What Thailand’s Global Financial Hub Initiative Means for Aspiring and Existing Businesses

The financial landscape is transforming with the Cabinet’s approval of the Financial Business Hub Act just recently. Prime Minister Paetongtarn Shinawatra’s administration led this legislation and it was a smart move to make Thailand a formidable player in the global financial era.

This initiative signals the dawn of a new era full of opportunities and possibilities for local and international businesses.

The New Financial Framework

The Financial Business Hub Act being approved is a strategic leap toward becoming a global financial hub due to its focus on innovation, robust legal framework offering and attractive incentives.

Components of this Initiative

One-Stop Authority or OSA has been established, as part of the transformation. Its official name is the Office of the Financial Business Hub Regulatory and Promotion Commission which will serve as the primary regulatory agency responsible for licencing, oversight, and policy direction.

The Thai government consolidated these functions under one roof to eliminate bureaucratic roadblocks that have complicated business operations in the past. It is aligned with “Ignite Finance” and “Ignite Thailand” visions. You can read more about them here.

A defining feature of the new framework is the creation of designated financial zones where businesses must operate to qualify for the benefits. This is a zoning approach to drive resources, infrastructure, and talent and create financial clusters.

Regulatory Changes & Business Operations

Businesses can expect clearer pathways to market entry because the OSA serves as a single point of contact for regulatory matters. They are free from the previous fragmented approach where businesses had to navigate multiple regulatory bodies with overlapping jurisdictions.

An operational requirement is the workforce nationality quota. It mandates that all businesses within the hub employ a specified proportion of Thai nationals to ensure that the initiative still benefits local employment and does not focus on fully attracting international expertise. There is still no news regarding the exact percentages, but they will be detailed in forthcoming regulations. Nonetheless, you should factor this requirement when staffing.

The scope of permitted financial activities is comprehensive. It encompasses traditional sectors like banking and insurance and emerging fields such as digital assets and payment services. This is an inclusive move to form a diverse financial ecosystem. One thing to keep in mind is that businesses will be required to serve non-residents primarily. There are some exceptions but they will be clarified in future regulations.

Compliance requirements will still align with global standards, including AML and data security. The goal here is a) for Thailand to meet international expectations for financial governance and b) provide businesses with a familiar regulatory environment.

Opportunities for Businesses

The Act opens up a door full of opportunities for the financial sector as it introduces incentives and operational advantages to attract new entrants and support existing business expansion.

Tax and Non-Tax Incentives

The first advantage is property ownership rights. Businesses are allowed to secure commercial and residential properties which is crucial for entrepreneurs planning to establish and/or expand in Thailand. This provision addresses a longstanding challenge for foreign businesses and makes long-term establishment more feasible.

The tax benefits to be granted by the OSA are designed to be more competitive than those offered by other global financial hubs. The rates are still being finalised but the framework promises substantial advantages for qualifying businesses (may include reduced corporate tax rates and other fiscal incentives).

Immigration and visa privileges are also part of the non-tax benefits package. The processes for work permits and visas for foreign professionals and their families are now more efficient than ever. The smoother process reduces the burden on the administration and helps companies attract and retain global talent.

Sector-Specific Opportunities

The following are unique opportunities for different financial sectors:

• Banking and Traditional Finance

1. 1. 1. Enhanced ability to serve international clients
      2. Streamlined cross-border transaction capabilities
      3. Opportunities for innovative banking products targeting the ASEAN market
      4. Simplified processes for establishing banking operations

• Digital Assets and Cryptocurrency

1. 1. 1. Clear regulatory framework for cryptocurrency exchanges
      2. Support for blockchain enterprises
      3. Opportunities in digital wallet services
      4. Integration with the Digital Asset Act

• Securities and Derivatives

1. 1. 1. Expanded access to Thai and regional markets
      2. Improved capabilities for international trading
      3. Opportunities for new financial product development
      4. Efficient licencing for securities operations

