How Russian Exporters Can Access The Thailand Consumer Market

With Russian exporters and manufacturers now looking to access and develop markets in Asia, we can take a look at the potential for the Thai market.

In 2020, Russia and Thailand agreed to work together and laid framework plans to raise bilateral trade to US$10 billion by 2023, in part to help reboot the economy after the Covid-19 outbreak.

Vladimir Ilichev, Russia’s Deputy Economic Minister, Thai Commerce Minister Jurin Laksanawisit said the two parties committed to raise two-way trade with mechanisms similar to the bilateral trade development between Russia and Vietnam after the signing of the Vietnam-EAEU Free Trade Agreement in 2015.

In 2021, Russian-Thai bilateral trade amounting to US$2.7 billion. Russian exports to Thailand accounted for US$1.5 billion, led by crude oil, steel, arms, and fertilizer.

Given that both Governments are keen to develop trade, there are opportunities for Russian companies to both sell to and invest in Thailand in order to buy and sell on the Thai and Russian markets. Thailand is a good choice as a developing trade and services partner for Russia, it has a growing medium-high per capita income level of US$7,800, and a population base of 69 million. It is therefore a significant consumer market, with the additional benefit of being an ASEAN manufacturing centre.

New research by the McKinsey Global Institute (MGI) finds that consumption in Thailand could grow sharply from US$120 billion a year to US$410 billion over the next decade. By 2030, up to 90 percent of Thailand’s population could belong to the “consuming class”—spending more than $11 a day in purchasing power parity terms and therefore able to afford not only basics like food and housing, but also discretionary spending. That figure is up from 70 percent today. The proportion of the population in the two highest tiers of consumers (spending more than $30 a day) is expected to double from today’s 20 percent to 40 percent in 2030.

Thailand’s largest cities, with access to the Thai middle class are Bangkok, Nonthaburi, Nakhon Ratchasima, and Chiang Mai.

In terms of exports to Thailand, Russia currently sells a variety of products, ranging from automobiles and parts being the biggest exports, followed by rubber and latex goods, machinery and parts, and processed fruits. There is also a growing Russian diaspora in Thailand given the current situation and the attractive expatriate lifestyle.

There are difficulties created by the Ukraine conflict as the Thailand–Russia Chamber of Commerce (TRCC) which has suggested that Thailand may need to export goods to Russia through other countries. The TRCC noted, however, that goods can still be exported to Russia through nations such as Belarus and China.

There are other benefits for Russian companies to establish operations in Thailand: Thailand is a member of ASEAN, which means there is Free Trade between Thailand and other ASEAN members Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, and Vietnam. Collectively, ASEAN nations have Free Trade Agreements with both China and India, meaning Thailand is an excellent base to reach out to the rest of Asia.

Russia has asked the Thai government to support the Mir card for use in Thailand to accommodate Russian tourists. About 1.7 million Russian tourists visited Thailand in 2021.

Establishing a marketing and import-export presence in Thailand is typically arranged through the establishing of a local Representative Office. These are not expensive to operate and can be used to assess the viability of the Thai market by establishing a limited presence in the country.

The function of a RO is limited to rendering non-revenue-raising services on behalf of its head office. A representative office cannot generate income from its business activities and is not permitted to receive any purchase order, or sign sale and purchase agreement, or negotiate business with any person. It can only engage in a limited range of activities such as sourcing of local goods or services in Thailand, reporting local business development and activities to its head office, and engaging with clients on behalf of its head office. Russian companies must obtain a foreign business license before establishing a RO in Thailand, as it is considered a service business under Schedule 3 of the FBA.

It is worth noting that Russia also has a Double Tax Treaty with Thailand, which if used correctly can reduce profits taxes for Russian entities based in the country. Professional advise should be sought.

Market analysis, research and entry assistance in Thailand can be obtained from our Bangkok offices where our firm has been assisting foreign investors and exporters for many years. Please contact thailand@dezshira.com

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