The World Bank inThailand Development in Partnership 46992 the World Bank's activities in Thailand and o t h e r n e w s r e l a t e d t o d e v e l o p m e n t October 2008 New Study ShowsThailand's Investment Climate Constrained by Macroeconomic and Policy Uncertainty A joint study by the Thai government and the World Bank has found that the overall environment for investmentinThailandworsenedslightlyin2007when compared with 2004. However, future investment decisions byThai companies could well be affected by the uncertain macroeconomic and policy environment. The study, Thailand Investment Climate Assessment Update 2008, is based on a comprehensive survey of 1,043 firms during May-November last year. In this survey, more than two-thirds of the firms rated macroeconomic instability and unclear government policy direction as the major concerns for doing business in Thailand in 2007. This is twice as many as World Bank economists, Dr. Xubei Luo (far left), and Dr. Kirida in2004,thelasttimeThailand'sinvestmentclimatewas Bhaopichitr, (with microphone), presented the findings of the new assessed. study, Thailand Investment Climate Assessment Update, to the press at the Grand Hyatt Erawan Hotel on Aug. 22. The study, supported While this perception is subjective, it could have an by the Ministry of Industry, is the result of collaboration between impact on future business decisions, said Dr. Xubei the Thailand Productivity Institute, the National Economic and Luo, theWorld Bank economist who led the team that Social Development Board (NESDB), and the World Bank. Also prepared this study. attended the press briefing were Dr. Phanit Laosirirat (second right), Executive Director for TPI, andKhunThaninPa-Em (far right), Senior "Whencompanymanagersmakebusinessdecisions,they Advisor, NESDB. often depend on their subjective judgments of the business environment," Dr. Luo said. " If they are not priorities.Inmanystudieswedid,wefoundthecorrelation confident that the current environment is favorable to between improving investment climate and improving business,theywillpostponetheirdecisions.Soimproving productivity." investor confidence should be one of the government's Thailand Investment Climate Assessment Update 2008 is a result of collaboration between the National EconomicandSocialDevelopmentBoard(NESDB),the Foundation for Thailand Productivity Institute (FTPI), and the World Bank. Building on a similar work done in 2004 by the same tripartite group, this study is sponsored by the Thai Ministry of Industry. Other factors affecting business decisions in Thailand included shortages of skilled workers, limited access to finance, unreliable infrastructure, and burdensome business regulations, the study shows. These are the same concerns mostThai firms have raised in the 2004 Continue on page 2 Page Continued from page investment climate survey, and the Thai government suchasfiscal,monetaryandtradepolicies;governance has been working closely with the private sector to and institutions; and infrastructure. address them, Dr. Luo said. Firms and entrepreneurs making decisions about Despite these concerns, Dr. Luo noted that Thailand's investment of limited resources and other company infrastructure, regulations, and other objective efforts will base their decisions on perceptions of the investment measures are comparable with similar overall business climate as well as the risks and returns middle-incomecountries,includingBrazil,China,India associated with that business climate. Improving the and Turkey."Thailand lags behind Singapore, but that's business climate can encourage more business and understandable since Singapore is the region's leader," investment, creating more jobs for the people. Dr. Luo said. The Thailand survey covered nine industries in six The investment climate survey measures specific regions, including Bangkok and other metropolitan constraints facing firms and relates them to measures areas.The nine industries are food processing, textiles, ofcompanyperformance,growth,andinvestment.The garments,automobileparts,electronicparts,electrical investment climate can be defined by three broad sets appliances, rubber/plastic, furniture/wood products, of variables. These include macroeconomic policies and machinery. Thailand Ranked 13th in Doing Business 2009 East Asia Gains Momentum in Regulatory Reform-China andThailand Make Key Improvements, SingaporeTops Global Rankings EastAsiaandthePacifichadthegreatestmomentumamongregionsinreforming business regulations this year, according to Doing Business 2009 -the sixth in an annual series of reports published by IFC and the World Bank. The new report identifies 26 reforms between June 2007 and June 2008 that make it easier to do business in 24 economies across the region. Among the world's large emerging markets, China led with reforms that make it easier to obtain credit, pay taxes, and enforce contracts. The region's other top economies in reforming business regulations include Thailand, Cambodia, and Malaysia. Improvements made it easier to pay taxes, start a business, trade across borders,andregisterproperty.Thesecountriesalsotookstepstoprotectinvestors, improve bankruptcy procedures, and strengthen the legal rights of creditors and borrowers. Cambodia's new secured transactions law made it the world's leading economy in easing access to credit. Thailandledotherreformersintheregionwith improvements in four areas - Registering Property, Protecting Investors, Paying Taxes, and Trading across Borders. As a