Thailand is reforming its regulatory environment to help facilitate the growth of businesses in the country. Since 2017, the government has focused on reducing administrative burdens to improve the business environment by improving the licensing process and developing online platforms to further facilitate e-commerce. In 2017, the Thai government has committed to improving the regulatory process in its revised constitution. Thailand has also developed a new 4.0 Strategy aimed at transforming the country into a first world nation with the development of future industries. To help small and medium-sized enterprises (SMEs) link up with global value chains (GVCs), the government has established dedicated industry clusters to support the growth and development of priority industries domestically and abroad.
Good Regulatory Practices to Support Small and Medium Enterprises in Southeast Asia
Chapter 10. Thailand
Abstract
Regulatory context
Thailand’s commitment to improving service delivery is rooted in the Royal Decree on Criteria and Procedures in Good Governance (B.E. 2546) passed in 2003. The decree was introduced by the government as a way to improve the quality and performance of public administration across the different ministries, agencies and state institutions in the country and lift up the quality of services provided to citizens and businesses.
The government also recognises the importance of reviewing the suitability and feasibility of legislation. In this regard, it has enacted the Royal Decree on Revision of Law B.E. 2588, which has been in force since 9 September 2015. The law requires that the relevant authority conduct a review of the appropriateness of the law every five years since its implementation.
In parallel, the government enacted the Licensing Facilitation Act, B.E. 2558 in 2015 to help reduce the administrative burden on licensing procedures. The act requires each authority to review the laws concerning their respective licensing requirements and determine whether such licensing requirement should be repealed or replaced by another measure every five years since the licensing requirement has come into force.
To affirm this commitment to good regulatory practices, Section 77 of the new Thai Constitution passed in 2017 clearly outlined the use of good regulatory practice tools in the enactment, revision and repeal of laws. This includes the need to conduct assessments on a mandatory basis as well as stakeholder consultation throughout the regulatory process.
Every five years, Thailand develops two national SME strategies, reflected in the SMEs Promotion Plan or Master Plan, which lays down the foundation for SME activities for the next five years, and the Action Plan, which is issued after the master plan and serves as an implementation plan and guidance – based on the master plan – for Office of the SME Promotion (OSMEP) and all involved agencies.
The most recent SMEs promotion plan (No. 4) (2017-21) aims to increase the contribution of SMEs to more than 50% of gross domestic product (GDP) in 2021. The current promotion plan is well-aligned with Strategy 3 of the National Economic and Social Development Plan, which highlights the importance of creating a strong, sustainable and competitive economy by developing a strong entrepreneurial environment conducive to SMEs and community and social enterprises. Strategy 3 also emphasises the importance of registering SMEs to encourage participation in the formal economy.
Sub-strategy 3 of the 4th SME Promotion Master Plan also aims to promote SME access to domestic and international markets and stipulates the importance of creating and developing new export products and services by organising activities to strengthen the knowledge needed to conduct international business, such as customs, laws, regulations and related matters to enhance the knowledge of SMEs who have no experience in exporting or have just started exporting.
Regulatory governance
Institutional and regulatory setup
Table 10.1. Institutional and regulatory setup
Sources: OECD compilation; Office of the Council of State (2017), Philosophy, Mandate, and Organisation Chart, www.krisdika.go.th/wps/portal/general_en/!ut/p/c5/04_sb8k8xllm9msszpy8xbz9cp0os3g_a2czq0ctq89apyana0__eioaqgdxawm_y30_j_zcvp2cbedfafgmrsc!/dl3/d3/l2djqsevuut3qs9zqnz3lzzftjbdnjfbndfjuujsqjbjt1qwuffdrtawvja!/; Office of the Public Sector Development (2017), History, https://www.opdc.go.th/content.php?menu_id=2&content_id=3491 (accessed on 22 December 2017); The Federation of Thai Industries (2015), About F.T.I., https://www.fti.or.th/2016/eng/ftiaboutfti.aspx (accessed on 20 December 2017).
Regulatory process
The formulation of new laws and regulations pertaining to SMEs are held by both the executive and the legislative bodies of the government. Line ministries are responsible for drafting regulations within their respective domain.
On the executive side, the Council of Ministers is endowed with the authority to propose either a normal bill or a draft emergency decree to the National Assembly. The normal bill requires the approval of the National Assembly and the signature of the king as well as a formal publication in the Government Gazette before it becomes an act that comes into force. Majority of the bills passed by the Government of Thailand are classified as normal bills (Office of the Council of State, 2017[4]).
In case of emergencies related to maintaining national public safety or economic security as well as calamity-related events, the council holds the power to draft an emergency decree which can be passed on directly to the king without any prior review or approval from the National Assembly. However, since the decree is enacted based on immediate threat or danger, the council would then need to present the decree to the National Assembly without delay in the next National Assembly. If approved, the decree will permanently have the force of law; otherwise, if not, it will be considered as lapsed (Office of the Council of State, 2017[4]).
