(source: Thailand Investment Review, July 2016)
hailand’s food industry is one of the biggest contributors to the nation’s economy. According to Mr. Yongvut Saovapruk, President of the National Food Institute (NFI), Ministry of Industry, the Thai food industry “contributed about 23% to the country’s Gross Domestic Product (GDP) in 2015.” With abundant natural resources, year-round growing season, continuous Research and Development (R&D), commitment to food safety and international standards, as well as a well-educated workforce and supporting government policies, the Thai food industry has plenty of room to develop and prosper, while reinforcing its strong global position as the ‘Kitchen of the World.’
A Brief Overview
Known as the ‘food basket of Asia,’ Thailand is one of the world’s largest producers and exporters of food. According to NFI data, food exports in 2015 totaled roughly THB 897 billion (USD 25.5 billion), with the top 5 exports being rice (17.1%), sugar (8.6%), chicken (7.8%), tuna (7.5%), and shrimp (6.3%). In 2015, these specific products represented around 50% of total food exports.
In the first quarter of 2016, food exports reached THB 239 million (USD 6.8 million), reflecting an impressive growth rate of 9.5% compared to the same period last year. Thailand still has room for growth in this sector, according to Mr. Saovapruk. The NFI has also demonstrated its high readiness to support and collaborate with both the public and private sectors, in order to bring Thailand to the global stage.
Competitive Food Industry
Based on research undertaken by NFI’s Food Intelligence Center, Thailand has four key strengths that place the country in a very strong position, ensuring that it stays competitive in the international food industry.
Firstly, Thailand’s year-round growing season provides abundant resources, giving the country a major comparative advantage in the industry. The strategic use of these resources, the optimization of its food technology and the nation’s commitment to world class quality standards, guarantees Thailand’s top position as a world leader in the international food industry.
Secondly, Thai manufacturers possess over 60 years of experience and this expertise comes into play in the development of efficient processes to produce, process, and create value-added export quality products. For instance, Thailand currently occupies the number one position for canned pineapple exports and is second with respect to sugar exports.
Thirdly, Thailand’s high availability of a quality workforce with competitive wages explains its popularity as a manufacturing base for global food processors. Examples of multinational companies with a base in Thailand include
McKey Food Services, Tep Kinsho Foods, Dole, etc.
Finally, Thai food products are widely accepted for their high quality and safety standards. Currently, Thailand mainly exports to developed nations such the United States, Europe, Japan, Canada, and Australia, all of which have stringent criteria for food quality and safety standards. Although Thailand’s production costs are not the lowest in the world, many corporations still prefer to have a manufacturing base in Thailand due to the country’s high consistency with respect to quality.
Given the Thai food industry’s many strengths and huge contribution to the country’s economy, the government has implemented a number of incentives and supporting policies to help both Small-Medium Enterprises (SMEs), and big corporations grow and benefit from the growth of this sector.
Global Food Innovation Hub
The Thai government recognizes the importance of food innovation. According to the National News Bureau of Thailand, the Finance Ministry has proposed setting up a THB 10 billion (USD 283.8 million) fund to support the Food Innopolis Project at the Thailand Science Park (TSP). This project aims to position Thailand as a global food innovation hub in the global food industry. According to the Ministry of
Science and Technology, the expected availability of resources for the Food Innopolis include 3,000 researchers, 10,000 students in Food Science and Technology, 9,000 food factories, 150 food research laboratories, 20 pilot plants, and 70 universities.
The government hopes that this project will provide a one-stop solution for Research, Development and Innovation (RD&I) services to investors. The goal is to link private sectors at all levels, ranging from startups and SMEs to large companies, to effectively take part in the food industry value chain at an international level, and create a perfect atmosphere to support an innovation ecosystem.
Attractive BOI Incentives
The Thailand Board of Investment (BOI) offers a wide range of tax and non-tax incentives in the food industry, especially as the Food Innopolis belongs to one of the BOI’s Super Clusters. Tax-based incentives include the exemption of corporate income tax for up to 8 years, with an additional 50% reduction for five years and the exemption of import duty on machinery. Non-tax incentives include the permission to own land and facilitation on visas and work permits. Additional information about specific manufacturing activities relating to the food industry can be found on the BOI website or by contacting the BOI office.