As a free trade agreement is set to facilitate exchanges between Switzerland and Thailand from next year, the market of more than 65 million inhabitants is becoming more attractive for Swiss SMEs.
Thailand, Switzerland’s second-largest economic partner in Southeast Asia, purchased CHF 953 million worth of Swiss goods in 2024 (excluding precious metals). Total trade between the two countries reached CHF 7.6 billion, representing an increase of 2% compared to 2023. Swiss exporting companies active in watches (27%), pharmaceutical products (22%), and electrical machinery (10%) achieved the greatest success on the Thai market in 2024. Signed last year in Davos between Thailand and the European Free Trade Association (EFTA), of which Switzerland is a member, the free trade agreement is expected to enter into force in 2027, following parliamentary approval. Marco Rudin, Director of the Swiss-Thai Chamber of Commerce in Bangkok, expects both facilitation and growth of bilateral trade in the coming years.
Which sectors are the most promising for Swiss SMEs in Thailand?
Marco Rudin: It is worth looking at the areas where Thailand’s needs are greatest. The government aims to move from a middle-income economy to a high-income economy in the coming years and wants to develop certain key sectors through various programs, including the Eastern Economic Corridor. These include, for example, food of the future, the digital economy, renewables, the automotive sector, where Japanese players were traditionally very strong, with a growing presence of the Chinese industry today, as well as medical tourism and healthcare. Any Swiss SME offering advanced technologies, tools and machinery, engineering services, or automation solutions in one or more of these fields should take an interest in the Thai market.
Companies such as Ricola, Nestlé or Swatch already sell their products on the Thai market. What will the new free trade agreement change for them?
Rudin: Certain sectors, such as watches, textiles, cheese or chocolate, for example, will see customs duties almost disappear upon entry into Thailand. According to SECO, tariff reductions could amount to more than 63 million dollars for Swiss exporting companies. Swiss products, which sometimes suffer from their price level, will thus be able to be marketed in Thailand at lower prices than at present. It should be noted, however, that some areas, such as coffee (an important Swiss export product), will not see their taxes abolished, as Thailand is a fairly protective market when it comes to its domestic products. Other advantages related to patent protection and the fight against counterfeiting, respect for the Swiss Made designation, as well as the sale of services in Thailand, are also provided for under the agreement.
Several medium-sized Swiss companies, such as the printing tool manufacturer Polytype, the sewing machine designer Bernina or the industrial systems supplier Bühler already produce in Thailand. Will the new agreement change the situation for these companies?
Rudin: I cannot comment on individual companies as such, but the new agreement should simplify the import of materials or products required for the machining or assembly of goods in their local factories from Switzerland, and vice versa. Some administrative simplifications are also to be expected.
What are the advantages of having a presence in Thailand?
Rudin: Having an office in Thailand makes it possible to cover the region, thanks to the country’s central position in Southeast Asia and its good international air connections. With products "Made in Thailand", it is also possible to benefit from the free trade agreements that the government has signed with its neighbors. Such an office also makes it easier to visit customers and provide after-sales service.
As far as the Thai market itself is concerned, local entrepreneurs appreciate knowing their Swiss partners personally and being confident of their availability. This also allows Swiss employees of the company to gain a good understanding of Thai culture. Thais have a different way of working and doing business compared with other economies in the region, such as Singapore, Indonesia or Vietnam, for example.
In addition, sounding out the market as a Swiss supplier or manufacturer is not expensive. It is possible to hire a local person (via a consulting company) for six to twelve months to sell the product for a relatively modest sum. Salary costs remain limited in the country for trained staff who are perfectly capable of following well-formulated instructions. Thai workers are, however, not accustomed to thinking "out of the box" in typical local companies, and they will need time to adapt to this new approach. This advice also applies to companies that decide to manufacture in the country. Manufacturing precision will be achieved with good managers. Tasks involving R&D activities, or taking initiatives and responsibilities, will however, be less straightforward for the local workforce
Conversely, what challenges might a Swiss SME encounter?
Rudin: Formally, there are many barriers to entry, such as the limit of 49% foreign ownership in a Thai company, or the rule of one foreign employee for four local employees. However, exceptions are provided for, notably in the key sectors mentioned at the beginning of the interview. It is therefore worth making substantial efforts at the outset to obtain the right access and useful information, and to find the right partner. Once the company is properly established, things work well.
What is the perception of Switzerland in the country?
Rudin: Its image is excellent. "Swiss Made" enjoys a reputation for very high quality among the population. The upper middle class appreciates Swiss brands such as On Shoes or Läderach. Thai entrepreneurs generally enjoy working or doing business with Swiss partners, who are regarded as reliable and highly skilled. King Bhumibol, who has since passed away, spent 18 years of his life in Lausanne, and many Thais are aware of this. It is an important link between our two countries.