Figure 10.1. Legislative process in Thailand
Source: Office of the Council of State (2017), Thai Legislative Process, http://www.krisdika.go.th/wps/portal/general_en/!ut/p/c4/04_sb8k8xllm9msszpy8xbz9cp0os3g_a2czq0ctq08jb0tta09zqw83c58wywt_q_2cbedfakmaacy!/.
Business laws and regulations in Thailand
There are 3 004 679 registered small and medium-sized enterprises (SMEs) in the country, which account for 99.7% of the total number of enterprises in the country. SMEs also represent around 78.48% of total employment; however, there is currently no distinction between part-time and full-time employment within SMEs.
Given the importance of the SME sector in Thailand, the Government of Thailand passed the SME Promotion Act, B.E. 2543 in 2000. The Act aims to promote and strengthen SMEs in Thailand and align them with international standards. The Act also provides Office of the Small and Medium Enterprise (OSMEP) with the authority to define the SME criteria based on present economic and social conditions. Currently, micro, small, and medium enterprises (MSMEs) in Thailand are defined by the number of employees and fixed assets (Table 10.2). Micro-enterprises are bulked together with small enterprises, as there is currently no available definition for micro-enterprises.
Table 10.2. Definitions of MSMEs in Thailand
Source: Information provided by the Office of Small and Medium Enterprise Promotion (OSMEP) Thailand, 2018.
All efforts and programmes on SME policy development and promotion are carried out under the guidance and supervision of the Office of the SME Promotion (OSMEP) through its master plans. Other than what is specified in the master plan, SMEs are subjected to all business regulations, including those provided in the table below (World Bank, 2017[5]).
Table 10.3. Business-related laws and regulations in Thailand
Source: World Bank (2017), Law Library, www.doingbusiness.org/law-library/ (8 March 2018).
Business registration in Thailand is done through the Department of Business Development of the Ministry of Commerce, but the extent to which certain agencies are involved also depends on the type of business. Most non-Thai individuals are in the country are engaged in a partnership or company. Although a non-Thai individual is not prohibited from engaging in a sole proprietorship in Thailand, specific labour laws and other legal issues limit the ease of engaging in this type of business (Ministry of Commerce, 2018[6]).
Table 10.4. Registration requirements in Thailand
* A list of the costs can be found here: http://www.dbd.go.th/dbdweb_en/ewt_news.php?nid=3974&filename=index (sole proprietorships); http://www.dbd.go.th/dbdweb_en/ewt_news.php?nid=3973&filename=index (partnerships); http://www.dbd.go.th/dbdweb_en/ewt_news.php?nid=3966&filename=index (company).
Source: Ministry of Commerce (2018), Department of Business Development, www.dbd.go.th/dbdweb_en/main-php?filename=index (accessed on 12 March 2018).
At the same time, non-Thai individuals engaged in partnerships and companies also face some limitations with regard to the type of business they can be engaged in. For example, they are not allowed to engage in the following activities: 1) media, including print, radio or television broadcasting; 2) rice, arable, or orchard farming; 3) livestock rearing; 4) forestry and related products; 5) fishery in relation to marine life and special economic zones; 6) extraction of Thai medicinal herbs; 7) auctioning of local historical artefacts; 8) manufacture of Buddha image and alms bowls; 9) real property trading.
Highlights of regulatory opportunities and challenges to support SMEs
Administrative simplification
An implementation plan to review and simplify business-related legislation that impacts on SMEs is underway. Nonetheless, the government has been proactive in continuously improving the business environment. In 2017, the government launched an administrative burden reduction programme to improve the regulatory environment for businesses. The reform aims to change the process, legal acts and back office efficiency as a way to reduce the costs and risks of regulations for businesses and citizens and improve the country’s international ranking for ease of doing business.
Furthermore, the Licensing Facilitation Act was passed to improve accountability and transparency and reduce regulatory burden on businesses that apply for licences. Box 10.1 elaborates on the specific objectives of the law (Khampee, 2016[7]).
Box 10.1. Improving licensing procedures in Thailand
In 2015, the Thai government introduced The Licensing Facilitation Act, B.E. 2558, which mandates each authority responsible for licensing to review and evaluate their respective licensing act or procedure every five years and determine if it has to be repealed or replaced by an alternative measure. This review is carried out by the issuing authority, with the support of the Law Reform Commission under the Office of the Council of State and is subsequently submitted to the Council of Ministers. The implementation process is overseen by the Public Sector Development Commission.
The licensing act targets four specific tools and services:
Licensing manual
In the event licensing is required, the responsible authority would need to prepare a licensing manual. The manual would need to explicitly state all the information needed by the applicant such as the rules, terms, conditions, channels and duration of the services, fees, and other requirements. The manual would need to be available, accessible and distributed to the public or applicants. This is done by establishing a Service Link centre in each responsible authority. At present, around 8 000 manuals have been published on www.info.go.th.
One-stop service and online service
As a way to further facilitate the licensing process, the responsible government is also mandated to establish a One-Stop Service Centre to carry out the licensing process and expand its e-service channel.
