CONTENTS

September 2015 Volume 25 No. 9

Page

BOI’s New Direction, New Leadership 1

News Bites / BOI Net Applications 2

Industry Focus: Machinery 4

Mexican-Thai Chamber of Commerce 6

Company Interview: Baxter International Inc. 8

BOI Inked an MOU with Invest Hong Kong 10

Thailand: Low Cost, Great Access 10

BOI’s Missions and Events 11

Thailand Economy-At-A-Glance 12

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BOI’s New Direction, New Leadership

Thailand Investment Review recently had the opportunity to speak with newly appointed Secretary General Hirunya Suchinai to discuss the opportunities and challenges that the organization faces and what direction she will take Thailand’s premier investment agency.

Sitting at the helm of the BOI, Secretary General Hirunya is a career civil servant who guided the BOI during an historic transition in the organization’s investment regime.

The Secretary General begins by noting that the BOI has always been successful because of its ability to adapt to new challenges. Thailand, which is now an upper middle income country with a growing middle class, is experiencing both a changing domestic and international investment environment and needed a path to become a newly developed economy. On the domestic front, the minimum wage, which had been increased to 300 baht per day, presented challenges in competition for low wage jobs with neighboring countries like Cambodia, Laos, Myanmar and Vietnam, or CLMV. However, the Secretary General is optimistic that this provides a good opportunity and motivation for Thailand to move up to a knowledge-based economy.

NEWS BITES BOI NET APPLICATIONSSustainable Agriculture

The Cabinet approved a budget of 6,500 mill ion baht to be used in sustainable agriculture projects, to be expanded in all 76 provinces within two months; more than 10 million people will benefit from the projects. In addition, the Ministry of Agriculture and Cooperatives will promote and support crop rotation in areas with less water to help reduce the cost of production.

Tourism revenue growth

The revenue from tourism is projected to increase from 2.2 trillion baht in 2015 to 2.3 trillion baht in 2016 and will reach the set target of 2.5 trillion baht in 2017.

TAT projects 28.8 million international visitors in 2015. From January to July this year, Thailand welcomed 16 million international tourists. Statistics show a 138 percent surge in Chinese visitor spending paved the way for Thailand’s tourism industry to amount to 697.5 billion baht in total visitor expenditure in the first half of 2015.

The total expenditure by visitors of all nationalities rose by 29.69 percent from January to June 2014, and matched the 29.54 percent growth in visitor arrivals between January and June 2015.

Thai-Vietnamese Cooperation

Prime Minister General Prayut Chan-o-cha and Vietnamese Prime Minister Nguyen Tan Dung have agreed to set a new target for bilateral trade between Thailand and Viet Nam from 15 billion to 20 billion US dollars by 2020.

Viet Nam has agreed to facilitate Thai investments in various projects, such as manufacturing of garments and textiles, consumer goods production, energy development, agriculture, agro-industry, and tourism. Thailand has invited Viet Nam to join the International Tripartite Rubber Council to help stabilize rubber prices in the world market. Indonesia, Malaysia, and Thailand, which are major rubber producers, have become members of this council.

Viet Nam is now Thailand’s fourth-largest trading partner in ASEAN, while Thailand is Viet Nam’s largest trading partner in this region. In 2014, trade between the two countries expanded by 13 percent. Thailand is now planning many large investment projects in Viet Nam and is expected to be ranked among major foreign investors in Viet Nam in the future.

2014(US$ = 32.90THB)

2014 (Jan-May)(US$ = 32.52 THB)

2015 (Jan-May)(US$ = 33.55 THB)

Number of projects Value Number of

projects Value Number of projects Value

Total Investment 3,363 65,101 471 9,161 306 1,438

Total Foreign Investment 1,573 31,094 334 7,072 155 407

By Sector

Agricultural Products 789 8,158 57 391 31 121

Minerals / Ceramics 103 4,685 16 470 10 80

Light Industries / Textiles 120 1,274 14 90 7 22

Automotive / Metal Processing 736 9,895 111 4,866 39 99

Electrical / Electronics 384 4,418 77 199 67 47

Chemicals / Paper 485 12,693 42 784 17 99

Services 746 23,980 154 2,362 135 971

By Economy

Japan 643 8,164 155 2,202 40 153

Europe 243 4,668 43 1,974 36 21

Taiwan 72 780 9 21 10 36

USA 70 3,858 11 812 7 3

Hong Kong 43 701 16 225 9 44

Singapore 121 1,279 18 102 26 90

By Location

Central 1,113 9,867 180 783 138 544

East 1,294 40,770 183 7,070 74 321

South 190 1,524 21 204 19 96

Unit: US$ MillionNote: Investment projects with foreign equity participation from more than one country are reported in the figures for both countries / Statistics on net applications are adjusted whenever applications are returned to applicants due to insufficient information.

ONE START ONE STOP INVESTMENT CENTER (OSOS)18th Floor, Chamchuri Square Building,

319 Phayathai Road, Pathumwan, Bangkok 10330Tel: +66 (0) 2209-1100 Fax: +66 (0) 2209-1199

Website: osos.boi.go.th Email: osos@boi.go.th

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Thailand has the second largest economy in ASEAN; its technology level is middle to high. It needed to look for a strategy suitable to Thailand’s level of development. Aiming for modern industries and knowledge-based industries is the path to remaining competitive country in the long run, following a similar path as Singapore and Malaysia.

