BOI Investment Incentives

Zone 1
Investment promotion zones

Zone 2 Zone 3 (36 provinces) Zone 3 (22 provinces)

NON-TAX INCENTIVES Land ownership rights for foreign investors Permission to bring in foreign experts and technicians Work permit and visa facilitation ZONE-BASED TAX INCENTIVES Corporate income tax holiday up to 8 years depending upon zone Machinery and raw material import duty reductions or exemptions depending upon zone Additional incentives for Zone 3 including Laem Chabang Industrial Estates and promoted industrial estates or zones in Rayong Province include double deduction from taxable income of transportation, electricity and water costs for up to 10 years, and other deductions for infrastructure installation and construction costs. The BOI also facilitate foreign investors through non-tax incentives which come in the form of land ownership rights for foreign investors, permission to bring in foreign experts and technicians, rapid processing of visa and work permits.

FOOD INDUSTRY

Thailand, the Kitchen of the World

Thailand has become one of the worlds largest and most advanced producers and exporters of processed food products. Its rich agricultural roots and resources, combined with its investments in international quality standards, technology, and R&D for food safety, have helped make Thailand the sole net food exporter in Asia and one of the top five net food exporters in the world. Thailands export-oriented food industry brings in about $10 billion dollars annually and comprises up to 28.3% of Thailands gross domestic product (GDP). Thailand is currently the worlds largest producer and exporter of the following processed foods: canned pineapple, pineapple juice & concentrates, processed chicken, canned and frozen seafood, rice, and frozen and processed shrimp

Thailands Exported Food products 2005 - 2008f

Export Items Livestock Chicken and poultry Fishery Shrimp Canned / processed tuna Chilled / frozen fish Squid Other canned/processed fish Vegetable and fruit Canned / processed fruit Vegetable products Fresh / dried fruit Vegetable / fruit juice Other food products Rice Sugar Palm oil Cassava products Cassava flour and starch Flour and starch Rice products Seasonings Non-alcoholic beverage Pet food Animal feed Other foods not specified Total 7,537,342 3,041,397 175,221 3,031,308 1,430,777 196,972 65,031 154,898 155,662 199,310 484,402 2,961,678 23,259,220 2,276 689 92 311 236 76 90 159 110 328 51 1,774 12,648 7,438,571 2,238,809 298,314 4,224,763 1,697,579 273,407 70,958 153,082 201,550 217,883 516,175 2,725,172 24,258,560 2,672 760 138 471 383 99 107 199 132 399 96 2,011 15,433 8,730,086 4,429,117 411,814 5,331,994 1,529,217 194,943 68,955 165,422 243,078 230,794 856,304 2,279,799 28,725,734 3,306 1,330 275 631 404 106 135 233 174 456 283 2,048 17,894 8,860,064 3,544,023 470,909 6,596,806 1,805,932 242,798 76,793 193,230 232,724 257,486 1,054,985 2,885,574 30,872,291 3,379 1,138 289 780 460 124 129 264 205 511 302 2,495 19,262 285,022 1,364,041 282,994 454,909 353,360 101,017 171,761 2,176,162 832,731 483,225 634,600 225,606 852 4,024 1,742 1,107 445 396 333 1,579 688 414 293 183 313,615 1,477,854 346,911 501,652 364,709 95,573 169,009 2,410,829 959,250 541,356 594,313 315,910 1,022 5,012 2,374 1,344 483 441 372 1,931 828 523 337 243 338,117 1,494,863 359,500 455,396 400,573 96,645 182,749 2,421,230 908,928 537,166 685,272 289,864 1,162 5,275 2,489 1,321 539 485 442 2,076 900 542 387 247 364,353 1,558,399 361,650 506,956 388,249 102,309 199,235 2,728,217 1,076,418 574,042 738,635 339,122 1,247 5,578 2,584 1,460 537 514 484 2,358 1,038 584 443 292 2005 Quantity Value Quantity 2006 Value Quantity 2007 Value Quantity 2008f Value

(Quantity: Ton, Value: million US$)

f = forecast figures. Source: Department of Trade Negotiations and Food Institute.

