CONTENTS

April 2015 Volume 25 No. 4

PageNew Era of Enhanced ASEAN-Japan Partnership 1

News Bites / BOI Net Applications 2Thailand Gains on Legatum Prosperity Index 4

Industry Focus: Alternative Energy 5A Haven for Savvy Investors 7The EIU Worldwide Cost of Living 2015 report 8

Turn Creativity into Digital Economy 8Company Interview: Energy Absolute 9BOI’s Missions and Events 11Thailand Economy-At-A-Glance 12

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New Era of EnhancedASEAN-Japan Partnership

There is anticipation that more foreign direct investment (FDI) will flow into Southeast Asia, especially into infrastructure and innovative products, once the ASEAN Economic Community (AEC) becomes fully effective at the end of this year. At a seminar on “Opportunities in a New Era of Enhanced ASEAN-Japan Partnership”, noted economists and academics from across Southeast Asia and from Japan agreed that the AEC would be the largest single market in the region and open opportunities to link its members to the rest of the world. That would challenge foreign interests to invest more into the regional grouping. The Toshiba International Foundation (TIFO), the Federation of Thai Industries (FTI), and Thai Chamber of Commerce (TCC) organized the event with support from Chula Global Network, Chulalongkorn University and Graduate School of Public Policy, University of Tokyo, Nation Multimedia Group and Asia News Network (ANN).

The aim of the symposium was to explore a new paradigm of cooperation between ASEAN and Japan and identify the most effective approach to achieving it. Furthermore, the conference surveyed ways to maximize human capital potential as well as to enhance institutional capacity, which underlines a path towards greater development, and also to create a sustained and equitable society over the long term. Similarly, the question of how the concept of “advanced-stage development in Asia” should be defined, operated and implemented was discussed.

NEWS BITES BOI NET APPLICATIONSMoving toward Green Manufacturing

More than 10,000 factories have joined a project to develop themselves into green industries. The Ministry of Industry will encourage people to consume products and services that have been produced from environmentally friendly manufacturing processes. At the same time, the Ministry will urge factories to attach greater importance to environmental conservation and safety standards, under the Green Industry Thailand project, which is intended to encourage industries in the country to be more environmentally friendly and focus more on social responsibility for sustainable development.

During the past three years, a total of 11,375 factories have joined the Green Industry project, which concerns sustainability and environmentally friendly production.

Preparing for ASEAN Community

Thai land is preparing for the ASEAN Community 2015 and the special economic zones in border areas of the country.

At a meeting of the National Committee on Skill Development and Coordination of Occupational Training, Deputy Prime Minister and Defense Minister General Prawit Wongsuwon noted that human resource development is crucial for driving Thailand’s economy, which is growing together with the country’s industrial expansion. The Ministry of Labor has set up an ASEAN Division, and through the Department of Skill Development has set a target to develop communication skills in English and ASEAN languages for 21,480 workers and entrepreneurs.

Thailand Developing into MICE Center in ASEAN

Thailand Convention and Exhibition Bureau (TCEB) is proceeding with its plan to help various educational institutions develop an international standard MICE curriculum. This will help the country become a MICE Education Center in ASEAN.

TCEB has so far joined 50 educational institutions in MICE curriculum development. It is expected that 5,000 MICE personnel at an international standard will be produced each year, which would help expand the labor market for the MICE industry. TCEB foresees that in 2015 Thailand will welcome more than one million international MICE visitors, which will bring in about 106.8 billion baht.

Thailand has combined space of more than 460,000 square meters that can be rented for exhibitions, now the largest in

2013(US$ = 30.06THB)

2014 (Jan-Feb)(US$ = 32.65 THB)

2015 (Jan-Feb)(US$ = 32.57 THB)

Number of projects Value Number of

projects Value Number of projects Value

Total Investment 2,237 34,335 170 1,901 107 539

Total Foreign Investment 1,132 16,227 121 1,449 50 88

By Sector

Agricultural Products 64 742 2 13 2 2

Minerals / Ceramics 28 1,144 4 48 4 25

Light Industries / Textiles 59 327 4 8 1 2

Automotive / Metal Processing 378 7,668 37 508 12 31

Electrical / Electronics 207 2,784 22 14 13 13

Chemicals / Paper 124 722 14 683 4 4

Services 272 2,838 38 173 14 12

By Economy

Japan 562 8,746 61 532 15 20

Europe 132 972 17 95 8 9

Taiwan 53 216 5 11 6 14

USA 55 359 3 299 3 1

Hong Kong 39 624 8 65 2 3

Singapore 93 704 11 67 7 8

By Location

Central 766 7,284 62 141 43 217

East 711 11,502 69 1,443 28 111

South 103 2,013 9 73 5 23

Unit: US$ MillionNote: Investment projects with foreign equity participation from more than one country are reported in the figures for both countries.

ASEAN. There are also several major international convention centers in Thailand, such as IMPACT Arena in Bangkok and the Chiang Mai International Convention and Exhibition Center in Chiang Mai province.

Special Economic Zones

The Board of Investment approves the proposal of the Special Economic Development Policy Committee and announces 13 groups of activities now eligible for additional incentives if located within a special economic zone: agro-industries, fisheries and related businesses; ceramic products; textile, clothing and leather; furniture; gems and jewelry; medical devices; automotives, machinery and parts; electronics and electrical appliances; plastics; pharmaceuticals; logistics; industrial estates; and businesses that support tourism. These activities can be eligible to receive maximum incentives of 8-year corporate income tax exemption and an additional 5-year 50% CIT reduction.

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A more recent initiative suggests that ASEAN countries must look beyond 2015. A long-term outlook is whether many ASEAN member states would be able to graduate from the middle-income stage and move towards the status of newly industrialized countries. Indeed, “ASEAN connectivity” is to function as the key propellant of the AEC as it will expand trade and commerce by reorganizing supply chains across the region. As a result, the quality of regional infrastructure, particularly the implementation of the latest technologies and systems, will be paramount to the success of the AEC. Already there exists the East-West corridor, North-South corridor, maritime corridor, and new economic corridors, like the Dawei project in Myanmar. Still, each ASEAN member is responsible for ensuring a transparent economic environment.

