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Legal Update

New Criteria and Procedures for Business Operations in Industrial Estates

28 August 2008
Mayer Brown JSM Legal Update


The Industrial Estate Authority of Thailand (the "IEAT") has recently issued a new regulation regarding the criteria, procedures and conditions regarding business operations in industrial estates in Thailand. 

Full Update
The IEAT, a government juristic person, is responsible for the development and establishment of industrial estates which are areas of land allocated for industrial factories.  There are 38 industrial estates operating in Thailand at present.
Amendment No. 4
The Industrial Estate Authority of Thailand Act (Amendment No. 4) 2007, which came into effect on 9 January 2008, made significant changes that affect both business operators and private industrial estate developers. These include:
  • Expansion of the general industrial zone to include areas designated for services;
  • Renaming of the export processing zone to the IEAT free zone and relaxation of export requirements for businesses inside the zone;
  • Relaxation of procedures to set up an IEAT free zone industrial estate and the operation of businesses therein; and
  • Allocation of land inside private industrial estates.
The New Regulation
On 24 August 2008, a new regulation – The Regulation of the Board of Directors of the Industrial Estate Authority of Thailand Re: Criteria, Procedures and Conditions on Operation of Business in an Industrial Estate B.E. 2551 (the "Regulation") – will take effect.  It sets out general criteria and procedures regarding business operation inside an industrial estate and conditions that apply to the business operators to carry on their activities after permits have been granted by the IEAT.
The Regulation newly divides the activities which can be carried out inside an industrial estate into four categories:
(i) industrial activities;
(ii) services permitted inside the general industrial zone;
(iii) commercial activities inside the IEAT free zone; and
(iv) other activities related to or beneficial to the aforesaid activities.
Certain service providers are now allowed to operate and own land inside the general industrial zone and receive privileges from the IEAT.  The type of service businesses which would qualify is left to the IEAT's discretion.
Under the Regulation, written approval from the IEAT is required for any (i) mortgage, (ii) sale with redemption right, (iii) lease, (iv) hire-purchase or (v) creation of any encumbrance on the business operator’s factory, building, machinery, equipment or other assets constructed, installed or attached to the land that will affect the land utilisation or which may result in a change of control of the business operator.  If the land utilisation will not be affected, the business operator only needs to notify the IEAT in writing not later than 15 days before the transaction.
Requirements and conditions as regards the granting of applications and the construction and alteration of any factories or buildings have not been changed.
Any application to operate businesses inside an industrial estate submitted prior to the effective date of the Regulation but still pending approval shall be deemed as applications under the new Regulation and subject to the criteria therein. 
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