This industry, which has been growing at approximately 13% per annum in recent years, is forecast to continue to grow. The development of ready-to-cook products targeted at developed economies such as Japan and the European Union (EU) along with government and industry efforts to promote high quality and sanitation standards will strengthen Thailands food industry abroad, while growth in the domestic consumption of processed food will support continued development of the industry at home. Opportunities abound not only within the food processing industry itself, but also in its supporting industries, such as food processing equipment and packaging equipment.

Government and industry initiatives have helped Thailands processed food industry upgrade its procedures and technologies so that its products meet international quality and sanitation standards and are better able to compete on a global basis. These initiatives have been so successful that processed food exports now exceed primary agricultural exports.

Rice

Industry Overview : When fresh produce meets technology

A shift from an agricultural commodity-based economy to a manufacturing-based economy has given rise to the relatively new food processing industry. Prior to 1960 the food processing technology available within Thailand was limited, and food preservation included only drying, pickling and sugar glazing. However, the Investment Promotion Privileges that the government began offering to investors in the food processing industry in the 1960s and 1970s encouraged the transfer of technologies. The technology to process sweetened condensed milk, canned fruits and vegetable and vegetable oil were then imported from Taiwan and Japan. Later, in the 1980s and 1990s, technology from the United States and Europe were imported and allowed for a surge in the export of frozen and chilled commodities. As exporting processed foods grew more profitable, producers began to invest more effort in developing their technical knowledge and the quality of their products. From 1990 to the present, the most critical issues facing the industry have been safety, quality and efficiency the prerequisites for global competitiveness. In particular, the industry has been working to improve the hygienic conditions of the production process, develop more value-added products, adhere to environmental and safety regulations, and reduce production costs. Expertise in product development, food processing and agriculture is growing and contributing to Thailands position as one of the most dynamic food centers in the world. Thailands natural resources are central to its comparative advantage in the food processing industry; more than 80% of the raw materials used by the countrys food industry are locally sourced at low prices. Thailand will maintain its position as a world leader in the food processing industry by drawing on this natural wealth and leveraging new technologies and improved standards in efficiency, production, safety and hygiene.

Thailand is the number one exporter of rice in the world. In 2007 Thailand exported 8.73 million tons of rice valued at US$ 3.31 billion a 20% increase over 2006. Currently, companies are allocating more resources to R&D in the areas of disease-resistant rice cultivars and yield improvements. Products are also being diversified to include new products such as organic rice, vitaminfortified rice, and frozen rice dishes. Chemical-free rice in particular is increasingly popular as consumers are growing more and more health-conscious.

Ready-to-Eat (RTE)

Thai food processors are increasingly developing frozen food products to keep up with the changing consumption preferences of Thais. In 2007 Thailand exported 307,492 tons of RTE food valued at US$ 483 million a 20% increase over 2006. Thai RTE food is gaining popularity overseas as other countries grow accustomed to Thai quality, nutrition and taste.

Food Ingredients

Sauces and curries are experiencing particular success in overseas markets; in 2006 and 2007 growth was between 9% and 11% annually with a total value of US$ 231 million. Major export markets currently include the U.S., Japan, the E.U. and Australia.

Processed Chicken

Thailands production and exportation of chilled and frozen chicken steadily increase. Overall livestock production grew 8.5% year-onyear. Processed chicken has been an important export industry for Thailand for many years, with major markets including the EU and Japan.