In December of last year, Secretary General Hirunya and the BOI met with a large gathering of investors at the Impact Muang Thong Thani’s Convention Center, unveiling a completely revised set of investment incentives. These changes were begun well over a year ago, but their deployment was delayed several times until the political situation was stable and also to give investors sufficient time to be made aware of the intent and direction of the changes.

The Secretary General mentions that the new BOI policy grants the most benefits, particularly in terms of tax exemptions, to companies that are knowledge based, environmentally friendly, energy saving, using modern science and technology, focusing on research and development, as well as design. Companies in these activities are qualified for a maximum 8 year exemption from corporate income tax, among other incentives.

The new investment scheme also supports the government drive to build a digital economy in Thailand, something that will be a leap forward and a crowning achievement for Thailand. Samples of eligible activities for investment promotion that support digital economy development are Cloud-based Service, Data Center, Software Park, Software, Electronic Design and many others.

Another important policy of the government to expand our role as a gateway to ASEAN and beyond, the BOI together with the Revenue Department, the Department of Business Development, and the Bank of Thailand have teamed up to improve the old scheme for Regional Operating Headquarters (ROH) and International Procurement Office (IPO). The cooperation of four government agencies helped Thailand move one step beyond the ROH with the introduction of the International Headquarters (IHQ) and International Trading Centers (ITC) policy, which allows for a broader scope of activities such as treasury centers and trading centers, a major means of capitalizing on Thailand’s strategic position.

Secretary General Hirunya indicates that the fiscal incentives under this promotion come from the Revenue Department, non-fiscal incentives are granted by the BOI, such as the right to own land and facilitation for visa and work permit issuance. In the first eight months, 10 IHQ and 29 ITC projects have been approved, along with two projects involving a change of status from ROH to IHQ and 26 projects involving a change of status from IPO to

ITC. The Secretary General expects that this attractive package will help Thailand to become a trading hub of Southeast Asia.

Furthermore, as a result of BOI’s attentiveness to its clients, during the January to August 2015 period, BOI has received applications from 653 projects for a value of 122.55 billion baht, with a full year target at 350 billion baht, and has approved 1,563 projects for a value of 542.22 billion baht. Despite the headwinds created by the global economy, private investment has actually increased in some areas. And in others, while the investment value may not be as high, the investments are important for their ability to create value-added products, something Thailand needs to achieve it economic development goals. The Secretary General says these would include sectors such as ICT, R&D, medical devices, and trading offices. In fact, the new government incentives for IHQ and ITC are expected to have a multiplier effect on economic growth.

Now that she has successfully led the BOI through this period of transition, Secretary General Hirunya points out that the next significant transition that Thailand faces is the ASEAN Economic Community. This is something the BOI has been preparing for by looking for other benefits and strengthening facilitation for investors, as tax incentives may not be the only factor for companies to consider their investment location. In fact, Thailand has the added benefit of advanced infrastructure and logistics. Companies located in Thailand can enjoy improved connectivity with neighboring countries by road as well as by rail. Thailand, ASEAN’s second largest economy, is now well positioned to become a logistics hub in the region.

One thing that was highlighted as making Thailand a great location for investors is the facilitation system offered by the BOI. Investors, both new and existing alike, can come to the One Start One Stop Investment Service Center (OSOS) located at Chamchuree Square in the central business district, where BOI can arrange face-to-face meetings with other government agencies, or answer any questions they may have about investing in Thailand. Also, there is the time-saving electronic filing of applications.

Recently, the OSOS took a further step to add more services as a part of government policy to enhance convenience for investors. More government agencies participate at the OSOS in providing information and consultations related to doing business in Thailand, including topics such as science and innovation, source of funds, banking and financing. Apart from various topics on doing business in Thailand, the OSOS is creating an enabling environment for investors by also acting as a ‘One Stop Service Center for IHQ/ITC, providing information and consultation on application for privileges. And another service for investors is the new ‘One Stop Service Center’ for Special Economic Zones (SEZs) in central Thailand to link with other One Stop Service Centers located in each Special Economic Zone to provide local information and assistance with arranging on-site visits.

Looking ahead, the opportunities that await you in Thailand are significant. Secretary General Hirunya is very confident that the new policies will attract investment that is a good fit for the direction of Thailand’s economy.

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INDUSTRY FOCUS

Machinery: High Demand Amidst Rapid DevelopmentThe development and implementation of machinery was responsible for one of the great advances in human history, the industrial revolution. Machinery encompasses a vast range of products, ranging from huge industrial machines costing millions of dollars to the common lawn mower, but all machinery has one common defining feature: it either reduces or eliminates the amount of human work required to accomplish a task. Machinery plays a key role in the production of much of the country’s goods and services because nearly every workplace in every industry uses some form of machinery. From the oil derrick that pumps out oil to the commercial refrigerator in use by your favorite restaurant, machinery is mainly responsible for the way we live today. Thus, while most people never use or even see the machinery that makes their lifestyle possible, they use the products it makes every day.

