Hardworking entrepreneurs can make it in the Kingdom

Hardworking entrepreneurs can make it in the Kingdom. But to get there, you must take in some hard earned advice and act accordingly. Otherwise you may end up a loser.
     Most Swedish upstarts here are winners if we measure success as getting by, stay up and live comfortably with reasonable quality of life and personal safety.
     These are the main conclusions from a round table discussion on starting up in Thailand, featuring Mr. Bengt G Carlsson, Commercial Counsellor Swedish Embassy Bangkok; Mr. Robert Elm, Managing Director Intenture Ltd.; Mr. Stefan Widing Executive Director Scandinavian Village; Mr. Johan Winlof Director Connector Asia and Mr. Hakan Alm Managing Director Vision House Ltd.
     Together they represent many facets of Swedish entrepreneurship, from advisers and investors to hands on managers.

Christer Nilsson “The first question any entrepreneur should ask: have I got a market in Thailand and how do I find out the answer?”

Bengt Carlsson “The trade section at Sweden’s embassy offers general information about export and import. For example, if a Thai producer wants to know what regulations that govern exports to Sweden we will be able to tell about tariffs etc. If the request is complicated we may ask the Trade Council in Stockholm for help. We do not charge for basic information requests. It is however a grey zone between free and charged services and we decide on a case by case basis. Services not for free include market surveys or finding an agent. A service we do not provide is expert legal advise. But we can of course recommend good law firms.”

Robert Elm “In the real world, do you face requests from large companies? Small and medium sized should be the ones with a need for your services.”

Bengt Carlsson “You are right. Large corporations are not common clients even if it happens. They usually have their own resources.”

Robert Elm “We did not do as Bengt suggested. We were a group of people who had worked in Thailand, knew the market and believed there was an opening for our idea to set up a software and systems company in Bangkok. It was more of a gut feeling than analysis. However, it is always right to ask for advice and of course especially if you are new in the market, my recommendation is to seek information from the Embassy’s trade section or the local chamber of commerce. In addition to facts and information, they also have a very valuable network in the business community that might be useful for a newcomer to get in touch with.”

Stefan Widing “My first advice is to ask a consultant who knows the local market. Begin by booking a few hours there. It is money well spent. Step two is the market survey. A tip is that often companies have done something similar to what you have in mind and their experience can be drawn upon, one way or another. A market survey and creating a network of contacts are the two most important issues. In our case (establishing a long stay housing project for senior Scandinavians/ editor’s remark) we did have solid experience from Thailand but needed to identify and create a market in Sweden. We spent a lot of money before we went ahead.”

Johan Winlof “Don’t spend a lot of money in one big splash. Do it in stages. I have encountered several Swedish entrepreneurs who have spent big initially and done the serious thinking later. But often a meeting with a consultant or the embassy is enough for a start. Our recommendation is a multi staged approach. First talk about the business idea. Then, if it seems to be a viable concept proposed, conduct an initial market survey where we take a closer look at issues like growth, rules and regulations in a rather superficial way. Not before these two steps have been taken do we recommend a third one, a full market survey. A small company can not do all this on their own. It is difficult. But supported by a consultant or the embassy, they can get a picture of what it is like in Thailand. Larger corporations often act differently. They may have a board decision from the owner to set up operation in Thailand and they just have to do it – even if that takes time and require substantial efforts – and work hard. Entrepreneurs that arrive in Thailand with a product or an idea completely new to this country have to be even more careful. In such cases it may be worthwhile to look back and analyze the demand situation in established markets. Thailand is like any developing country. Tough and demanding. There are no exceptions.”

Hakan Alm “As an example, let me tell you my very concrete experiences from setting up a diving operation in Phuket some years ago. My contribution then was the six seven years in Thailand and that I am a hobby diver and thus had met people in the Thai diving business in Phuket. We in the new venture, noted increasing tourism as well as higher interest for diving. Add to that much better safety arrangements and quality of equipment for divers over a period of years. Diving developed from a rather adventurous to a fairly undramatic matter. It all translated to a higher market potential for diving operators. Realising this we began to look on what was offered and what we felt was needed, not simple diving schools but quality live aboard ships. It turned out to be a quite pricey market, not bad but also not very good. We started by charging budget boat prices for live aboard on our very well equipped diving vessel, especially the kitchen which featured a large a la carte menu with many dishes, and went to target North Europeans, Americans and Australians. A large part of our marketing was done over the internet. That approach generated volume which made up for the lower price.”

Robert Elm “Would you recommend the same diving ship venture again today?”

Hakan Alm “Yes and no. There are opportunities. But not for simple dive shops. I do for example believe in exclusive boats targeting upscale customers. That is always sellable, and Thailand as such do not need any marketing. Divers know we have world class diving sites here.”

