Introduction:
Thailand has emerged as a leading global business hub, offering a variety of opportunities for multinational corporations seeking to streamline their operations and expand their international presence. One such opportunity is the establishment of an International Procurement Office in Thailand.
This article will highlight the role of an IPO, the benefits it offers, the incentives provided by the Thailand Board of Investment (BOI), and the detailed steps required to set up this type of business.
Key Points
- An International Procurement Office in Thailand serves as a centralised hub for sourcing raw materials and components for manufacturing, optimising supply chain efficiency.
- The Thailand Board of Investment (BOI) offers attractive incentives for IPOs, including tax exemptions, foreign ownership rights, and visa facilitation.
- BOI IPOs in Thailand benefit from streamlined supply chain management, access to local and international markets, and cost reduction through BOI incentives.
- Thailand’s strategic location, industrial capabilities, and free trade agreements make it an ideal hub for BOI IPOs serving the Asia-Pacific region and beyond.
Understanding International Procurement Offices
An International Procurement Office in Thailand functions as a centralised hub for sourcing and managing the procurement of raw materials, parts, and components that are considered essential for manufacturing. Its primary purpose is to optimise supply chain efficiency and cost-effectiveness, enabling companies to consolidate their procurement activities and take advantage of Thailand’s industrial capabilities and network of free trade agreements.
The concept has undergone significant development over recent years in Thailand, with the BOI recognizing its importance in strengthening the country’s position as a global procurement and distribution hub. Initially, the IPO category was replaced by the International Headquarters and International Trading Center promotions, but the BOI reintroduced it in 2020 as a dedicated incentive scheme to attract foreign investment and promote Thailand’s supply chain in the face of the COVID-19 pandemic.
Key Characteristics of a BOI IPO in Thailand
BOI Incentives for International Procurement Office
To encourage the establishment of International Procurement Offices in Thailand, the BOI offers a range of attractive incentives. These incentives are designed to enhance the country’s appeal as a procurement hub and support businesses in reducing costs and improving operational efficiency.
General Business Support Incentives
Majority or 100% Foreign Ownership
The BOI allows up to 100% foreign ownership of International Procurement Offices, providing foreign investors with the flexibility and control needed to manage their operations without the constraints of local ownership requirements.
Right to Own Land
IPOs are granted the right to own land in Thailand, facilitating the establishment and expansion of permanent facilitiesy. Land ownership rights for an IPO promotion are the same as a regular BOI promotion. Please see here for more information.
Visa and Work Permit Facilitation
The BOI offers streamlined processes for obtaining visas and work permits for foreign employees, ensuring that businesses can efficiently bring in their expert personnel to support smoother operations and knowledge transfer.
Tax Incentives
Exemption of Import Duty on Machinery
Machinery used in the project is also exempt from import duties, promoting the adoption of advanced technologies and equipment to enhance the efficiency and productivity of procurement operations.
Exemption of Import Duty on Raw Materials
IPOs can benefit from the exemption of import duties on raw materials used in export manufacturing, helping to reduce procurement costs and improve the quality of inputs.
Advantages of Establishing an International Procurement Office
Establishing an IPO in Thailand offers strategic and economic benefits for eligible projects. Key advantages include:
Streamlined Supply Chain Management
One of the primary advantages of an IPO is its ability to streamline the supply chain, reducing procurement costs and enhancing overall operational efficiency. By centralising procurement activities, companies can improve coordination, visibility, and control over their global supply networks.
Access to Local and International Markets
Thailand’s strategic location and extensive network of free trade agreements provide IPOs with preferential access to a vast array of domestic and international markets. This connectivity enables companies to source materials and components from a diverse supplier base and efficiently distribute their products across the Asia-Pacific region and beyond.
Centralized Operations and Improved Coordination
By consolidating procurement operations under an IPO, companies can enhance the coordination and control over their supply chains. This centralized approach allows for better decision-making, inventory management, and responsiveness to market dynamics.
Reduction of operating costs through BOI IPO Incentives
The BOI offers a range of incentives to IPOs, including exemptions from import duties on machinery and raw materials used in export manufacturing. These tax benefits, combined with the ability to leverage local resources, can significantly reduce operational costs and improve the overall profitability of the business.
Talent Attraction and Knowledge Transfer
The BOI’s provision of visas and work permits for foreign employees enables IPOs to efficiently hire specialised expertise and talent from around the world. This, in turn, facilitates the transfer of industry best practices and technological innovations to Thailand, further enhancing the country’s procurement capabilities.
Investment Opportunities Offered by IPOs in Thailand
The establishment of an International Procurement Office in Thailand opens up numerous investment opportunities, allowing companies to capitalise on the country’s manufacturing prowess and strategic geographic position. Some of the key investment prospects include:
Procurement of Raw Materials, Parts, and Components
IPOs can leverage Thailand’s cost-effective supply of high-quality raw materials, parts, and components, particularly in sectors such as automotive, electronics, and consumer goods, where the country has established a strong manufacturing base.
Optimization of Inventory and Warehousing Operations
By setting up an IPO, companies can take advantage of advanced logistics and warehousing technologies to optimise their inventory levels and enhance the efficiency of their warehousing operations. This, in turn, reduces operational costs and improves the speed of market responsiveness.
Export and Distribution of Goods to International Markets
Thailand’s extensive network of free trade agreements and its central location in the ASEAN region make it an ideal hub for IPOs to serve as export centres. This advantage allows companies to distribute their products efficiently across Asia-Pacific and beyond, strengthening their global supply chain capabilities.
Establishing an International Procurement Office in Thailand
Setting up an International Procurement Office (IPO) in Thailand involves a structured process that satisfies the requirements of the Thailand Board of Investment (BOI). In practice, the process usually looks as follows.
Our Thoughts
As import/export is often a popular choice for foreign investors looking to start a business in Thailand, an International Procurement Office established under the Board of Investment (BOI) of Thailand can be a beneficial opportunity for foreign investors. For example, an IPO doesn’t require foreign investors to set up a full-fledged manufacturing facility, offering more flexibility in their investment approach. However, companies operating as BOI-promoted IPOs may be eligible for import duty exemptions on machinery and raw materials used in export manufacturing.
