My Egg Noodles

Some thoughts to consider before setting up a company in Thailand.

Around once a month I get an email via this blog regarding setting up a business here in Thailand. I decided to write this article on Thailand’s business culture in hopes of educating people who are considering opening up a company here based on my own experiences.

For me, I didn’t come here specifically to open up a company and run a business… it sort of just happened (isn’t that how life works?). I was living on Koh Samui with a mate and was thoroughly enjoying the lovely beaches by day and the crazy parties by night. When my mate returned home I quickly started getting bored and not wanting to return home, I moved to Bangkok and opened a company, got myself an office and started employing staff.

Since then I’ve moved my business to 3 different offices and I have had experience with managing over 25 Thai staff (I now have 4). With this experience I’ve gotten a good idea of what it takes to set up and run a business in Thailand.

There have been many ups and downs from the minute I decided to register a company, to getting my first business visa to employing staff that have very different ways of working and views on life that I have. Along with these obstacles, this is also my first company, so you could say I’ve had a few challenges to overcome.

When people email me asking for advice on opening up a company here, I normally respond with: “If living in Thailand really appeals to you, then go for it. If it doesn’t, I’d recommend you go else where” In this guide, I want to further explain what I mean by that.

For me, it’s the living in Thailand part of the equation that really appeals to me. I enjoy living here and I enjoy what Thailand has to offer. However if these feelings were to go it would be a no brainer to move my business somewhere else, most likely Singapore.

The reason why I’d recommend you going else where if you really don’t appreciate what Thailand has to offer outside the office, is the fact that running a business here is a lot tougher and depending on your industry, can affect the way your business is viewed on and operated.

Firstly, Thailand doesn’t make it easy for foreign investors to set up businesses here due to many loop holes one most go through before they are legally set up to work and operate a company. In fact, many people have the opinion that foreign investors are not welcome here and to be honest, I can understand these opinions to a certain extent. Here’s a few basics you’ll need to understand before you embark on setting up a limited company:

• A minimum of 2 million baht ($60,000) registered capital is needed to open a registered company.

• You can only have one work permit for every 4 Thai staff.

• You must have a business visa before you can apply for a work permit, which means traveling out of the country (As to why you can’t do this inland always baffles me).

• Work permit and business visas are organized at the immigration department, one of the most unorganized places I’ve ever been to.

• Foreigners must meet a minimum wage which varies depending on nationalities (which in fairness is very little).

• The killer: Foreign investors can only own a maximum of 49% of the company shares. (If you are American, you may want to read the comments below as you can own 100% of the company shares via a Treaty of Amity and Economic Relations between the US and Thailand))

The Thai authorities don’t exactly make it easy for foreign investors.

Sadly, Thailand doesn’t project a good light in the west. From personal experiences and of other business owners I know here in Thailand, some companies in the west will draw a negative image about doing business with you solely based on you being located in Thailand. This can have serious negative effects if you heavily rely on customers from the west. I’ve had potential clients and investors back down from deals after discovering I am based in Thailand – It sucks, but its reality.

Now let’s move on to Thailand’s infrastructure.

Internet speed is a big problem for businesses relying on fast upload and download speeds. In my office we pay for a 2MB line but most days we only get dial up speeds – for a metropolitan city like Bangkok, it’s a joke. I don’t use the landline for voice calls much but a friend of mine heavily relies on the telephone and he mentioned that call charges are high here in Thailand. I use VOIP (skype) which relies on a fast internet connection and as expected with slow internet speeds, the quality is very poor. Sadly, there isn’t any plans in place (that I know of) that will improve internet speeds in the near future.

Transport. The public transport, mixed with serious congestion problems on the road, doesn’t make traveling around the city easy. The sky-train and underground only cover a fraction of the city; however work is underway to extend both lines which are expected to be completed within a few years. Most office workers in the city live near the sky-train, so if your office is located along this route you won’t have any problems with recruitment. Bangkok has 2 airports, one offering domestic and the new airport, Suvarnabhumi, offering both international and domestic travel. Along with Bangkok’s serious pollution problem, we could come to a conclusion that Thailand’s infrastructure is not perfect for most businesses.