Christer Nilsson “So having done all the homework does not guarantee success but it limits the risk for a complete failure, and it is still lots of hard work required for a smooth start. But even if the market looks bright, some businesses in Thailand are best left alone to the locals. Any examples?”

Bengt Carlsson “I don’t know. But we do get a range of naive requests. Rather wild things. We try in an early stage to make them understand that this is not a very good idea, really. This week a couple of them called us after a Thailand holiday and said they wanted to open a bar. In those cases, one has to tell them that it is maybe not that easy.”

Robert Elm “In our business segment of IT services and products, we have one activity I recommend to be extremely careful with and that is trading off the shelf software, especially high end products with a higher value and price. Thailand has a high frequency of software privacy. The ‘Pantip-Plaza-Spirit’ still rules, even far into large established organisations and companies. This attitude makes it more difficult to get an understanding for the right value of software products.”

Johan Winlof “Start with what you are good at. Your competitive edge. And what Sweden is good at. Make your own niche. Compete with low-priced goods is for example very tough in Thailand. Another difficult area with time-consuming negotiations during bidding and evaluation is doing business with government and state owned organizations.”

Stefan Widing “Well, government business, if you create the network and have the right connections, then maybe you can try it. Personal connections can open doors.”

Bengt Carlsson “Now, if you get a problem with state and government organisations, we as the official representative of Sweden, can support you. I have a fresh example when we on behalf of a Swedish company approached a state agency and presented the grievances of the company. The Swedish company had on two occasions provided winning bids for a project which all of a sudden was cancelled and a new tender was offered. This intervention on the higher official level has not yet led to a 100 percent satisfactory result, but I think we will get there in the end. The Thais have felt compelled to take action.”

Hakan Alm “There are areas to avoid. For example projects that are decided at such a high level, or within a certain trade or business, that they are prone to corruption. It could be construction, especially construction material, or food. I know a producer of pre-packed foods that had to retreat from the market because they could not deal with the unofficial obstacles. It may be outright corruption or simply relations you do not have. Watch out for lobby-infected areas, where politics come into the picture. If you get in, keep in mind that there are many more or less dormant rules and regulations that can be activated and utilised by enemies if they want to damage your business.

Johan Winlof “Which takes us back to the need of a market survey. It is important to be prepared. Watch out for businesses easily influenced by trouble makers, like large industries and projects. Hidden obstacles like corruption and restriction to foreign ownership may surface.”

Christer Nilsson “Thailand has a wide range of juridical formats for business operations. From partnerships to fully foreign owned enterprises. So what kind of company set up should one opt for?”

Bengt Carlsson “The customer makes the choice. What do you want to achieve? We offer a service called business support office, BSO, at the trade section. A company gets an address, phone and fax numbers and we take all the calls and mails. Some companies may not need an office for the time being, others like to try their wings without too much expenditure.”

Robert Elm “If possible, I recommend a company under Board of Investment, BOI, regulations. Anyone who can use it should give it a try. Not only because of tax breaks and other incentives but also for the trouble free handling of formalities for expats, like getting an extended visas and work permits. It is also important for me to own the company for real and not be forced into risky partnerships just for the sake of being allowed to register a company. Therefore my recommendation is to register as a foreign owned company, and BOI definitely supports in this aspect”

Stefan Widing “We picked BOI too, for other reasons. Not to get rid of bureaucracy or have tax breaks but because we get full ownership of land and buildings at Scandinavian Village. We have never used the visa and work permit privileges from BOI, still do all that at our local immigration and labour department offices and it works fine for us. I like to add that a BOI approval do not necessarily mean fast decisions. A land purchase took us four months because the land deal must be approved by BOI. It did not matter that buyer and seller agreed rapidly in no time at all. Having said that, I advise against setting up a company here as a limited or registered partnership. You get no advantages. A company limited do however work well, not least because there are many similarities in the Thai and Swedish company rules and regulations which makes it an easy company format to work with and to understand.”

Johan Winlof “It depends on what size you should go for. The BOI, representative office and fully foreign owned (a fairly new company format introduced in Thailand/editor remark) companies do all require quite some time to register as well as lots of documentation to support the applications. And there are also tougher rules on capital injections in them than for a company limited. BOI-approved companies must live up to high, detailed and tightly scheduled reporting rules. Field inspections by BOI officers who check that everything goes by the BOI book are not uncommon.”

Hakan Alm “Many overlook that representative offices must pay VAT but have few ways to compensate it or claim any VAT returns. So in a way you have seven percent higher costs in a representative office than you would in a company limited, for example.”

Johan Winlof “The most important drawbacks in a limited partnership is that the manager must be a Thai national and that this manager has unlimited responsibility for everything within the company. In a registered partnership must the managing partner be a Thai national. But in a company limited you are free to have a foreign national as managing director.”