Animal Feed Halal Food

Thailands Top 10 Agricultural Commodities produced in 2005

Commodity 1 2 3 4 5 6 7 8 9 10 Rice, Paddy Natural Rubber Cassava Indigenous Chicken Meat Sugar Cane Indigenous Pig Meat Maize Mangoes Pineapples Hen Eggs Metric Tons 27,000,000 3,020,000 16,938,000 968,975 49,572,000 686,417 4,180,000 1,800,000 2,050,000 384,000 World Rank 6 1 4 12 4 19 19 3 1 -

Thailands animal feed exports and production have been growing considerably. In 2007 alone, animal feed production grew 11.7%. The Central Islamic Committee of Thailand accredits companies based on a scientific standard for Halal Food. Thailand was the first country to implement this standard, which requires that products comply with Islamic rules. Major markets for Thai Halal food include Singapore (for re-export), Malaysia, Indonesia, Brunei, UAE, Saudi Arabia and Egypt.

Source: Food and Agricultural Organization of the United Nations Economic and Social.

Thailands Processed Food Manufacturing 2005 - 2008

Thailands Export of Major Processed Food 2004 - 2007

Source: Thai Food Processors Association.

Total Thailands Processed Food Export 2004 - 2007

f= forecast figure. Source: Office of Industrial Economics.

Source: Thai Food Processors Association

Exports of these companies processed foods are one of the key drivers of Thailands food industry as a whole. In 2007, overall food exports increased 18.4% by volume and 15.9% by value, largely fueled by growth of the countrys major markets Japan, member nations of the Association of Southeast Asian Nations (ASEAN), the EU, Africa and the Middle East. Thailand has led international exports in several processed products, such as canned juice, canned seafood and frozen poultry. Notable export achievements in 2007 include: Livestock product exports increased 13.8% by value; this increase was driven by an expansion of the Japanese and European markets and the Middle Easts recent acceptance of Thai food production standards. Fishery exports increased, following the restoration of Generalized System of Preferences (privileges) in the World Trade Organization (WTO). Most notably, shrimp exports increased 3.6%, fish exports 9.8%, and fresh squid exports 1.1%. Processed and canned vegetable and fruit exports increased 3.6% and 8.8% by value, respectively, following an increase in demand from the European and Russian markets. Sugar exports increased 97.8% by volume and 74.9% by value. Exports of food ingredients and ready-to-eat meals increased 32% by value and 19% by volume, following Thailands work to meet food regulation standards in export markets such as the United States (US), Japan, Europe and Australia.

Processed food products overtook raw commodities for the first time in 2007; they comprised 50.20% of the US$ 18.06 billion revenues from the food industry as a whole. The National Food Institute (NFI) projects that total revenues will increase 7.20% in 2008 to US$ 19.21 billion, with revenues from processed food products showing a substantial increase in particular. At present, the Thai food processing industry is comprised of over 10,000 food processing companies. Some of the major Thai and multinational industry leaders include: Nestle, Saha Pathana Inter Holding Ltd, Patum Rice Mill & Granary, Royal Friesland Foods NV, Unilever Group, Thai Union, Dole Thailand, Charoen Pokphand Group, Betagro, Saha Farms, Thai Beverage PLC, Kelloggs, Kraft, PepsiCo, Del Monte, Procter & Gamble, Ajinomoto and Ef-fem food.

Thailands Major Food Export Markets, 2007

Food safety and food standards

Source: National Food Institute.

Though most processed food products are for export, domestic consumption of processed food is growing due to changes in the lifestyle of Thai consumers and increasing demand for convenient food options. In 2007 alone domestic demand for processed food products increased 12.9% year-on-year. These processed food products are available in a wide variety of venues, most notably those of the following major Thai supermarkets: Tesco, Makro, Carrefour, The Mall Group, Big C, Foodland and Tops.