Thailand’s machinery and metalworking industries currently employ a labor force of around 400,000 people and consist of approximately 50,000 enterprises. The limited supply of domestic high-end machinery and parts has left downstream Thai industries to look for imports. Machinery and parts currently rank in Thailand’s top five most imported goods with 694 billion baht worth imported in 2014. Japan was the primary source with 24.6% of the total, followed by China (21.3%) and the US (9.4%). Electrical machines and apparatus with individual functions (E&E) were the leading products with US$44.87 billion imported in 2014. Opportunities exist for suppliers to capitalize on this growing demand for more sophisticated machinery by providing domestic downstream industries with a local source.

Thailand’s status as a regional export hub allows local machinery and parts suppliers to benefit from the economic growth of its neighbors. Exports have grown 243% since 2004 (143 billion baht) to over 491 billion baht in 2014. Rapid development in the region coupled with favorable trade relations after the signing of the ASEAN Free Trade Agreement (AFTA) sparked this recent rise in Thai machinery and parts exports. The trend of export growth looks likely to continue as demand from developing nations such as Vietnam, Malaysia and Indonesia grows.

While Thailand is certainly a large producer of agricultural goods, it has also shifted to being a producer of packaged and processed foods. Due to this shift, there are ample opportunities available in the manufacturing of a number of different types of agro-machinery. For instance, there is a high demand for drying, cooling and purifying machines; fruit, vegetable and cereal processing machines, and also for animal feeding. With more than 10,000 food-processing companies operating, a high demand for packaging machinery has been created such as for filling, closing, sealing, wrapping and labeling machines. In 2014, 12.7 billion baht was spent on importing machinery into Thailand for this purpose, and 1.65 billion baht was spent on machinery for the preparation of meat and poultry.

Major imported food processing and packaging equipment generally originate from Japan, China, Germany, Italy and the United States. Japanese machinery leads the market with a 22% share of total imports. Imports from China dominated the

low-end segment with 20%. Imports from Germany account for 12% share of the market, mainly at the higher end. Products from Italy and the United States each account for a 5% share of total imports.

Growth in Thailand’s automotive and E&E industries is expected to fuel demand for modern machine tools. Automotive and auto parts firms are the biggest buyers of machine tools, purchasing 35% of the domestic market. The supporting metalworking industry follows with 27% while the E&E industry buys 14%. With a limited number of domestic enterprises specializing in the manufacture of machine tools, most of the demand is met by imports that totaled 90 billion baht in 2014. On the other hand, the top three exported categories of machine tools in 2014 were parts and accessories for machines; machine tools for the removal of material; and lathes for removing metal.

Reflecting a growing demand, Thailand’s market for computer numerical controlled (CNC) machine tools remains heavily

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dependent on imports, half of which come from Japan, and the machinery and metalworking industry is keen to source more of these sophisticated machine tools domestically. The top-exported categories of CNC machine tools being lathes and horizontal lathes (including turning centers) for removing metal. Additionally, tooling for high precision machining processes is needed, namely cutting, milling, grooving, shaving, grinding, polishing and threading.

Thailand’s world-class downstream manufacturing industries have boosted imports of industrial machinery, while the industrial machinery industry itself has rapidly developed as an exporter. Imports in 2014 totaled 591 billion baht, marking an 84% increase since 2004 (321 billion baht). Printing machinery saw the biggest increase in the same year with a 42.7% rise to 81,937 million baht in 2014.

In the decade leading up to 2014, Thailand’s exports of industrial machinery more than tripled from 133 billion baht in 2004 to a level of 453 billion baht. The main exports of industrial machinery were printing machinery, refrigerating & freezing equipment, and air or vacuum pumps, gas compressors and fans. Printing machinery was the greatest export gainer in 2014 with an increase of over 450% from 1.76 billion baht in 2004 to 81.9 billion baht.

Molds and dies are essential inputs for downstream manufacturing. With Thailand’s automotive and electronics/electrical appliances (E&E) industries expected to grow, the prospects for the mold and die industry are just as bright. According to a Thai Tool and Die Industry Association (TDIA) survey, there are approximately 1,061 mold and die factories in Thailand. Of these factories, 90% produce molds and dies for plastic and metal, while the rest produce those for rubber, glass and ceramics.

Local mold and die manufacturers are only partly able to meet the increasingly sophisticated demands of Thailand’s downstream industries. exported US$203.5 million mainly to Japan, US and China. Closing this trade deficit presents an investment opportunity in Thailand’s mold and die industry, which is made even more attractive by growing downstream sectors and supportive government policies.

Thailand’s machinery and metalworking industry is bustling with activity especially as the demand for more sophisticated machinery continues to grow. This scenario also presents many attractive opportunities for investors since local industries can offer only a limited supply of high-end machinery and its spare parts, thus making many companies look in the direction of imports. Machinery actually ranks as Thailand’s top five imported goods, with the suppliers being mainly from Japan, China and the United States, in that order.

There are manifold reasons to choose Thailand as a machinery and metalworking production base. For starters, the country boasts of a strong and stable business climate. Furthermore, with the ever-growing domestic demand, the government is encouraging the development of national machinery and mold and dye clusters. The Land of Smiles also is Southeast Asia’s largest vehicle producer, world’s second largest manufacturer of pickup trucks; global leader in HDD components, world’s fourth largest fabricator of air conditioners and, with the world’s 19th highest agricultural output, it is the biggest exporter of rice, sugar, cassava, processed chicken, canned and frozen seafood and processed pineapple products.

