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Mekong Memo Thailand Weekly, October 13, 2023: Business, politics, finance, trade & legal news.
We monitor and filter the very best and most insightful stories from Southeast Asia directly to your inbox every weekday.
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Here is your Mekong Memo Thailand for the week of October 13, 2023:
Thailand EV Landscape: Investments and Collaborations
Chinese Carmaker Geely and Malaysia's Proton in Thailand: Chinese automaker Geely and Malaysia's Proton are in discussions to establish an EV plant in Thailand, marking a significant move in the ASEAN automotive landscape. This development aligns with Thailand's ambitions to become an EV hub in the region. (Khaosod)
BYD's Dominance in the Thai EV Market: Chinese automaker BYD has solidified its position in the Thai EV market, with sales reaching a record high in September 2023. The company's sales accounted for 47% of the total EV sales in Thailand for that month. Furthermore, BYD is expanding its manufacturing capabilities in Thailand, with a new factory set to commence production in 2024. (CarNewsChina)
Toyota and Idemitsu's Advanced EV Batteries: Toyota is partnering with energy company Idemitsu Kosan to mass-produce all-solid-state batteries, aiming to enhance the driving range of EVs. This collaboration focuses on sulfide solid electrolytes, a crucial material for high-capacity batteries. Toyota's goal is to implement these advanced batteries by 2027 and establish mass production by 2030. (Khaosod)
Malaysian Automaker Proton's Plans in Thailand: Proton, the Malaysian national automaker, is contemplating the establishment of an EV factory in Thailand. This move is supported by both the Thai and Malaysian Prime Ministers. Proton's shift towards EVs is further emphasized by its association with Chinese automaker Zhejiang Geely Holding Group. Thailand's government incentives, including subsidies for passenger EVs, make it an attractive destination for such investments. (Nikkei Asia)
Tesla Eyes Thailand for Potential EV Factory: Tesla is contemplating the establishment of an electric vehicle manufacturing facility in Thailand, as revealed by Prime Minister Srettha Thavisin following a meeting with Tesla CEO, Elon Musk. This move comes shortly after Tesla began its operations in Thailand, initiating orders and deliveries within the past year. Despite the Thai auto market's significance, with sales of over 750,000 cars last year, this is the first hint of Tesla's manufacturing investment in the country. Thailand, already a major vehicle assembly hub in Asia, aligns with Tesla's ambitious goal to produce 20 million vehicles annually by 2030. (Electrek)
Thailand Accelerates EV Drive with Lucrative Incentives
Thailand is positioning itself as a regional leader in the electric vehicle (EV) market by offering incentives and tax breaks to automakers establishing EV research and development centers. With a rich history as the region's top car producer, Thailand aims to transform 30% of its 2.5 million annual vehicle production into EVs by 2030. To support this ambition, automakers will receive tax benefits and grants for R&D investments, with added perks if they relocate their regional headquarters to Thailand. This move has already attracted significant investments from major Chinese and Japanese car manufacturers. At the same time, Thailand’s Board of Investment has entered into discussions in an attempt to support Japanese automakers which still produce vehicles driven by internal combustion engines in order to ensure that Thailand maintains its status as a production hub for the next 15 years.
Central Bank Prioritizes Long-Term Outlook Over Short-Term Data
Thailand's central bank emphasizes the significance of the broader economic outlook over short-term data when determining monetary policy, senior officials said Wednesday. Despite challenges in tourism and exports, Bank of Thailand (BOT) director, Phurichai Rungcharoenkitkul, highlighted that the nation's economic recovery is aligned with expectations, currently driven by domestic demand. Recently, the BOT raised its key interest rate to a decade-high of 2.50%. While the bank adjusted its 2023 growth forecast downward to 2.8%, it anticipates a growth of 4.4% in 2024, up from the previous 3.8% estimate.
BOI Greenlights USD1.1 Billion of Investment
The Board of Investment (BOI) has sanctioned investment applications totaling 41 billion baht ($1.1 billion) for projects spanning electric vehicle manufacturing, renewable energy generation, data centers, and travel infrastructure. This move aligns with the BOI's revised 5-year strategy, emphasizing five strategic industries, including Bio-Circular-Green and Automotive, especially EVs. From January to August 2023, the BOI witnessed a 47% surge in the value of investment applications compared to the same timeframe last year. Key approved projects include a deal for THAI Airways, Changan Automobile's EV factory, and True Internet Data Center's business expansion.
Consumer Confidence on the Rise
In September, Thai consumer confidence witnessed its second consecutive monthly increase, driven by government stimulus measures and a surge in foreign tourist arrivals. The University of the Thai Chamber of Commerce reported that their consumer index climbed to 58.7, up from 56.9 in August. This uptick in confidence is attributed to the establishment of a new government and its subsequent economic-boosting policies, including a 10,000 baht digital wallet handout for approximately 56 million individuals set for next year.
