Thailand’s Pandora box: 100% foreign ownership

100% foreign ownership in real estate is crucial in driving Thailand’s economic growth and unlocking benefits for investors as well as the local population.

December 15, 2023

Despite global headwinds, emerging Southeast Asian markets including Thailand have outperformed other mature markets, registering a 55% y-o-y growth of commercial real estate transaction volume in Q2 2023. However, Thailand’s position as the prime investment location is still partly hindered by laws and regulations surrounding 100% foreign ownership. In recent years, the Thai government has taken proactive measures to promote foreign investment by offering the possibility of 100% ownership in certain sectors. This blog explores Thailand's push for 100% ownership and compares it to other Southeast Asian countries in order to shed light on the potential benefits and considerations for foreign investors.

Thailand's decision to open its doors to 100% foreign ownership in specific economic sectors has significantly enhanced its appeal to investors. The policy allows foreign entities to fully own businesses in sectors such as manufacturing, services, and tourism-related activities. This strategic move seeks to attract higher foreign direct investments (FDIs) by eliminating previous restrictions and promoting economic growth.

When considering foreign investment opportunities in the region, it’s essential to compare Thailand’s 100% ownership policy with other Southeast Asian countries. Malaysia, for instance, allows 100% foreign ownership in most economic sectors, including manufacturing, services and trading, registering an FDI of USD 17.1 billion in 2022. However, significant restrictions still exist in sectors such as healthcare and education. Indonesia permits partial foreign ownership across most sectors, with certain limitations on some strategic industries, registering an FDI of USD 22.0 billion in 2022 due to its market size. Vietnam, on the other hand, offers relatively limited opportunities for 100% foreign ownership, mainly necessitating joint ventures, but it has gained further traction for FDI inflows due to its potential expansion at USD 17.9 billion in 2022.

Figure 1: Foreign Direct Investment (FDI) in Southeast Asian countries as of 2022

Source: Oxford Economics

Thailand’s 100% ownership policy, compared to other Southeast Asian countries, offer several benefits and considerations for foreign investors. Firstly, the removal of ownership restrictions provides enhanced control and decision-making power to foreign entities, instilling greater confidence in their investment. Secondly, by allowing full foreign ownership, Thailand encourages innovation, technology transfer, and knowledge exchange to stimulate economic growth and fortify the domestic workforce. Moreover, this policy fosters healthy competition among foreign and domestic players in the market, leading to increased productivity and efficiency.

However, foreign investors must still navigate certain hurdles. Understanding the local business culture, legal environment, regulatory framework, and potential language barriers is crucial. Thailand's decision to allow 100% foreign ownership in selected sectors has opened new avenues for foreign investment, unlocking Pandora’s box, yet not fully opening it. While comparisons highlight different approaches to foreign ownership across the region, Thailand's progressive policy seeks to attract more investors and foster economic prosperity.

Nevertheless, careful planning, local insights, market transparency, and understanding the intricacies of the Thai market remain vital for foreign investors seeking to explore the plethora of opportunities. Investor sentiment in Thailand slightly lags behind emerging markets like Vietnam and mature markets like Singapore raising the question; should Thailand fully open the box?