Thailand has successfully negotiated many free trade agreements with various countries. This is hardly to be wondered at, since the country offers a superb infrastructure with an extensive network of roads, efficient international airports and deep sea ports, first-rate telecommunications, coupled with a labor cost-effective workforce and a government that imposes no unnecessary restrictions on manufacturers. With the upcoming inauguration of the ASEAN Economic Community it looks to be a favorable time ahead for Thailand’s machinery industry, especially as the growth upswing from neighboring countries like Vietnam, Malaysia and Indonesia strengthens.

The new seven-year BOI investment promotion strategy (2015-2021) contains three activities that are related to the manufacture of machinery, equipment and parts. They are categorized as follows:

Group A2 activities carry an eight-year CIT exemption as well as an exemption of import duty on machinery, and raw materials used in the manufacture of products meant for export, along with other non-tax incentives.

• Automation machinery and/or automation equipment with engineering design. The condition is that projects must have a design control system that uses an embedded system.

Group A3 activities carry a five-year CIT exemption as well as an exemption of import duty on machinery, and raw materials used in the manufacture of products meant for export, along with other non-tax incentives.

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• Machinery, equipment and parts and/or repair of molds and dies. The condition is the projects must have a part forming process with an engineering design.

Group A4 activities carry a three-year CIT exemption as well as an exemption of import duty on machinery, and raw materials used in the manufacture of products meant for export, along with other non-tax incentives.

• Assembling of machinery and machinery equipment. The condition is that projects must have an assembling process as approved by the BOI.

Offering excellent institutional support, the Thai government is aware of the need to support the continued development of the machinery and metalworking industries, as well as the technological capabilities of its workforce. Thailand offers many resources for research and development (R&D), technical training and industrial organization, including:

- Thai-German Institute (TGI)- National metal and Materials Center (MTEC)- Bureau of Supporting Industries Development (BSID)- Metal-working and Machinery Industry Development Institute

(MIDI)

- Thai Tool and Die Industry Association (TDIA)- Thailand’s Institute of Scientific and Technology Research- Thailand-Japan Technology Promotion Association (TJTPA)- Metals and Materials Research Center – Kasetsart University

Thanks to rapid industrialization, Thailand has a growing need for machine tools. Regarding the current state of the Thai economy, machinery and metalworking continue to play an important role. In fact, these are forecasted to grow. Without doubt, there is bright export potential for all ASEAN markets. Moreover, it is believed that the market for machinery and metal working technology in the Asia-Pacific will expand substantially in the coming decades. The launch of the AEC and the Thai government’s infrastructure projects will generate increased need for specialized machinery and metal parts to tap into regional growth and to move the national economy up to the next level of development. Indeed, Thailand has the potential to become the Asia-Pacific’s distribution hub for agricultural machinery to cater to increasing demand domestically as well as from ASEAN, India, Australia and Africa. What is certain is that investments in machine tools and metal parts will continue to prove lucrative into the future, as Thailand steadily evolves into becoming an added-value economy.

Mexican-Thai Chamber of Commerce: Breaking New Ground for Trans-Pacific Business and Investment

Even though actual trade figures between Thailand and Mexico appear to be minimal, both countries have economies full of potential synergies that could benefit from a bilateral free trade agreement. Thailand

is looking for a window to increase its commercial links with Mexico, especially by utilizing it as a gateway to the Americas. This would enable Thailand to expand its markets in the Western Hemisphere, while at the same time creating more opportunity to connect the manufacturing sectors and markets of the two countries. S imul taneous ly, Tha i land could become the gateway for Mexican products to ASEAN, China, India, and beyond.

On 28 August 1975, Mexico and Thailand formally established diplomatic relations. Following the inauguration of the Asia Pacific Economic Cooperation grouping in 1989, both countries have signed several treaties, including the Cooperation Agreement of Aviation and Transportation (1992), Agreement

on Visa Exemption for Diplomatic and Official Passports (1999), and Agreement on Culture and Education (2003). Besides these bilateral conventions, the governments of Mexico and Thailand offer scholarships to citizens of each country to study in their respective nations at the graduate level and/or for diplomatic training.

Not long ago, the Thailand Investment Review newsletter team had the chance to visit the office of the Mexican-Thai Chamber of Commerce in Bangkok and interview President Steve Cheah. A number of questions and topics were covered that provided an in-depth look into the mission, vision, and future plans of the Chamber as well as the economic relationship between Mexico and Thailand.

To begin, the launch of the Mexican-Thai Chamber of Commerce this year was the result of many factors. Interestingly, it started as a conversation topic, evolving over time and emerging finally from formal discussions with the Ambassador of Mexico to Thailand. It is the only official Latin American commercial representative not just in Thailand, but also in Southeast Asia. Mr. Cheah asserted that the primary purpose of the Chamber is to function as a non-political, non-bureaucratic channel of communication between its members and the Government of Thailand.

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Actually, the Chamber aims to create an environment that can foster friendship and networking, thereby cultivating economic relations between Mexico and Thailand. Likewise, it sets to improve bilateral trade and investment by building personal relationships between Mexican and Thai entrepreneurs. How is this to be accomplished? As Mr. Cheah replied, “Focusing on the commonalities, especially social and cultural features like cuisine, lifestyle, mindsets”. Nonetheless, the Chamber has been founded to increase awareness of Mexico in Thailand and vice versa.