Application acceptance
This means that no applications can be refused by the government. Instead, the officer responsible for the application procedure must provide suggestions in any case the application does not meet the necessary requirements. In case that the requested requirements cannot be met, both the applicant and the officer-in-charge would need to sign a memo agreeing to the case.
Officer’s procedures
The officer would need to abide by the processing time specified in the manual. In any case that the application process exceeds the suggested timeline, the officer must provide a notice to the applicant and the Office of the Public Sector Development every seven days until it the application has been resolved. The applicant may file a civil action against the officer in case of delay.
Sources: Khampee, K. (2016), Workshop on New Approaches in Measuring and Reinforcing Trust in Public Institutions, www.opdc.go.th/english/files/MeasuringandReinforcing.pdf; Government of Thailand (2015), Licensing Facilitation Act, B.E. 2558, http://www.opdc.go.th/uploads/files/2558/LICENSING_FACILITATION_ACT_2015.pdf.
Through the Licensing Facilitation Act, government agencies responsible for granting licences are provided with the authority to establish a one-stop service centre to administer this process (Government of Thailand, 2015[8]).
Box 10.2. One-stop shops in Thailand
Examples of one-stop services setup based on the Licensing Facilitation Act in Thailand include:
One Start One-Stop Investment Centre (OSOS)
OSOS is operated by the Thailand Board of Investment (BOI) and serves as Thailand’s first comprehensive service centre for investors. Available services include advisory services, registration, applications for investment-related permits and licences, and applications for public utilities.
One-Stop Service Centre (OSSC) for visa and work permits
An OSSC has been established by the Bureau of Immigration to process visa and work permits for non-nationals. However, not all are entitled to use OSSC services and is only available for applications who are requesting for an extension of their temporary stay, change in address, a re-entry permit or a change in visa status. This is also applicable for non-nationals concerned by the following laws: Immigration Act, Petroleum Act, Board of Investment Act and Industrial Estate Authority of Thailand.
One-Stop Service (OSS) for SMEs
The One-Stop Service Centre for SMEs is managed by the Office of Small and Medium Enterprise Promotion (OSMEP) and provides services to SMEs, including:
Help desks for needs and requirements of SMEs.
Free consultancy services for the development of products and services, marketing planning, financial management and company upgrading.
SMEs registration desks.
Assistance for internationalisation and promotion, as well as matchmaking with large companies.
Other existing service centres include that of the Food and Drug Administration, Express Authority (EXAT), Thailand Film Office, etc. To date, the services are only available in Thai.
Source: Government of Thailand (2015), Licensing Facilitation Act, B.E. 2558, www.opdc.go.th/uploads/files/2558/LICENSING_FACILITATION_ACT_2015.pdf.
In recent years, various laws have been introduced to facilitate e-commerce in the country (Table 10.5). Several e-commerce promotion programmes that aim to strengthen the capacities of Thai businesses have also been spearheaded by various government agencies (Ministry of Commerce, 2018[6]) (Box 10.3).
Table 10.5. Laws and decrees supporting e-commerce in Thailand
Source: Information provided by the Ministry of Commerce, 2018.
Box 10.3. Fostering e-commerce in Thailand
Department of Business Development (DBD)
The E-market Expansion Programme aims to build and develop Thai businesses and encourage them to expand using e-commerce.
The Offline 2 Online Community Product Development Programme aims to create an online marketing channel and establish distribution channels for Thai entrepreneurs through the online platform.
Electronic Transactions Development Agency (ETDA)*
ETDA has rolled out a number of programmes to support SMEs, namely: the Thailand E‑commerce Sustainability programme, SMEs Go Online programme, and the Electronic Market Promotion and Development programme for SMEs.
* The list is not exhaustive. Additional projects and programmes can be found on the following website: https://www.etda.or.th/promotion.html.
Source: Ministry of Commerce (2018), Department of Business Development, www.dbd.go.th/dbdweb_en/main-php?filename=index (accessed on 12 March 2018).
The Department of International Trade Promotion (DITP) of the Ministry of Commerce has a number of programmes and activities in place to support the export of local products from the country. For example, DITP had introduced an online platform for local businesses to connect with domestic and foreign suppliers. In addition, the Electronic Transactions Development Agency (ETDA) is responsible for the use and development of electronic transactions in the country, both at the corporate and public sector level. To help achieve this, ETDA has introduced a number of platforms to support consumers and businesses to help improve the use of online transaction systems and platforms (Electronic Transactions Development Agency, 2012[9]).
Box 10.4. Thailand’s online platforms for SMEs
Thaicommercestore.com
Thaicommercestore serves as an online platform for SMEs to sell their products domestically. The website is operated by the Department of Business Development (DBD) of the Ministry of Commerce. Sellers can register for free and can sell as many products as they wish. In addition, users of the platform can also access information and participate in workshops on market development and management of online products and shops.
