Opportunities For Russian Business In Thailand As Lavrov Wants Russia-Thai Trade At US$10 Billion

Op/Ed by Chris Devonshire-Ellis

Existing Double Tax Treaties And An Agreed Scope Of Investment Provide Plenty Of Room For Russian ROI In ASEAN 

The 52nd ASEAN Foreign Ministers meeting is currently taking place in Thailand, with Ministers from all the ASEAN nations, together with those from Russia, China, India, Japan, the European Union, Australia, New Zealand and the United States all taking part. The Russia-ASEAN dialogue was held yesterday, with Russian Foreign Minister Sergey Lavrov taking part in several ASEAN-related events in Bangkok during the organisation’s 52nd Foreign ministers’ meeting. He held negotiations with his Vietnamese, Malaysian and Thai colleagues, as well as with top diplomats from other countries. Russia has also invited Malaysia’s Prime Minister Mahathir Mohamad to attend the upcoming Far Eastern Economic Forum in Vladivostok, which will be held early next month.

In terms of trade, Russia-Thai trade volume saw a 17% increase in 2018, with agricultural trade increasing by 39%. Lavrov wants to take that further and has set a target for bilateral trade to reach US$10 billion by 2022. Key areas of mutual interest for the two countries are energy and infrastructure projects, agriculture, tourism and transportation. Russia is also looking at establishing a Consulate in Phuket. Sergey Lavrov’s visit, which was concluded yesterday, will be followed by a number of Russia-related events in Thailand. A Russia-Thailand business forum will kick off in August in the capital, with a focus on cooperation in robotics, pharmaceuticals, transportation, agriculture, and banking. In September a bilateral forum on digital cooperation (which is also one of the key ASEAN priorities), will be held in Bangkok, with Russian companies presenting the latest telecoms and computer security technology.

Russia-Thailand Double Tax Treaty
Russia and Thailand already have a Double Tax Treaty (DTA), which are useful tools to facilitate trade and use as tax reduction mechanisms. They mitigate against the potential for being taxed in two countries, and often provide clauses that permit the reduction in income tax, VAT, and other pertinent taxes between citizens of Russia and another treaty state. This means the application of them can help open up new markets in Russia and vice versa by reducing the overall tax burden. This can have significant impact on trade profitability. Professional advise is needed to enact this, however it can mean profits tax reductions of between 5-15% when structured properly.

Thailand & The Eurasian Economic Union
Thailand is also understood to be holding negotiations with Moscow over a potential Free Trade Agreement with the Eurasian Economic Union. This would significantly reduce duties on applicable goods and services included within that treaty. As and when this occurs, bilateral trade between Russia and Thailand will receive a massive boost. An example of this is with nearby Vietnam, which when it agreed at FTA with the EAEU saw Russian investment increase from close to zero to US$10 billion in just two years.  Vietnam is also a member of ASEAN, with Russian businesses investing there also able to sell produce manufactured there across the ASEAN bloc, duty free. This is important as the ASEAN nations are all going through a period of significant GDP growth.

Russian entrepreneurs in Thailand should think about these developments. When national governments agree to cooperate over trade and actively want to increase that, it becomes state policy. That means the bilateral trading environment becomes easier, and opportunities begin to emerge. It is time for Russia businesses to assess Thailand as a market.