Explaining further the organization’s mission, Mr. Cheah remarked that the Chamber encourages the participation of non-Mexican local companies in line with its inclusive engagement approach towards the business community found in Bangkok. With this in mind, the Chamber will organize and host events and activities such as seminars and informal gatherings in order to advance knowledge and understanding. Mr. Cheah announced that it is an ambition of the Chamber to put together investment symposia that concentrates on bilateral investment. It would be the Chamber’s first private initiative and it would deal with the subject matter of trilateral trade and NAFTA. What’s more, the Chamber is ready to work with the other eight Latin American embassies located in Bangkok so as to promote complementarity, particularly in cultural aspects.

Mr. Cheah mentioned that in 2014, two-way trade between both nations amounted to US$4.71 billion. The main export products from Thailand to Mexico are electrical machinery, general machinery, rubber, medical equipment, plastics, iron and steel, textiles and clothing, toys and sports equipment, glass and glassware, footwear, automobiles and automotive parts, and food processing. On the other hand, the main export products from Mexico to Thailand are machinery, automobiles and automotive parts, iron and steel, chemicals, electrical machinery, aluminum, copper, cardboard and paper, fish and seafood and pharmaceuticals. In fact, Mexico is Thailand’s biggest trading partner in Latin America and Thailand is Mexico’s 6th biggest trading partner in the Asia-Pacific region.

Equally significant, Mr. Cheah pointed out that private sector organizations in Thailand and Mexico have signed two agreements, which have enhanced business links between the two countries, namely the Agreement on Cooperation between the Confederation of Chambers of Commerce of Thailand/Board of Trade of Thailand and the Mexican Business Council for Investment Trade and Technology (COMCE) in 1990. The other is the Agreement of Cooperation between the Confederation of Industry of Thailand/Federation of Thai Industries and the Business Council of Foreign Trade Investment and Technology (COMCE) in 2003. In addition, there have been yearly visits by business delegations from Mexico to Thailand and conversely from Thailand to Mexico.

Mexican companies such as Cemex (cement manufacturer), Metalsa (producer of metal frames for trucks), and KidZania (specialty theme parks for children) have invested in Thailand. At the same time, new opportunities have surfaced for Thai investors who want to start a business in Mexico, where investments in sectors such as hospitality, construction, wood processing industry and exploration of oil and natural gas are available. So far, Indorama Ventures, a Thai-based Indian company, set up a polyethylene terephthalate (PET) plant in Queretaro, Mexico, in 1994. Today, it has a total capacity of 478,000 tons per annum. Indorama is one of the world’s leading petrochemical producers and a leading global manufacturer of wool yarns.

Indeed, back in April 2015, Director of the BOI Thailand – Los Angeles Office, Ms. Tanita Sirisup spoke at a breakfast seminar in Querétaro. The event was organized by the Mexican business magazine Visión Empresarial Querétaro in collaboration with the Instituto Tecnológico de Monterrey, Querétaro Campus. She gave a presentation entitled, “Thailand: An Asian Hub.” Later in May 2015, Ms. Sirisup was a member of Team Thailand’s Economic Roadshow organized by the Embassy of Thailand in Mexico to strengthen relations between the two countries in various areas. This mission was led by the Thai Ambassador to Mexico and included other Thai delegates from the Tourism Authority of Thailand – Los Angeles office, Office of Agricultural Affairs – Los Angeles Office, and the Office of Science and Technology in Washington D.C.

The focus of the visit was trade and investment as well as cooperation in science, technology and innovation in sectors which both Thailand and Mexico place high priority including automotive, aerospace, biotechnology and information technology. Additionally, the BOI introduced its IHQ and ITC schemes to build interest amongst Mexican MNCs in establishing themselves in Thailand.

To illustrate how bilateral relations have deepened, Mr. Cheah stated that on 6 October 2014, Thailand and Mexico held its first ministry-level Political Consultative meeting. It took place in Mexico City and was co-chaired by Mr. Songsak Saicheua, Director General for American and South Pacific Affairs at the Ministry of Foreign Affairs of Thailand, and Mr. Alejandro Madrigal Becerra, Director General for Asia Pacific Affairs at the Ministry of Foreign Affairs of Mexico. The meeting was attended by representatives from the Thailand International Cooperation Agency (TICA) and the Mexican Agency for International Development Cooperation (AMEXCID).

Both sides focused attention on the state of bilateral relationships and discussed plans for celebrating the 40th anniversary of the establishment of diplomatic relations in 2015. They also agreed on the need to expedite the conclusion of a number of pending legal instruments currently under negotiation, which include agreements on investment promotion and protection, tourism, and the elimination of double taxation.

Thailand plays a pivotal role in Mexico’s “Pacific Horizons” strategy. Both countries maintain an ongoing dialogue in key forums such as the Asia-Pacific Economic Cooperation (APEC), the Pacific Economic Cooperation Council (PECC), the Pacific Basin Economic Council (PBEC), the Asia-Pacific Parliamentary Forum and the Cooperation Forum Latin America-East Asia (FOCALAE) all of which constitute fruitful cooperation channels.

