Thailand’s Eastern Economic Corridor – Will this be another failed project in ASEAN?

Photo: Prayut Chan-ocha/Wikimedia Commons

The Eastern Economic Corridor will diversify the Thai economy and create a booming economic hub on the Eastern Seaboard.

by Oliver Ward

Investment has been pouring into Thailand’s Eastern Economic Corridor (EEC) as foreign companies sniff out investment opportunities and seek to turn the three eastern provinces of the country into a technological manufacturing hub. But as foreign investment increases, Thailand’s government are risking turning their Thailand 4.0 dream into an illusion.

The project hopes to turn the Chonburi, Rayong and Chacoengsao provinces in the east of the country into a special economic zone by 2021. It will be achieved by improving transport connectivity in the region and by ploughing investment into manufacturing and service industries.

Thailand has significantly less special economic zones than other countries in the region. The Philippines, for example, have enjoyed considerable success, with the establishment of special economic zones driving foreign investment into the country.

Country Number of Special Economic Zones
Philippines 358
Vietnam 400
Thailand 10
Myanmar 1
Malaysia 1

The region has great potential and is already meeting expectations

The region has already undergone 30 years of development as part of the Eastern Seaboard Development Project. As a result, the region already has established petrochemical, automobile and electronic industries.

The development of the region increased national exports by 12% and the Thai economy grew 7% per year over the first twenty years of the project. The EEC project aims to expand on these already impressive figures and establish Thailand as one of Asia’s Tiger economies.

The government has outlined 15 major investment projects

The Thailand 4.0 vision includes the development of five existing industries and the emergence of five new industries. The EEC plans aim to build on existing automotive industries, smart electronics, affluent medical tourism, biotechnology, and food innovation in the region.

The government plans to establish new robotics industries, aerospace engineering, logistics and aviation, biofuel industries, and medical services. The Eastern Economic Corridor will provide the drive and impetus behind the adoption of these new industries to the country.

Improved connectivity and infrastructure will create a manufacturing hub

To kick-start the EEC, the government have selected five projects of high priority. Most of these are aimed at increasing infrastructure in the area to support the prospective economic opportunities.

The U-Tapao airport is being extended to increase its capabilities. A second runway is planned, along with a 2.24 million square foot second terminal.

Laem Chabang Port will also be developed to handle increased traffic. The port is expected to increase its container accommodation from 7 million to 18 million a year. Car export accommodation is also expected to rise from 1 million to 3 million units a year. The development projects will establish Laem Chabang as a gateway to ASEAN and the region.

High Speed Rail projects are in the pipeline. The plan is to link Bangkok to Rayong with a high-speed rail line, thereby putting three airports within one hour. The railway will be able to accommodate 110 million passengers a year.

The most lucrative development project could be the addition of a double track railway between sea-ports and industrial zones. According to Deputy Prime Minister Somkid Jatusripitak, the project aspires to link to China’s One Belt One Road initiative. Connecting Bangkok with Laos and Kunming in China.

Once fully operational, the EEC is expected to create around 100,000 new jobs and increase Thailand’s GDP by 5% annually.

Where is the money coming from?

The project will be funded from a mixture of foreign direct investment, state funding and public-private partnerships (PPPs). Thailand’s board of investment received US$6,268.55 million in foreign investment between January and November of 2016, the bulk of which is expected to be spent on projects in the EEC. Russia is one of many companies interested in investing heavily in the project.

Country Investment Jan-Nov 2016 (US$ million)
Japan 1,133.8
Singapore 756.1
China 721.0
Hong Kong 558.6


The government estimates that the project will require US$43 billion over the first five years.

Where will the US$43 Billion be spent?

The government are offering glittering incentives to foreign investors

To boost foreign investment, the Thai government are offering a host of incentives. There is a promotion package of a 50% reduction on Corporate Income Tax (CIT), well below what is permitted by the BOI-Act. As a result, the government have suspended more than 100 laws under the Eastern Economic Corridor Bill, to remove obstacles for foreign investors to do business in the region.

Land is being leased on leases of up to 99 years and the personal income tax rate has been lowered to a rate of 17% for management and experts. Five-year business visas are being made available to skilled foreign workers. The automobile industries in the EEC will be exempt from import taxation for up to eight years.

Deputy Prime Minister Somkid is offering “super privileges” to Chinese investors, which include removing the current limit of 49% on foreign shareholders.

While these privileges will undoubtedly ignite foreign investment, the EEC bill and suspension of so many Thai laws is concerning academics.

The government is selling off Thai rights in exchange for foreign investment

The economic benefits of the EEC dream are undeniable, but the suspension of Thai law to create the Special Economic Zone of the EEC could turn the project into a Thai nightmare.

Somnuck Jongmeewasin, a lecturer at Silpakorn University is concerned that Thais would end up as “second class citizens” in a zone where foreign multinationals operate above the Thai law.

Foreign corporations would be able take advantage of the low tax rates, and funnel profits out of the country. Exempt from Thai law, the establishment of the trade hub would only make it more difficult for domestic companies to compete with foreign companies in Thailand paying significantly less tax.

“This will be just like Hong Kong in the colonial era,” he said. “Ten laws and more than 100 articles will be waived for the establishment of the EEC and this will eliminate some legal protections in regard to the rights of Thai citizens.”

Thailand risks opening the door to a new form of colonialism

The decision to waive city planning laws means that the EEC is free to establish a special economic zone on whatever land it chooses within the three Eastern provinces. This can be done regardless of local regulations.

“If local people are lucky enough not to be driven from their land for special economic zone development, they will find themselves alienated in their own homeland as all the regulations and resources will only provide benefits for foreign investors”, Somnuck added.

He is not the only one concerned. Decharut Sukkumnoed at Kasetsart University echoed his concerns. “It is very likely that large amounts of land will be taken from local people’s lands and distributed to investors,” he said.

With lower levels of taxation and more relaxed visa approvals, foreign firms will be able to establish themselves in Thailand and bring in foreign specialists to undertake the skilled labour. As a result, the project may not even boost the local population and economy through meaningful and skilled employment.

The EEC dream looks alluring and promises to add significant value to Thai GDP, but current government policy risks letting the benefits trickle through Thai fingers into the hands of waiting foreign firms. Thailand escaped from the chains of colonialism, now she is about to voluntarily put them back on.