Thaitrade.com
Launched in 2013, thaitrade.com has been playing an important role in promoting and bringing Thai products to the local and domestic market. Thaitrade is a business-to-business (B2B) online marketplace established by the Ministry of Commerce. It allows local suppliers to post their products on line with detailed descriptions as well as certifications. Products that are endorsed on the website are verified and approved by the DITP. Interested and potential buyers can also search for sellers or after-sales requests on the website and access deals and promotions.
Membership is free of charge. Members of the platform are able to access a wide range of benefits and privileges, including discount and special rates from banks and shipping costs. In addition to serving as a channel for trade negotiations, the website also provides users with market information, updates and relevant news for Thai entrepreneurs and clients to access. Announcements for training and workshops organised by the government or partners in the private sector can also be found in the platform.
Thaitrade.com has been extended to tap online retailing. For example, Thaitrade.com’s Small Order OK (SOOK) is a business-to-consumer (B2C) e-marketplace targeting retail shoppers around the world that are interested in purchasing in smaller quantities (Department of International Trade Promotion, 2017[10]).
Thaiemarket.com
Thaiemarket.com is an information system or centre for e-commerce operators in Thailand – serving as a learning channel to facilitate knowledge sharing and best practices across users. It also serves as a database that keeps track of the volume and value of electronic transactions and provides a platform for handling complaints and co‑ordinating with relevant agencies on issues relating to e-commerce operations.
Online complaint centre
The online complaint centre provides a platform to respond to issues from consumers and businesses with online transaction problems. The centre also promotes user confidence by providing guidelines or criteria when receiving and addressing complaints.
Sources: Department of International Trade Promotion (2017), Thaitrade, www.thaitrade.com/home (accessed 3 January 2018); Electronic Transactions Development Agency (2012), Highlight Projects, www.etda.or.th/promotion.html (accessed on 15 June 2018).
Regulatory quality management
Regulatory impact assessment
Article 77 of the revised constitution (2017) requires government agencies to conduct assessments of newly introduced regulations. Other than that, there is no formal requirement to assess SME impacts of newly-introduced regulations.
When regulatory impact assessments are conducted for new regulations and are passed to the Cabinet for consideration, the responsible ministry or agency is required to present the negative and positive impacts of the new regulation. As a supplement to the guidelines (Box 10.5), a checklist for examining the necessity of a legislative enactment must also be filled up by the responsible entity (Government of Thailand, 2017[11]).
Currently, training and workshops are regularly organised by the government to improve the understanding of regulatory impact assessments and encourage its application. The government has also developed a set of guidelines for the assessment process.
The Department of Business Development notifies the result of the impact assessments and regulatory requirements through the department’s website or the Office of Small and Medium Enterprise Promotion.
Box 10.5. Guidelines for drafting legislation in Thailand
All draft legislation must:
Comply with and not be contrary or inconsistent with the Constitution and Organic Acts.
Comply with and not be contrary to or inconsistent with the National Strategy and National Reform Plans.
Have regard to or consider the compliance with the principles and substance of the Facilitation of the Licensing Facilitation Act, B.E. 2558 (2015) and the Royal Decree on the Criteria and Procedures for Good Governance, B.E. 2546 (2003) and the Royal Decree on Revision of Law, BE. 2558 (2015).
Comply with the principles of Section 77 of the Constitution.
For example, for a permit system, the legislation must: 1) have clear objectives; 2) have the rules, time period and framework for the issuance and denial of the permit clearly provided in the draft; 3) have evidence of the implementing agency’s readiness and capability to examine and comply with the legislation; 4) have a well-defined reason for its necessity and period of validity; and 5) use information technology to facilitate the system and achieve objectives.
A more detailed version of the requirements can be found online.
Source: Government of Thailand (2017), Cabinet Resolution B.E. 2560, www.lawreform.go.th/index.php/post/506 (accessed on 12 March 2018).
Ex post evaluation
In 2003, the government launched the Process Improvement Project based on the Royal Decree on Criteria and Procedures for Good Governance. The project aimed to reduce the time required to deliver services. 144 government agencies participated in the process improvement as part of the evaluation phase of the project (Khampee, 2016[7]).
Building on the work that has been achieved, the sub-committee on the Reform of Business Activity Regulations of the Thai government had initiated a joint initiative with the private sector to do an inventory and review of eight selected indicators1 and to improve or simplify policies and processes that constrain the growth of businesses or help curb corruption.
Box 10.6. Doing business reform programme in Thailand
In 2017, a public-private joint initiative, also referred to as the “guillotine project”, was launched to improve the business environment in the country. This reform aims to change processes, legal acts and back office efficiency as needed to move Thailand to top 20 in the 2019 World Bank Doing Business rankings. This is carried out through a careful case-by-case review to ensure that regulations needed in Thailand to protect health, safety and environment, such as appropriate health, safety and environmental rules, are maintained and strengthened, even as unnecessary requirements that distract regulators and businesses from the important protective regulations are removed.
The programme’s goal is to:
Substantially reduce the costs and risks of regulations affecting businesses and citizens by simplifying or abolishing rules affecting the doing business procedures and produce concrete and visible results in 2017.
