A Brief look at Thailand Market and Expansion Opportunities for Indian Startups!

Thailand is probably one of the most overlooked internet markets in all of Asia. This might be mainly due to the fact that emerging China, India and lately Indonesia with their pure size attract most attention and that information about the Thai market are both hard to obtain and if available mostly in Thai, rarely spoken outside of Thailand.

Thailand has a population of about 70 million people, out of which more than 25 million have access to the internet. Thai internet users are addicted to social networks, especially Facebook and Instagram.

More than 75% of all internet users are on Facebook. More impressively, Bangkok is considered the world’s capital of Facebook users by some estimates., no other city has more Facebook users than Bangkok (2012).

There are more than 77 million mobile phones used in Thailand, roughly 15 million of which have mobile internet.

Payments are a huge challenge, in total only 17 million credit cards have been issued. However, of the 17 million credit cards, less than 8 million are expected to belong to unique holders. This explains, why credit cards usually are only responsible for less than 20 percent of all online payments. B2C logistics are challenging as well, many companies use their own delivery fleets.

Overall, the internet market is still in its infancy –the total Thai B2C market is estimated at about 95 billion US dollar, e-commerce makes up less than one percent of it. This share is expected to reach up to three percent by 2015.

All of this translates into chances and opportunities…

The total number of internet users is expected to reach 40 to 50 million by 2015. Even though credit card penetration won’t raise that fast, innovative companies are developing ways to tackle these issues. Many Japanese, American and European start-ups need time to adapt to the local market specifics – payment and fulfillment are not issues in their home markets.

In general, the Thai online market has more in common with other emerging countries. Internet companies from emerging economies are used to tackle issue and to face challenge, Western markets have overcome a decade or more ago.

In light of the similarities between the Indian and the Thai market, the large number of Thai nationals with Indian roots and attractive government promotions, it is surprising that not more Indian start-up have discovered Thailand as one of their first markets for international expansion.

How Indian Startups can expand to Thailand

Let’s have a more detailed look on how Indian start-ups might expand their scope to Thailand. The most advisable way to do so would be to first apply for an investment promotion under the Board of Investment (BOI).

Typically, an internet start-up falls under one of the two following promotion chapters: 5.8 Software Development or 5.9 E-Commerce.

These chapters both allow for full foreign ownership, the Thai government guarantees not to nationalize promoted companies and the application for work permits for non-Thai staff is much easier. Chapter 5.8 software foresees up to eight years of corporate income tax exemption.

In both cases, the applicant needs to be able to show that this project benefits Thailand (e.g. skill transfer, work force training etc.) and that the investment volume is not less than one Million Thai Bath.

The application process itself consists of two distant steps, a written application outlining based on a reasonable business plan and an in-person presentation of the project to the Board of Investment (BOI). Projects involving people with relevant prior experience have much higher success probabilities.

Once the promotion has been granted, the actual incorporation, thanks to the promotion allowing full foreign ownership, takes place. Once all of that is done, the promoted company enjoys the wide range of benefits outlined before.

This generous promotion scheme is set to run out (5.9 e-commerce) or be downgraded (5.8 software development) in the mid of this year. Indian Entrepreneurs looking to enjoy the full range of promotion benefits are thus advised to hand in their promotion applications before the respective regimes expire.

[box type=”shadow” ]About the Author:Julian Leitner, formerly the head of Rocket Internet Thailand, operationally heading Zalora Thailand, started a legal advisory firm, Stein Advisors, focusing on investment promotions for innovative start-ups in Thailand.[/box]