Dealing with the military
The regulatory framework for arms deals in the land of smile
Thailand’s armed forces consist of RTA Royal Thai Army, RTN Royal Thai Navy which includes the RTMC Royal Thai Marine Corps, and the RTAF Royal Thai Air Force. Military expenditure in Thailand amounts to roughly US$ 7 billion, which equals to 70% of the military budget of the Netherlands and 1,5% of Thailand’s GDP.
International business: Thailand has good relationships with countries that may be competing or are adversaries with each other, including the USA, China, Australia, and Canada. This has an obvious impact of its procurement strategy, above others for Security and Safety Equipment (SEC), Airport and Ground Support Equipment (APG), Aircraft and Parts (AIR), and Aviation Services (AVS).
Selling military equipment of any type to Thailand’s armed forces as well as the providing of services are highly sensitive operations. This applies to a formal tender and to off-market procedures, be it on invitation, with the support of a specialized middleman and agency, or else. The private business partner has to have a clear view of his own compliance requirements and how to meet his standards regarding transparency and other aspects.
Legal updates and business opportunities in Thailand’s military sector
Military hub: Thailand pushes to become a regional hub for aircraft maintenance, repair, and overhaul (MRO). The MRO facility at U-tapao airport is part of the country’s Eastern Economic Corridor strategy. It offers heavy and routine (line) maintenance for all wide-body aircraft types, specialized repair shops including for composite structures, as well as extensive maintenance training courses for technical personnel from Thailand and overseas. Airbus seems to be the preferred JV partner in this project.
Air Navigation Act: Under the Air Navigation Act (No. 13), the Royal Thai Navy is in the process of opening bids for the first phase of the U-tapao aviation city project. Aircraft manufacturing, aircraft parts manufacturing, and maintenance, repair and overhaul (MRO) for aircraft can be done by fully foreign-owned Thai companies with BOI investment promotion.
Defence Technology Act: Under Thailand’s Defence Technology Act as of 2019, the government is planning new “special economic zones” aimed at better supporting Thailand’s defense technology industry. Cooperation with the private sector is explicitly requested to further develop defense technology and eventually make the country more “self-reliant,” given as a goal in the 2019 law.
A royal decree has been issued to lay down conditions for foreign parties wanting to set up maintenance, repair, and overhaul (MRO) operations in Thailand, according to the Civil Aviation Authority of Thailand (CAAT).
Memorandum of Understanding 2020: The RTA will sign a memorandum of understanding with the Finance Ministry to ensure sound management of its commercial and welfare schemes. The implementation will be divided into phases with army-run golf courses, boxing stadiums and the Suan Son Pradipat Army Rehabilitation and Recreation Centre in Prachuap Khiri Khan being the first to come under the Finance Ministry’s oversight. These businesses — which were originally introduced as part of a welfare scheme for army personnel — will be managed by professionals from the private sector.
PUGNATORIUS Ltd. is the Bangkok-based specialist provider of transactional legal and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property developments and acquisitions. Sophisticated solutions in a complex legal environment. Serious legal and tax advice in the land of smile.
Please consult with the law firm on how to obtain professional services and transaction support in this highly sensitive environment.