Mr. Hiroshi Watanabe, governor and chief executive officer of the Japan Bank for International Cooperation, declared that ASEAN and Japan needed to decide on a number of critical issues regarding future cooperation. The first thing to consider is whether they should work together on a bilateral agreement basis - ASEAN-Japan - or under a multilateral agreement. For the latter, he cited a possible ASEAN-Japan-China model, as Tokyo already cooperates successfully with Beijing on a wide range of economic matters.

For Mr. Watanabe, maintaining an effective and relevant ASEAN-Japan partnership revolves around several interrelated themes, such as how to keep an efficient supply chain, how to enhance connectivity in the region, how to mobilize private capital in the region, how to set a good standard for financing and channeling resources, and how to increase the food supply to match expanding demand.

It was pointed out during his presentation that ASEAN would have to decide on whether to keep a single intra-regional chain or accept a double one with China alone. Similarly, in order to strengthen connectivity across Southeast Asia there needs to be more promotion of cross-border projects, equitable sharing of responsibility for the development of the ASEAN Economic Community, and greater institutional linkage that would result in system harmonization. Mr. Watanabe also remarked that the mobilization of private capital in the Asia-Pacific region is essential for the economic advancement of the entire ASEAN community. Accordingly, such action hinges on the effective utilization of the Tokyo stock market and the injection of capital by ASEAN banks for investment purposes. Indeed, Japanese financial institutions will act as a guarantor of these funds. Likewise, sharing common best practices in PPP operations, emphasizing agricultural technology transfers, and encouraging on-site processing of agricultural produce will heighten regional manufacturing efficiencies, industrial capacities, and deeper multi-sectoral integration. The AEC holds a bounty of promise.

Recently, Japan has urged ASEAN members to develop their connectivity, especially cross-border transportation and logistics services, to strengthen regional competitiveness and pave the way for further Japanese investment. Experts said countries in Southeast Asia needed to improve their connectivity, especially overland and across borders, and that the region should enhance logistics services to cope with more investment from Japan in the long-term. “Japan has been investing in ASEAN for more than 40 years, and ASEAN is its largest production base. Therefore, we are now talking about how to support ASEAN [countries] to build

their connectivity to cope with further investment from Japan,” said Masahiro Kawai, project professor at the University of Tokyo.

Economists and other experts offered views for countries on how they should identify and create a new paradigm for advanced development in ASEAN, as the region approaches full implementation of the ASEAN Economic Community at the end of the year. Japan stands ready to support Thailand in building quality infrastructure as well as carrying out technology transfers. “ASEAN economies can be developed from the existing land [transportation] system, such as a corridor linking Myanmar, Thailand, Laos and Vietnam,” added Akihiko Uchikawa, minister at the Embassy of Japan in Thailand.

Ms. Sunanta Kangvalkulkij, deputy director-general of the Department of Trade Negotiations at the Ministry of Commerce, said ASEAN already had signed free-trade agreements, with China, Japan, India, South Korea, and Australia and New Zealand. This opened opportunities for trade and investment in ASEAN. Additionally, she mentioned that AEC 2015 will present challenges to Southeast Asia. For instance, the elimination of non-tariff barriers (which actually are increasing rather than decreasing), removal of behind-the-border impediments (customs, product inspections, immigration), improvement of regional trade facilitation (e.g. AFTA), alignment of domestic laws with ASEAN’s common market commitments, and narrowing of the development divide.

What is interesting is that an AEC post-2015 vision is being discussed now at the governmental level. The AEC is a single platform creation but the concept can be expanded and adjusted to meet the demands and challenges of an ever-evolving global marketplace. As a result, the services sector must be deepened and extended. By embracing greater liberalization, more trade and investment prospects will emerge across Southeast Asia. ASEAN needs to be relevant to the New Economy. Therefore, it becomes imperative to develop effective public-private partnerships that focus on cross-border trade activity and further market integration.

Mr. Fukunari Kimura, chief economist at the Economic Research Institute for ASEAN and East Asia, told the symposium that Japan really did not need high-speed connectivity between Thai cities or within the region at the moment, but required efficient and quality logistics services, which would significantly reduce time-costs and strengthen the production system. “As many

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Continued from P. 3Japanese firms have a production base in the region, they need advanced logistics management. If ASEAN can meet that need, it should help strengthen both Japan and ASEAN,” Mr. Kimura explained.

During his keynote address, “Enhancing ASEAN/Japan Partnership in a New Paradigm of AEC Post-2015”, Mr. Kimura asserted that the regional grouping must promote connectivity and innovation both within the economic bloc and within the individual national economies. Indeed, ASEAN has presented a novel development model that has taken advantage of the mechanics of production networks. This is in reference to the second unbundling, where manufacturing is spliced and diced into separate fragments that can be spread around the globe. Additionally, Mr. Kimura declared that it is essential that ASEAN step up the development ladder and address geographical and industrial gaps. Such fissures can be dealt with through connectivity and innovation. Plus, agglomeration and dispersion are the main forces at work in today’s new economic environment and businesses exploring opportunities in ASEAN must take them into account.

Japan and the ASEAN bloc have worked together for decades and the “special relationship” that exists between them is crucial for the continued progress and prosperity of all concerned parties. Mr. Kimura identified “four pathways” that must be pursued in order to elevate ASEAN-Japan cooperation. First, ASEAN needs to become more competitive and enterprising. These qualities can be actualized through better market integration, connectivity, and human resource development. Actually, investment in the expansion of human capital should be recognized as the cornerstone of sustainable development for the region. Secondly, ASEAN needs to draft and implement

policies that cultivate an economic environment of inclusivity, particularly for SMEs. Thirdly, ASEAN needs to create and follow market strategies that are sustainable and ensure the economic security of the community in areas like energy, food, macro- and micro-financial stability. And finally, there needs to be dynamic equilibrium between the centrality of ASEAN and ASEAN’s strategic partners. In conclusion, Mr. Kimura proclaimed to the audience that the AEC is a process, not an end.

