Is your project a good BOI business?

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Thailand’s Board of Investment (BOI) process is designed to bring in large investment into the country, and the BOI welcomes larger investments so long as they meet the strict criteria and rules that are set out to ensure that the projects are compatible with the requirement of Thailand and Thai people.

So how do you know if your project would be good BOI business? You need to run a feasibility study. As the following information is primarily a set of rules to follow, the information is taken directly from the BOI website.

Two different feasibility studies

A Feasibility Study for a Project with Investment Capital of over 80 Million Baht but not more than 500 Million Baht (Excluding Cost of Land and Working Capital)

1. Demand of the Product(s) Applying for Promotion:

  • Import statistics for five preceding years
  • Future demand and growth rate of the products
  • Major export markets and future trends of these markets

2. Financial Feasibility of the Project:

  • Sources of fund: the quantity of equity and debt (both foreign and local) to be used.
  • Cash flow at Net Present Value and Internal Rate of Return (IRR) in case of … –year corporate income
  • tax exemption and in case of not receiving corporate income tax exemption

A Feasibility Study for a Project with Investment Capital of over 500 Million Baht (Excluding Cost of Land and Working Capital)

1. Summary of the Project

The applicant’s products, investment capital, factory location, the number of workers, raw materials in use, technology, etc

2. Industry Overview

The linkage between the products for which investment promotion is requested with other industries. Explain the general situation of these industries both in Thailand and in foreign countries.

Domestic demand for the product:

  • Import statistics for the five preceding years
  • Production quantity of other manufacturers (if any)
  • The quantity and future trend of the industries which use the products for which investment
  • promotion is requested, as their raw materials
  • The demand and future trend of the products

Major export markets and future trend of these markets

Local production capacity of similar products:

  • The number of non-promoted manufacturers, their product quality and productivity
  • The number of promoted manufacturers and utilization of production capacity (at full scale)
  • The Appropriateness of the project

3 Investors and financial aspects

  • Explanation of business and industry experiences of Thai and foreign investors and the company’s
  • executive and investment ratio of all investors concerned;
  • Progress in the negotiations between investors: in the initial stage of negotiation or where the contract is signed;
  • In the case of utilizing an existing company by not setting up a new one, explanation of the shareholders, business, profit and loss, and the preceding balance sheets of the existing company.
  • Sources of funds: The amount of equity and/or debt from local and foreign countries
  • Utilization of investment capital: For land construction, machinery, working capital, etc.
  • Cash flow, net present value and internal rate of return (IRR) in the case of exempted corporate income tax and non-exempted corporate income tax;
  • Progress in the financial institute’s consideration of the application for debt; is it still under consideration or is the debt is approved?

The Competitiveness:

  • Suitability of import duties and business taxes on the products and the main raw materials;
  • Average production cost at 50 percent, 80 percent and 100 percent of production capacity;
  • CIF prices and cost of imported products;
  • The advantages of manufacturing the products in Thailand;
  • Sensitivity analysis: The effects of changes in the projection of the raw materials’ selling price and changes in the rate of taxes and duties on the main raw materials on the viability of the project;

Technical aspects:

  • Available production techniques, the advantages and disadvantages of each technique, techniques used in various countries, the reasons why the project chose the specific technique;
  • Explanations of technical supporters, aspects which they assist,
  • Conditions and limitations of technology transfer, the cost of know-how;
  • The appropriateness of production process;
  • The appropriateness of production scales in comparison to those used in factories in other countries;
  • Sources and adequacy of raw materials, including, opportunities to produce raw Materials in Thailand;
  • Factory location, reasons for choosing the province as the factory location; the adequacy of water, electricity and other infrastructure;
  • Utilisation of labour at various levels; training courses.

Effects on the environment:

  • Will the raw materials or the products or production process cause environmental problems?
  • Measures to eliminate or control pollution; investment capital for machinery and for expenses of implementation of pollution control plans.

Research and development (R&D)

  • Explanation of R&D plan
  • Improvements on production quality and product design;
  • Improvements on productivity in conserving raw materials and employees;
  • Improvements on production process;
  • Improvements on the quality of the raw materials in use.

4. Effects to the Overall Economy

How much will the Government lose in revenue by promoting the project?

  • Corporate income tax;
  • Import duties on machinery;
  • Import duties on raw materials;

Benefits to the overall economy:

  • Domestic value-added;
  • Saving or bringing in net foreign currency;
  • Increases in domestic employment;
  • Factory establishment in provincial areas;
  • Benefits to linked industries corporate income tax and non-exempted corporate income tax;
  • Progress in the financial institute’s consideration of the application for debt; is it still under consideration or is the debt is approved?

5. The Assistance from the Government:

  • The necessity to apply for promotional privileges; the requested incentives;
  • The degree of necessity to adjust import duties on raw materials and finished products;
  • Is it necessary to request special protection from competition from foreign countries or is it necessary to limit the number of local manufacturers?

The government assistance in various aspects, such as electricity, water, infrastructure etc.

The information provided is correct at the time of writing but is subject to change. It is always advisable to speak to an expert to get correct, up to date advice prior to commencing your business.