After contracting by 6.1% in 2020, the Thai economy is now witnessing a growth curve in its economical development. There are various factors and metrics which contribute to this growth. Widespread adoption of digital platforms, reopening of borders for foreigners are the strong reasons behind this growth. BCG Economy in Thailand also has a lot of contribution in the foreign fund inflow resulting in bio-circular-green business investments.
Overview of Post-COVID Thai Economic Growth
- Thailand’s economy grew in the fourth quarter, faster than projected. It is all due to strong exports and a resurgence in domestic activity. It happened after the lifting of coronavirus restrictions and the reopening of borders to foreign tourists.
- The government kept its economic growth forecast at 3.5 percent to 4.5 percent. This cites a little impact from the omicron-driven coronavirus outbreak. There are improvements in domestic demand, tourism recovery, and continuing export and public investment support.
- Thailand’s GDP growth is 1.6 percent in 2021, after contracting by 6.1 percent in 2020.
Government Focuses on BCG Economy in Thailand
The Industry Ministry wants to use BCG economic development to enhance Thailand’s post-pandemic GDP. It is also targeting to convert the country into an ASEAN bio-hub by 2027.
BCG promotes manufacturers to create and add value to products that have no or little environmental effect. Bio-economy focuses on renewable resources, particularly farm produce, and turns them into value-added products.
“We want to increase high-value agricultural products to better support, local farmers, in the long term,” – Industry Minister Suriya Jungrungreangkit.
The Federation of Thai Industries (FTI) estimates that investments in BCG projects will increase expenses by 30 to 50 percent. Therefore, the government must encourage investors by providing tax incentives. The FTI’s vice-chairman, Kriengkrai Thiennukul, focuses on the need of following the BCG economic model to improve production efficiency. Additionally, there must be preventions in trade obstacles on the production of items in factories that do not safeguard the environment.
Response to the BCG Economy Model of Thailand
More than 10 billion baht has been invested in bio-economy projects so far. The major projects are as follows:
- Polylactic Acid (PLA) Project in Rayong
- Nakhon Sawan Bio complex in Nakhon Sawan, and,
- Palm Bio complex in Chon Buri
PLA is a biopolymer that can be composted and used in a number of applications. Normally, it has significant use in coffee capsules and food packaging.
Other business opportunists acknowledge that the BCG push is in line with the worldwide effort to minimize carbon dioxide emissions. There was a recent joint poll by the Industrial Estate Authority of Thailand (IEAT) and the Japan External Trade Organisation. According to the responses, 49% of investors are keen to make new investments under the BCG economic model.
Mitrphol Group’s chief operating officer, Pravit Prakitsri, announced his company will invest 5% of total revenue on BCG projects.
PTT Global Chemical Plc plans to spend $20 billion between 2021 and 2050 to reduce greenhouse gas emissions. This is the statement of Chaya Chandavasu, senior vice-president for sustainability and corporate branding.
BOI Announcements for BCG Economy of Thailand
According to the Thailand BOI, the value of foreign and local investment applications in 2021 was 642.7 billion baht. This is approximately US$19.5 billion. Furthermore, this is a 59% growth primarily by foreign direct investments (FDI) in technology sectors. This is a continuous increase in the value and number of projects in Bio-Circular-Green (BCG) industries. Additionally, this is a continuity in the expansion of the power generation sector.
There was a BOI meeting chaired by Prime Minister Gen Prayut Chan-Ocha. Additional incentive measures to promote the national strategy for boosting the country’s status as a regional bio-hub and the bio-economy initiative were the conclusion of the conference.
“Investment applications in BCG activities are steadily increasing. Investors are taking advantage of the promotion measures that we have issued. This is assisting Thailand’s economy and businesses in preparing for changing consumer demand and supply chains in the post-Covid-19 world”. This was the statement of BOI Secretary-General Ms. Duangjai Asawachintachit in the meet. According to her, “When it comes to FDI, we’re witnessing steady growth in target sectors like smart electronics, specialty chemicals, bioplastics, and the medical cluster.”
Therefore, if you are interested and hold experience in the above industries, you can think now to start your business in Thailand. Make sure that your idea is coherent with the ideologies of the BCG Economy of Thailand.
Sectors Witnessing Growth in BCG Economy Model of Thailand
With 104.5 billion baht in value, electrical and electronics topped the list of target sectors. It was able to attract the most applications, reflecting the soaring demand for electronics devices and parts. The medical sector came in second with 62.2 billion baht. Just after that are the petrochemicals and chemicals with 48.4 billion baht. Agriculture and food processing with 47.7 billion baht, and automotive and parts with 24.6 billion baht follows henceforth. The 12 target industries received a total of 340.5 billion baht in commitments, accounting for 53 percent of all pledges.
Digital was the fastest-growing sector. 2021 value of applications is 14 billion baht, which is double its value of 1.61 billion baht a year earlier. From 68.4 billion baht in 2020, the total value of activities of BCG, a cross-sector grouping of biotechnologies and environmental-friendly manufacturing, grew to 152.4 billion baht. Therefore, this confirms investors’ growing commitment to sustainable activities such as bio-plastics manufacturing and agricultural waste recycling.
There is an increase in the power generation infrastructure increases. Furthermore, this adapts to a higher share of renewable energy and clean natural gas. Moreover, the power generation sector experienced a significant amount of investment. Meanwhile, FDI commitments accounted for 71% of total pledges. In total, it is 455.3 billion baht for 783 project applications. Surprisingly, this is a nearly three-fold increase in value from the 169.3 billion baht in 2020.
With a combined investment value of 80.7 billion baht for 178 projects, Japan once again topped the list of FDI source countries. There is China with 38.6 billion baht in investment promises for 112 projects, and Singapore with 29.7 billion baht for 96 projects. Electrics and electronics, petrochemicals and chemicals, and the medical cluster were the top three sectors for FDI applications.
Additional Measures to Support Bio-Hub
“Digital Trading Platform for Agricultural Products” and “Agri-Food Industrial Estates/Parks,” will join the BOI list of activities eligible for incentives. Moreover, this will be part of the additional measures to assist the bio-economy.
The activity of the digital trading platform is to enable the “from farm to factory” idea. This intends to secure a continual supply of high-quality raw materials to industry and boost agricultural production, including allowing farmers access to appropriate new technologies. This approach is to boost Thailand’s competitiveness as the world’s leading food supplier by enhancing a more resilient supply chain in the agricultural, food, and non-food industries.
Despite the high number of current enterprises in the bio-based sectors, clustering of these activities is unlikely to be noticed and should be encouraged in order to strengthen the relationships between participants in the same supply chain. The agricultural and food industry special zones are intended to bring together businesses involved in the agricultural and food supply chain, such as food processing and businesses that use agricultural products, by-products, and waste as primary raw materials, as well as businesses that provide science and technology services (such as testing laboratories) and training.
For the next five years, both new activities will be eligible for tax incentives.
Improved benefits and conditions for enterprises producing extracts from natural raw materials and goods containing those extracts are also included in the approved package. The product coverage has been broadened, and incentives have been improved, in order to encourage the use of sophisticated technology and higher product standards, as well as the commercialization of public-sector-funded research.
Bottomline
After reading this article, we hope that you have got an idea of the amount of attention the BCG Economy Model of Thailand has attracted globally. The Board of Investment and the Royal Thai Government is also focusing on the model and Bio-hub initiative. This is a great opportunity for foreign investors to seek BOI promotions and attain 100% foreign ownership in their business in Thailand. Write to us at [email protected] for all types of support and assistance regarding your business idea for the BCG Economy in Thailand.
