THAILAND

Region : Asia Pacific

Edition : June 2008

D&B Country Risk Indicator

This "DB" Rating Indicates: Trend

DB4a Moderate risk

Significant uncertainty over expected

Improving

The country's overall risk profile is

returns. Risk-averse customers are improving as a result of favourable
advised to protect against potential political/commercial, economic and/or
losses. external developments

The 'DB' risk indicator provides a comparative, cross-border assessment of the risk of doing business in a country and
encapsulates the risk that country-wide factors pose to the predictability of export payments and investment returns over a
two year time horizon. The 'DB' risk indicator is a composite index of four over-arching country risk categories:

Political risk - internal and external security situation, policy competency and consistency, and other such
factors that determine whether a country fosters an enabling business environment;

Commercial risk - the sanctity of contract, judicial competence, regulatory transparency, degree of systemic
corruption, and other such factors that determine whether the business environment facilitates the conduct
of commercial transactions;

External risk - the current account balance, capital flows, FX reserves, size of external debt and all such
factors that determine whether a country can generate enough FX to meet its trade and foreign investment
liabilities;

Macroeconomic risk - the inflation rate, government balance, money supply growth and all such
macroeconomic factors that determine whether a country is able to deliver sustainable economic growth to
provide further expansion in business opportunities.

The DB risk indicator is divided into seven bands, ranging from DB1 through DB7. Each band is subdivided into quartiles (a-
d), with an 'a' designation representing slightly less risk than a 'b' designation and so on. Only the DB7 indicator is not
divided into quartiles.
Key Facts

Country Overview:
Population: 64.2m Thailand is located in Southeast Asia and borders
Burma, Malaysia, Cambodia and Laos. The country
Surface area (sq km): 513,120 was ruled by an absolute monarchy until 1932, and
the monarchy retains a powerful position in society
Capital: Bangkok and commands enormous respect across the
Timezone: GMT +07:00 political spectrum.

Official language:
Head of state:
GDP (USD):
GDP per capita (USD):
Life expectancy (years):
Literacy (% of adult
pop.):
Thai Since 1932 Thailand has alternated between periods
of weak elected coalition governments and military
King Phumiphon backed governments; the most recent coup was
Adunyadet when former PM Thaksin Shinawatra was toppled in
September 2006. The country returned to civilian
176.6bn rule in early 2008 after an election in late 2007.
2,750 Thailand has a free market economy, but state
71 influence remains in some areas, and corruption is a
serious problem. Exports (and high-tech
92.6 manufactures in particular) are a key growth driver:
the country is the world’s largest manufacturer of
computer keyboards. However, Thai firms are seen
as increasingly uncompetitive against low-cost
Chinese producers of high-tech goods.

Trade & Commercial Environment

Trade Terms

Minimum Terms: SD

The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export
trade with the stated country.

Recommended Terms: LC

D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum
terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to
limit the risk associated with a transaction made on minimum terms.

Usual Terms: 30-90 days

Normal period of credit associated with transactions with companies in the stated country.

Transfer Situation

Local Delays: 1-2 months

The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports.

FX/Bank Delays: 1-2 months

The average time between the placement of payment by the importer in the local banking system and the receipt of funds by
the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system.
Trade & Commercial Environment
In May 2008, the government agreed to raise the minimum wage in Bangkok and surrounding provinces by
just over 4.5% to THB203 (USD6.50) a day; it will increase the minimum wage elsewhere based on a 5%
inflation rate. Although the increase is below inflation, it will help to stabilise private consumption;
nonetheless, increased labour costs will cut firms' margins further. Between January and April, Thailand's
FX reserves increased 21% to USD108.4bn. While Thailand registered a trade deficit in early 2008, net FX
reserves increased as a result of strong services income (e.g. from tourism). Despite the Thai central bank
removing its capital controls in March, uncertainty in Asian financial markets has obviated any large inflows
of international funds.

Export Credit Agencies

US Eximbank Full cover available

Atradius ST cover available
ECGD Full cover available
Euler Hermes UK Full ST cover available

Economic Indicators

2005 2006 2007e 2008f 2009f

Real GDP growth, % 4.5 5.0 4.8 5.5 5.5

Inflation, annual ave, % 4.5 4.7 2.3 5.5 3.0

Govt balance, % GDP 0.2 0.1 -2.0 -2.6 -3.0

Foreign debt, % GDP 32.5 33.1 31.9 31.5 31.5

C/A balance, % GDP -4.5 1.6 4.5 3.2 2.6

*Government balance data are for fiscal years (October-September).