Stefan Widing “We are a first in our trade with full foreign ownership. It required a lot of networking, information and contacts to create an atmosphere of trust and understanding.”

Christer Nilsson “Only a few Swedish businesses in Thailand are started without any local partner paving the way or simply being there because the law says so. So partner picking is a big, importance and difficult issue best dealt with way before the legal paperwork is started. How to go about it?”

Hakan Alm “You can of course pick up some Thais from the street and put in as nominees but you must be aware that any shareholder with more than five percent shareholding in a company limited can cause lots of trouble, if they wish to do so. You can get into very sad issues with the wrong partners. So you should either find a good solution with nominees, which in itself is illegal and may get you in trouble if discovered, or a real partner and shareholder. It is always difficult to find good partners in a joint venture. But to for example put all Thai shares in your wife’s name is really stupid. And, again, using nominees is illegal!”

Johan Winlof “Start asking yourself Ôdo I need a partner?’. Can I do it myself? Regardless of solution I always recommend to write a shareholders agreement that is as detailed as possible. A shareholders agreement in a company limited is valid in court and all serious Thai partners follow them too. Shares can be assigned with different voting rights, this is legal in Thailand, one way to control the company. Shares must be paid up and that can be solved by loans to shareholders if needed. Another matter, when we discuss power and influence in a company, is the benefit of being a sole director. The director has wide ranging rights, and of course duties as well.”

Stefan Widing “Put time and effort to find a good Thai partner. If you succeed, and get a serious and engaged Thai partner, you have the ideal formula. It is maybe like winning the lottery, but it solves so many issues. It makes enterprising so much easier. I strongly recommend that you always spend resources and time to localise a real Thai partner who is cooperative and truly interested in the business.”

Christer Nilsson “As we begin to touch on problems we may as well take in some experiences and views on that area now.”

Johan Winlof “Make sure that all bookkeeping is done correctly and transparently.”

Stefan Widing “Yes. The room for interpretation is wide in Thai laws, don’t cheat with your bookkeeping! We were visited eight times in one year by government officials that wanted to check our books. Someone wanted to get us in trouble. But we have everything in order. Each time we welcomed the officials friendly and provided all the documentation they asked for. They never complained after the inspections. Finally we found out why they came and asked to meet the officials in charge, which we were allowed to, and that information and those talks, also very friendly and polite, led to us being left alone.”

Johan Winlof “And you must realize that Thailand is a developing country, adapt and act accordingly. It is not possible to compare Sweden with Thailand!”

Hakan Alm “The discussion has taken a turn to the negative for a while. Maybe we should remember why we are here. Because hardworking entrepreneurs have opportunities in Thailand. Just don’t take too much for granted.”

Robert Elm “A sad area to be aware of is the corruption and kickback syndrome. Even though international ethical businesses and transparency standards are gaining acceptance, it still seems to be common, especially in large projects. Kickbacks may appear also among your own staff who has sales and purchasing roles. I have experienced it myself in my own organisation and have been forced to take actions. There is definitely a need to an open way, discuss it within the company and set up your ethical standards and policies.

Johan Winlof “Kickbacks may appear more often in large projects, where decisions are taken at a high level. It is more common in state owned organisations. In private business there is more transparency.”

Bengt Carlsson “But there is also a development among civil servants towards reforms, transparency and responsibility. Civil service reform is underway and the Swedish government, through Sida, has been able to assist with funding projects that strive to increase transparency and efficiency in the Thai government.”

Johan Winlof “The Thai media has played a big part in exposing corruption, increase transparency and openness in Thailand. Media expose scandals and unfair practices. And Thai students have become more questioning. They ask questions and express opinions. It has to do with a more open society. It is a positive development.”

Stefan Widing “I was involved in a case in Thailand where a foreigner used his lawyer as the Thai 51 percent partner. This foreigner started to be suspicious when he discovered that his car was not registered in his name. He had purchased a house and car and other assets in the company’s name. But we did actually manage to solve the problem in cooperation with the lawyer.”

Johan Winlof “We had a Swedish client who already had a Thai partner and transferred assets to the Thai company when we stepped in. When the Swedes began to be suspicious they asked us to assist. A quick look into the bookkeeping was enough to see that the local partners had pocketed funds without telling the Swedish side about it. First we tried to remove the Thai partners from the board. We called to an annual general meeting, AGM. They responded through their lawyer, who discovered formalities missing in the call for AGM, but finally it was all in order and the AGM could take place in our office. Immediately the Thais started to protest against all proposals. Pretty soon it developed to a fist fight. The Swedes had brought two Thai police officers as protection but they did absolutely nothing to stop the fighting and just sat and looked on. All of a sudden one of the Thais pulled out a gun. Then I interfered with full force. But I found out later that the gun was not loaded. We managed to pull the Thais out of the office. There the building’s guard force took over and finally deposed the Thais.”

