Thailand offers tax cut to manufacturers quitting China

Thailand is proposing a new package to attract more foreign investment in the country, including a 50% tax break to entice manufacturers relocating production from China.

The package of measures, called ‘Thailand Plus’, is targeting companies looking to move away from China as a result of the ongoing trade war with the US.

“The new package covers comprehensive measures that will enhance Thailand’s attractiveness as an investment location, including investment acceleration incentives, fiscal measures supporting STEM manpower (science, technology, engineering, mathematics) development, deregulation, and improved pre- and post-investment services,” says Kobsak Pootrakool, deputy secretary-general to the prime minister. Investments in automation systems will be entitled to double deduction.

For companies to qualify for the incentives they must apply next year for approval to invest THB1bn (US$32.7m) or more in the country and carry out the investment by 2021. Approved investors will see their corporate tax obligations reduced by half for five years.

“Thailand’s economic development policy is in line with South Korea’s New Southern Policy, China’s Belt and Road Initiative, the Indo-Pacific strategy of Japan and the United States, and India’s Look East Policy. Thailand is also a prominent hub linking the countries in mainland Southeast Asia, or CLMVT (namely Cambodia, Laos, Myanmar, Vietnam and Thailand), and ACMECS (Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy) area,” Pootrakool adds.

Board of Investment (BOI) secretary-general, Duangjai Asawachintachit, adds that in order to increase the ease of doing business in the country, the government aims to reduce constraints faced by foreign investors. Further measures will also be added such as the extension of “smart visas” to enhance the pool of foreign talent in Thailand.

According to the re:source by just-style strategic sourcing tool, Thailand has around 4,500 textile and apparel manufacturers, mostly located around Bangkok and in eastern Thailand, that employ almost one million workers.

Thailand is improving its competitive position in apparel by refining its value-added products and technologies, and the government already provides incentives such as tax relaxation and import duty exemptions on machinery and inputs necessary for manufacture. In addition, the government is making its regulatory framework more efficient and transparent to attract investment and integrate the economy into the global marketplace, a move helpful to Thailand’s textile companies that participate in ASEAN’s integrated textile supply chain..

Thailand is pretty competitive on the sourcing front when compared to its South Asian peers too. When comparing the cut and make cost of a standard white t-shirt, Thailand comes in at US$1.37, compared with Vietnam’s $1.14, Myanmar’s $1.3 and Cambodia’s $1.05.

On the garment worker wage front, however, it’s a little more pricey than some of its neighbours. Monthly, Thai garment workers are paid on average US$270, compared with $120-200 in Vietnam, $182-200 in Cambodia and $73 in Myanmar. However it is still broadly in line with garment worker wages in China. Companies that have been sourcing garments from China will note that in recent years, the garment worker wage has steadily risen to a current average of US$210-580.

Source: Just-Style

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