Thailand stands literally at a crossroads. It is a member of the ACD (Asia Cooperation Dialogue), BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), ACMECS (Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy), GMS (Greater Mekong Subregion), and the IMT-GT (Indonesia–Malaysia–Thailand Growth Triangle). Because of its geographical location, the country naturally functions as a regional hub of connectivity, a veritable multimodal corridor linking ASEAN with not only the broader Asia-Pacific but also the rest of the world. Indeed, the development of transportation and logistics is critical to the concrete actualization of the AEC. Yet this mission will require the active support and involvement of the Japanese.

Japan always has played a very constructive role in the ASEAN region since 1973, when it established informal dialogue relations with the organization. No one can deny that Japan will continue to be an integral part to the future development of ASEAN, but how Japan’s role will evolve in the years to come is still a big question. Fortunately, ASEAN and Japan have just celebrated 40 years of close partnership, so the expectation exists that this relationship will remain very productive, healthy, and necessary to the progress and prosperity of ASEAN and its individual member states.

Thailand Gains on Legatum Prosperity IndexThe Legatum Prosperity Index, an annual ranking of 142 countries by the Legatum Institute, now in its 6th year, has released its 2014 rankings. The Index measures factors such as wealth, economic growth and quality of life. Thailand is ranked 51st, improving by one place since last year. In comparison to other countries in Asia, Thailand ranks among the top-10.

Thailand’s best indicator is in economics, where it ranks 13th. This sub-index measures countries’ performance in four key areas: macroeconomic policies, economic satisfaction and expectations, foundations for growth, and financial sector efficiency.

“The 2014 Prosperity Index provides a lens through which to view a comprehensive assessment of national success. The Index measures the broad set of indicators that tell us not only how nations perform economically but in vital areas of education, health, freedom, opportunity, social capital, and more. The Prosperity Index covers 142 countries in the world, accounting

for 96 per cent of the world’s population and 99 per cent of global GDP making it the most comprehensive tool of its kind” wrote Stan Hansen, Executive Director of Legatum Institute.

In addition to scoring well in the economy sub-index, Thailand also scores well under social capital. This sub-index measures countries’ performance in two areas: social cohesion and engagement, and community and family networks. According to Legatum, “A person’s wellbeing is best provided for in a society where people trust one another and have the support of their friends and family, and this also encourages increases in per capita income. The Social Capital sub-index measures countries’ performance in two areas: social cohesion and engagement, and community and family networks.”

Thailand continues to make progress in the annual rankings and with new investment policies in place and a government committed to strengthening infrastructure and the overall economic environment, the time to invest in Thailand is now.

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INDUSTRY FOCUS

Alternative Energy

As a country, Thailand benefits from strong year-round solar radiation with the largely rural northeast Isaan region benefitting most. The combined solar potential areas account for around 14.3% of the country’s overall area, gaining average daily solar exposure at around 19–20 MJ/m2 per day, while the other 50% the country gains around 18–19 MJ/m2 per day. With such potential in abundance, solar power in Thailand was expected to reach 55 megawatts by 2011, then 95 megawatts by 2016, and late 500 megawatts by 2022. In 2013, installed photovoltaic capacity nearly doubled and reached 704 megawatts by the end of the year.

Economic renewable energy development typically requires that governments exploit their natural renewable resources with subsidies reducing in line with technology costs and market maturity. Thailand has adopted such an approach and while its biomass has the greatest renewable generation potential, the rapid growth of solar energy could conceivably see solar challenge wind power as the Kingdom’s second most important renewable resource by 2020.

In order to stay competitive in a rapidly globalizing economy, Thailand has emerged as one of the first countries in Asia to encourage alternative energy investment. In an effort to maintain the sustainability and security of energy in Thailand, the government developed the 10-year Alternative Energy and Development Plan (AEDP), with the target of increasing alternative energy consumption from 7,413 ktoe (kilo tonnes of oil equivalent) in 2012 to 25,000 ktoe in 2021.

The AEDP 2012-2021 has the twin goals of transforming the country into a low-carbon society and of increasing the use of renewable energy to 25% of total energy consumption by 2021. A significant portion of this target is to seek substitutes for natural gas power generation, with an emphasis on wind energy (wind turbine farms), hydropower, biomass, biogas, as well as waste and garbage.

On 16 July 2013, the National Energy Policy Committee approved updated feed-in tariffs for both rooftop and ground-mounted solar photovoltaic panels with contract terms of 25 years on the condition that they had to be installed by the end of 2014. Regarding rooftop solar power, a target of 100 megawatts was set for households

and 100 megawatts for SMEs and factories. To be specific, the goal was to increase Thailand’s target installed Photovoltaic (PV) capacity by 1,000 MW to a total of 3,000 MW. Since the government no longer accepted applications under the known adder-tariff-scheme (feed-in premium) for solar projects, these policy packages reopened support for solar power in Thailand. The move was a new step of the Department of Alternative Energy Development and Efficiency’s (DEDE) to develop commercial solar power generation and bolster the country’s energy security.

With solid governmental commitment to develop a clean energy society, the DEDE was established under the Ministry of Energy, to support, promote, and develop clean energy production and consumption cost-effectively and sustainably. In addition, the government office aspires to transform the country as an energy knowledge base society, as witnessed with the inauguration of the School of Renewable Energy Technology – an institute at Naresuan University – to train students and scholars in this field.

In fact, the DEDE launched its solar cell standard testing and research center with the intention of becoming a hub for the ASEAN region. Currently, solar cells are used to produce over 3,200 kilowatts of electricity and rapidly increasing. The Department emphasizes on the quality, efficiency, and product life of relevant components such as solar panels, batteries, inverter, and battery-controlled equipment.