Next up is dealing with Thai companies. Sadly I have never had a smooth transaction with a Thai company on a business level. From installing phone lines to ordering desks and computers to working with Banks, problems have always acured. I really go out of my way to not rely on a Thai company if I can help it. I’m not sure why customer service is so unorganized and unprofessional across so many Thai operated companies – It’s a real shame.

Politics – I don’t like talking about politics but as I wanted to cover as many aspects of Thailand’s business culture as possible, it’s worth noting that Thailand’s political situation has been unstable for years. Depending on what business you’re in will depend on how much of a negative impact this will have.

Lastly, I wanted to cover Thai personnel. This has been my biggest challenge (along with slow internet) for me; I’m still learning how to manage Thai’s and from time to time I still find myself scratching my head.

The number one thing you need to understand is how Thai’s are as people. This is really important and does influence how they work. Many Thai’s, both in business and daily life, are extremely careful about loosing face or making someone else loose face. Once you understand this principle, your half way there in understanding Thai society, Thai business and Thai people.

There are a lot of qualified professionals here in Thailand and finding them is relatively easy. Rates of pay are extremely low compared to the west which is often the main reason why businesses consider setting up a company here. While heaps of available professionals on offer at a fraction of the cost sounds like a dream come true, unfortunately there are a few down sides to consider.

Thai’s generally make more mistakes than the staff I have worked with in the west. On many occasions work has taken up to twice as long, often due to misunderstanding and communication problems. Now, this could well be due to how I manage staff (remember, this is my first company) or this could be due to staff not speaking up and asking questions when they should, due to worrying they will loose face. A friend who manages 30 Thai’s confirms the later. My friend also once commented that most Thai’s are happy to do a substandard job. I agree with him.

A comment that really sticks in my head comes from my Dad who has 600+ employees at his company: “Learning to manage people well takes a lifetime” – so the above is without a doubt a mix of poor management skills from me.

Finding staff with excellent English language skills is very difficult. I think this is due to many Thai’s being reluctant to learn new things which may involve a little lose of face. For example, miss pronouncing a word while learning a new language would cause most Thai’s a little embaracement, causing them to lose face. If any Thai’s are reading this, I would love their views on why so few Thai’s speak English (to a high standard).

The above may sound negative and I thought long and hard before publishing the above. I want to make it clear that my views above are based on a business level and a business level only. Remember what I said above, if you really like what Thailand has to offer outside the office, you’ll overcome these difficulties (like I have done).

Let’s summarize the negatives and positives of opening up a company here in Thailand:

Negatives:

• Poor infrastructure

• Very few staff available who are fluent in English

• Staff culture and communication issues to deal with

• Can only own 49% of shares in Company (this also applies to land)

• Could potentially miss out on business opportunities due to being based here

• Unstable government

Positives:

• Low employment costs

• Cheap office space

• Inexpensive cost of living

• Great social life outside work

Now let’s compare the above to Singapore:

Negatives:

• High cost of living

• High employment costs

• Social fun is limited (although flights to Bangkok are cheap and frequent)

Positives:

• Great infrastructure

• Setting up a business is easy, either as an international arm or as a company

• In Singapore you can own 100% of the company shares

• Setting up a company (admin) is cheaper to set up than in Thailand

• You only have to renew your “Personal Employment Pass” (work permit) once every 5 years (In Thailand it’s done yearly)

• Can get permanent residency easily within 3 to 6 months with no minimum capital – which means can buy land

• Singapore residents are not taxed in Singapore on offshore income

• High level of fluent English personnel

I hope you now understand what I mean by: “In short, if living in Thailand really appeals to you, then go for it. If it doesn’t, I’d recommend you go else where”

Comments are welcome.