Improvement in international rankings to signal Thailand’s reforms to the international community.
Provide credibility and full transparency in the reform process by setting targets for improvements and reporting publicly on improvements in regulations by regulatory agency overtime.
Stimulate small businesses and entrepreneurship by removing barriers to starting up and expanding businesses.
Reduce corruption and business uncertainty resulting from complex and discretionary procedures.
As a result of these efforts, in November 2017, Thailand’s rank in the World Bank’s latest Doing Business indicators rose to 26 from 48 (World Bank, 2017[12]).
Source: World Bank (2017), Thailand Moves Up in Global Doing Business Ranks, www.worldbank.org/en/news/press-release/2017/11/01/thailand-moves-up-in-global-doing-business-ranks.
In 2015, the Thai government passed a sunset law (Royal Decree on Revision of Law, B.E. 2558), which requires all government agencies to review the suitability and feasibility of the existing or planned law and determine whether it should be kept, revised or repealed. Since 2015, government legislation passed by the Ministry of Commerce have been reviewed at least once.
Stakeholder engagement
In addition to requiring assessments for newly introduced regulations, Article 77 of the new Constitution of Thailand requires stakeholder consultation. The government has developed a set of guidelines for the consultation process accordingly.
Consultations are mostly conducted through physical public meetings prior to the drafting of the legislation and then passed to the Cabinet.
Box 10.7. Consultation process for draft legislation in Thailand
1. The agency would need to arrange a public consultation to gather opinions for the preparation of the legislation. The public hearing must be announced, at the very minimum, on line or through other platforms such as www.lawamendment.go.th. All public hearings must be held for more than 15 days.
2. The agency would need to announce the procedures, period of commencement, and termination. I should also disclose information on the legislation, such as: a) the current problems and causes; b) the necessity of the legislation to address the problem; c) the substantive principles; and d) specific issues which require opinion or the draft act for the public consultation.
3. After the consultation, the state agency is required to prepare a report to conclude the results of the consultations. The report must contain: a) the method for conducting the public hearing; b) the number of sessions and period of time for each session; c) target groups; d) issues and opinions discussed and raised; e) dissent or opinion of state agencies and parties involved; f) statement of reason for each issue; g) decision and results of public hearing in the legislation.
4. The state agency should prepare a statement according to the checklist to examine the necessity of the legislative enactment and submit it to the Cabinet Secretariat for the proposal of the draft legislation. The results of the consultation must also be attached to the proposal.
5. The Cabinet Secretariat shall analyse the results of the consultation and the impact that may arise from the legislation according to the criteria outlined in the checklist. If necessary, the Cabinet Secretariat can request more information the agency or request for additional consultation. Once addressed, the draft must be returned to the Secretariat.
6. The Council of Ministers then passes the draft to the Office of the Council of State for consideration. The Office of the Council of State reviews the impact assessment and consultation. If needed, it may request the state agency to provide more information or additional consultation or may conduct it itself. A report shall then be prepared by the Office of the Council of State following the modifications to or approval of the draft.
7. If an amendment is to be made, the Office of the Council of State would need to notify the agency of the revisions and submit a statement in accordance with the criteria prescribed in the checklist.
Source: Government of Thailand (2017), Cabinet Resolution B.E. 2560, www.lawreform.go.th/index.php/post/506 (accessed on 12 March 2018).
A number of the consultation processes related to business issues are conducted with representatives from the private sector, such as the Thai Chamber of Commerce (TCC) and the Federation of Thai Industries (FTI).
Two websites (www.lawamendment.go.th and www.dbd.go.th) publish all ongoing consultations with stakeholders. Recently, the Office of Small and Medium Enterprise Promotion (OSMEP) has conducted a public consultation for the draft legislation on Social Enterprise Promotion, as a way to promote the growth of enterprises that also aims to improve the quality of life of the Thai population (www.lawamendment.go.th, 2017[13]).
Regulatory delivery
Civil service framework
Regulations are delivered through the different state agencies. Various mechanisms are used to ensure that SME regulations are carried out efficiently. Implementation of SME regulations is carried out by the respective ministries and local governments. When applying regulations, agencies adhere to the legal definition but often tailor this according to the local conditions.
Although policy reviews are not carried out on a regular basis, the government, through the Office of the Public Sector Development Commission (OPDC), continues to make significant efforts to improve the business environment and provide better quality services to citizens and businesses via ongoing public sector reform initiatives (Box 10.8) (Office of the Public Sector Development, 2017[14]).
Box 10.8. Improving service delivery in Thailand
Public Sector Management Quality Award (PMQA) is an award provided on an annual basis to government agencies or state institutions that adopt good governance practices. Performance of ministries, agencies, or institutions is measured using seven categories.
Ministerial and Provincial Rightsizing is being carried out by the government to strengthen roles, missions and rightsizing, and improve the overall competitiveness of public servants in a fast-changing, global environment.
