EEC s Role in Shaping up Thailand 4.0. Somkiat Tangkitvanich Saowaruj Rattanakhamfu

Transcription

1 EEC s Role in Shaping up Thailand 4.0 Somkiat Tangkitvanich Saowaruj Rattanakhamfu 10 October 2017

2 Key Messages (1) The EEC is a strategy to implement the Thailand 4.0 vision in a right direction after the failure of previous schemes. The EEC has 3 pillars: infrastructure upgrade, investment facilitation and supergenerous incentives. 1 Infrastructure U-Tapao airport, dual-track railways and motorways are likely to be developed as planned. However, the development of high-speed rails, new smart cities and worldclass universities are unlikely to materialize in the near term. The government should only invest in infrastructure projects with high benefits and low negative impacts on the environment. 2 Investment facilitation The EEC will unlock existing regulatory obstacles and integrate fragmented public service delivery. The lessons learned from regulatory reform and integrated public service delivery in the EEC should be applied nationwide. 2

3 Key Messages (2) 33 Super-generous incentives Tax incentives would induce additional investment in targeted industries. However, it is very costly and has limited effectiveness. Most new investment will be in the sectors that Thailand has comparative advantage Existing industries: tourism, automotive and auto-parts, and healthcare services. New industries: aviation MRO, logistics, and automation. The success of the EEC should be measured by the increase in technological capabilities of the country and higher skill of Thai workers. Effective investment attraction of high tech companies requires holistic programs, including research support, skill development & regulatory reform. universities & research institutes to engage in R&D activities with private investors. The government should set up an industrial research institute in the EEC Government procurement should be used to build technological capabilities for smart cities and rail system projects 3

4 The Evolution of Ideas The EEC aims to implement the Thailand 4.0 vision after low uptake of previous schemes Thailand 4.0 April 2016 June 2016 EEC SEZs: Border provinces Super-Clusters & 10 S-Curves June 2014 September/November 2015 EEC Act (come into force in Q4, 2017) Eastern Seaboard project 4

5 3 Pillars of the EEC The implementation of the EEC is based on 3 pillars. 1 Infrastructure upgrade 2 Super-generous incentives 3 (0.7 trillion baht in 5 years) Airport Seaports Railways motorways Existing S-Curves: Next-generation automotive Smart electronics Affluent and wellness tourism Agriculture & biotechnology Food for the future New S-Curves: Robotics Aviation and logistics Biofuels and biochemical Digital Integrated healthcare Investment facilitation One-stop service administered by the EEC Office 5

6 EEC Administrative Structure Formulate policies and approve area development plans Determine special areas and promoted sectors Propose area development plans and policies Provide one-stop service Approve licenses on establishment of the enterprises/factories NCPO ORDER no. 2/2017 EEC Policy Committee, chaired by PM EEC Management Committee, chaired by Ministry of Industry EEC Office Secretary-General: Dr. Kanit Sangsubhan DRAFT EEZ BILL (September 2017) EEZ Policy Committee, chaired by PM EEZ Office CEO: Secretary-General 6

7 Four Areas of Investment LAEM CHABANG PORT MOTOR WAY CHONBURI RAYONG CHACHOENGSAO 4 Core Areas 15 Core Projects = + U-Tapao international airport and aircraft maintenance Map Ta Phut port (phase III) Laem Chabang port (phase III) Sattahip commercial port Dual-track railway High-speed train Highways and Motorway Next-generation automotive (EV/AV) Aviation industry, Robotics, Smart electronics Advanced petrochemical and bioeconomy Medical hub Many Ministerial projects EECi Innovation hub Digital infrastructure: Digital park, Data center HIGH SPEED TRAIN DUAL-TRACK RAILWAY Tourism SATTAHIP COMMERCIAL PORT U-TAPAO INTERNATIONAL AIRPORT MAP TA PHUT PORT Global business Hub/Free economic zone New cities, inclusive growth Public utilities 7

