Currently, sustainability and environmental, social and governance (ESG) considerations have become key priorities for businesses around the world. ESG is a concept that revolves around three important factors related to sustainability: environment, society and governance.
Consumers and investors are increasingly interested in companies’ ESG initiatives before making a purchase or investment decision. This is the case in Thailand, where we see more and more companies announcing sustainability initiatives, leading government authorities to respond favorably to these efforts.
In this two-part article, we will first focus on sustainability trends in Thailand and the role of the Thai Board of Investment (BOI) with examples of current incentive programs and privileges that facilitate activities related to sustainable development.
There are currently an overwhelming number of global sustainability programs, such as net carbon emissions, circular economy, renewable and alternative energy, grassroots campaigns and zero waste. As expectations rise, Thai companies have also incorporated ESG objectives into their business strategies to positively impact the environment and society.
One of the first authorities in Thailand to foresee the importance of sustainability was the Stock Exchange of Thailand (SET). In 2015, the SET introduced the Thailand Sustainability Investment (THSI) list, a list of listed Thai companies that have leading ESG initiatives, with the aim of promoting these companies. The SET defines sustainable companies as those that embrace risk management, supply chain management, innovation and ESG responsibility. At the end of 2021, 147 companies were on the THSI list.
Furthermore, according to the SET website, he states, “Long-term investing these days tends to be more focused on sustainable businesses. Financial statement performance and consideration from an environmental, social and governance (ESG) perspective are key aspects for analysis”.
In 2007, the Thailand Greenhouse Gas Management Organization (TGO) was established and its effectiveness was enhanced in 2019 through amendments to the underlying law. It is the key public organization for greenhouse gas mitigation in Thailand, leading the country towards a sustainable low-carbon economy and society.
The BOI is keen to encourage businesses to implement sustainability measures and actively promotes investment in environmentally friendly businesses, including electronic vehicles, natural gas separation plants, and cold stores using natural refrigerants.
The BOI currently grants investment promotion – including tax and non-tax privileges – to companies that invest in various types of business activities or implement certain sustainable strategies, such as the use of alternative energy. Examples of the main measures and activities promoted by the BOI with the aim of promoting sustainability are summarized below.
Depending on the measure, a qualifying investment will be entitled to the following privileges: (i) tax privileges, including exemption from corporation tax ranging from three to eight years (depending on the promoted activity concerned), exemption from import duties on machinery and exemption from import duties on raw materials used in production for export; and (ii) non-tax privileges, including permission to bring skilled foreign workers and experts to Thailand for the promoted business, permission to own land for the promoted business, and permission to transfer money out of Thailand in foreign currency.
The four main measures put in place by the BOI are:
- Measure to promote Thailand as a regional hub for electric vehicles.
- Measure to promote activities related to sustainable development.
- Special measures to improve production efficiency.
- Measure to promote a local economy.
In the next article, we will discuss in more detail each of these measures and privileges granted by the BOI.