Blueprint for Change is a change management system that aims to increase the efficiency within the public sector. This includes adopting new patterns, techniques, frameworks and processes as a way to continuously improve the management aspects of public service.
Participatory Public Administration is a new policy that encourages government officials to reach out to the stakeholders in the decision-making process, both directly and indirectly. This can be achieved through referendums, public hearings and other platforms.
Source: Office of the Public Sector Development (2017), Public Sector Reform Initiatives, www.opdc.go.th/english/content.php?url=view&cat_id=2 (accessed on 22 December 2017).
Regulatory compliance
Compliance with standards and intellectual property
SMEs and potential start-ups face certain issues in relation to intellectual property (IP) registration, which may be attributed to the limited capacity and expertise for the approving agency to operate more efficiently and take decisions on specific applications. The government continues to adjust staff and operations of IP registration to suit the current demand; however, specific bottlenecks that prolong the process limit the possibility for SMEs to seize the existing opportunities.
Labelling and other non-tariff barriers are issues faced by Thai SMEs to be able to compete within the global value chain. For example, although some certification processes are harmonised, SMEs face issues in relation to numerous accreditation bodies that operate under different standards.
As a way to address these issues, the government has introduced several programmes and activities, including some focused on developing skills and knowledge for entrepreneurs to create value added in their products and services. These activities include branding and product development or packaging development to meet new trends and needs in the international market.
Box 10.9. Promoting intellectual property in Thailand
IP Mart (www.thaiipmart.com) serves as an online centre of intellectual property trading for various artefacts and for people interested in buying goods, exchanging ideas or setting up meetings with IP Mart as an intermediary. Since 2017, IP Mart has been improving the credibility of information posted on the website and further increasing accessibility, operability and efficiency by exploring other channels and platforms such as mobile applications. IP Mart was set up as a way to encourage innovation and business expansion, as well as help reduce the import of technology from abroad (Ministry of Commerce, 2018[15]).
Source: Ministry of Commerce (2018), IP Mart, www.thaiipmart.com/home (accessed on 18 June 2018).
SME linkages
Clusters
In September 2015, the Thai government introduced a cluster policy, which aims to increase the industrial competitiveness of specific sectoral and geographical areas. These clusters help link producers or manufacturers, suppliers, research institutions and other supporting organisations involved within an industry. Through these clusters, the government is able to properly target a wide range of development projects and reforms that can facilitate investment and growth.
Other projects carried out by the Department of Industrial Promotion focus on specific programmes that link entrepreneurs to foreign companies in industries such as medicine and health, aircraft development and automatic engines and robotics.
As a way to further link and enhance the performance of Thai entrepreneurs to the supply chain, the Thai government, through the Department of Industrial Promotion of the Ministry of Industry, is conducting several activities to support the development and increase added value of the exported products, including:
A potential super cluster programme.
A development programme for entrepreneurs and industrial enterprises in automatic engines and robotics.
An automotive parts development programme.
Beyond product development, the Board of Investment (BOI) has been supporting entrepreneurs, notably SMEs, to integrate into the global value chains. The BOI Unit for Industrial Linkage Development (BUILD) helps link SMEs with major companies domestically and internationally through matchmaking events such as a central market for trading materials and parts, buyer meets seller, sourcing services and international exhibitions. The Department of International Trade Promotion’s (DITP) website provides the possibility for SMEs to look for Thai suppliers working in different industries.
In addition to clusters, the Government of Thailand is has also developed new growth hubs through the Eastern Economic Corridor (EEC), which covers 13 000 square kilometres between Chachoengsao, Chonburi and Rayong provinces. The government aims to accelerate the growth in these provinces and establish them as centres for trade, investment and regional transportation.
Thailand 4.0
The Thai government has also launched Thailand 4.0, a new economic model that aims to strengthen the country’s potential in addressing challenges such as the inequality, imbalance and the middle-income trap (Box 10.10). Thailand 4.0 aims to encourage the growth of specific industries by providing investors with incentives to participate in the development of target industries (Royal Thai Embassy, 2017[16]).
Box 10.10. Highlights of the Thailand 4.0 strategy
The Thailand 4.0 strategy aims to achieve four objectives: economic prosperity, social well-being, raising human values and environmental protection. To achieve these objectives, the government has prepared five agendas:
Prepare Thais for Thailand becoming a First World nation
The model aims to transform Thai citizens into competent citizens through: 1) reforming the education system; 2) setting up a skills development programme; and 3) introducing measures to support refill and reform strategy by improving their status and potential through provision of financial support, social opportunities and other area-based mechanisms.