Solar is a clean natural energy resource that can be converted into heat and electricity. There are two main methods for generating electricity from solar energy. One is photovoltaic (PV) cells, which generate power by converting solar radiation into direct current (DC) electricity using semiconductors. The other method is a concentration system, using lenses or mirrors to focus sun radiation. The concentrated sunlight heats water or other fluids to generate steam for use in steam turbines to generate electricity.

Recognizing the importance of alternative energy to the country, the Board of Investment (BOI) has designated it as a priority sector. With the recent announcement of the Seven-Year Investment Promotion Strategy (2015-2021), the BOI has introduced new criteria and project classifications that apply to the solar power sector.

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First, the production of electricity and steam from renewable energy, such as solar, wind, biomass or biogas, except from garbage or reuse derived fuel, is included. Secondly, there is the manufacture of solar cells and/or raw materials for solar cells. Yet this activity must abide by the guideline that the Board must approve the manufacturing process and energy yield for the production of solar cells. Furthermore, these particular activities fall under the category of Group A2 and as a result shall receive the following incentives:

• 8-year corporate income tax exemption, accounting for 100% of investment (excluding cost of land and working capital);

• Exemption of import duty on machinery;• Exemption of import duty on raw or essential materials used

in manufacturing export products for 1 year, which can be extended as deemed it appropriate by the Board; and

• Other non-tax incentives, such as permission to bring in foreign workers, own land, and take or remit foreign currency abroad. Additionally, projects in manufacturing and many service sectors are entitled to majority or total foreign ownership.

The current legal, regulatory and business environment provides great market opportunities for foreign solar companies and entrepreneurs to develop and engineer a solar project, to obtain financing based on the power purchase agreement, to enter into a joint venture with the major players in the Thai energy market.

Compared with other Southeast Asian countries, Thailand has the highest electricity demand, with plans for increasing imports from neighboring countries such as Laos, Myanmar, and China. Investments in renewable energy is one of the country’s priorities, given its goal to reduce its energy imports. Furthermore, the soon-to-be-announced Thailand Power Development Plan 2015 - 2036 will open the doors to foreign investments in renewable energy, especially solar photovoltaic projects.

Of equal significance, the Government Public Relations Department recently reported that the National Reform Council (NRC) has given support to the “Quick Win” proposal, which seeks to liberalize the installation process of solar rooftops to generate electricity. Indeed, Mr. Alongkorn Ponlaboot, Chairman of the NRC Energy Reform Committee, stated that solar power generation is a part of the energy reform plan. It is expected that in the first five years of implementation, from 2015 to 2020, schools, workplaces, government offices, and households will begin to install solar rooftops.

During that period, at least 100,000 sets of small solar rooftops could be installed at various houses and generate 500 megawatts of electricity. In the next 20 years, at least one million small solar rooftops are likely to be installed, generating at least 5,000 megawatts of electricity. For Mr. Alongkorn, the energy reform plan would help reduce imports and investments in the construction of more power plants. The plan also would develop Thailand as a “green country” and as a leader in ASEAN in the use of solar energy.

Concerning energy investment policy, priority will be given to energy-saving technologies and the promotion of renewable sources, such as ethanol, biodiesel, biogas, biomass, solar and wind. Under the revised 10-year alternative energy development plan (2012-2021), the solar power generation target has been lifted to 3,000 megawatts from 2,000 megawatts. According to Prime Minister Prayuth Chan-ocha, since Thailand could not rely solely on gas and oil for fuel sources, the use of renewable energy must be promoted and domestic production must be

encouraged. The objectives are to reduce the burden from imports and conserve limited petroleum and gas resources.

Presently, installed capacity stands at 35,000 megawatts, with the majority of energy sources from LNG liquid natural gas (66%) and coal (20%). Non-hydro renewable energy contributes a minor (around 5%) but increasing share of total electric power generation.

Several policies already are in place to support investments in renewables, including tax incentives and benefits. The first package announced was the aforementioned policy scheme to support the deployment of rooftop PV in Thailand. According to the Ministry of Energy, the scheme is meant to encourage private and community investments, minimize peak load and contribute to energy security in Thailand. Meanwhile, the Provisional Electricity Authority of Thailand offers a fixed purchase price for solar power, which is composed of the average electricity price plus an additional premium or “Adder” by way of remuneration.

Today, the state-owned Electricity Generating Authority of Thailand (EGAT) generates roughly half of the country’s electrical power. The other half of the generation assets are developed and owned by private companies and sold to the government electric utilities like the Metropolitan Electricity Authority (MEA/Bangkok) and the Provincial Electricity Authority (PEA/Upcountry). In fact, according to the Ministry of Energy, at the end of December 2014, 294 solar farms have started selling 1.32 gigawatts to the grid, while 14 with total capacity of 296 megawatts have signed sales contracts but have not supplied power. Some 178 solar stations have applied to sell 1.01 gigawatts.

Thailand was one of the first Asian countries that put into place an incentive scheme for renewable power generation back in 2006. A perfect illustration is the Feed-in Tariff (“FiT” - measured in Thai baht/kWh), which is a long-term fixed payment guarantee for produced renewable energy. FiTs are the most widely used national renewable energy policy instrument worldwide, and are recognized as one of the most effective and efficient drivers of renewable energy scale-up by creating investor security. Under the Renewable Energy Adder Program (REAP), it affixes supplementary payments (“Adders”) on top of the normal prices paid by the governmental off-takers like EGAT, MEA and PEA. This ensures guaranteed long-term purchases, easy project financing, and attractive tariff rates to eligible grid-connected renewable power projects.

Unlike thermal power plants, the operation of a solar power station has negligible environmental impact. There are no waste products, no harmful coolants used, no noise, and no impact on flora and fauna. Indeed, solar energy is an abundant resource throughout Thailand and can represent a potential of more than 50,000 megawatts in installed power capacity, according to international measurements of average solar irradiation over the last 20 years. The DEDE estimates that technical potential for Thailand’s solar energy is as high as 42,356 megawatts.