Read more: Bangkok Post
PM Tilts Towards China for Economic Boost
Thai Prime Minister Srettha Thavisin, inaugurated in August, has unveiled policies reminiscent of "Thaksinomics," emphasizing increased minimum wages and digital cash handouts. However, these policies face criticism, drawing parallels to the controversial money-driven politics of Thaksin Shinawatra's tenure. Notably, Srettha's administration is pivoting towards China for economic growth, breaking diplomatic norms by meeting the Chinese Ambassador before ASEAN envoys. With visa-free entry for Chinese tourists and potential collaboration on China's "Belt and Road" initiative, Thailand's diplomatic alignment appears to be shifting, especially as U.S. engagement in Southeast Asia wanes.
Read more: Nikkei Asia
Central Group's Expansion in Retail and Property Sectors
Central Group, a dominant force in Thailand's retail landscape, is amplifying its market presence with two significant ventures. Firstly, through its retail arm, Central Retail Corp. (CRC), the group is launching GO Wholesale, a membership-only warehouse club. This move, which aims to open 43 locations with a 20 billion baht investment over five years, is set to challenge Charoen Pokphand (CP) Group's Makro in the bulk food market. This announcement comes as Central Group closes their Tops Club behind Central Rama 2.
At the same time, Central Pattana Plc (CPN), the property development arm of Central Group, has announced plans to invest over 100 billion baht in five mega mixed-use projects in Bangkok from 2023 to 2027. The flagship project, Central Park, within Dusit Central Park, is slated to redefine Bangkok's urban landscape by 2025. This ambitious expansion comes as Central Group seeks to leverage the growing preference for modern retailers and capitalize on Thailand's anticipated tourism growth.
Inheritance Tax Law Overhaul Planned
Thailand's Revenue Department is contemplating changes to the inheritance tax law, aiming to address economic disparities. The proposed amendments focus on three main areas: setting the tax threshold for assets exceeding 100 million baht, redefining taxable assets through royal decrees, and exempting properties bequeathed to a deceased's spouse. However, concerns arise over potential tax evasion loopholes. The tax would be based on an individual's net wealth, with assets valued up to 100 million baht exempted and any surplus taxed at a rate of up to 10%.
Read more: Bangkok Post
SEC Renews Focus on Market Revitalization
The Securities and Exchange Commission (SEC) of Thailand, under its new Secretary-General Pornanong Budsaratragoon, is prioritizing the restoration of investor confidence following recent unsettling events with More Return Plc. and Stark Corporation Plc. The SEC aims to transform the Thai capital market into a primary platform for both funding businesses and public savings. Immediate actions include collaborations with the Department of Special Investigation to address stock exchange discrepancies and exploring the establishment of a rehabilitation fund for affected investors. Additionally, the SEC is enhancing regulations on digital assets, with clarifications anticipated by year-end.
Read more: Thai News PRD
UBS: Debt Outlook Remains Positive
Despite initial apprehensions regarding the potential impact of the 10,000 THB digital wallet scheme on Thailand's credit rating, the Union Bank of Switzerland (UBS) has affirmed the nation's long-term debt sustainability as stable. Government spokesperson Chai Watcharong highlighted that the current public debt-to-GDP ratio stands at 70%, aligning with debt sustainability. He emphasized that creditworthiness evaluations consider broader factors, such as fiscal plans and economic growth. Chai also acknowledged the need for robust measures to boost Thailand's economy, which has recently lagged in ASEAN growth rates.
Read more: VietnamPlus
Cannabis Policy Shift Concerns Tourists and Business Alike
Thailand, once celebrated as the "Amsterdam of Asia" after its groundbreaking move to decriminalize cannabis, is now reconsidering its stance. The nation's new government is contemplating restricting cannabis use to medical purposes only, potentially impacting the burgeoning cannabis tourism industry. This shift has particularly resonated with Malaysian tourists, who have been drawn to Thailand's liberal cannabis policy. While Thailand's potential policy change might be welcomed by Malaysian authorities concerned about drug smuggling, many Malaysian tourists appreciate the country's progressive approach and the unique experiences it offers. On the business front, The Thai Industrial Hemp Trade Association is urging clarity so that businesses can plan ahead.
Secondary Cities: Untapped Potential for Growth
Thailand's cities beyond Bangkok, such as Chiang Mai, Khon Kaen, and Rayong, hold the potential to drive the country's economic growth, states a World Bank study. While Bangkok has traditionally been the epicenter of economic activity, these secondary cities can spur growth with enhanced urban infrastructure, including mass transit and renewable energy. However, the study emphasizes that relying solely on central government funding isn't sustainable. It suggests that these cities should explore municipal borrowing and public-private partnerships, advocating for fiscal autonomy to attract private investments and improve infrastructure.
Tobacco Industry: Economic Impact and Challenges
Thailand's tobacco sector plays a significant role in the nation's economy, supporting approximately 50,000 households and contributing THB59.8B ($1.65B) to the government's revenue in 2022 via excise taxes. This report delves into the potential consequences of a proposed ban on tobacco additives, highlighting economic risks for growers, the emergence of illicit trade, and potential revenue loss. With a focus on sustainable growth, the study provides insights into balancing socio-economic factors, consumer preferences, and public health, offering valuable perspectives for stakeholders in emerging markets and public officials.
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