Develop technology clusters and future industry
Thailand aims to develop ten future industries as a way to attract high-value investments in the country. The government provides benefits to investors in the ten industries classified under first S-curves and new S-curves. The first S-curves are industries that have a solid foundation but require more innovation and research and development (i.e. next generation automotive technology; smart electronics; affluent, medical and wellness tourism; agriculture and biotechnology; food for the future). On the other hand, the new S-curves focus on new industries that can improve competitiveness and innovation in the country (robotics, aviation and logistics, biofuels and biochemical, digital, and medical hub). In brief, the country aims to build on five groups of technology and targeted industries, namely: 1) food, agriculture, and biotech; 2) health, wellness, and biomedical; 3) smart devices and robotics; 4) digital, internet of things (IoT), artificial intelligence, and embedded technology; and 5) creativity, culture, and high-value services. As a way to propel the growth of these industries, the government aims to focus on the demand for knowledgeable and highly skilled manpower and the need to reform the Thai research system.
Incubate entrepreneurs and develop networks of innovation-driven enterprise
The focus on the five groups of technology and targeted industries intends to support entrepreneurs and networks through: 1) shifting traditional farmers to “smart farmers”; 2) transforming traditional SMEs into “smart SMEs”; 3) switching from traditional services to “high-value services”; and 4) promoting the development of start-ups.
Strengthen the internal economy through the mechanisms of 18 provincial clusters and 76 provinces
The aim is to ensure that the benefits of economic growth are spread to all regions and that there is an equal distribution of economic benefits. To do this, the government aims to strengthen the economic structure and internal market system by creating a database on trade and connectivity across all levels of government and setting up an appropriate regulatory regime to support growth and access of SMEs and social enterprises to the market. Furthermore, several strategies and guidelines have been developed for 19 provincial clusters to develop them as strategic economic region, e.g. Upper Northern Region 1 as the creative cluster and agricultural good innovation hub while the southern region serves as the southern agricultural trading centre for rubber, oil palm and fruit. An innovation hub is also expected to be established in each region.
Integrate with ASEAN and connect Thailand to the global community
Thailand aims to position itself as a trading nation and one of Asia’s business centre by: 1) encouraging multinational corporations to establish international headquarters and trading centres in Thailand; 2) developing the Eastern Economic Corridor; 3) developing industrial clusters to promote high potential bases for targeted industries or the so-called superclusters; and 4) establishing special border economic zones in 10 provinces. Thailand also aims to bridge trade with neighbouring countries (Cambodia, Laos, Myanmar and Viet Nam) and aims to adopt a service sector policy and strategy to enhance the competitiveness of Thai service providers abroad.
Source: Royal Thai Embassy, Thailand 4.0, http://thaiembdc.org/thailand-4-0-2/ (accessed on 2 January 2018).
Labour mobility
Labour policy for foreigners in Thailand is guided by the Royal Decree on Recruitment of Foreigners, which was recently introduced in 2017. The decree sets the extent and limitation of foreign recruitment.
Non-resident foreign nationals may be employed in supervisory, technical or advisory roles, notably in special economic zones or priority clusters identified by the Board of Investment.
Information and networking
The Board of Investment regularly updates its business guide, which provides information for investors investing in the country. The business guide includes information on the different regulations that may affect them as well as incentives and assistance schemes (full ownership, tax incentives, etc.) that can be availed of when investing in specific priority areas.
Promotional events are regularly organised by the government, through the Department of International Trade Promotion (DITP). To do this, DITP has been introducing various schemes to support trade. Some promotional programmes are also organised by the Department of Foreign Trade through embassies abroad. These activities include trade promotions and other activities as a way to expand trade, border investment and participation in special economic zones.
Table 10.6. Export promotion schemes in Thailand
Source: OECD (forthcoming), ASEAN SME Policy Index 2018: Boosting Competitiveness and Inclusive Growth in ASEAN, OECD Publishing, Paris.
Customs
Thailand has introduced several programmes to improve customs procedures, including an integrated tariff database and an e-Tracking System (Box 10.11). The government has also been pursuing activities and reforms that help facilitate rules of origin. These include improving the systems that focus on: 1) issuing certificates of origin; 2) licensing and issuing certificates on general import-export goods; 3) costing for products; 4) self-registration; 5) database on the rules of origin; 6) digital signature; and 7) electronic signature and seal.
Box 10.11. Improving customs procedures in Thailand
Integrated tariff database
The database allows users to access information on import and export tariff rates as well as related information on exemptions of duty or special privileges. The database also includes information to related acts, e.g. the Customs Act, the Customs Tariff Act and other notifications from the Customs Department and the Ministry of Finance.
e-Tracking System
The system provides users with online customs clearance tracking services, such as account information, invoices and shipment status.
Sources: Thailand Customs Department (2018), Official integrated tariff database, Thailand 4.0, http://igtf.customs.go.th/ (accessed on 24 August 2018); Thailand Customs Department (2018), E-tracking system, http://e-tracking.customs.go.th (accessed on 24 August 2018).
Thailand’s National Single Window system has been officially in place since October 2014. Since then, government agencies have been collaborating to further facilitate import, export and other logistical operations (The Thai Customs Department, 2016[17]).
Table 10.7. Agencies linked to the Thai National Single Window
Source: The Thai Customs Department (2016), The Progress Report on the Development of Thailand National Single Window, www.thainsw.net/INSW/Ent/DisplayDocumentDetailServlet?act=SRH&docCde=765&nswLang=E.
