Negotiations, Contracts & Payments in Bangkok

Please note that the following section is based on my own experiences doing business in Thailand for more than 16 years, as well as the advice I've gotten from others over the years. This advice is not meant to deter you, only to caution you about some of the challenges you might face doing business in the "land of smiles." (Michael)

Contacting and negotiating with Thai companies can be one of the biggest challenges in doing business in Thailand. The primary issue is usually lack of English skills. Many companies may not have anyone with the skills to communicate in English. If they do, you may end up talking to someone without any knowledge of the person or group you're actually trying to contact, and of course no ability to take decisions for them.

Even once contact is made, don't expect negotiations to proceed very fast. You may have exactly what your prospect needs, or be able to demonstrably save them lots of money, but the need to have a consensus in most organizations tends to slow things down. A further complication may involve the need to "test" your product or service for its usability. The usability may seem obvious to you, and even other cultures that you've dealt with, but as noted above, Thais tend to be quite skeptical about the applicability of a product or process that works well everywhere else. A big contributing factor in this is the Thai educational system, which relies almost entirely on memorization, and practically discourages problem-solving. The result in business is that Thais often won't believe that a product will work for them unless you show them doing exactly what they want it to do.

Contracts are another area to exercise extreme caution. You may not have any significant problems negotiating contracts, but your worries aren't necessarily over once you get the signature. You may find that key provisions of the contract are partly, or even completely, ignored even though the Thai company appeared to pay close attention to them when negotiating the agreement. The problem stems from a fairly fundamental cultural difference between Thais and westerners. In the west, we're taught from a very young age that promises are very important, and keeping promises is something one must do (well, except for politicians). For Thais, a promise (and a contract) is treated more like a statement of intent. It's not that they're agreeing to do things that they really have no intention to follow through with. Instead, it's usually a case of finding out later that what they agreed to is more difficult than they anticipated, or costs more than they thought, or simply proves "inconvenient" to follow through with. This inability to plan and anticipate is a very common factor in the failure of many projects.

Getting paid is the last, and often the most frustrating, hurdle to doing business in Thailand. As with contracts, the problem is rarely one of actual attempts to avoid paying obligations. The reality is that Thais, much like the rest of us, just don't like paying their bills. Companies have evolved large bureaucracies both to delay payments as long as possible as well as to try and get around these tactics. The most common delaying tactic is to have fixed payment dates, usually no more than two a month. They will not pay invoices until the next payment date after the invoice due date. Using this method they can stretch 30 days credit to as much as 60 days. A further tactic that may delay payment, if you don't know about it, is the fact that Thai companies will not send you a check. To get paid, you have to go collect the money from the company, on the specified date only. Thai companies employ armies of motorcycle riders whose sole job is to go around submitting invoices and collecting payment. The cost of all this bureaucracy to the Thai economy must be enormous, but it's another curious aspect of Thai culture that nobody questions it. Needless to say, if you are exporting to Thailand and expect a Thai company to transfer payment overseas to you, it is strongly advised that you insist on a letter of credit so that you can be paid promptly.

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