Adherence to quality and hygiene standards is critical for global competitiveness in the food processing industry. Thailand has a number of authorized food safety certifying agencies in Thailand, including: the Department of Medical Science; the Thai Industrial Standards Institute; the Department of Agriculture; the Department of Fisheries; and the Department of Livestock. The Food and Drug Administration (FDA) ensures product safety by issuing manufacturing licenses, labeling food product, conducting pre- and post-marketing control, and enforcing adherence to Good Manufacturing Practices (GMP). GMP certification is mandatory for manufacturers and importers of 54 different food product types. The National Bureau of Agricultural Commodity and Food Standards (ACFS), established in 2002, certifies the standards applied to agriculture commodities and food for domestic and foreign consumers. ACFS standards include Good Agricultural Practices (GAP), Good Hygienic Practices (GHP) and Hazard Analysis Critical Control Point (HACCP), as well as other, general standards regarding pesticide residues and diagnostic testing for foot and mouth disease and bovine tuberculosis. Processed food containing genetically modified organisms (GMOs) are well-regulated as well. The Ministry of Public Health, through the Manual for Labeling Procedures for GMO Products, according to Ministerial Notification No. 251, B.E. 2545 (2002), has a rigorous certification and labeling process for all of these products. Thai standards are drawn from and adhere to international standards such as Codex, OIE Standards and the International Plant Protection Convention. Quality assurance systems such as GMP, Total Quality Management (TQM), HACCP, and the International Organization for Standardization (ISO) are mandatory for certain products, including canned foods. All of the standards Thailand uses to regulate its food industry have been accepted by the members of the Asia-Pacific Economic Cooperation (APEC), and the Ministry of Agriculture and Cooperatives is accelerating its standards and certification project to ensure that Thailands food industry meets other international standards. For example, the NFI, as part of the team responsible for Food Safety Management in Thailand, promotes food safety by helping entrepreneurs produce products to international standards. It provides the following services: Consultancy services in the implementation of GMP/HACCP/ISO 9000/ISO14000/ ISO/IEC 17025 and Clean Technology Systems Risk Assessment studies; Dissemination of information related to food safety regulatory laws and standards; and Chemical and microbiological testing of food samples to ensure that products destined for commercial distribution are up to international regulatory standards.

Trends
The Office of Industrial Economics (OIE) predicts that Thailands food processing sector has made the following predictions for the growth that can be expected in Thailands food industry in 2008: Livestock production will expand 13.6%, while its export value will grow 7.8%, following increased demand in the EU, the Middle East and, most notably, Japan, after the enactment of the Japan-Thailand Economic Partnership Agreement (JTEPA). The volume of fishery exports is projected to increase 4.3% due to the restoration of GSP privileges from the EU and an expansion of the Japanese market. The value of processed vegetable and fruit products exported is expected to increase 13.6% due to higher demand, especially for pineapple. Sugar production is expected to climb 20%.

Food Machinery and Equipment

Thai processors have demonstrated a willingness to upgrade equipment to keep pace with growing demand and maintain the countrys competitiveness in the food processing and packaging sector. In particular, the introduction of the GMP standard for the food safety equipment in 2003 brought a notable increase in the volume of GMP-level equipment purchased by Thailand-based firms. The Thai market for food processing and packaging equipment has grown an average of 20% annually since 1999. The majority of this equipment, which is largely machines used in the processing of dairy, meat and poultry, fishery, fruit and vegetable products, is imported from Germany (36%), Japan (15%), Italy (11%) and the US (5%). The demand for domestically produced equipment is on the rise. Local production rivaled the $408 million imports in 2007 at $380 million. Of the domestically produced total, $84 million was exported, with the remainder being utilized locally. The export value of Thai manufactured equipment has been steadily increasing at an average rate of $10 million per annum Opportunities also exist in the following areas: Inspection analysis of crop, livestock or aquatic-animal diseases; Inspection of soil or water for agricultural use; Manufacture of farm and food processing machinery; Grading, packaging and storage of produce, plants and flowers; Quality standards inspections; Organic product development and processing; Advanced technology for crop drying and silo facilities; Trading centers for agriculture goods; Food packaging materials-filling, closing, sealing, wrapping and labeling machines; Supply chain management systems to improve traceability capabilities; Cold storage and cold storage transportation; R&D, product development and biotechnology; and Ready-to-eat food manufacturing.