8 Infrastructure Upgrading DONMUANG INTERNATIONAL AIRPORT SUVARNABHUMI INTERNATIONAL AIRPORT CHONBURI CHACHOENGSAO Upgrading existing projects U-Tapao international airport 215 billion baht Map Ta Phut port (phase III) billion baht Laem Chabang port (phase III) 35.3 billion baht Sattahip commercial port 2.04 billion baht Dual-track railways 64.3 billion baht Motorways 35.3 billion baht LAEM CHABANG PORT RAYONG MOTOR WAY HIGH SPEED TRAIN DUAL-TRACK RAILWAY Planning new projects (still early stage) High-speed train 64.3 billion baht Smart cities Digital park EECi SATTAHIP COMMERCIAL PORT U-TAPAO INTERNATIONAL AIRPORT MAP TA PHUT PORT 8

9 U-Tapao International Airport Defense Research Industry Research Centre Medical & Education Zone Navy s Masterplan Development Zone Commercial Gateway EXISTING RUNWAY 1 RUNWAY 2 Airport operations Community Park and Retail Mixed Use Freight Rail Yard Free Trade Zone Cargo Handling Maintenance Repair and Overhaul (MRO) Aviation Training Center Utility System Cornerstone of EEC Budget: 200 billion baht Responsible Agencies: U-Tapao international airport, Royal Thai Navy The 2 nd terminal, with the capacity of 3 million passengers per year, will be opened in August 2017 Investment budget of 8 billion baht for the 2 nd runway is approved The 3 rd terminal will be based on PPP, and scheduled to be finished in 5 years U-Tapao airport development is likely to stimulate affluent, medical & wellness tourism aviation: MROs, aircraft parts, training, logistics (air cargos) 9

10 Laem Chabang Port Phase 3 Container Container SILT POND E1 E2 Area: 2,572 Acres Total Capacities 18M. TEU/Year RO-RO F1 F2 Designed to increase the capacity for cargos from 11 million TEUs to 18 million TEUs Will be expanded from export-import port to transshipment port for distribution to CLMV Budget: 88.1 billion baht; PPP (private 53.1 billion baht) ( ) Responsible agency: Port Authority of Thailand Currently under PPP project preparation. Bidding is expected at the end of 2017 CHALLENGES: Requires land reclamation and has to pass EIA amidst community opposition 10

11 Map Ta Phut & Sattahip Ports MAP TA PHUT INDUSTRIAL PORT PHASE III Sediment Retention Pond SEDIMENT RETENTION POND Warehouse and Natural Gas-related Business Breakwater, section 1 Breakwater, section 2 SATTAHIP COMMERCIAL PORT Liquid Bulk Port Natural Gas Port Service Boat Port Another 1,000 rai will be added to Map Ta Phut Port Cargo capacity will be expanded from 25 to 35 million tons/year Responsible agency: Industrial Estate Authority Budget: 10 billion baht CHALLENGES: Requires land reclamation and has to deal with community opposition Sattahip commercial port will be developed to be ferry port to support tourism and facilitate goods transportation to other ports Two ferry ports and a terminal are planned to be completed by 2020 Responsible agency: Royal Thai Navy Budget: 2.0 billon baht ( ) CHALLENGES: The project may be delayed as the Navy lacks experiences in commercial project management 11

12 Dual-Track Rail & Motorway HUA MARK CHACHOENGSAO JUNCTION SRIRACHA JUNCTION CHACHOENGSAO- KLONG SIP KAO-KAENG KHOI DUAL-TRACK RAIL (under construction) CHONBURI CHACHOENGSAO Dual-track rail (Chachoengsao, Klong Sip Kao, Kaeng Khoi), currently under construction, will complete the dual-track routes in EEC It will be operational partly in October 2017, and fully in February 2019 Upgrading the dual-track links among Laem Chabang, Sattahip and Map Ta Phut Ports is planned LAEM CHABANG PORT KAO CHI CHAN JUNCTION SATTAHIP COMMERCIAL PORT SATTAHIP PORT PATTAYA MAP TA PHUT MOTORWAY (construction: 24%, complete in 2019) MAP TA PHUT PORT MAP TA PHUT RAYONG The Pattaya-Map Ta Phut Motorway (32 KM) will complete the motorway routes in the EEC and reduce congestion Budget: 17.8 billion baht Existing dual-track rail Dual-track rail (under construction) Existing single-track rail 12

