Introduction
Thailand is a country with strong and lasting religious traditions that has adapted well to the demands of technological and industrial development. The nation has an established infrastructure and liberalized economy that has positioned it as one of East Asia’s top economic performers. The people of Thailand are also notably proud of being the sole nation in the region to have never been colonized by any outside power. Thailand is sometimes compared to Hong Kong as a leading East Asian international hub, but political volatility tempers that ambition and remains a concern for many investors and entrepreneurs. Recent events like the 2005 coup d’état and massive public demonstrations in 2008 and 2010 illustrate the risk. The country’s history of 18 coups d’état since its modern establishment shows the challenges Thailand confronts of maintaining stability in the face of strong regional competition and growing investor exportations for world class infrastructure and production quality standards. Despite the unsettling politics, business in Thailand provides many commercial opportunities and a growing population of potential customers. Thailand is the 21st largest population in the world and its booming young generation is demanding western-style services and products.
Business Etiquette
Greetings
While globalization has brought western handshakes to Thai business culture, the traditional greeting is still the “wai,” where a greeter joins the palms of his hands at chest-level and bows over them. The position of your hands signifies the level of respect you hold for the person in front of you. To acknowledge seniority, greeters lower their forehead closer to their hands. The wai will not be returned if there is a notable social difference between two people greeting.
Business Meetings
Social status, hierarchy and connections are all considered by Thai business people when establishing a new partnership with both locals and foreigners. Status can also be determined by your dress, manners, education, complexity of your family name and connections. It is therefore important to clarify hierarchical roles and ranks within your organization during initial business meetings.
Business meetings tend to take place at the office. Arriving late signals disrespect, so you should always be on time for meetings. Dress should be traditional, elegant and conservative. During your meetings, decorum matters and openly complaining or losing your temper is viewed negatively within Thai culture. Try and keep a calm attitude at all times and present your ideas with tranquility and serenity.
Business Cards
Business cards are exchanged after an initial meeting and you should always offer your business card to the most senior person first. Cards are exchanged using the right hand and traditionally people tend to make comments about them to acknowledge their reception. It is recommendable to have your card translated into Thai prior to your visit.
Gift Giving
Gift giving is not common practice, even when visiting a Thai’s home. However, it will be appropriate and appreciated if you arrive with simple gifts like flowers, fruits or chocolates. Avoid giving Marigolds or Carnations because these are funeral flowers. Also avoid wrapping gifts in green, black or blue as they are also associated with funerals and mourning. Gifts are not opened when received and they are usually offered by the right hand and acknowledged with a wai.
Dinner and social events
For Thais, eating is a central and important activity. Sharing a meal is fundamental within Thai tradition and you should be ready to taste all dishes served. If the host is not wearing shoes when you arrive, make sure you remove yours before entering the dining room. In general, Thais will expect you not to talk about work related issues during meals and adopt a calm attitude. Avoid talking about Thai monarchy, religious issues or superstitions. It may be suggested that you pick up the tab for restaurant meals. This is actually a sign of respect as the wealthiest person is usually given the privilege of covering the cost of a meal. In general, there are no established tipping policies, but mid-range restaurants will include a 10 percent service charge on your check. When paying in cash or for smaller services, you can tip with any available coin.
Temple etiquette
During your visit to Thailand, you may be granted a visit to a temple. Temples are places of worship so treat your visit with utmost respect. Conservative dress is expected and flash photography should be avoided. Women should never touch or pass items directly to a Monk.
The Ethical Climate for Commerce
Ethical Challenges
On June 24, 1939, Siam, the only Southeast Asian nation to never have been a European Colony, changed its name to Thailand, a word that stands for “Free Land.” The change occurred following a bloodless coup which transformed the longstanding absolute monarchy into a constitutional government. Thailand’s economy boomed from 2000 to 2008 with an average 4 percent GDP growth annually over the period. The country has focused on building a solid infrastructure to support a free-enterprise economy with strategic emphasis on the development of high-technology goods for export. Although the recent financial crisis had a severe impact on Thailand’s economy, there are signs of recovery.
As good as the prospects for business might be, investors often complain about the chaotic political scene. Recent protests from “red shirts” (former Prime Minister Thatskin followers) have alerted foreigners, with concerns of a possible coup. However, regardless of street demonstrations, regular business activities seem to continue with little disruption. While unrest concerns many international business players, local entrepreneurs tend to discount the importance of frequent protests, feeling that they can be coped with.
Nevertheless, as a result of the recent crisis, credit has become tighter. According to Bangkok Bank, the country’s largest lender, debt rescheduling for small-medium enterprises had increased by around 3 percent by 2009. Thailand’s government has put in place a number of initiatives including capital injections for Thailand’s Export-Import Bank and permits allowing Thai companies to offer loans to non-affiliated firms abroad.
