership to grow the business
Corporate Governance and accountability
1. STRATEGY
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Doing Your Homework
Foreign Direct Investment into any country has opportunity and risk.
Do your homework and understand the real issues beyond tabloid media
What do you know about Thailand? Looking beyond the stereotypical
benefits
Understanding Thai culture and the deep roots of Buddhism on society
Making your decision based on business facts and professional advice
Understand your main costs (e.g. is it labour, capex, energy or distribution?)
Understanding your competition – local or international
Economic Climate
Thailand has a long history based on agricultural exports
Over the past few decades, the Thai economy has
undergone significant industrial development with
industry and services assuming a more prominent role
Most industrial activity is located in the central area of
Thailand
Politicians are very supportive of business development
The Thai economy is large
* Source: Australian Trade Commission
Thailand Market Snapshot
GDP: US$387.2 billion (2013)
GDP per capita: US$5,674 (2013)
GDP Growth: 2.9% (2013)
Population: 68.2 million (2013)
Trade with Australia: Au$19.4 billion (2012-13)
Source: Austrade
* Source: Australian Trade Commission, 2011 GDP data
Typical Labour Costs*
Annual Salary (Baht)
Annual Salary (AUD)
MD / GM
1.2 million
48,000
Financial Controller
960,000
38,000
Office Manager
600,000
24,000
Office Clerk
156,000
6,000
Sales / Marketing Staff
228,000
9,000
Translator
360,000
14,000
Accountant
240,000
9,500
Housekeeper
108,000
4,300
Semi-Skilled Labour
116,400
4,600
* Based on median monthly salaries surveyed in 2015 and published by the Thailand Board of
Investment. Exchange rate based on 1 Thai Bhat = $0.04 AUD as at 1 February 2016.
2. EXECUTION
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Working with Advisors
Although Thai is main language, bi-lingual help is relatively easy to
find
English is widely recognised and accepted in Thailand
Choosing the right advisor in Thailand (or any foreign country can be
difficult). How do you assess skills; do they understand your
business; how do you manage costs?
One approach is to go through the Thai Board of Investment (TBOI)
and a trusted Australian advisor with established international
networks who can assist with the screening process and cost
management considerations for you
Resourcing
What resources do you need?
Get help in undertaking a feasibility study
Thai BOI can provide introductions to expert advisors in any
industry and other assistance and guidance
Austrade
Financial advisor who specialises in the agricultural industry
Legal support
Thai Free Trade Agreement with Australia
Industry support
Can you qualify for an Australian Export Market Development
Grant (EMDG) through Austrade or other support?
Are there any Thai business incentives you can take advantage
of?
Thailand-Australia Free Trade
Agreement (TAFTA)
TAFTA is one of two Free Trade Agreements that
Australian Businesses can use
The elimination of 94% of Thailand’s tariff & quota
barriers on imports from Australia as of 2010
Remaining tariffs being phased out from 2015 to 2020
Increased access and new ownership rules for
Australian investors
Provisions on Investment Protection
Right to transfer funds out of Thailand at any time
Livestock exports = 0 tarriff
Attracting Investors
Putting together your feasibility study and business plan
Do you know your expected return on investment?
Is your financial structure in place?
Determining how much funding you need
Do you need a Thai business partner? Maybe & the role
of the Thai BOI
Marketing through your advisor network
Financial Considerations
Manage Financial Risk
Choosing your structure
Foreign exchange risk
Hedging strategies
Do you have appropriate insurance?
Debt to equity mix can impact return on investment
Taxation
Government Incentives
Categories of Risk
Importance of Financier
Relationship
“Your financier, whether a bank or some other financial
organisation, plays a crucial role in supporting the
operation, growth and success of your business.”
For long-term stability, you need to develop an unofficial
‘partnership’ with your financier.
One of the biggest frustrations of a growing business is
being unable to secure the financing needed resulting in
lost opportunities & stifling growth
How Risk Is Viewed From a
Financier’s Point of View
Each risk is identified, and appropriate pricing is adopted
for the facilities
The greater the perceived risk, the greater the margin
paid
Minimise risk for the bank/ financier, through better &
more timely reporting, audit processes, good corporate
governance, better financial systems and control
Taxation Overview In Thailand
Overview
Rate / Feature
Company tax rate (including branches) 20%
Carry forward of tax losses
5 years
Thin capitalisation rules?