At present, 26 agencies have completed data linkage for all types of goods and customs information and formalities. The statuses of other agencies connected to the system are outlined in the table above.
Recommendations
Use the administrative burden reduction programme as an opportunity to further improve the stock of regulations and further identify issues that affect SMEs. Consider expanding the programme to cover specific issues or industries of concern.
Enhance implementation of regulatory impact assessments (RIA) and involve businesses, especially SMEs, in the development of new regulations.
Consider broadening the range of stakeholders involved in the deliberation of SME regulations and programmes. Encourage more participation from industry leaders in the ASEAN region and beyond to help align policies and programmes with initiatives introduced at the regional and international level.
References
[10] Department of International Trade Promotion (2017), Thaitrade, https://www.thaitrade.com/home (accessed on 3 January 2017).
[9] Electronic Transactions Development Agency (2012), Highlight Projects, https://www.etda.or.th/promotion.html (accessed on 15 June 2018).
[11] Government of Thailand (2017), Cabinet Resolutions B.E. 2560, http://www.lawreform.go.th/index.php/post/506 (accessed on 12 March 2018).
[8] Government of Thailand (2015), Licensing Facilitation Act, B.E. 2558, http://www.opdc.go.th/uploads/files/2558/LICENSING_FACILITATION_ACT_2015.pdf.
[7] Khampee, K. (2016), Workshop on New Approaches in Measuring and Reinforcing Trust in Public Institutions, https://www.opdc.go.th/english/files/MeasuringandReinforcing.pdf.
[6] Ministry of Commerce (2018), Department of Business Development, http://www.dbd.go.th (accessed on 12 March 2018).
[15] Ministry of Commerce (2018), IP Mart, http://www.thaiipmart.com/home (accessed on 18 June 2018).
[18] OECD (forthcoming), ASEAN SME Policy Index 2018: Boosting Competitiveness and Inclusive Growth in ASEAN, OECD Publishing, Paris.
[2] Office of the Council of State (2017), Philosophy, Mandate, and Organisation Chart, http://www.krisdika.go.th/wps/portal/general_en/!ut/p/c5/04_SB8K8xLLM9MSSzPy8xBz9CP0os3g_A2czQ0cTQ89ApyAnA0__EIOAQGdXAwM_Y30_j_zcVP2CbEdFAFGmRSc!/dl3/d3/L2dJQSEvUUt3QS9ZQnZ3LzZfTjBDNjFBNDFJUUJSQjBJT1QwUFFDRTAwVjA!/.
[4] Office of the Council of State (2017), Thai Legislative Process, http://www.krisdika.go.th/wps/portal/general_en/!ut/p/c4/04_SB8K8xLLM9MSSzPy8xBz9CP0os3g_A2czQ0cTQ08jb0tTA09zQw83c58wYwt_Q_2CbEdFAKMAAcY!/.
[1] Office of the Public Sector Development (2017), History, https://www.opdc.go.th/content.php?menu_id=2&content_id=3491 (accessed on 22 December 2017).
[14] Office of the Public Sector Development (2017), Public Sector Reform Initiatives, http://www.opdc.go.th/english/content.php?url=view&cat_id=2 (accessed on 22 December 2017).
[16] Royal Thai Embassy (2017), Thailand 4.0, http://thaiembdc.org/thailand-4-0-2/ (accessed on 2 January 2017).
[20] Thailand Customs Department (2018), E-tracking System, http://e-tracking.customs.go.th (accessed on 24 August 2018).
[19] Thailand Customs Department (2018), Official Integrated Tariff Database, Thailand 4.0, http://igtf.customs.go.th/ (accessed on 24 August 2018).
[3] The Federation of Thai Industries (2015), About F.T.I., https://www.fti.or.th/2016/eng/ftiaboutfti.aspx (accessed on 20 December 2017).
[17] The Thai Customs Department (2016), The Progress of Thailand National Single Window, http://www.thainsw.net/INSW/Ent/DisplayDocumentDetailServlet?act=SRH&docCde=765&nswLang=E.
[5] World Bank (2017), Law Library, http://www.doingbusiness.org/law-library/ (accessed on 8 March 2018).
[12] World Bank (2017), Thailand Moves Up in Global Doing Business Ranks, http://www.worldbank.org/en/news/press-release/2017/11/01/thailand-moves-up-in-global-doing-business-ranks.
[13] www.lawamendment.go.th (2017), Summary of the Results of the Hearing on the Draft Social Enterprise Promotion Act, http://www.lawamendment.go.th/index.php/laws-department/item/1130-2017-08-29-03-57-28.
Note
← 1. The eight priority indicators in the World Bank Doing Business Indicator as well as Thailand’s rank in each include: dealing with construction permits (Rank 42); registering property (Rank 68); getting credit (Rank 82); protecting minority investors (Rank 27); paying taxes (Rank 109); trading across borders (Rank 56); enforcing contracts (Rank 51); resolving insolvency (Rank 23).