Updated: Jun 7, 2021
As you think of Thailand and the exciting opportunities, slow down. Thailand is an excellent country to base a business and particularly has been growing as the “Detroit of the east” for many years. Although still a great place to set up and establish your SE Asian base there are some differences in Thailand that have to be considered. Since the last coup however corruption and disfunction have also been growing. Thailand dropped to a place of 104 out of 180 countries ranked by Transparency.org in their latest published rankings. There are a few considerations when looking to establish a business in Thailand vs. neighboring countries like Vietnam or Malaysia.
I personally live in Thailand and love it. Great people, great food, great weather. From a business standpoint there is a stable and educated workforce. Labour costs are low versus many parts of the world and the infrastructure to move goods or provide services is in place. There are a few peculiarities in Thailand, that if you are aware of will ensure no surprises. One overall comment as we delve into the legal side of Thailand. For the most part you are better off getting to know your customer and suppliers in Thailand. Then write a letter of understanding – on one page – and start business. Long contracts with lots of clauses are used here, however the ability to enforce any clauses, terms or conditions is in practice, at best, a years long process and at worst, completely ignored even with court judgements. Save the legal costs, get to know the parties you will do business with and be flexible.
The legal system in Thailand is different. It should be noted that going back to the era of colonization Thailand was never colonized. Thailand therefore does not have the assumed common law system of Europe and the Americas. There is a combination of law that has civil law jurisdictions, some overtures of common law, however the traditional Thai laws, practices and customs are present. Navigating this with your home-based legal team will result in time and costs. Time and cost in business you do not need to waste. This is not all negative as there are some ways things can actually move at a different pace, however to our point above, a sit-down discussion to sort an issue will work best both in the short and long term.
Since we are discussing the legal / contract items consider that the choice of law provision, (that is the part of your contract where you stipulate using the laws of Thailand, or Singapore or elsewhere for interpretations) does not really work in Thailand. In practical terms the choice of law provision is unenforceable because of the unique Thailand legal system.
If you are going to invest in Thailand, your first investment needs to be time. Time to do some research on people and culture. Do not assume things will be the same. Again Thailand is progressive and has much to offer. There really is no hesitancy to invest in Thailand, however if something develops that takes things sideways be prepared. Consider that Thai courts ignore the selection of a foreign court system for dispute resolution. Foreign judgments are not enforceable in Thailand. Arbitration clauses can and do work, however in actuality arbitration can be difficult if your arbitration clause is not very well prepared against the backdrop of the Thai legal landscape. Also of note, in legal proceedings due to the practice of legal statutes being written in very broad terms, there is significant discretion vested in officials, who often operate to unpublished rules or established, unwritten, practices and customs. The results will often be very frustrating for someone from outside of Thailand and not at all what you will expect.
Thailand has so much to offer. Stable workforce, low costs, good infrastructure, good banking laws, access to other Asean nations with free trade agreements, stability for business. There are military coups from time to time, however business and foreign investment are recognized as needed so even in time of political uncertainty business is somewhat insulated. There are in Thailand, as in other Asean countries differences. Do not make any assumptions and talk to us at Viet Thai Consulting Group. We are here to help you navigate when looking at Asia outside of China. As the Thai saying goes it is “Same Same but different”. We can help!