According to Mr. Cheah, there is an expectation that 2015 should see bilateral trade surpass US$5 billion mark. Great potential exists in joint ventures in the automotive sector. Consequently, the Chamber can function as a bridge: for Thai investors in learning how to utilize NAFTA and for Mexican investors in learning how to see Thailand as a hub of ASEAN. Similarly, opportunities abound in the E&E industry, especially in computer parts. Also, the prospect of trilateral trade with Mexico and Thailand combining to explore trade and investment possibilities in a third country holds enormous promise. Finally, Thailand could facilitate Mexican companies in their search for local partners when exploring the untapped markets of the CLMV countries.

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COMPANY INTERVIEW

A g l o b a l h e a l t h c a re company headquartered in Deerfield, Illinois, USA, Baxter International Inc. was founded in 1931. B a x t e r ’s e m p l o y e e s worldwide are building upon the company ’s rich heritage of medical breakthroughs to advance the next generation of healthcare innovations that enable access to care for patients. Furthermore, the company’s global footprint and the critical nature of its products and

services play a key role in expanding access to healthcare in both emerging and developed countries.

In Thailand, Baxter has been providing life-saving and life-sustaining treatments to patients and hospitals for two decades. With its Thai presence established in 1994, the company is today one of the fastest growing enterprises and amongst the top 10 multinational pharmaceutical firms in Thailand. Its diverse product and service range has allowed Baxter to carve out a niche market that holds immense potential for expansion.

For Baxter, partnerships are critical in creating and ensuring a sustainable healthcare future. The company announced in 2012, an investment to build a new peritoneal dialysis (PD) manufacturing facility in Thailand and is among the first US healthcare firms to invest and establish a manufacturing presence in Thailand in recent decades. Located in the Amata City Industrial Estate, this site will provide the scale of operations to optimally serve long-term patient needs and increase access

to quality home dialysis for ESRD (end stage renal disease) patients.

Recently, the Thailand Investment Review newsletter team had the chance to visit Baxter’s office in Bangkok and interview the company’s country manager, Ms. Tippawan Jitpimolmard. A number of questions and topics were covered that provided an in-depth look into the operations, products and future plans of the company.

To begin, Baxter currently employs nearly 200 employees in sales and marketing, administrative and manufacturing roles. The company continues to tap heavily into the local talent pool and the proportion of foreign staff to Thais is less than 2%. With the opening of the Thailand PD manufacturing facility, approximately 400 skilled jobs will be created.

According to an April 2014 report by the Economist Intelligence Unit, Thailand’s healthcare spending is estimated to rise by 8% a year from 2014-2018 to reach US$18.7 billion, up from an estimated US$12.8 billion in 2013. The healthcare industry continues to support this growth in the Land of Smiles.

When queried about the product line of Baxter, Ms. Jitpimolmard introduced the company’s broad portfolio of essential renal and hospital products, including home, acute and in-center dialysis; sterile IV solutions; infusion systems and devices; parenteral nutrition; biosurgery products and anesthetics; and pharmacy automation, software and after sales services. In Thailand, Baxter is a leading provider of peritoneal dialysis solution for home dialysis, parenteral nutrition, inhalation gases for anesthesia and biosurgery products.

Ms. Jitpimolmard noted that Thailand similar healthcare challenges that are similar to many other countries around the world. Healthcare demand and expenditures continue to

When the interview turned to a discussion about the Board of Investment of Thailand, Mr. Cheah stressed that the Mexican-Thai Chamber of Commerce seeks to develop social and marketing projects in partnership with the government agency. For instance, in organizing business networking and matchmaking events as well as information sessions that can highlight the advantages of NAFTA and the AEC. Mr. Cheah would like to work in tandem with the BOI in fashioning an attractive investment package for investors from Mexico, as Southeast Asia is new territory for Mexican firms. Furthermore, the Chamber is looking to collaborate with the BOI on the possibility in putting together a trade mission to visit Mexico in 2016. This would be an excellent chance for the business communities of both countries to become more familiar with specific industries of future growth like automobiles, computer parts, and machinery. Likewise, Mexican and Thai enterprises could survey first-hand the feasibility of investing in a third country, whether in the Americas or in ASEAN.

Despite the distance between the two countries, prospects for greater trade and investment exist. Mexico and Thailand

can function as “gateways” for their respective regions. As declared by Mr. Cheah, “Now the Board of Investment is no longer focused exclusively on bringing investment into Thailand but it is starting to realize it needs to get Thai companies to go outside Thailand.”

Latin America and Southeast Asia are the most dynamic economic regions in the world today; and the potential for growth and exchange is enormous. Mexico and Thailand are commercial focal points in their respective regions and in spite of the fluctuations of the global economy both countries have continued to build upon their trade exchanges. The Mexican and Thai business communities have an exceptional opportunity to establish strategic links in the automotive, food, infrastructure and construction sectors. Mexico offers many advantages such as its geographical location as a “entry point” to North, Central and South America, along with the Caribbean, through a wide network of free trade agreements. The same rings true with Thailand concerning ASEAN, China, India, and the rest of Asia.

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grow in correlation to the increasing affluence and an aging population. For instance, as disclosed in the May 2010 issue of the Nephrology Dialysis Transplantation journal, chronic kidney disease prevalence in Thailand is 17.5% of the total population or about 8 million people. Of this number, approximately 40,000 ESRD patients require renal replacement therapy to survive.

