6Nov 2019

Thailand’s Agriculture 4.0

agriculture thailand

agriculture thailand

Foreign investment opportunities for agriculture in the “Kitchen of the World”

Foreign investments will help to develop Thailand into a farming superpower. The country’s natural biodiversity boosts ecosystem productivity to supply the world market as a major player in producing and exporting tropical farm products. The law firm in Bangkok supports and assists foreign companies and entrepreneurs to successfully invest in farmland and agricultural projects in the land of smile.

Apart from being one of the major exporters of rice in the world, Thailand’s other agricultural commodities include sugar, fish, canned tuna, pineapples, rubber, gr, in and frozen shrimps. Currently, almost 40% of its people work in the agriculture division, but the agriculture sector accounts only for 8-10% of Thailand’s GDP. This disproportion shows the urgent need for improvements.

Most of the local farmers are used to traditional farming methods for hundreds of years. These methods have been poorly developed and only little by little they adopted into a more innovative way using machinery for more productivity. The current non-smart system can’t feed Thailand in the future.

Agribusiness firms, both local and foreign, play an important role in Thailand’s development in the agricultural sector. Because of the better resources of technology, funds, and knowledge than the farmers and other groups in the industry, they become the innovators and pioneers in the business.

 

Smart agriculture, smart farmers, superfood and super farms

During the last years, Thailand has been focusing on strengthening its economy with research and development, creativity, innovation, and investment programs. Thailand 4.0 is the latest development model that the government aims to give way to pull them out of the middle-income trap.

One of the focusses of Thailand 4.0 is the agriculture sector to promote and strengthen its abundant resources both for local and international use. Agriculture 4.0 aims to increase yield per rai by reducing inefficiencies, water consumption, fertilizer insecticides, and other chemicals and harmful effects on soil, animals, and people. Thailand is the kitchen of the world.

The government is seeking more ways to improve and give way to foreign investors to make Thailand 4.0 and Agriculture 4.0 more feasible. Multi-stakeholder partnership projects and investment programs that will bring together the non-government organizations, companies, the government, universities, and farmers shall be the way for technological transformation that will also provide access to shared information, technology, finances, and markets. This kind of project will play an important role in transforming Thailand’s agricultural progress.

 

Criteria for farm investments

Project in agricultural, animal husbandry, fisheries, mineral exploration, and mining, and other service businesses under List One of the FBA, Thai nationals must hold shares with a total of at least 51 percent of the registered capital. Foreign investors can hold a majority or all of the shares in promoted manufacturing projects stipulated in List Two and List Three of the FBA (B.E. 2542). Under certain circumstances, the BOI may set the maximum and the minimum for foreign shareholdings in some promoted projects at the level it deems appropriate.

Under the Foreign Business Act, foreigners are strictly prohibited from operating rice farming, plantation, or crop growing, livestock farming, and forestry and timber processing from a natural forest. Foreign companies require specific investment promotion by the Thailand Board of Investment to carry on such businesses.

New BOI investment promotion

The Thailand Board of Investment (BOI) places great importance on promoting agricultural activities and products throughout the food production chain. The BOI offers high tax incentives in order to enhance competitiveness and to promote the application of advanced production technology. The BOI investment promotion scheme is expected to lead to the advancement of the agricultural industry in the modern era.

To promote “Smart Farming” and modernization of the agricultural sector, the following three measures have been implemented:

  • Production or services in the agricultural sector, e.g. production of tracking, monitoring or control systems to regulate resources (water, fertilizers, pesticides). Tax holidays will be granted for five years without any cap.
  • Measure to upgrade the agriculture industry towards international standards, e.g. Good Agriculture Practices (GAP), Food Safety Management System (ISO 22000), etc. Tax holidays for three years, max. 50 % of the investment capital. The application must be submitted until December 31, 2020.
  • Promotion of local communities in certain local areas, e.g. production of organic fertilizers, nano-chemical fertilizers, organic pesticides, plants and animal breeding, quality control, packaging and preservation of fruit and vegetable, manufacturing or preservation of food and beverages and trading center for agricultural products.

This BOI incentive scheme covers various types of activities from upstream, midstream to downstream as follows: Promoted upstream activities are, for instance, plant or animal breeding, an economic forest plantation, production of biological fertilizers, organic fertilizers, nano-coated organic chemical fertilizer, bio-pesticides, etc.  Promoted mid-stream activities are, for instance, processing businesses and production of fuels from agricultural materials or products, etc. Promoted down-stream activities are, for instance, extraction of natural raw materials, production or preservation of food and beverages using modern technology.

In addition, the BOI promotes the products or services of modern farming systems or so-called “Smart Farming” systems which incorporate the design of systems and software to manage related resources by integrating the system into the farming process. The system will collect, analyze and interpret the data. The “Smart Farming” system also helps farmers reduce cost, optimize production processes, increase proceeds per area, upgrade production standards and control the production quality as markets demand. The yield of the proceeds derived from “Smart Farming” is, therefore, higher than on other regular farms.

In case farmers are categorized as SMEs, these farmers will fall under the BOI special investment promotion measure which is the“measure to increase the competitiveness of SMEs”. The BOI will ease certain conditions for SMEs. For example, the minimum required investment capital will be reduced to THB 500,000 (approx. 16,438 USD) instead of THB 1 million for regular promoted projects. The BOI also allows the usage of used machinery from Thailand with a value of less than THB 10 million. Promoted projects under this measure will receive a corporate income tax exemption of up to eight years with a corporate income tax exemption cap not exceeding 200 percent of the investment capital (BOI conditions applied).

Legal advice and support on foreign investment opportunities

PUGNATORIUS Ltd. is a Bangkok-based specialist provider of bespoke transactional legal and tax advice in the corporate and property legal and taxation industry sectors. The law firm provides comprehensive services to acquire farming land, to structure the farming business, to apply for licenses and BOI investment promotion and to guide foreign clients through regulatory hurdles and red-tape. It advises on the seven aspects of an agribusiness venture: (i) corporate structure, (ii) BOI promotion, (iii) commercial agreements, (iv) FDA licensing, (v) factory license, (vi) patents and other IP rights, and (vii) liability protection.

The focus of any foreign investment in Thailand’s farming industry should be on adding value and producing high-quality farm products. Digital technology, biotechnology, and physical technology have to be used to drive farm sector development, raising productivity both in terms of volume and quality for a variety of products. The law firm is the one-stop service point for agriculture, rubber tree and livestock investments in Thailand.

Disclaimer: A little knowledge is a dangerous thing. This low-resolution high-level outlook constitutes neither legal advice nor an attorney-client relationship.

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