Starting a Business in Thailand

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Why Thailand?

Welcome to the Land of Smiles. It's easy to find reasons to start up in Thailand - the incredible scenery, the tantalising cuisine, the beautiful ladies, the centuries of cultural treasures and the laid back lifestyle. And how could we not mention the lady-boys. Thailand, meaning Land of the Free', takes pride in never having been occupied and welcomes all religious and cultural backgrounds. However, the famous Thai hospitality can quickly become a cold shoulder for foreigners or farang who want to latch on to the enterprising spirit of the Thai. Those who try to pierce the closed sphere of Thai commerce will find themselves bound up in red tape.

Partnership with a Thai citizen is a common way to start a business in Thailand. Due to the complexity of labour and immigration laws, the alien' (yes, that's you) would not be able to take part in the day-to-day running of the business and would require the Thai partner to front the operation. These types of operation have a high failure rate.

Alternatively, you could form a limited company, but beware - foreign shareholders can only have a maximum of 49%, so the owner may be outvoted by the 51% majority Thai shareholders. You also need to employ a minimum number of Thai staff per foreign employee.

Coming by a work permit is not easy, and you'll need to fork out for a Thai lawyer to ensure the aforementioned red tape doesn't gain a strangle hold. In addition to this, many sectors are reserved for work by Thai nationals alone, so foreigners are restricted in the types of business they can run. Permits are issued for specific hours and types of work, and the entire process must be repeated from scratch annually. Applications must be made in the Thai language, so you'll need a nifty interpreter. Starting a business in Thailand takes an average of 33 days, compared to the world average of 38 days.

In a nutshell, starting up in Thailand is fraught with difficulty and should only be attempted by experienced or ambitious entrepreneurs. Foreign investment is always welcome, particularly at the moment, but whether the risks outweigh the potential gains is a matter for serious consideration before jumping into any project.

Economic Overview

One of the original Tiger Economies, Thailand experienced a growth spurt in the early nineties, with the highest growth rate of any country at 9% between 1985 to 1996. Thailand's rich natural resources including timber, precious stones and fisheries and the country is one of the world's biggest rice exporters. Tourism, textiles, jewellery and electrical appliances are also big players.

Alas, the Asian economic miracle' turned out to be a fragile bubble, and crisis hit in 1997, with Thailand at the epicentre as the Baht collapsed. The IMF stepped in with a rescue package of over 20 billion which was paid back early in 2003. Since then, growth has been steady, but the last quarter of 2008 saw a marked downturn, and the contraction of the Manufacturing Production Index was greater than that of 1998.

A huge 60% of the GDP is made up of exports, so Thailand has been hard hit again by the worldwide crisis as the global market has weakened - exports to the US in November 2008 were down 14.5% compared to the previous year.

Whilst the 2004 tsunami did not harm tourism in the long-term as expected, the demonstrations of the People's Alliance for Democracy in Bangkok have released pessimistic speculation. Political instability has further contributed to economic uncertainty. A coup in September 2006 led to new rules on foreign investment and since 2008's exile of Prime Minister Thaksin Shinawatra, the rules have changed once again.

Fresh-faced new PM Abhisit Vejjajiva faces a challenge to get the economy back on track and encourage foreign investment. British born, Eton and Oxford educated (Boris and Veggie' are old chums), he stands in good stead to attract foreign business and investment, but as confidence in the Thai economy plummets, it's not going to be an easy ride.

Working Hours

The maximum number of work hours is eight per day or 48 per week, except for work deemed by law to be hazardous, in which case employment is limited to seven hours per day and 42 hours per week. Overtime compensation must be paid at a rate of between 1.5 to three times the normal hourly rate to qualifying employees.

Employees are entitled to 13 national holidays per year, plus a minimum of six days of vacation after one year of consecutive work. Thirty annual paid sick days is standard, and an employer may require a doctor's certificate for sick leave of three days or more. Female employees are entitled to 90 days of maternity leave, including 45 days of paid leave. The minimum daily wage rate varies, depending upon location, from $4 to $5.

Population

Thepopulation of Thailand, estimated at 64.86 million in 2006, includesethnic Chinese, Malays, Cambodians, Vietnamese, Indians, and others.Immigration is controlled by a quota system.

Language

The complexities ofThai can be hard to grasp, but English is widely spoken. Picking up atleast a smattering will earn you great respect, and help you gainadvantage in the daily haggling stakes.

By ANNA CHAMBERS

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