Furthermore, Thailand is confronted with the need to expand access to high-quality care and improve outcomes, while simultaneously controlling spending. The cost of innovative healthcare technologies often is cited as an obstacle in this context; yet meaningful, cost-effective healthcare innovation actually can help providers deliver enhanced value. Under Thailand’s PD First Policy, new end stage renal disease (ESRD) patients requiring dialysis are prescribed Continuous Ambulatory Peritoneal Dialysis (CAPD) unless the patient is medically not suitable for PD.

According to Ms. Jitpimolmard, PD is a self-administered dialysis therapy that can be managed by patients at home. Evidence shows that PD home therapy generally is less expensive than in-patient hemodialysis (HD), as detailed in a 2007 journal article published in Value in Health. Additionally, PD can offer improvements in clinical outcomes and quality of life for the patient by providing care at home. For example, in the September 2002 issue of Kidney International, it is reported that residual (or remaining) kidney function may be better preserved in patients treated with PD as compared with hemodialysis performed at either hospitals or clinics.

Collaborative Partnerships

Regarding the relationship between Baxter and the Board of Investment, Ms. Jitpimolmard expressed her gratitude to the BOI for their support and assistance in successfully establishing the Amata PD manufacturing facility. She attributed this to BOI’s vision and partnership. “Through its various initiatives, the BOI has created a business-friendly environment, providing consultation and useful information enabling us to continue to produce affordable high-quality PD products to meet the domestic needs for patients.”

Equally significant, the Thai government already has in place a policy to support the local manufacturing of pharmaceutical products and a strong vision on future access for patients to life saving and sustaining peritoneal dialysis care, which Baxter will support through this investment. Baxter will be the largest PD solution manufacturers in Thailand enabling access to affordable quality care for patients in the country.

Building High Performing Teams

When discussing the company’s workforce, Baxter strives to create an inclusive culture and a diverse work environment. Baxter believes that this drives innovation; creates trusted partnerships with customers, suppliers and community members; and ultimately contributes to the success and sustainability of the business. The company works to attract, motivate, and retain a diverse workforce that allows it to better understand and address the needs of its employees, customers, business suppliers, patients, and caregivers.

For instance, at its new manufacturing facility in Amata City Industrial Estate, Baxter is recruiting people of various levels of education, starting from grade 12 for operator positions, to technicians, engineers and pharmacists with college degrees. Ms. Jitpimolmard said, “We aim to attract the best people in the

industry and we are prepared to train and develop all employees we recruit.” Likewise, the company is committed to providing its employees a great place to work and in its manufacturing facility, these priorities are to create safe and healthy workplaces.

ASEAN Economic Community

In discussing the ASEAN Economic Community (AEC), Ms. Jitpimolmard observed that regional economic integration will create opportunity for both local and MNC pharmaceutical manufacturers. For Baxter, the prospect exists for greater, export-oriented production capacity once the demands of the domestic market have been served fully. In addition, as Thailand is situated geographically in the center of mainland Southeast Asia, it can serve as a logistics hub for the AEC. Similarly, implementation of the AEC will raise expectations of improving production standards, thereby opening a door to local manufacturers to raise productivity levels and to be more competitive at both a regional and global level. Ms. Jitpimolmard noted that Baxter looks forward to the emergence of pan-ASEAN harmonized standards, registration and evaluation processes as well as opportunities for capacity building among regulatory agencies and for human resource development by healthcare providers across the region.

Partnering for a Sustainable Healthcare Future

Baxter’s mission is to save and sustain the lives of patients. For Ms. Jitpimolmard, “Baxter’s mission inspires our work and our commitment to deliver products and services that are essential building blocks of healthcare. This purpose drives our commitment to develop and strengthen the country’s healthcare delivery system and to bring a high level of care to Thai patients.” To achieve these goals, Baxter believes partnerships with government bodies, universities, hospitals, and communities are critical in creating and ensuring sustainable healthcare in Thailand. As a leader in the discovery and development of innovative specialized treatments for chronic and acute medical diseases, Baxter is focused on expanding and sustaining access to quality care, upgrading treatment methods, and the training of healthcare professionals. Indeed, Baxter supports the Thai government’s objectives related to enhancing access to life saving, cost-effective care, as well as its healthcare industrial development goals.

September 2015

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BOI Inked an MOU with Invest Hong Kong

Thailand: Low Cost of Living, Great Access

During its investment roadshow to Hong Kong last June, the BOI inked a memorandum of understanding with Invest Hong Kong, a government organization under the Hong Kong Commerce and Economic Development Bureau, to strengthen cooperation between the two parties which includes, for example, information exchange, support to facilitate two - way investment both from Hong Kong into Thailand and from Thailand into Hong Kong.

The MOU was signed by Senior Executive Investment Advisor of Thailand BOI Ms. Ajarin Pattanapanchai and Director-General of Investment Promotion at Invest Hong Kong Mr. Simon Galpin, in the presence of Deputy Prime Minister of the Kingdom of Thailand M.R. Pridiyathorn Devakula and Secretary for Commerce and Economic Development Mr. Gregory So.