• Insurance and Reinsurance

1. 1. 1. Market access for international insurance providers
      2. Opportunities for innovative insurance products
      3. Simplified entry for reinsurance operations
      4. Better cross-border insurance services

• Payment Services

1. 1. 1. Support for FinTech innovation
      2. Opportunities in cross-border payment solutions
      3. Integration with regional payment systems
      4. Development of new payment technologies

• Fintech Innovations

1. 1. Regulatory sandbox environment for testing new solutions
   2. Support for emerging financial technologies
   3. Opportunities for collaboration with traditional institutions
   4. Access to the growing digital economy of Thailand

Considerations for Businesses

Whether you are a business owner in Thailand or an aspiring one, your success depends on how well you plan and understand these opportunities and requirements.

Market Entry and Expansion

Businesses must work directly with the OSA for licencing and registration. They must also meet specific capital requirements based on their sector of operation and prepare detailed business plans that align with the financial hub objectives.

On top of that, you should plan carefully when establishing your operations within designated zones. You should have a technological infrastructure that conforms with local and international standards, create operational frameworks targeting the same, and implement secure data management systems and operational resilience measures. This is how you plan for the infrastructure and operational setup.

To have effective teams and be able to meet the workforce requirements, you should do the following:

1. Plan meticulously to meet employment quotas
2. Develop training programs to build local talent
3. Create competitive packages to attract and retain skilled professionals
4. Implement knowledge transfer mechanisms between international and local staff

Compliance and Risk Management

Businesses should also establish compliance frameworks that follow compliance requirements such as the following:

• Integration with regulatory reporting systems
• Alignment with international standards and best practices
• Regular updates to comply with the changing regulations
• Development of internal compliance monitoring systems

You should also pay attention to AML compliance. If you have none, it’s recommended that you implement KYC or Know Your Customer procedures. Additionally, you must also develop transaction monitoring systems and conduct training programs on AML requirements and regular audits/updates of AML procedures.

Impact on Different Business Types

For New Entrants

New businesses that are entering the financial sector should concentrate on performing a thorough market analysis. By doing so, they can find opportunities within the hub and devise strategies that leverage available incentives.

It is also wise to build relationships with key stakeholders like the OSA and some potential local partners. Don’t forget to create realistic timelines that account for regulatory approval processes.

If you want a successful establishment of your business, here are some factors that you might consider:

1. Optimal business structure and registration type
2. Suitable locations within designated zones
3. Compliance frameworks development from the ground up
4. Local banking relationships and operational infrastructure

Then, you allocate resources by investing in necessary technology infrastructure and setting aside enough capital for initial operations and contingencies.

For Existing Businesses

As an existing player in the field, your focus must be on aligning current operations with the new requirements. Update your systems and processes, if needed, to meet hub standards.

Try to restructure your operations to see if you can maximise available incentives. And, as obvious as it may sound, you should devise your own strategies if you want to maintain a competitive advantage over other players under the new framework.

How so? You can either expand your service offerings to new market segments, develop innovative products enabled by the new regulations, or build new partnerships with incoming international firms. These are but a few examples of expansion opportunities. Choose which suits your setup, or combine if necessary.

For some quick tips to reposition your company for competition, you may want to:

1. Reassess market position in light of new competition,
2. Use existing market knowledge and relationships, and
3. Identify and capitalise on first-mover (be the first to introduce a product or service to the market) advantages in new areas

Conclusion

The recent approval of the Act for Thailand to become a global financial hub gives you the chance to participate in reshaping Southeast Asia’s financial landscape. The success lies in the active participation of the business community. Will many aspiring and existing businesses start and follow through?

How will you position your business in this dynamic landscape, one that can change faster than an eye blink? Discuss with us and discover how you can use our expertise in corporate matters (from accounting services to business licences and visas). Remember, your next steps lie in your willingness to build upon the foundation.