No but debt to equity limits may be
imposed if certain business licences or
other approvals are required from the
Thai BOI
Transfer pricing rules?
Yes
Withholding tax on dividends
10%
Withholding tax on interest
15%
Withholding tax on royalties
15%
Service fees (technical services
treated as royalties)
15%
VAT (certain exemptions apply)
10% / 7% until September 2016
Tax year
Calendar year
Choosing your Structure
A number business structures are available in Thailand including various
forms of partnerships (ordinary, registered and limited partnerships) as well
limited companies and public companies.
It is common for foreign investors to structure their business through a
limited company, branch or representative office
From an Australian perspective, whether the Thai structure is held through
an Australian company, trust (family or fixed trust) can impact return on
investment depending on your circumstances
Consider debt and equity funding mix
3. MANAGEMENT
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How to avoid costly business failure
when investing offshore
Many businesses with international aspirations have
failed when they attempt cross border investment. Why?
People issues are often at the root cause of failure
You need to do your due diligence on people – a critical
business issue for any investor
What should your management team look like?
Relocated Australian managers, experienced expats,
local management and leadership teams
Clarity around roles, expectations and reporting lines
Coaching and mentoring
Leadership in Thailand
Preparing managers and executives for an expat
assignment
Business in Thailand is formal – understand the rules of
protocol
Hands on management – leaders give orders – strictly
chain of command
Focus on managing individual performance
Change management occurs through clear top-down
direction and patience
Thailand has a collective culture – emphasis on group
orientation and teamwork
The value of Corporate Governance
What is Corporate Governance?
Corporate governance definition
Principles for businesses engaged in exporting or foreign
direct investment
Practical implementation
Stage in business life cycle will influence type of
corporate governance processes required
Importance of Good Governance
Corporate Governance for Small to Medium
Enterprises investing offshore
Corporate governance is not just for big corporations
SME’s can benefit from adopting good governance
Establishing a framework of company processes to
communicate, control and monitor (or govern) the
business
Managing and controlling risks by being informed
The impact of good governance
Impact of Good Governance
Improves performance management
Improved risk management
Identifying
Analysing
Mitigating
Legal & financial impact
Greater compliance with legal requirements
Reduced cost of capital
To Finish Off:
Some Business Etiquette Tips
The traditional form of greeting in Thailand is the “wai”, which is the placing
of palms of the hand together and raising them with fingertips at eye level
and inclining the head slightly
Foreign business people are not expected to initiate the wai
Business cards should be exchanged using the right hand or both hands
and should be read upon receipt
Attire at business meetings should be formal business attire
Building personal relationships is important to Thai business development
Again, peer to peer meetings are important
Exchanging gifts is widely practiced and signify friendship or an appreciation
of hospitality
Gifts are opened in private
Thai Government Incentives
The Thai Government recently announced a 7 year
investment promotion strategy from 2015 to 2021 to
encourage both foreign investment into Thailand as well
as Thai outbound investment.
Foreign investment in Agriculture and Agricultural
Products is one of the specifically targeted areas.
Broadly, the incentives are divided into two groups:
Activity-Based Incentives
Merit-Based Incentives
Foreign investors can take advantage of both ActivityBased and Merit-Based Incentives
Thai Government Incentives
(continued)
Activity-Based Incentives
These are further divided into sub-classes of activities but
broadly relate to incentives relating to knowledge based activities
focussing on R&D; development of infrastructure and high
technology activities.
Incentives provided include:
Corporate income tax exemption from 3 to 8 years
Exemption on import duties of machinery and raw materials
Relaxation of certain regulations covering:
Entry into the country and use of offshore skilled labour
Ownership of land
Foreign currency exchange controls
Thai Government Incentives
(continued)
Merit-Based Incentives
These are additional incentives to further encourage
investment that focus on improving the country’s
business competitiveness; decentralization and
development of industrial areas.
Incentives provided include:
Corporate income tax exemption between 3-8
years
Additional deductions about to 200% of
expenditure in certain areas such as
transportation; electricity and water supply