Solar power is a renewable source of energy that is clean and unlimited. The Thai government is taking steps to increase the share of renewable energy in the country by tapping Thailand’s abundant solar potential. Solar cell technology has proved to be an environmentally friendly solution. No doubt, Thailand holds great promise in the installation of more solar rooftops. Apart from reducing the burden during peak demand hours, this technology also will contribute to energy conservation and transform the country’s energy system over the long-term.

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A Haven for Savvy Investors

Thailand remains a haven for savvy investors, with the Board of Investment approving 10 additional projects at its 2 April 2015 meeting, with a total investment value of 28,541.7 million baht.

Now in its fourth month of the new investment incentives initiated at the beginning of the year, the momentum at the Board of Investment not only confirms that investors continue to have a strong interest in Thailand, but also that the government is committed to affecting change in Thailand to improve the investment climate.

Dr.Prasarn Trairatvorakul, Governor of the Bank of Thailand, recent ly speaking before the Japanese Chamber of Commerce, stated that “The steps taken reflect the desire by the current government to not only facilitate and encourage private investments, but also to steer the new investments into more productive sectors, which will raise our long-term competitiveness.” He went on to say that the only way for any country to escape the middle-income trap is to raise productivity and innovation, which require among others investment in infrastructure. It should be noted that the Bank of Thailand is keeping monetary policy accommodative in order to support economic recovery and public confidence.

Not even in office for a year, this is exactly the development path that has been embraced by the government. Thailand has already had talks with both China and Japan for cooperation in various aspects of the national rail improvement that will connect China and Thailand, and through Thailand connect to other parts of ASEAN. Japanese companies and other in Thailand look forward to the double track program as one of the measures that will enhance the nation’s logistics capacity.

In fact, at its meeting on 27 March 2015 the cabinet approved the Thai Transport Infrastructure Development Plan 2015-2022, which includes 1) intercity train network development, 2) public transportation network development to solve traffic problems in Bangkok and its outskirts, 3) increase of highway capacity to connect the country’s key production bases with those of neighboring countries; 4) marine transport network development; and 5) enhancement of air transport services capacity. Also approved at that meeting was the Urgent Transport Action Plan 2015, which also deals with these issues.

Confidence in Thailand extends well beyond regional interests, as recently affirmed by the courtesy call paid at the end of

March by the Ambassador of Canada to Thailand to Prime Minister Chan-o-cha, signaling Canada’s readiness to expand cooperation with Thailand.

The meeting between the two comes following the conclusion o f t h e C a n a d a - A S E A N Business Forum. According

to the release issued by Government House, “The Canadian Ambassador mentioned expertise of Canadian private sector in various fields which might match Thailand’s demand, such as financial and banking, satellite, aircrafts, and automotive parts. Both parties also discussed certain cooperation which would lead to the agreement on FTA between the two countries in due time.”

Likewise, the meeting in early April between Thailand’s Prime Minister Chan-o-cha and Russian Prime Minister Dmitry Medvedev was a reaffirmation of confidence and friendship between the two countries which have enjoyed diplomatic relations for nearly 120 years. The meeting follows up on their meeting at the 25th ASEAN Summit in Myanmar, during which Thailand invited Russia to invest in Thailand’s infrastructure projects, and a readiness to improve trade and investment.

Speaking to the media after their recent meeting, Prime Minister Chan-o-cha stated that they had exchanged opinions on how to boost trade between Thailand and Russia to US$10 billion next year.

Thailand’s door remains open for foreign investors and with new investment incentives, a government that is actively promoting foreign investment in the kingdom, a commitment to strengthen infrastructure and lower logistics costs, there is little wonder that UNCTAD has ranked the country the 8th top prospective host economy.

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The EIU Worldwide Cost of Living 2015 reportThe EIU Worldwide Cost of Living 2015 report ranks Bangkok as only the 57th most expensive city in the world, with Singapore once again at the top of the list at #1, followed by Paris, Oslo, Zurich and Sydney. However, it should be noted that since the report ranked the most expensive cities the changes in exchange rates and the collapse in the price of oil would likely alter the rankings to a degree if made today.

According to the report, “The survey gathers detailed information on the cost of more than 160 items-from food, toiletries and clothing to domestic help, transport and utility bills…More than 50,000 individual prices are collected in each survey round, which take

place in March and September, and surveys are updated each June and December. A cost-of-living index is calculated from the price data to express the difference in the cost of living between any two cities.”

Investors can rest assured that choosing Thailand as their investment destination remains a cost effective alternative, yielding high returns.

Turn Creativity into Digital EconomyDr. Yongyuth Yuthavong, Deputy Prime Minister, presided over the seminar “Turn creativity into Digital Economy”, which was arranged by the Thailand Creative & Design Center (TCDC) on 16 March 2015 at the headquarters of Thailand Post Co., Ltd.

Speaking at the event was Dr. Sitthichai Pokai-udom, an adviser to Deputy Prime Minister Pridiyathorn Devakula, who said that the government will form a National Digital Economy Committee to take responsible on this policy. Further, that the Ministry of Information and Communication Technology will become the Digital for Economy and Society Ministry.

Within the first three years, said Dr. Sitthichai, the priority is to build a national fiber-optics network, and conduct an auction for fourth-generation cellular spectrum licenses; every household must have fiber-optics internet.

Thailand’s aim is to have the lowest cost of internet fee in ASEAN and become the hub of the ASEAN internet system.

The Ministry will also support e-commerce business, which is something now promoted under the new BOI investment policy.

Dr. Sitthichai also noted that the single window idea is to integrate people’s information within one card (an identity card), reducing the time and access to documents when contacting governmental agencies.

This far, the cabinet approved 10 of the digital economy draft

bills, including the NDEC bill which will give authority to the National Digital Economy Committee to take action against any civil servant who fails to comply with committee orders or directives regarding digital economy policy.