Stefan Widing “Still, watch out for lawyers as partners. The guy we helped had unknowingly put assets worth THB 78 million in his lawyers lap…”

Hakan Alm “I have been cheated by foreigners, several times. It is not unusual, and something one actually must be very aware of. It may feel like an easy way out and the right way too, turning to your fellow nationals or other farang, but be careful!”

Christer Nilsson “If deciding company format and selecting partners are hard issues, managing the Thai staff you employ is a totally different matter. Thailand has a culture with traditions the average Swedish manager have never heard of. How do you manage staff here? From the small core to a growing organization?”

Stefan Widing “There is a huge difference in the ways Thais organise themselves compared to what we are used to in Sweden. Thais think differently. As a Swedish boss one may like to flatten the organization, but that can be counterproductive in Thailand. If you rush in too hard, ask for changes they don’t like to have and feel unhappy about, you may fail. At the same time, it is obvious you can delegate responsibility in Thailand. Training, education and not growing too rapidly are key issues to watch. Be clear with who does what as well as with rules and regulations. Much more clarity is needed here than in Sweden. A Swedish boss might want the employees to see and learn what should be done while you in Thailand, might need extremely clear instructions and rules. If you start to manage the wrong way you may cause the staff to feel bad. Accept that this is a different culture!”

Robert Elm “Teamwork is a lot better in Thailand. My experience is that Thais work a lot harder and better in and for the team than Swedes do, and with much less complaints. Teamwork is appreciated and well received in Thailand.

Hakan Alm “One has to be a micro manager, and sometimes show exactly how something should be done, and then it works fine. When you reach a certain level of experience and education of local staff, then it is possible to work with Thais like you do in Sweden. At that stage, locals act on their own and solve the issues.”

Johan Winlof “Culture is essential to understandings. One should absolutely study Thai culture and be aware how it is integrated in society.”

Hakan Alm “Right. One may for example be fooled by a Thai that speaks excellent English. After a short while it turns out that they did not understand what you meant even if they got the words, and this has nothing to do with intelligence! It is simply how you interpret what is said in the Thai cultural context.”

Robert Elm “Low English skills is a problem in my trade where basically all communication, both oral and written, needs a decent English language.”

Stefan Widing “English is becoming better, but is mostly at a theoretical level. Spoken English is often poor because they don’t practice.”

Hakan Alm “If you learn Thai, it solves a lot. You will understand the culture. And after a while you realise, when faced with something you initially felt weird, that Ôyeah, you can do it that way as well!’ and that is worth a lot.”

Christer Nilsson “Sweden has just said no to the Euro in a referendum but we are indeed a EU member. In what, if any way does Sweden’s EU membership has an impact on us doing business in Thailand?”

Bengt Carlsson “There is sometimes a negative image of the EU in Thailand, right or wrong, and some of it is caused by the agricultural policy in EU and some by environmental regulations. Both are often criticized as hidden trade obstacles. Sometimes we have to respond locally and explain how the system works. On the plus side, there are many funds and money available in the EU for enterprising outside the EU. Sweden is unfortunately one of the worst EU nations of all when it comes to making use of these support opportunities.”

Christer Nilsson “Well, there has been good advise and experiences shared during the roundtable discussion, and also some whining from the participants. But there is a reason you are all here?”

Hakan Alm “We came to Thailand because the possibilities to get something done are great for a hardworking entrepreneur. Nothing is easy but everything is possible. Thailand is a livable country and Bangkok is a safe and sound city with relatively low cost of living. There may be other places where we would make more money but feel less happy in.”

Johan Winlof “Thailand was the first country I arrived at in Asia 17 years ago. It is also the country I like the most and it has become my new home. It is wonderful for an entrepreneur as it has relatively free and growing economy, young population, and open culture. Furthermore is it a natural centre in South East Asia if you want to expand business to other countries in the region, including China.”

Stefan Widing “I came to Thailand in the first place because I feel convenient with the way you are able to choose by your self what to do with your life, I mean it’s up to your self if you want to save money for your pension or spend them. Tax is low and you can actually save to the pension by your self. No property tax at all as one example. I also agree with Hakan that nothing is easy but a lot of opportunities are in place.”

Bengt Carlsson “In conclusion, I would say that even if we have highlighted some problems or obstacles here today, the fundamentals for doing successful business are in place in Thailand – otherwise there wouldn’t be so many Swedes and Swedish companies active here. I would also like to point to the fact, that the economy is doing quite well at the moment and the future as of now looks quite bright for the Thai economy.”

To which the other participants nod in agreement, rounding up the following pieces of advise:
     – Don’t lose perspective and never forget that you are a foreigner!
     – Keep in mind what your competitive strengths are.
     – One should not become ‘Thai’, not because it is in any way bad but because there are 61 million Thais around that are a lot better than you in being Thai!

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