The new scheme, if successful, will see Thailand charting a more innovative course to economic development which diverges from conventional thinking. The country already has a chronic inequality problem with a significant proportion of the population still living an agrarian existence while utilising migrant labour to power its construction, manufacturing and export sectors.
Thailand is moving forward with an ambitious scheme to attract 1 million foreign residents to the kingdom between 2022 and 2026 who are expected to account for up to 6% of the country’s annual GDP by the end of the plan’s final year. The programme, which involves significant changes to the country’s labour and property ownership laws, was given the green light this week and is to be monitored by the National Economic and Social Development Council (NESDC).
A Thai cabinet meeting at Government House on Tuesday agreed in principle to a range of measures aimed at attracting up to one million high-income foreigners to live and work in Thailand over the next five years.
After cabinet, government spokesman Thanakorn Wangboonkongchana gave some further details.
The scheme is being pushed by the Centre for Economic Situation Administration (CESA) led by Deputy Prime Minister Supattanapong Punmeechaow.
It is understood that former JP Morgan boss in Thailand Mr Chayotid Kridakon, a key advisor to the government, is the mastermind behind the plan.
The kingdom’s divergent economy and society is facing significant and growing challenges
It comes as Thailand’s economy and society face a range of chronic problems including a deteriorating demographic profile which places increasing demands on the country’s still developing social security services and the economic damage inflicted by the COVID-19 crisis.
The kingdoms’ economy diverges from world norms with a reliance on cheap migrant labour to support its manufacturing and export industry as well as its thriving construction sector while between 33% and 40% of people still live on the land in agrarian communities with limited access to economic opportunities.
The project to attract 1 million foreigners is estimated by the government and proponents of the initiative to have the potential to add 6 to 7% to Thailand’s annual GDP over the same time frame up to the end of 2026.
World Bank has consistently called on the government to address inequality of opportunity in its economic policies for future generations
The move comes as The World Bank and International Monetary Fund have consistently urged Thai economic planners to widen and develop social security protections in the kingdom, to broaden the tax base and tackle inequality to help develop the domestic economy, improve access to education and economic opportunities for younger generations in Thailand.
A recent study showed that the flow of bank deposits in the financial system since the outbreak of COVID-19 had exacerbated the country’s financial inequality leaving 91% of all accounts with deposits of over ฿1 billion held by 1.6% of the population.
Bank of Thailand figures also showed that ฿596,779 billion in funds was held by foreigners in Thailand while the country’s elite or wealthiest people held funds estimated at ฿11.41 trillion.
At the same time, 91.22% of account holders, held funds valued only at ฿1.128 trillion or 9% of the total.
Poverty is on the rise in Thailand bucking a decades-long trend where it consistently reduced
The World Bank has been particularly insistent on this issue and in 2020, it highlighted that Thailand’s poverty rate grew between 2015 and 2018 reversing decades of steady progress by the Thai government in reducing poverty in the kingdom especially since the 1980s.
The same report showed that, even before the COVID-19 recession, up to 40% of Thai people had a problem paying for food and shelter.
It pointed out that, in that period, the poverty rate grew from 7.21% to 9.85% while in absolute terms the number of people living in poverty estimated at below $2 or a day or ฿60 rose from 4.85 million to 6.7 million.
Since 1988, the poverty rate in Thailand has reduced from 65% of the population to under 10% with blips occurring during periods of economic turbulence such as the Asian Financial Crisis of 1997 and the World Financial Crisis in 2008.
The bank particularly noted that the provinces in Thailand’s Central and Northeast regions were badly hit.
Concern that children in remote areas of the kingdom lack access to education and opportunity in life
It highlighted that while 50% of young children aged 6 to 14 years in Bangkok have access to education and support infrastructure, that figure was only 10% for children in the kingdom’s Northeast or Isan region.
Prime Minister in New York predicts that Thailand will be a first-world economy in 17 years or by 2036
It also warned that Thailand’s economic development would require regular and consistent GDP growth to even keep up with a rising standard of living globally without even considering the government’s stated goal of developing the kingdom into a high-income economy in the coming decades.
New scheme targeted wealthy foreigners, pensioners and skilled workers who contribute to the economy
The new long term visa plan, agreed in principle, targets four categories of foreigners including wealthy people worldwide, pensioners moving to Thailand, those wanting to work from the kingdom and highly skilled professionals.
The proposal would involve new long term visas for approved foreigners who can demonstrate the potential to invest in Thailand and contribute to the economy.
It is being proposed that these visas will come without the current 90-day reporting rule.
The government also plans to adjust the laws concerning the ownership of land and property as well as labour laws concerning foreigners to facilitate the new scheme.
Changes to be made to work conditions attached to visas relating to foreign and Thai employees
It is suggested that current conditionality relating to the employment of Thai and foreign workers may be changed to make it more attractive for certain groups of people to work here while tax incentives are also being touted as part of a package to make Thailand an attractive base for foreign business people, skilled executives and entrepreneurs.
The cabinet tasked the National Economic and Social Development Council (NESDC) to work on the proposal and to liaise with the Board of Investment Office and other government agencies such as the Ministry of the Interior, Royal Thai Police, Ministry of Labour and the Finance Ministry to finalise the plan in further detail.
This body will also be responsible for monitoring the circumstances and progress of the initiative from 2022 when it is expected to come into force until the end of 2026.
Cabinet told on Tuesday that ฿1 trillion a year can be added to the country’s GDP by its new residents
The top economic body estimates that the plan can succeed in attracting 1 million new residents to Thailand by the end of 2026 who will generate expenditure of ฿1 trillion per annum within the economy representing over 6% of GDP based on 2020 figures.
Thailand’s GDP for 2020 was $501.09 billion or ฿16.285 trillion. That’s an estimated annual expenditure of ฿1 million per annum for each of these new wealthy foreigners that the government hopes to be living in Thailand by the end of 2026.
There is further potential for ฿800 billion in investment and ฿270 billion in extra tax revenue from this group on an annualised basis.
At the cabinet meeting, it was decided that further measures could be implemented to augment the plan if deemed suitable but that the package would be reevaluated every five years.
The long term visa will also be extended to spouses and dependents of those who qualify.
Bar is set high for foreigners seeking to qualify for long-term visas and residency in Thailand
For wealthy individuals to qualify, they will need to invest $500,000 in Thai government bonds, Thai property or foreign direct investment into the kingdom.
They will also need to show at least $1 million in assets and earnings of at least $80,000 a year for the previous two years.
For pensioners, the investment in Thai bonds or property required will be $250,000 but an annual pension of $40,000 a year must be shown or they must show earnings of $80,000 for the previous two years.
For skilled workers or professionals, a requirement of intellectual property ownership or advanced education is required together with recent earnings over the past two years of $80,000.
Similarly, skilled entrepreneurs with either the required education standard to master level or work experience as well as meeting the same income threshold, will be accepted on a case by case basis.
The new long term visas will essentially grant long term residence to foreigners who qualify for the dispensation.