Also speaking at the seminar was Dr. Narongchai Akrasanee, Energy Minister, as an adviser of the National Council for Peace and Order on fourth-generation cellular spectrum licenses. He noted that the idea of a digital economy first started during the Creative Economy Policy in the Cabinet of former Prime Minister Abhisit Vejjajiva. The task now is for the Cabinet to integrate the relevant aspects of the Creative Economy and Digital Economy. He expects that 25 million Thai freelancers will utilize the digital economy to push Thai economy.

It should also be recalled that at an earlier seminar held in Japan, Deputy Prime Minister M.R. Pridiyathorn Devakula stated that both government and private sector are working hard in Thailand to develop the digital eco-system to support and accommodate the dynamics of a digital economy.

In support of that initiative, the BOI now promotes electrical products with the capability of connecting with the internet, or so-called internet of things, as well as digital content; software, cloud services, enterprise software, conferencing applications, E-learning via broadband and multimedia, E-commerce, software parks, data center industrial estates or industrial zones, and R&D to name a few of the activities that support the building of a digital economy.

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COMPANY INTERVIEW

Energy AbsoluteWhat is solar power? Simply put, it is produced by collecting sunlight and converting it into electricity. This is done by using solar panels, which are large flat panels made up of many individual solar cells. It is used most often in remote locations, especially in areas with a high density of solar radiance, although it is becoming more popular in urban areas as well. Even though the potential of solar power as a renewable is practically limitless, the industry still is in its early stages of development with many countries just beginning to explore the opportunities. Thailand is a perfect example.

In late October 2014, Prime Minister Prayuth Chan-ocha, chaired the National Energy Policy Council, which endorsed a new program to boost renewable energy production, with a particular focus on solar power. The tilt towards solar power is due to the dependence on natural gas, principally liquefied natural gas (LNG). Some 65% of the country’s electricity is generated via natural gas, of which 14% comes from neighboring Myanmar, and the other 4.5% from other international markets. Additionally, demand is set to accelerate over the next decade. And that will have to be imported, due to dwindling domestic reserves. By 2023, one-third to two-thirds of natural gas demand will have to be met by imported LNG.

With this scenario in mind, Thailand needs to switch to an alternative. Renewable energy sources look the most promising, above all solar power. Thailand already has more solar power and biomass power capacity than every other Southeast Asian country combined. The sharp fall in the price of solar panels and input costs also will persuade people to utilize solar power. The price of solar panels has dropped from an average of US$5 per watt in 2010 to US$0.5 per watt, equivalent to a 90% cost saving. Meanwhile, the Thai government provides subsidies to companies investing in solar energy.

Presently, there are a number of solar power companies operating in Thailand but only one stands out as a true pioneer in the field, and that firm is Energy Absolute. In late March of this year, the Thailand Investment Review newsletter team was privileged to sit down with Mr. Amorn Sapthaweekul, Director and Deputy CEO, and talk about Energy Absolute and the future of solar power in Thailand.

Energy Absolute (EA) entered the green energy business in 2007 with an investment in the production and sale of biodiesel made from crude palm oil. Since then, the quality of EA biodiesel has continued to improve due to the company’s improved technology and the knowledge and experience of its employees. This has enabled EA to become one of the three largest manufacturers of biodiesel in Thailand, and major oil companies in Thailand, such as PTT, Esso, Chevron, Star Petroleum Refining and IRPC, have accepted EA’s biodiesel product widely in terms of quality standards.

After the success of its initial venture, EA started to look for business opportunities that would increase investment return, diversify risk, and enhance the financial security of the company in the long-term. However, the imperative was to remain within the framework of alternative energy and in alignment with the government’s development plan. Mr. Sapthaweekul observed that the solar power sector appeared to be loaded with potential but that for an emerging SME like EA the market was rife with uncertainties. Still, the EA executive team was not risk averse and after careful study entered the arena with a modest pilot program worth Bt800 million in order to convince lenders of the viability of renewables in generating power. Furthermore, EA management recognized the need to focus on the functional improvement of its personnel as there were many large

operators in the marketplace, meaning that competition would be fierce.

Energy Absolute launched itself into renewable power production by starting with solar energy and then extending to wind energy, while staying alert to other prospects offered by climatic conditions and the natural environment in Thailand. EA was able eventually to organize four solar energy power plant projects with a total contracted capacity of 278 megawatts and eight wind power plant projects with a total capacity of 386 megawatts. At present, EA earns 70% of its income from biodiesel and 30% from power generation.

Established in 2006, EA researches, develops, manufactures, and distributes methyl ester biodiesel products in Thailand and internationally. The company also generates high-speed diesel oil and purified glycerin, first successfully produced by EA. In addition, it is involved in the generation and distribution of electricity through solar and wind power plants as well as in the construction of solar power plants. Moreover, it provides consulting services for solar power plant projects. The company formerly was known as Suntech Palm Oil and changed its name to Energy Absolute in 2008.

Mr. Sapthaweekul commented that EA has broadened its portfolio significantly, diversifying into renewable energy from its traditional business of biodiesel production to take advantage of easy access to financing and the national grid to ramp up capacity. The shift in focus came as the Thai government began providing incentives in 1992 to reduce the country’s reliance on imports, which still account for more than half of its energy supply. Capacity from solar and wind will rise to 4,800 megawatts by 2021 from 1,046 megawatts in 2013, according to the Ministry of Energy’s website.

In December 2013, the company began selling electricity to EGAT from a new 90-megawatt solar power plant in Nakorn Sawan province. The solar farm, the first of three of that size

Mr. Amorn Supthaweekul, Director and Deputy CEO

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that EA intends to build through 2015, is the largest in all of Asia. Funding came from a successful debut on Thailand’s Market for Alternative Investment (MAI) and the project came on the heels of a successful launch of an 8-megawatt solar power plant in Lopburi a year earlier.