13 High-Speed Train DONMUANG INTERNATIONAL AIRPORT SUVARNABHUMI INTERNATIONAL AIRPORT CHACHOENGSAO STATION CHACHOENGSAO The integration of high-speed train and the airport link is designed to connect Donmueng- Suvarnnabhumi and U-Tapao airports Responsible agency: State Railway of Thailand CHONBURI STATION CHONBURI SRIRACHA STATION PATTAYA STATION U-TAPAO INTERNATIONAL AIRPORT U-TAPAO STATION MAP TA PHUT STATION RAYONG STATION RAYONG CHALLENGES: As a net-cost PPP project, it may have difficulties finding investors. The SRT also lacks PPP experiences. 13

14 Financial Incentives Investment in EEC gets super-generous tax incentives Scheme Boi (Sector based) Boi+ (Technology based) Boi++ (Strategic investment) Incentives for EEC Supporting Laws BOI Announcement (2014) BOI Announcement (Mar 2017) Competitiveness Enhancement Act (Feb 2017) BOI Announcement (Mar 2017) and Draft Royal Decree (expected in Q2, 2017) Sector All sectors identified in BOI Act Technology and innovation development sectors New industry/ New or advanced technology sectors (more details to come) 10 S-Curve industries, and EEC supporting sectors Area Chonburi, Rayong, Chachoengsao CIT Concession Standard: max 8 yrs Merit based: +(1-3 yrs) or (50%x5 yrs) Standard: 10 yrs Merit based: +(1-3 yrs) Standard: max 15 yrs Standard: BOI or BOI+ or BOI++ Merit based: +(50%x5 yrs) (Must apply by 29 Dec 2017) Others Grant from Competitiveness Enhancement Fund PIT fixed at 17% rate -Have world class skills -Never work in Thailand before -Work in BOI-promoted companies in 10 S-Curve industries 14

15 Comparison of CIT Rates in ASEAN Thailand s CIT is already among the lowest in ASEAN CIT rates in ASEAN Legal rate Possible minimum rate Percent Philippines Indonesia Malaysia Vietnam Thailand Source: Athiphat Muthitachroen (2017) 15

16 Non-Financial Benefits Investment in EEC also gets unprecedented non-tax benefits EXISTING REGIME DRAFT EEZ BILL Land lease for yrs Hire of Immovable Property for Commerce and Industry Act B.E Allowed for land lease over 100 Rai Holding foreign currency account Allowed to trade using foreign currencies Operation of foreign business Foreign Business Act B.E. 2542: foreigners cannot operate most services Foreigners may be allowed if the EEZ Policy Committee proposes to the Cabinet for consideration. Approval or License Responsible government agencies Secretary-General can approve or give licenses. Professional licenses Must get license from professional organizations May be permitted to practice if getting license from foreign countries designated by the EEZ Policy Committee Other regulations, such as EIA, FDA, etc. Related laws EIA report approved within 1 year/ the EEZ Policy Committee may propose to the Cabinet for law amendment and update 16

17 Comparison of Land Lease in ASEAN Thailand s land lease period is already among the longest in ASEAN. COUNTRIES LEASEHOLD PERIOD (Years) RENEWAL OPTION (Years) Malaysia 99 n.a. Singapore 99 n.a. Cambodia 99 n.a. Vietnam 70 n.a. Brunei case by case basis Thailand Philippines Myanmar Laos 50 case by case basis Indonesia

