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Thailand: Sustainability and investment promotion schemes (Part 2)

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In brief

In Part 1 of our newsletter on sustainability and investment promotion, we discussed the current climate of a drive towards sustainability goals and the role of the Thailand Board of Investment (BOI) in supporting businesses in this direction.  In this second part, we will elaborate on measures adopted by the BOI so far, including: measure to promote Thailand as the regional EV hub; measure to promote sustainability-related activities; special measures to improve production efficiency; and measure to promote a grassroots economy.

Contents

  1. In depth
  2. Promoting sustainability-related activities
  3. Improving production efficiency
  4. Promoting a grassroots economy
  5. Time to prepare for sustainable business

In depth

Promoting Thailand as the regional EV hub

The electronic vehicle (EV) industry is one of the targeted industries promoted by the BOI. The BOI plans to promote Thailand as the regional EV hub, and has been offering incentives to investors in activities relating to EV manufacturing.

New investment in the following activities related to EVs are currently eligible for investment promotion:

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Key conditions

The business operator will need to meet a list of requirements and conditions to obtain investment promotion – for example, implementing technology transfer plans to enhance local suppliers, meeting specific safety standards, or manufacturing certain parts (e.g., traction motors, battery management systems, or drive control units).

Promoting sustainability-related activities

The BOI generally promotes numerous business activities that are considered environmentally-friendly such as the manufacture of eco-friendly chemicals or polymers, or products from eco-friendly polymers; recycling and waste treatment; and industrial estates or zones for environmental conservation.

Recently, in response to Thailand’s mission to reduce its carbon footprint and become a low-carbon economy, the BOI grants the following investment incentives to new investment in several business activities:

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*CCUS: carbon capture, usage, and storage technology

Improving production efficiency

The BOI grants privileges to qualified investments to promote the improvement of production efficiencies in various areas. The following measures particularly relate to environmental protection and sustainability. These measures are available for both new and existing businesses, regardless of whether the business is already promoted by the BOI at the time of application.

Under this measure, the BOI promotes:

A. Energy and environmental conservation

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A business operator can benefit from BOI privileges if it plans to improve production by investing at least THB 1 million1 (or THB 500,0002 for SMEs) in environmentally-friendly machinery to support energy conservation, alternative energy or reduce the negative effects on the environment (such as installing solar power systems):

✓    Investments in modern-technology machinery to conserve energy.

✓    Investments in machinery to utilize alternative energy.

✓    Investments in machinery to reduce environmental impacts (e.g., waste, water pollution, and air pollution).

✓    Investments in machinery to reduce greenhouse gas emissions (registered and certified by the TGO).

B. International sustainability certification

Upgrading Thailand’s agro-industry to meet
international sustainability standards

A business operator can benefit from BOI privileges if it plans to improve production by investing at least THB 1 million3 (or THB 500,0004 for SMEs) to upgrade the standards of the agriculture industry in Thailand to meet international standards such as Good Agriculture Practices (GAP), Forest Stewardship Council (FSC), Program for the Endorsement of Forest Certification Scheme, and Food Safety Management System (ISO 22000).

Deadline

Unless extended by the BOI, the deadline to apply for the investment promotion under this measure is the last working day of 2022.

Promoting a grassroots economy

The BOI grants privileges to qualified investments to support local organizations in developing, among other things, a sustainable agro-industry. This measure is available for both new and existing businesses, regardless of whether the business is already promoted by the BOI at the time of application.

Key conditions

Business operators who are interested in supporting local communities can obtain investment promotion under this measure if the following conditions can be fulfilled:

✓    Investment of at least THB 1 million5 (excluding land and working capital) by contributing at least THB 200,0006 per local organization. For existing promoted projects, only the contribution of at least THB 200,0007 per local organization will be required. 

✓    Proposal of a plan to collaborate with a local organization to: (i) enhance competitiveness in production or service; (ii) support the local organization on water management; or (iii) develop a sustainable agricultural business.

Deadline

Unless extended by the BOI, the deadline to apply for investment promotion under this measure is the last working day of 2022.

Time to prepare for sustainable business

Sustainability initiatives play a key role in the growth of companies in all sectors. Businesses that are interested in launching sustainability and ESG initiatives in Thailand should consider applying for investment promotion from the BOI – to both enjoy the privileges and support the journey towards sustainability and achieving ESG goals.

1 This is estimated at USD 27,000

2 This is estimated at USD 13,500

3 This is estimated at USD 27,000

4 This is estimated at USD 13,500

5 This is estimated at USD 27,500

6 This is estimated at USD 5,400

7 This is estimated at USD 5,400

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Author

Pornapa Luengwattanakit currently leads Baker McKenzie’s Corporate & Commercial, Tax, as well as the International Trade, Compliance & Customs practice groups in Thailand. She practices mainly in the areas of corporate restructuring, major projects, mergers and acquisitions and trade competition. Ms. Luengwattanakit joined Baker McKenzie in 1982 and became a partner in 1989.

Author

Peerapan is a Corporate and M&A partner and heads the Sustainability Group and Healthcare & Life Sciences Industry Group in Bangkok. She also co-heads the Investigations, Compliance & Ethics Practice Group in Bangkok and is currently a member of the Firm's Global Executive Committee. Peerapan has nearly 40 years of experience advising on transactional and regulatory matters in highly regulated industries. Peerapan is exceptionally fluent in regulatory matters relating to healthcare, consumer protection and product liability.
Peerapan also has extensive experience advising on compliance issues, risks facing companies across various industry sectors, and regularly assists clients in practically managing and mitigating those risks. She has been consistently recognized as 'Leading Individual’ in Corporate M&A by the Asia Pacific Legal 500 for eight consecutive years (2013-2020) and has been inducted into the Asia Pacific Legal 500 Hall of Fame in Corporate M&A in 2020-2023. More recently she has been shortlisted for Corporate and M&A Lawyer of the Year by the Legal 500 Southeast Asia Awards. Peerapan was also awarded ‘Client Choice winner’ for Healthcare & Life Sciences 2019 by Lexology.
In October 2022, Peerapan was elected to join the Global Executive Committee and serve as chair of the Asia Pacific region. In this role, Peerapan works alongside the Firm's leadership to drive forward the Firm’s business strategy and prioritized actions.

Author

Chana Sooppipat is an Associate in Baker McKenzie, Bangkok office.

Author

Supakorn Sriwasumetharatsami is a Legal Professional in Baker McKenzie, Bangkok office.

Author

Jaywon Yi joined Baker McKenzie in 2016. She is active in the Antitrust and Competition, Corporate and M&A, and International Commerce & Trade Practice Groups.

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