As reported by Bloomberg Business in August 2014, EA plans to lay out about Bt46 billion (US$1.4 billion) over the next three years to boost generation capacity from renewable energy. In fact, this past February EA completed building a 90-megawatt solar power plant in Lampang worth Bt8.5 billion. Now EA is setting up another solar project in Phitsanulok with a capacity of 90 megawatts worth Bt8.5 billion. It plans to invest an additional Bt29 billion on wind farms with total output of 386 megawatts. Two of these green power plants will be located in the southern Thai provinces of Nakhon Si Thammarat and Songkhla with a total combined capacity of 126 megawatts. They are to be completed in March 2016. In the meantime, wind farms in Chaiyaphum province will be finished in 2017. About three-fourths of the investment funds used for these projects will come from commercial bank loans and the remainder from the company’s cash flow.

“The company has a strong ambition to become the leading operator of renewable energy in Thailand and the region,” Mr. Sapthaweekul declared. “Revenue from solar and wind power plants will outstrip the company’s traditional biodiesel business after the completion of those new plants in the next few years.”

According to Mr. Sapthaweekul, the vision of EA is to be a leader in the alternative energy business through the use of modern and environmentally-friendly technology while benefitting consumers, shareholders, business partners, and employees. With a staff of 300 team members, mainly consisting of engineers, educational qualifications are necessary but experience is more important. Furthermore, it is essential that the individual possesses problem-solving skills as the solar power sector is quiet new in Thailand and challenges often surface on a daily basis. It is interesting to note that Mr. Sapthaweekul views his entire team as a vast human resource pool from which the company can tap into and engage in practical research and development. EA is built around employees who work in an environment that encourages creativity and innovation that can enhance the company’s competencies.

On the topic of the company’s relationship with the Thailand

Board of Investment (BOI), Mr. Sapthaweekul pointed out that the two organizations have a solid partnership and that since the beginning the BOI has provided constant support and guidance concerning government regulations on alternative energy, particularly solar power. Also, working together with the BOI has benefitted the company by making it more attractive to lenders, which are pivotal for the injection of capital funds. He declared that the BOI offers service with a personal touch and that the lines of communication always remain open. The BOI has been involved with EA for many years and much of the success achieved by the company can be attributed to its substantive cooperation with the BOI.

The company’s founders recognized the importance of environmentally-friendly energy, and embraced the business opportunities inherent in the Ministry of Energy’s Renewable and Alternative Energy Development Plan, AEDP 2012-2021. This government strategy aims to increase alternative energy usage to 25% of Thailand’s energy consumption within ten years, and reduce dependency on energy imports. As a direct consequence, EA has been resolute in seeking out prospects in this field, and any problems encountered have been seen as challenges and not obstacles.

Thailand is one of the fastest growing solar energy markets in Southeast Asia. Several large firms are looking to set up solar power projects in different provinces of Thailand. In fact, the electricity consumption in the country is rising at a rate of 4% to 5% per annum, and only renewable energy can bridge the demand-supply gap and reduce dependence on fossil fuel imports. As s result, the Thai government has implemented numerous initiatives to promote solar power infrastructure. In 2013, the government announced long-term feed-in tariffs for rooftop panels as well as large-scale solar photovoltaic projects.

It is often stated that power production capacity in Thailand is expected to rise to 55 gigawatts by 2030 with its share of renewables to increase to 25% by 2021. Biomass is expected dominate the renewable energy market whereas solar photovoltaic and wind energy are expected to be the second and third largest contributors, respectively. Yet in whatever direction the Thai renewables market goes, one should not be surprised to see Energy Absolute out in front of the crowd as the company has proven to adapt to a changing business environment.

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On 2 April 2015 BOI Deputy Secretary General Chokedee Kaewsang spoke with investors at a seminar entitled “BOI Investment Opportunities in Auto Sector in Thailand” at the Sheraton Centre Toronto, Canada.

On 12 March 2015 BOI organized a Dinner Talk on “Thailand as a Trading Hub” in honor of a high-level Singaporean business delegation led by the Singapore Institute of International Affairs visiting Thailand at the Grand Hyatt Erawan Bangkok, where a speech was delivered by Deputy Prime Minister Pridiyathorn Devakula.

On 3 April 2015 BOI Deputy Secretary General Duangjai Asawachintachit, together with guest speakers from the Thai Chamber of Commerce and Board of Trade of Thailand sploke at a seminar on “New Investment Promotion Strategies and Measures to Promote SMEs” , where more than 200 SMEs joined at the Miracle Grand Convention Hotel.

During 23-27 March 2015 BOI Deputy Secretary General Duangjai Asawachintachit led an investment mission to Taiwan. Investment seminars on “New Investment Promotion Strategies: Towards Sustainable Growth” were held in Taipei on 25 March and Tainan on 26 March 2015.

BOI’S MISSIONS AND EVENTS

BOI Senior Executive Investment Advisor Ajarin Pattanapanchai joined as a panelist to discuss the topic “Why Thailand” at a forum held by the Canadian-ASEAN Business Forum in Bangkok from 18-19 March 2015 at the Anantara Siam Hotel Bangkok.

On 23 March 2015 BOI Senior Executive Investment Advisor Ajarin Pattanapanchai gave a presentation at a BOI seminar on “New Investment Promotion Strategies: Towards Sustainable Growth” in Guangzhou, China, during an investment promotion mission to China from 22-25March 2015.