result, the country moved up to 13th in the Doing Business ranking. It made paying taxes easier by reducing some fees and facilitating online filing and payments. In addition, it now exempts companies with taxable income not exceeding 1.2 million baht from corporate income tax and applies concessionary 25 percent rates for newly listed companies. Amendments to the Thai Securities and Exchange Act strengthened minority shareholderrights.Directorsnowhavegreater Another way for paying taxes in Thailand duties with respect to transactions between Page 2 interestedparties.Ifheldliableforusingthecompany's assets for their own benefit, they will have to pay damages,disgorgeprofits,andpayfines-andmayeven go to jail. Provisional reductions of the property transfer fee and specific business tax have lowered the cost to transfer propertyfrom6.3percentofthepropertyvalueto1.13 percent. A new internetbased customs clearance system reduced the number of documents that must be submitted in hard copy from 9 to 3 for imports and from seven to four for exports. DoingBusinessrankseconomiesbasedon10indicators of business regulation that track the time and cost to Joining the press conference were Khun Acksiri Buranasiri (far left), meet government requirements in starting and Deputy Director-General, Fiscal Policy Office, Ministry of Finance, Khun PimpapaanChansilpa (2nd from left), Chief of Inspector General, operating a business, trading across borders, paying MinistryofCommerce,KhunAvootWannvong(2ndfromright),Deputy taxes, and closing a business. The rankings do not Secretary-General, Office of the Public Sector Development reflect such areas as macroeconomic policy, quality of Commission,andDr.KiridaBhaopichitr(farright),CountryEconomist, infrastructure,currencyvolatility,investorperceptions, World Bank . or crime rates. "Economies need rules that are efficient, easy to use, Singapore leads the global rankings on the overall and accessible to all who have to use them. Otherwise, regulatoryeaseofdoingbusinessforathirdconsecutive businesses get trapped in the unregulated, informal year. New Zeland is runner-up, and the United States economy, where they have less access to finance and third. Hong Kong (China) retains fourth place, while hire fewer workers, and where workers lack the Thailand advanced to 13 and Malaysia to 20. protection of labor law," said Michael Klein, World "Countriesintheregionareclearlycommittedtoreform Bank/IFCVicePresidentforFinancialandPrivateSector agendas,"said Dahlia Khalifa, a coauthor of the report. Development. "DoingBusinessencouragesgoodrules, "Regardless of their stage of economic development, and good rules are a better basis for healthy business they are recognizing the role that regulatory reform than`who you know,"he added. can play in staying competitive while boosting Doing Business 2009 ranks 181 economies on the entrepreneurship and job creation,"she added. overall ease of doing business.The top 25 are, in order, Among regions, Eastern Europe and Central Asia led Singapore,NewZealand,theUnitedStates,HongKong the world in reforms for a fifth consecutive year. And (China), Denmark, the United Kingdom, Ireland, the trend is moving eastward as newcomers join the Canada, Australia, Norway, Iceland, Japan, Thailand, list of economies making the most reforms.The top 10 Finland, Georgia, Saudi Arabia, Sweden, Bahrain, are, in order, Azerbaijan, Albania, the Kyrgyz Republic, Belgium, Malaysia, Switzerland, Estonia, Korea, Belarus, Senegal, Burkina Faso, Botswana, Colombia, Mauritius, and Germany. the Dominican Republic, and Egypt. To download full report, please visit www.doingbusiness.org NewThailand-World Bank's Environmental Partnership to Address Climate Change BANGKOK,September12,2008-TheWorldBankand environmentalpartnershipprogrambetweenThailand the Ministry of Natural Resources and Environment and the World Bank. The program provides for World agreed on Friday on a new environmental partnership Bank technical support to inter-related environmental program to help Thailand address the impacts of issues under the unifying theme of climate change, climate change and sustainable environmental including: management. · Coastal erosion and mangrove degradation Called the Country Development Partnership for · Integrated water resource management Environment, Phase II (CDP-E II), this is the second · Ozone-depleting substances (ODS) Continue on page 4 Page Continued from page · Livestock waste management change); and institutional capacity and instruments to · Reducinggreenhousegasemissionsintheenergy, address environmental issues. waste, industry, and forestry sectors · Urban air quality and solid waste management. "Formidable environmental challenges come with development. Under our newly extended partnership In addition, the World Bank will continue to provide which we launch today, the World Bank pledges to work technical support for strengthening policy and with the Thai government, our UN partners, and other developing institutional capacity to address each of stakeholders to meet these challenges," said Ian Porter, these issues. WorldBankCountryDirectorforThailand. "Ourcommon The CDP-E II builds on the first and very successful goal is to assure a clean, safe and sustainable future for CDP-E (2004-2007), which focused on air quality in coming generations. We look forward to another three Bangkok; water quality in priority river basins; global years of working together to achieve this goal." environmental commitments (ODS and climate Page 4