18 Impacts on S-Curve Industries Most investment in EEC will come from expanding the existing S-Curve industries S-curves Investment Nature of Investment Reasons Next-generation automotive Smart electronics Affluent & wellness tourism Agriculture & Biotech Food for the future Assembly of hybrid cars, not BEVs, are likely to happen, creating opportunities for supporting industries Only firms with existing production facilities are likely to expand investment More investment in tourism and related business is likely to happen Only firms with existing production facilities are likely to expand investment Only firms with existing production facilities are likely to expand investment Frontier products will be produced in developed countries or large markets such as China Only additional tax incentive to locate in EEC is PIT reduction. Expanded U-Tapao airport will facilitate tourism Only additional tax incentive to locate in EEC is PIT reduction. Many firms have already invested in Food Innopolis Only additional tax incentive to locate in EEC is PIT reduction. 18

19 Impacts on S-Curve Industries Among the New S-Curve industries, significant investment can be expected only in the aviation maintenance, repair and overhaul (MRO) and the logistics sectors S-curves Investment Nature of Investment Reasons Industrial robotics Very limited investment is expected There is too small domestic demand for industrial robotics investment. However, some Thai companies may invest in automation system integration. Biofuels and Biochemicals Integrated healthcare Digital business Aviation and logistics Limited investment is expected Limited investment is expected Very limited investment is expected Possible investment from big players, including Airbus Thailand has limited capacity to develop advanced biofuel. Bioplastic is not cost competitive w/o subsidy. The EEC Act will give full power to unlock the law obstacles. Actual exercise depends on political will. There is little rationale to locate in EEC except for those requiring super-fast internet connection. Demand is real due to location advantage. The expansion of U-Tapao airport will also support the industry. 19

20 Resource Challenges Limited water volume in reservoir caps the growth of industrial water production Million cubic metre Source: East Water Water in East Water (EEC) Water volume in reservoirs Water sold of by EastWater Water shortages Water shortages will become a challenge, especially during dry seasons Government agencies will invest in water infrastructure but limited surface water will be a bottleneck Skilled labor shortages Shortage of skilled manpower will hinder the development of high-tech industries Difficult to attract world-class universities from western countries Work-permit regime must be liberalized PIT reduction scheme will be hard to implement 20

21 Conclusions and Recommendations (1) The EEC is a strategy to implement the Thailand 4.0 vision in a right direction after the failure of previous schemes. Infrastructure development U-Tapao airport, dual-track railways and motor ways are likely to be developed as planned. However, the development of high-speed rail, new cities and world-class universities are unlikely to materialize in the near term The government should only invest in infrastructure projects with high benefits and low negative impacts on the environment. Investment facilitation The EEC will unlock existing regulatory obstacles and integrate fragmented public service delivery. The lessons learned from regulatory reform and integrated public service delivery in the EEC should be applied nationwide. 21

22 Conclusions and Recommendations (2) Super-generous incentives to attract investment in targeted industries Tax incentives would induce additional investment in targeted industries. However, it is very costly and has limited effectiveness. Most new investment will be in the sectors that Thailand has comparative advantage Existing industries: tourism, automotive and auto-parts, and healthcare services. New industries: aviation MRO, logistics, and automation. Effective investment attraction of high tech companies requires holistic programs, including research support, skill development & regulatory reform. universities & research institutes to engage in R&D activities with investors. 22

23 Holistic Investment Promotion: Singapore Schemes to support Singapore as a hub of pharmaceutical and biotechnology businesses Provide research funding to companies for partnership with public research institutes and clinical-research units in hospitals. Define regulatory frameworks to facilitate the development of innovative therapies, while ensuring global standards of safety, quality and efficacy Establish research institutes and research consortia in key fields Build up key infrastructure for translational and clinical research such as units to support early-phase trials in public hospitals and Singapore Clinical Research Institute to support later-stage trials. Recruit and nurture world-class researchers and scientists Provide scholarship and training to create a talent pool to support the industry. 23

24 Conclusions and Recommendations (3) The success of the EEC should be measured by the increase in technological capabilities of the country and higher skill of Thai workers. Thailand should Build technological linkages between business enterprises in the EEC and Thai business Develop human resources to support industries in the EEC Establish an industrial research institute in the EEC Use public procurement to build technological capabilities in smart cities and rail systems. The EEC should be a development model for Thailand 4.0 to succeed in Creating technology Developing human resources Reforming regulations and public service Being friendly to the environment 24

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