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THAILAND ECONOMY-AT-A-GLANCE

Source: Stock Exchange of Thailand

Source: Bank of ThailandSET Monthly Closing Values

International Reserves / Short-term Debt (%)

Exchange Rate Trends

Industrial Capacity Utilization (%)

Head Office, Office of the Board of Investment 555 Vibhavadi-Rangsit Road, Chatuchak, Bangkok 10900, ThailandTel: +66 (0) 2553 8111 Fax: +66 (0) 2553 8316 Website: www.boi.go.th E-mail: head@boi.go.thBEIJINGThailand Board of Investment, Beijing Office Royal Thai Embassy No.40 Guang Hua Road, Beijing, 100600, P.R.China Tel: (86-10) 6532-4510 Fax: (86-10) 6532-1620 E-mail: beijing@boi.go.th

FRANKFURTThailand Board of Investment, Frankfurt OfficeBethmannstr. 58, 5.OG60311 Frankfurt am Main Federal Republic of Germany Tel: (49 69) 92 91 230Fax: (49 69) 92 91 2320E-mail: fra@boi.go.th

GUANGZHOUThailand Board of Investment, Guangzhou OfficeRoyal Thai Consulate-General GuangzhouNo.36 Youhe Road, Haizhu District, Guangzhou, P.R.C 510310 Tel: +8620 8385 8988 Ext. 220-225 +8620 8387 7770 (Direct Line)

Fax: +8620 8387 2700 E-mail: guangzhou@boi.go.th

LOS ANGELES Thailand Board of Investment, Los Angeles Office Royal Thai Consulate-General 611 North Larchmont Boulevard, 3rd Floor, Los Angeles, CA 90004 USA Tel: (1-323) 960 1199Fax: (1-323) 960 1190E-mail: boila@boi.go.th

MUMBAIThailand Board of Investment,Mumbai OfficeRoyal Thai Consulate-General,1st Floor, Dalalmal House, Jamnalal Bajaj Marg, Nariman Point, Mumbai400 021 Republic of India Tel: (9122) 2204 1589-90 Fax: (9122) 2282 1071E-mail: mumbai@boi.go.th

NEW YORKThailand Board of Investment, New York Office 7 World Trade Center, 34th Floor, Suite F, 250 Greenwich Street, New York, NY 10007Tel: (1-212) 422 9009Fax: (1-212) 422 9119E-mail: nyc@boi.go.th

OSAKAThailand Board of Investment, Osaka Office Royal Thai Consulate-General, Osaka, Bangkok Bank Bldg. 7th Floor , 1-9-16 Kyutaro-Machi, Chuo-Ku, Osaka 541-0056 Japan Tel: (81-6) 6271-1395 Fax: (81-6) 6271-1394E-mail: osaka@boi.go.th

PARISThailand Board of Investment, Paris Office Ambassade Royale de Thailande, 8, Rue Greuze75116 Paris, FranceTel: (33 1) 5690 2600 (33 1) 5690 2601Fax: (33 1) 5690 2602E-mail: par@boi.go.th

SEOULThailand Board of Investment, Seoul Office#1804, 18th Floor, Koryo Daeyeongak Center,97 Toegye-ro, Jung-gu, Seoul, 100-706, Korea Tel: (822) 319-9998 Fax: (822) 319-9997E-mail: seoul@boi.go.th

SHANGHAIThailand Board of Investment, Shanghai OfficeRoyal Thai Consulate-General15 F., Crystal Century Tower, 567 Weihai Road, Shanghai, 200041, P.R.China Tel: (86-21) 6288-9728, (86-21) 6288-9729 Fax: (86-21) 6288-9730E-mail: shanghai@boi.go.th

STOCKHOLMThailand Board of Investment, Stockholm OfficeStureplan 4C 4th Floor 114 35 Stockholm, Sweden Tel: +46 (0)8 463 1158 +46 (0)8 463 1172 +46 (0)8 463 1174 to 75 Fax: +46 (0)8 463 1160 E-mail: stockholm@boi.go.th

SYDNEYThailand Board of Investment, Sydney Office 234 George Street, Sydney, Suite 101, Level 1,New South Wales 2000, Australia Tel: +61-2-9252-4884 Fax: +61-2-9252-4882E-mail: sydney@boi.go.th

TAIPEIThailand Board of Investment, Taipei Office Taipei World Trade Center 3rd Floor, Room 3E39-40, No.5, Xin-Yi Road, Sec.5Taipei 110, Taiwan, R.O.C. Tel: (886) 2-23456663Fax: (886) 2-23459223 E-mail: taipei@boi.go.th

TOKYOThailand Board of Investment, Tokyo Office Royal Thai Embassy8th Fl., Fukuda Building West,2-11-3 Akasaka, Minato-ku, Tokyo 107-0052 JapanTel: (81 3) 3582 1806Fax: (81 3) 3589 5176E-mail: tyo@boi.go.th

Facts about ThailandPopulation (2014) 65 millionASEAN Population 625 millionLiteracy Rate 96%Minimum Wage 300 Baht/day

GDP (2014) US$ 373.6 billionGDP per Capita (2014) US$5,445 GDP Growth (2014) 0.7%GDP Growth (2015, projected) 3.5-4.5%Export Growth (2014) -0.3%Export Growth (2015, projected) 3.5%

Trade Balance (2014) US$ 24.6 billionCurrent Account Balance (2014) US$ 14.2 billionInternational Reserves (2014) US$ 157.1 billionCapacity Utilization (2014) 60.48%Manufacturing Production Index (2014) 168.2Core Inflation (2015, projected) 1.59Headline Inflation (2015, projected) 1.89Consumer Price Index (Mar 2015) 106.33 (2011=100)

Corporate Income Tax 10-20%Withholding Tax 0-15%Value Added Tax 7%

Mar Average Exchange RatesUS$1 = 32.63 baht€1 = 35.32 baht£1 = 48.86 baht100 ¥ = 27.11 bahtCNY1 = 5.23 baht

Top 10 Exports 2015 (Jan-Feb)

Product Share Value (US$ bn)

1 Motor cars, parts and accessories 11.94 4.12 2 Automatic data processing machines

and parts thereof8.55 2.95

3 Precious stones and jewellery 5.41 1.86 4 Polymers of ethylene, propylene, etc in

primary forms3.93 1.35

5 Refine fuels 3.50 1.21 6 Electronic integrated circuits 3.39 1.17 7 Chemical products 3.27 1.13 8 Rubber products 3.20 1.10 9 Machinery and parts thereof 3.01 1.04

10 Iron and steel and their products 2.65 0.91 Total 34.48

Source: Ministry of Commerce

Source: Bank of Thailand

Source: Bank of Thailand BOI

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