Thailand’s Eastern Economic Corridor (EEC)

Thailand’s Eastern Economic Corridor (EEC): Opportunities for Investment

The Eastern Economic Corridor (EEC), with an area of 13,285 square kilometres is on track to become a successful flagship of Thailand government’s strategy on industrial development (Industry 4.0 initiative) and a gateway to the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC). The national project of the EEC, spanning across three south eastern provinces of Thailand’s Chachoengsao, Chonburi and Rayong intends to bring in opportunities for the Thai people to escape the ‘middle-income trap’ to become a ‘high-income’ economy and propelling the nation into a promising and sustainable future.

Why EEC?

For over 30 years, Thailand’s Eastern Seaboard has been the centrepiece of the Thai economy linking trade and investment with the rest of the world. Thailand’s eastern seaboard has been one of the major industrial areas and a major global production base for motor vehicles and electronics, with integrated deep sea ports and modern facilities. The area is rich with energy resources and manufacturing of raw materials, and an important source of professionals and high skilled labour in ASEAN. With these excellent facilities, the EEC is the most suitable location for investment to drive the Asian economy. For the development and realization of the EEC, the Thai government hopes to generate USD 43 billion (THB 1.5 trillion) in the next 5 years. The government expects the funding to come from a mix of state funds, public-private partnerships (PPP), and foreign direct investment (FDI). To make the EEC into a Special Economic Zone, the Thai government has identified five ‘core areas’, as follows:

1. Increased, improved and integrated infrastructure;
2. Target industries;
3. Business industrial clusters and innovation hub;
4. Creation of new cities and communities through smart urban planning; and,
5. Regional tourism.

Major focus areas of the EEC is to improve existing connectivity by air, land, rail and sea and foster manufacturing and innovation. Priority is given for various infrastructure projects including sea transport development plans of expanding the Laem Chabang Deep Sea Port; the development of the Map Ta Phut Industrial Port Phase III and upgrading and modernization of the Sattahip Commercial Port. The development of air transport includes the expansion of the U-Tapao International Airport in Rayong province, and the development of the motorway expansions and high speed and dual-track rail stations in Don Muang, Bang Sue, Makkasan, Suvarnabhumi, Chachoengsao, Chonburi, Sriracha, Pattaya, and U-Tapao. High speed rail connections will link the three airports of Suvarnabhumi, Don Muang and U-Tapao.

The development of the EEC is part of the Constitutionally-mandated 20 Year National Strategy of Thailand and governed by the EEC Act of May 15, 2018, which will be first of its kind in Thailand’s history, where the entire focus will be on region specific development. The EEC will ensure the continuity of both private and public investment, totalling more than USD 45 billion. The Thai government hopes to complete the EEC project by 2021, thereby, developing the eastern provinces into a hub of technological manufacturing and services with strong connectivity to its ASEAN neighbours and beyond.

What are the targeted industries?

There are ten major targeted industries recognized for the development of the EEC. This entails upgrading first Five S-Curve industries with immense potentials including, next generation automotive, intelligent electronics industry, agriculture and biotechnology, food processing industry, high wealth and medical tourism industries. Additionally, new Five S-Curve advanced industries will be the alternative driving force for the Thai economy, including robotics and mechatronics, digital industry, aviation and logistics industries, comprehensive healthcare industry, and biofuel and biochemical industries.

What are the benefits for foreign investors?

The establishment of the free trade zones around seaports and airports provide attractive incentives for international business. Investors are encouraged to capitalize in the EEC targeted industries. The EEC Act of 2018, combined with ongoing legislation introduced by the Board of Investment, will offer generous incentive packages, relaxed regulations and a One-Stop Service Center, alongside ongoing reforms that will ensure the ease of conducting business in the EEC. The Thai government has also relaxed certain laws and regulations to facilitate foreign investors looking for opportunities to invest in the EEC. Though the comprehensive lists of incentives is yet to be finalised, the Thai government has announced a major exemption of corporate income tax to 0% for up to 15 years and an income tax rate cap at 15%; rights to lease state land for 50 years renewable upon approval for a further 49 years and work permit for up to 5 years. The following incentives are also being considered by the government for foreign investors:

1. Exemption of import duties on machinery/raw or essential materials imported for use in production for export/goods for R&D;
2. Matching grants for investment/ R&D/ Innovation/ human resources development for targeted industries;
3. Permission to own land for BOI promoted projects; and,
4. Strategic Target Center (STC) to attract investors, experts and scientists from around the world.

The EEC offers immense competitive advantages for investors other than tourism. According to data provided by Thailand’s Board of Investment (BOI), as of 1 January 2018, the EEC has attracted USD 9.3 billion in FDI. The Thai government inked a Memorandum of Understanding (MoU) with the Japan External Trade Organization (JETRO) for possible collaboration in the automotive, electronics, medical equipment, aerospace and food sectors on 5 October 2018. According to Bangkok Post, JETRO has 1,016 companies in the EEC provinces out of a total of 5,400 companies registered in Thailand. From the Japanese counterparts, the Thai government expects to gain technological know-how in higher technology and innovation. Other foreign investors seeking joint businesses in the EEC are China, European countries, Singapore, South Korea and the US. The Thai government ensures that all regulatory and legal hurdles are cleared for the foreign companies to invest in Thailand’s EEC. India’s participation is keenly welcome.

India and EEC:

With a market size expected to reach USD 50 billion by 2025, India’s medical industry is poised for significant growth. India can collaborate in the EEC with Thailand, which is a highly competitive destination for medical tourism. India can explore wide opportunities in the space of robotics and Artificial Intelligence and help sectors like electronics, metal and machinery industry, and also retail and automotive industries to invest in the EEC. The adoption of robotics process automation will contribute to optimising the supply chain. Thailand’s food processing industry has the advantage of transforming raw materials into products well accepted by global consumers. With its abundant resources, long cultivated expertise, highly skilled workforce and widely accepted quality and standards of Thai food products, Thailand stands out to be competitive in the global food industry. With these advantages and incentives provided to foreign investors, India can explore and invest in this sector too. Besides this sectors, Indian companies, both private and public, can also explore opportunities for joint businesses in spaces like digital industry, biotechnology, aviation and other advanced industries under the EEC. For more information, please refer to www.eeco.or.th 

Conclusion:

Thailand’s and ASEAN’s centrality in Asia naturally forms the hub connecting Asian economies from north to south, starting from China down to Indonesia, and from East to West, linking Viet Nam to Myanmar. Strategically located at the heart of the ASEAN Economic Community (AEC), Thailand is at the centre for regional production, trade, exports and transportation. Thailand is also surrounded by the world’s fastest growing economies, that is, Cambodia, Laos, Myanmar and Viet Nam (CLMV), making the nation one of the best investment destination in ASEAN. With these advantages, the EEC hopes to grow into a value-based innovative economy, a modern metropolitan hive of activity, a hub of trade and investment, a center for regional transportation and logistics, a significant source for human resources, a tourist attraction and most importantly, the most modern Gateway to Asia.

Contributed by: Arenla
Economic Assistant, Royal Thai Embassy, New Delhi.
31 October 2018