Opportunities
Asia as a whole contains tremendous opportunity for food processors. Food demand in South and Southeast Asia will experience tremendous growth as populations and incomes expand. According to the World Bank, American consumers generally spend less than 10% of their income on food, while food composes up to 50% of Asian consumers expenditures.

Ready-to-eat food

Domestic demand for processed food goods is showing considerable growth; between 2001 and 2006 sales of ready-to-eat processed meals in Thailand grew 54%, reaching $33 million. As lifestyles continue to change, convenient and ready-to-eat processed food products will be increasingly popular. Additionally, Thailands sizeable tourism industry, which attracts over 10 million tourists per annum, will sustain further growth amongst the countrys food processing industry. These tourists bring with them not only money to spend, but also a demand for imported food products. Demand abroad is growing, too. Food processors located in Thailand have access to the ASEAN market of over half a billion consumers; according to the terms of the ASEAN Free Trade Agreement (AFTA), relevant tariff and non-tariff barriers amongst members will be eliminated or drastically reduced by 2010, further enhancing this market access. Furthermore, the new Bangkok International Airport, which started operating as a hub of Asia in 2006, will provide more effective and sufficient air freight transport for perishable products.

Snacks

Specific products notable for their current demand increases within Thailand include breakfast cereals, bread, spreads and extruded snacks, such as rice crackers and noodles. Thailands snack food market is supposed to reach 15 billion baht in 2008, from 13 billion baht in 2007, according to Managing Director, Surat Poobangkerdphol of snack food maker, Berli Jucker Foods. Potato chips are predicted to reach 4 billion baht, a growth of 17.4%, extruded snacks 8.9% and shrimp snacks 9.6%.

Why Thailand
Thailand offers a number of outstanding advantages for food processors. These include:

Health food

Increased education regarding nutrition has heightened consumer health-consciousness and demand for healthy products. The health food market in Thailand particularly tortilla chips, nuts, fruit snacks, products without MSG or preservatives, low-fat or -calorie foods, vegetarian foods, and foods with all-natural ingredients is expected to increase rapidly. Thailand is already in a strong position within this industry sub-sector.

Competitive workforce:

According to Thai National Food Institute, Thailands food industry provides employment to approximately 600,000 people. Thailand not only boasts relatively low labor costs, but also has an exceptionally well-educated workforce. Literacy rates are uncommonly high at 96%. There are many institutes to ensure that Thailands labor force will be able to meet the demands and skills required of the continually expanding food processing industry. These include: The Food Engineering Practice School (FEPS): - The Food Engineering Practice School program at King Mongkuts University of Technology Thonburi (KMUTT) is the forerunner of the growing trend of the private sector utilizing research and development potential of universities. - The aim is to meet the large demand for qualified food engineers in the fast-growing food and agro-processing industries of the country.

 Food Engineering Program: - Food Engineering Program, Department of Food Science and Technology at Kasetsart Universitys aims are to develop human resources specializing in advanced food process engineering, and to expand and transfer knowledge to the industry and government for continuous improvement of the safety quality and value of food products. Biotechnology graduate program: - Biotechnology graduate program at Mahidol University is aimed at training students as research scientists capable of carrying out independent work in academic and industrial settings. The program provides a wide range of expertise specializing in the areas of Agricultural Biotechnology; Food Biotechnology; Industrial Biotechnology and Bioprocess Engineering; and, Molecular and Medical Biotechnology.