Thailand and Hong Kong are close business partners. In the first quarter of 2015, bilateral trade between Thailand and Hong Kong increased 14% and Thailand is the 8th largest trading partner of Hong Kong, while Hong Kong is the 9th largest trading partner of Thailand. Moreover, Thailand occupied 60% of the rice market in Hong Kong. Thailand also is a popular destination for Hong Kong tourists with nearly 500,000 visitors to Thailand in

Thailand, an upper middle income country at the crossroads of ASEAN, with excellent investor incentives and a business friendly government, with improving logistics and transportation modes, offers a great location at low cost of living, with easy access to Asia’s premier markets. The Mercer cost of living survey puts Bangkok at 45th in the world, making it a great choice for those seeking the benefits of the forthcoming ASEAN Economic Community, nestled nearby southern China, and with routes to Hong Kong, Taipei, Seoul, Osaka and Tokyo.

2014. Therefore, this MOU signing is a significant step to expand trade and investment between Thailand and Hong Kong.

Thailand is located in the center of mainland Southeast Asia. It can perfectly act as gateway for Hong Kong companies to do business in the region, while Hong Kong’s strategic location is an ideal gateway for Thai companies to do business in China.

In 2014, there were 45 applications for BOI promotion submitted from Hong Kong with total value of 25,706 million baht. Hong Kong investment is mainly in services, such as logistics. At the same time as the MOU signing, the BOI organized a seminar titled “Thailand: A Regional Trading and Modern Industry Hub” to promote International Headquarters (IHQ) and International Trading Centers (ITC) business activities under its new policy to position Thailand to become a trading hub within ASEAN.

The BOI and Invest Hong Kong will support each other in doing their investment promotion activities, and the signing of the MOU will provide a framework to further enhance relationship for the mutual benefit of Thailand and Hong Kong.

Thailand: Low Cost of Living, Gateway to Asia

September 2015

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BOI Secretary General Hirunya Suchinai delivered an opening speech to Thai business people interested in investment opportunities in ASEAN, at the seminar on Enhancing Business in ASEAN: Investment Opportunities in Cambodia, Laos, Myanmar, Vietnam and Indonesia, hosted by the Thailand Board of Investment at Swissotel Le Concord Hotel, Bangkok, on 1 September 2015.

H.E. Mr. Clifford Borg Marks, Ambassador Extraordinary and Plenipotentiary of Malta to the Kingdom of Thailand, paid a visit to BOI headquarters on 20 August 2015 to discuss with Deputy Secretary General Duangjai Asawachintachit opportunities for Thai investors to invest in Malta and ways to enhance economic relations between two countries.

BOI Secretary General Hirunya Suchinai welcomed the new head representative from Hokuriku Bank, Mr. Junichi Iwamoto, at BOI headquarters, on 5 August 2015 and discussed BOI’s new investment policy. Mr. Iwamoto also extended his congratulations to the SG on her official appointment.

BOI Secretary General Hirunya Suchinai (second from left) welcomed H.E. Mr. Levan Nizharadze, Ambassador Extraordinary and Plenipotentiary of Georgia to the Kingdom of Thailand, at BOI headquarters on 20 August 2015, where they discussed enhancing cooperation in bilateral trade and Investment.

BOI Executive Director of the Investment Marketing Bureau Director Bonggot Anuroj (middle), welcomed a group from the Fukuoka University, led by Mr. Ichiro INOUE, Professor in Faculty of Commerce, on 18 August 2015 at the one Start One Stop Investment Center, Chamchuri Square, and gave a presentation on new BOI investment policy.

BOI Executive Director of the Investment Marketing Bureau Director Bonggot Anuroj (middle), together with BOI BUILD Director Sonklin Ploymee, welcomed SMRJ staff (Small & Medium Enterprises and Regional Innovation, Japan) at BOI headquarters on 26 August 2015.

BOI’S MISSIONS AND EVENTS

September 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 Boule-vard, 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,Express Tower, 12th Fl., Barrister Rajni Patel Marg, Nariman Point, Mumbai, Maharashtra 400021 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 Green-wich 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$ 404.8 billionGDP per Capita (2014) US$ 6,041.1 GDP Growth (2014) 0.9%GDP Growth (2015, projected) 2.7 – 3.2%Export Growth (2014) -0.3%Export Growth (2015, projected) -3.5%

Trade Balance (2014) US$ 24.6 billionCurrent Account Balance (2014) US$ 13.1 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 (August 2015) 106.33(2011=100)

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

August Average Exchange RatesUS$1 = 35.42 baht€1 = 39.46 baht£1 = 55.24 baht100 ¥ = 28.79 bahtCNY1 = 5.59 baht

Top 10 Exports 2015 (Jan-July)

Product Share Value (US$ bn)

1 Motor cars, parts and accessories 11.62 14.54

2 Automatic data processing machines and parts thereof

8.04 10.05

3 Precious stones and jewellery 4.81 6.02

4 Refine fuels 3.93 4.92

5 Polymers of ethylene, propylene, etc in primary forms

3.93 4.91

6 Electronic integrated circuits 3.37 4.21

7 Rubber products 3.35 4.19

8 Machinery and parts thereof 3.25 4.07

9 Chemical products 3.20 4.00

10 Iron and steel and their products 2.52 3.15

Total 125.08Source: Ministry of Commerce

Source: Bank of Thailand

Source: Bank of Thailand BOI

September 2015

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