Companies building factories in Thailand need to avoid the following risk points.

Companies building factories in Thailand need to avoid the following risk points

Land-related risks

- Land use and price traps: Land in Thailand is divided into colors according to use, such as purple is mostly for industrial and warehouse land, while yellow and green have other uses. Unscrupulous landowners or agents may sell non-purple land at the price of purple land. Businesses should carefully verify the use of the land color to avoid purchasing land at a high price only to have it restricted in its planned use.

- Original land deeds and transaction security: There are many types of land deeds in Thailand, so it is important to check the original land deeds to confirm the landowner's information and the status of mortgages and transfers. It is important to check the original land title to confirm the landowner's information and the status of mortgage transfer to prevent signing a contract with a landowner who is not the real landowner or purchasing land that has been mortgaged, which may lead to transaction disputes and damage to investment.

- BOI Investment Preferences and Legality of Land Purchase: Purchasing land outside of I-EA-T industrial zones usually requires BOI investment preferences. Enterprises should confirm in advance whether their own industries are in line with BOI incentive policies and product processes and other requirements, so as to avoid not being able to enjoy the preferences and causing economic losses.

Risks Related to Site Selection

- Adsorption effect of mega-factories: If you are not a supplier of a big brand, you should avoid being a neighbor of a mega-factory. Big brand companies may poach local key employees with favorable treatment, leading to their own labor shortage.

- Village disputes: Try not to choose a factory site next to a village, otherwise, if the villagers petition due to noise, dust and other issues, even if the factory procedures comply with the situation, it may face a shutdown.

- Flood threat: Thailand has a long rainy season and heavy rainfall, so factories near rivers are susceptible to flooding during the rainy season, resulting in damage to production equipment and loss of raw materials.

- Ice cream land” obstacles: Avoid choosing ‘ice cream land’ surrounded by other people's land, or else you will have to pass through other people's land to enter or exit, which will increase transportation costs and efficiency.

Policy and Regulatory Risks

- Investment Review and Access Restrictions: Although Thailand does not have specific laws on security review of M&A by foreign investors or M&A by state-owned enterprises, foreign investors are required to comply with the provisions of the Foreigners' Business Act that prohibit or restrict investment by foreigners.

- Compliance with labor laws and regulations: It is important to familiarize yourself with and comply with Thailand's labor laws and regulations, including working hours, overtime regulations, salary payment, welfare protection, dismissal and severance requirements, to avoid legal disputes and financial penalties due to non-compliance.

Costing Risks

- Tariff Costs: Clarify in advance the tariffs on raw materials imported from China to Thailand and the tariffs on finished products exported from Thailand to other countries, as tariff costs will directly affect production costs and profit margins.

- Cost of Certificate of Origin: Accounting for whether the local cost of the Thai factory can meet the cost requirements of the certificate of origin, if the certificate of origin cannot be obtained legally, the advantage of the product in the international market will be greatly reduced.

Other Risks

- Political stability: Although the current political situation in Thailand is relatively stable, there has been a history of political unrest, which may have an impact on the economy and business operations.

- Exchange rate fluctuations: Fluctuations in the exchange rate of the Thai baht may affect the costs and profits of businesses, especially for businesses that import raw materials from or export products to foreign countries.