Kasetsart University (KU) Institute of Food Research and Product Development (IFRPD) performs research on food science and technology to assist food industries by providing relevant information to social and academic offices and communities. KU Food Innovation Research and Services in Thailand (KU-FIRST) focuses on increasing the competitiveness of the Thai food industry in the world market through the development of food safety mechanisms Cassava and Starch Technology Research Unit aims to support the industrial sectors by: conducting R&D on cassava starch properties, processing, modification and industrial applications; coordinating technology between producers and users; and aiding the transfer of technology and supporting technical services. Others organizations supporting the growth and competitiveness of the food processing industry in Thailand include: Thai Food Processors Association: - Tuna Processors Group - Seafood Processors Group - Pineapple Processors Group - Fruit & Vegetable Processors Group - Sweet Corn Processors Group - Food Ingredient and Ready-to-eat Processors Group The Food Processing Industry Club, with 204 members in 12 sub-sectors: beverages; spice and seasoning; tea, coffee and cocoa; sugar and deserts, milk and diary products; oil and edible fats; meat and poultry; flour and flour products; fishery product; fresh and processed vegetables and fruit; feed, and other specialty foods.

Strong Business Climate: Thailands economy is one of the fastest growing in Asia. In 2008, the World Bank indicated that Thailand was ranked 15th in the world and 4th in Asia in terms of ease of doing business. Hub of Asia: The reduction of tariff and non-tariff barriers articulated in free trade agreements between Thailand and India, China, Japan, Australia and ASEAN extends trade opportunities with neighboring countries. Thailand stands out amongst neighboring countries because of its bilateral and multilateral collaboration, excellent infrastructure, abundance of raw materials, skilled work force, government support, central location within ASEAN and proximity to India and China. Excellent logistics systems:
Thailand boasts world-class infrastructure, including state-of-the-art ports, airports and communication facilities. Suvarnabhumi International Airport and Laem Chabang Deep Seaport offer manufacturers the transportation foundation they need for their export operations, while the 225 km of intercity motorways currently in expansion linking Bangkok to other regions of the kingdom allow for efficient transport within the country itself. In addition, the Greater Mekong Subregion (GMS) economic corridor linking Thailand with neighboring countries in the Mekong River basin, including Vietnam, Cambodia, Laos, Burma and Yunnan Province of China, will promote development and integration within GMS.

Board of Investment (BOI) Incentives

Thailands Board of Investment (BOI) considers the entire value chain of agriculture and agricultural products ranging from cultivation, production and services to the manufacture of farm machinery and food processing machinery as priority activities which enjoy many compelling tax and non-tax incentives. Tax incentives include: corporate income tax holidays of up to 8 years; reduction of or exemption from import duties on machinery and raw materials; and other zonedependent incentives such as 50% reduction of corporate income tax for another 5 years, double deduction of public utility and transportation costs from taxable income for up to 10 years, and additional 25% deduction of infrastructure investment costs. Non-tax incentives include: land ownership rights for foreign investors; permission to bring in foreign experts and technicians; and work permit and visa facilitation for expatriate employees.

Terrific Government Support

The National Center of Genetic Engineering and Biotechnology (BIOTEC): The Food Biotechnology Research Program focuses on R&D for the improvement of the Thai fermented food industry. Research and Technical programs such as Cassava and Starch Technology Program addresses two major elements, plant improvement and process development in starch production. The Food Research and Innovation Promotion Program supports basic research towards the development of nutraceuticals and functional food products as well as food standards and food safety. It aims to develop starter culture technology for the fermentation of Thai traditional foods. The National Food Institute (NFI) The Technological Services Department assists processors in the implementation of GMP or HACCP safety systems in food production. The Agricultural Research Development Agency (ARDA) cooperates with the NFI to develop processed food production and agro-food human resources.

For further information: Thailand Board of Investment (BOI): www.boi.go.th Thai National Food Institute: www.nfi.or.th The Food and Drug Administration: www.fda.moph.go.th/enginfo.htm The Food Processing Industry Club: www.fti.or.th/FTI%20Project/GroupCallEng.aspx Thai Food Processors Association: www.thaifood.org/Thai_Food_Processors_Association.htm