PATTAYA, Thailand – Statistics from the Board of Investment (BOI) indicate that investment promotion applications in 2025 broke all-time records, reaching more than 1.87 trillion baht, an increase of 67 percent. The automotive and auto parts industry remains one of the main target sectors, attracting more than 84 billion baht. However, beneath the impressive figures for Foreign Direct Investment (FDI) and GDP growth, evaluating economic success purely by investment volume may obscure underlying structural risks.
If the government lacks effective regulatory mechanisms, massive investments driven by economic policies could turn into resource extraction rather than creating sustainable prosperity. There are two main economic and legal dimensions that the state must urgently address to ensure that FDI truly benefits the country.
1. International tax structures and the prevention of profit outflows
A closed-loop supply chain business model, in which multinational companies import everything from raw materials to machinery, often comes with complex tax-planning strategies. The use of transfer pricing mechanisms between overseas parent companies and their subsidiaries in Thailand can shift profits out of the country and keep the domestic tax base as low as possible.
Combined with maximum tax privileges from the BOI, including corporate income tax exemptions and import-duty exemptions on parts, this can significantly reduce revenue that would otherwise enter the state coffers. Addressing such practices through domestic tax laws alone is not enough. The government must strengthen its oversight by fully utilizing international standards.
This includes the automatic exchange of financial information under the Common Reporting Standard (CRS) and the strict application of Double Tax Agreements (DTAs) to prevent tax avoidance and evasion and close gaps in national tax collection.
2. Local content crisis and trade competition law
FDI can create genuine added value for the country only when strong linkages are established with the domestic supply chain. Statistical data presents a worrying picture, as Thailand’s internal combustion engine (ICE) vehicle market has contracted significantly. Total vehicle sales fell by more than 20 percent year on year in the first quarter of 2024, while the EV segment expanded. At one point, Chinese brands accounted for more than 70 percent of Thailand’s EV market.
An analysis by KKP Research points out that the current influx of Chinese capital is partly driven by efforts to absorb excess production capacity and capitalize on price advantages. This differs from the approach taken by automakers from other countries in the 1980s, when Thailand was developed as a production base with deeper domestic supply-chain linkages.
If severe price wars are allowed to develop without effective enforcement of local-content requirements for raw materials and parts, Thai automotive-parts entrepreneurs at the Tier 2 and Tier 3 levels, who support hundreds of thousands of workers across the industry, could be forced out of business. Trade competition laws must therefore be strictly enforced to prevent the economic ecosystem from becoming distorted.
Opening the door to investment in target industries is necessary for the direction of Thailand’s economy. However, record-breaking FDI figures alone cannot guarantee success without fair taxation supported by international tax mechanisms and concrete protection for local entrepreneurs.
Without these safeguards, GDP growth could remain a mere illusion, while the resulting economic and social costs are ultimately borne by local communities and workers.