Currency Information

Exchange Rates
(London, 19 May 08)

EUR 50.1941
GBP 63.0541
JPY* 31.0113
USD 32.275
*(x 100)
 Local Currency
(Baht [THB]: USD)

Local Currency
(Baht [THB]: USD)

Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08

Week 1 33.848 33.448 32.925 31.475 31.675 31.725

Week 2 33.745 33.155 32.935 31.525 31.585 31.955

Week 3 33.595 33.035 32.515 31.380 31.435 32.275

Week 4 33.705 33.050 32.300 31.315 31.705 32.075

Week 5 33.685 31.440

Payments Performance

Payments Performance
(% of payments made 30 or more days over terms)

Data Table
Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
27.0 27.5 28.3 28.9 29.2 29.0 26.8
Risk Factor

Thai economic output picked up momentum in Q1 2008, growing 6.0% year on year (y/y) according to the
Bank of Thailand. This marks an improvement over Q4 2007, when output grew 5.7%, and over 2007 as a
whole, when output grew just 4.8%. Key macro-economic indicators suggest economic growth will continue
its upward trajectory in 2008: private investment grew 7.2% in Q1, up from 4.1% in Q4, and private
consumption grew 7.0%, up from 4.2%. Supply-side indicators also showed impressive growth in Q1; for
instance, the index that captures manufacturing output climbed 12.9%. These positive indicators have led us
to revise upward our forecast for real GDP growth by 0.5 percentage points to 5.5% in 2008.

However, the economy continues to faces serious commercial risks, particularly from price pressures.
Throughout Q1, the continued upward creep of producer prices, elevated by high international fuel and
commodity prices, began to seriously dampen the outlook of Thai businesses. In March, processing prices of
finished goods, intermediate goods and raw materials increased 8.6%, 14.4% and 15.9% y/y respectively,
while consumer prices only rose 5.3%. As a result, business sentiment has fallen. In March, the firms
surveyed by the Bank of Thailand expected that commercial conditions would worsen in the coming three
months, the first time that they have expressed a pessimistic outlook in eight months. Meanwhile the index
that captures the sentiment of small- and medium-sized trade and service firms, prepared by the Office of
Small and Medium Enterprises Promotion in March, also had a pessimistic outlook over the next three
months; their pessimism has also been triggered by high production costs. According to the Bank of
Thailand, firms in the manufacturing sector were the most pessimistic of all; however, the outlook of
infrastructure, trade, service and finance firms all worsened as well. In the short term, these sectors may
represent potential payment risks.

The government has implemented several schemes to ensure that demand remains adequate. For instance,
it raised minimum wages to ensure that low earners are not overburdened with the new cost increases, and
began selling fertiliser to small-scale farmers 35-45% cheaper than fertiliser sold by private firms. In general,
Thailand is well positioned to benefit from rising global agricultural commodity prices: in Q1, farmers (who
make up nearly 40% of the workforce) already saw benefits, with farm incomes jumping 21.1% as a result of
the high agricultural commodity prices. Continued high prices should encourage more consumption on their
part. Thai consumer confidence remains high and should help to mitigate the downside risks of inflation to
businesses and economic growth.

Glossary & Definitions

DEFINITIONS

Minimum Terms:
The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export
trade with the stated country.

Recommended Terms:
D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than
minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter
may wish to limit the risk associated with a transaction made on minimum terms.

Usual Terms:
Normal period of credit associated with transactions with companies in the stated country.

Local Delays:
The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports.

F/X Bank Delays:

The average time between the placement of payment by the importer in the local banking system and the receipt of funds by
the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system.

C/A (current account) balance, % GDP:

Part of the balance of payments that records a nation's exports and imports of goods and services, and income and transfer
payments.

DSR (debt service ratio), %:

Annual interest and principal payments on a country's external debts as a percentage of exports of goods and services.

Govt balance, % GDP:

The balance of government expenditure and receipts.

Real GDP growth, %:

GDP adjusted for inflation.

Inflation, %:
The increase in prices over a given period.

GLOSSARY

CiA Cash in Advance

CLC Confirmed Letter of Credit
CWP Claims Waiting Period
FX Foreign Exchange
LC Letter of Credit
LT Long term
MT Medium term
OA Open Account
SD Sight Draft
ST Short term

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