State enterprises in Thailand represent a complex puzzle for foreign investors as well. Employing over 300,000 people, most of these companies are in the process of consolidation into a State Investment Corporation, with the stated goal of providing more independence to all state-enterprises. However, some have voiced concerns that this new entity will create private enterprises with access to government funding and opportunities for unfair competition and abuses.
With regards to its social system, Thailand is a traditional society, with historic administrative practices that can lend themselves to exploitation. For example, the Sakdina system allowed government officers to remunerate themselves through the modest retention of taxes and dues collected. Such traditional practices can create a lax attitude to what many consider unethical behavior in a global economy.
Five Compliance and Ethics Issues to Consider
Ma Tha Put
The Ma Tha Put industrial complex is an illustration of some of the risks in Thailand. In recent months a judiciary court issued a temporary suspension for more than 70 projects being developed in the complex in response to the complaints from residents and NGOs over industrial pollution and environmental damage created, critics contend, by the uncontrolled manufacturing facilities at the site. The decision has impacted confidence and foreign direct investment, and it is unclear how the outcome of the court action will impact investors.
Deal with it
The Ma Tha Put case represents a belated attempt to protect Thailand’s coastline from rapid development. At the time the complex was established in early 70s, there was no policy regarding conservation or environmental management. The Ma Tha Put case indicates that this historic deficiency is being corrected and investors will need to consider the environmental impacts of development. Thailand’s authorities have been willing to cooperate with investor initiatives that protect the environment, but a proactive approach to environmental management should be considered basic to any investment strategy.
Political Instability
After 15 constitutions and 18 coups d’état in the last century, Thailand portrays an image of political instability. Investors coming to Thailand complain that the instable investment environment makes forecasting risk exposure difficult. Many expect that political volatility will continue with a repeat of the violent protests and sieges that caused interruptions to operations of Bangkok airports in 2008 and 2010.
Deal with it
The Economist Intelligence Unit ranks Thailand as a flawed democracy, terminology used to describe a country where, even where some regulatory factors are not under control, most administrative processes are set and running regularly. Despite the political scandals, Thais have been able to cope and economic development has continued. Monetary/investment exposure guarantees are possible ways to manage some of the potential business risks. The World Bank through the Multilateral Investment Guarantee Agency (MIGA), for example, can offer this type of coverage.
Corruption
It has been said that corruption is one of the burdens of Thailand. As discussed, some historic practices and attitudes have left an impression in the country that bribery is like an additional tax or service fee to get things done faster. The World Bank has argued that little to no progress has been made in reducing corruption. According to a 2009 poll by the Abac Pol Research Centre, just over 50 percent of respondents said they would tolerate a corrupt government as long as the economic condition improved. It should not then be a surprise that Thailand ranks 84th out of 180 countries in Transparency International’s Corruption Perceptions Index for 2009.
Deal with it
Traditional and popular customs convey a lax attitude toward ethically questionable business practices. However, it is important to understand that corruption is also facilitated by a disorganized political system, low salaries for public officers and educational and financial gaps between the social classes. Dealing with corruption in Thailand is an issue that has started to gain social attention and there are signs of a shift. The Global Corruption Barometer indicates, for example, that a significant percent of the population is willing to pay more to buy from a corruption-free company. This provides an opportunity for global businesses to advertise their ethical business practices, which may draw customers and will help foster greater social understanding of the problem and role business can play.
Taxes & tariffs
The complex and non-transparent nature of Thailand’s tax system poses a difficult task for international companies and individuals running operations from Thailand. A recent report produced by U.S. authorities presents Thailand as a country with high tariffs that remain an obstruction to the establishment of international business interests. The average tariff rate was around 11 percent for 2008. The main concern among foreign business owners relates to a perceived unequal treatment to local and foreign investors, since the highest import taxes apply to products that compete with locally produced goods.
Deal with it
Although, in general, high tariffs remain a market impediment in some sectors, the government is starting to provide concessions for companies listed on the national stock market or provide a value-added to Thailand’s society. Despite their apparent arbitrary nature, these tax breaks are a vehicle to achieving adequate taxation for investors. Businesses should be wary of questionable taxing practices, remembering that Thailand’s drug trade means money laundering is a common risk that is closely monitored by international organizations. Many companies may be able to take advantage of new regulations like a 2010 law that facilitates the repatriation of funds. Businesses should seek guidance from international auditing and taxing firms to better understand these opportunities.
Women and the Sex industry
Thailand is widely known as a center of sexual tourism. This industry has been widely criticized for cases of child and adolescent slavery and abuse and for fostering the growing number of HIV cases. People travelling or working within Thailand should be prepared to confront offers of illegal prostitution services during their stay.
Deal with it
Available statistics show only a small number of Thai women are actually involved in prostitution. However, because of the focus on business travelers, it is wise to tactfully ensure that any new acquaintances introduced by local contacts are not engaged in illicit activity.
