It’s hard to believe that there is a sizeable number of tech startups based in Phuket, Thailand; after all, the island town is more of a travel and tourism hub — more well known for bikinis and martinis than internet and venture capitalists.
Even if there are folks starting companies and building products, it’s likely that these people are so-called digital nomads rocking hammocks on white sandy beaches.
Speaking to JetRadar’s Dmitriy Kachanov, the Hong Kong-registered flight aggregator company had first placed 80 per cent of operations in Phuket, Thailand, three years ago as a way to cut expenditure and entice hires with a coastal town experience. Operation costs in Phuket are way lower than that in Moscow, where its parent company is based in, he said.
Recently, however, as JetRadar moved into the Thai market — an inevitable course of action given Thailand’s status as Southeast Asia’s Mecca of scrumptious cuisine, shopping and nightlife — the firm is now starting to see how its proximity to local businesses is helping it gain an edge over competitors based elsewhere in terms of access to local knowledge and partners.
Paul (Pawin) Suthapong, CEO, SpotOn International Group and Manager at Google Business Group (GBG) Phuket, also told e27 about the state of tech entrepreneurship in Phuket. He said, “Currently, I would say it is still at a very early stage and expanding.”
However, Suthapong noted that we need to first understand Phuket if we truly want to grasp the ins and outs of the Thai travel paradise. Drawing comparisons to other Southeast Asian cities like Bangkok, Chiangmai and Singapore, he explained, “We refer to them (aforementioned cities) each as one big city. Phuket is not like that; Phuket is a unique island with multiple large towns mostly clustered around beaches, the famous, for example, is Patong.” One thing to note about Phuket is that it is home to “multiple disconnected communities,” he added.
Incorporation and operations
Like JetRadar, search engine optimisation startup UpToPromo is yet another Hong Kong-registered Phuket-based website with a Russian parent company.
Hong Kong has been known to be one of the two best places in Asia to incorporate a company, the other being Singapore. Both countries boast low corporate tax rates; Hong Kong has a corporate tax rate of 16.5 per cent, while Singapore’s corporate tax rate is capped at 17 per cent. Thailand, on the other hand, has a corporate tax rate of 20 per cent.
Furthermore, Hong Kong-incorporated companies do not have to pay taxes if all operations are based offshore.
For background, there are two options for foreign companies looking to set up shop in Thailand. Firstly, these companies can go for the basic Thai company status which requires 51 per cent of shares to be owned by Thai nationals while having a local as a director. Furthermore, said firm will also need to comply with the 4: or 5:1 Thai to foreigner ratio and a certain amount of capital per foreign employee clause.
Conversely, foreign companies can apply for the Board of Investment (BOI). UpToPromo is one such company that has been granted the BOI status.
According to Alex Linenco, Project Manager, UpToPromo, the company does have a decent number of local staff members — 14 Thai people out of a team of 17 staffers across Phuket and Bangkok.
He did, however, lament that it is difficult to find skilled locals in Phuket, especially since most Thai professionals are either working in Bangkok or in another country. Currently, UpToPromo hires via word-of-mouth referrals and through job portals. Kachanov, too, echoed Linenco’s views that the talent pool is rather limited.
Kachanov also said that the BOI status is great for foreign startups that want to be based in Thailand. “From another point of view, BOI status gives good climate and tax lowering — which is great thing people would like to consider, when they are not completely sure where to be based (in),” he added.
According to Kachanov, companies should also look at the disadvantages of applying for BOI. Firstly, the process is “generally complicated” and not that easy to follow. It also requires the firm to have primary capital, to report regularly, and to comply with all obligations on a regular basis. However, it seems that the pros tend to outweigh the cons when it comes to BOI, as it allows non-Thais to run companies in the country.
Suthapong added that incorporation matters in Phuket are no different from Bangkok or other cities in Thailand. “The problem Phuket faces is people,” he shared. “Local (Thai) labour force don’t see Phuket as a viable destination for jobs in tech. Hence, people with skills (engineers, designers, etc) go somewhere else (Bangkok, Chiangmai, etc),” he said. This makes it harder for Phuket-based companies to hire locals.
“In contrast, this is not the case in Bangkok where most expat-led startups do have Thai staff as (the) majority,” said Suthapong.
While there are organisations in place to help grow the entrepreneurial crowd, its collective effectiveness is questionable, especially since the tech startup scene in Phuket is still fairly nascent.
That said, examples include the government’s Software Park Phuket, which was a community partner at e27’s Echelon Thailand Phuket Satellite held on August 16, 2014. In addition, there are co-working spaces like The Sea and Phuket Coworking.
According to Kachanov, there is definitely room for more community efforts and events in Phuket. Such activities will allow locally-based and/or owned businesses to start partnering one another and fostering innovation. For instance, there could be more gatherings between travel tech startups in Phuket, given its growing popularity as an industry.
e27’s Chief Operating Officer Thaddeus Koh also commented that there should be more cohesion between expatriates and locals, noting that collaboration between the two will bring forth new ideas. He further cited Reid Hoffman, CEO, LinkedIn, who said, “Immigration is key to any entrepreneurial ecosystem.”
Overall, entrepreneurs — be it locals or expatriates — in Phuket all need community support, alongside key necessities like talent, investors, working space and customers. “We just need to come together, expat and local, from all communities: Patong, Phuket Town, Chalong, Rawai, Surin etc,” concluded Suthapong.