The Report: Thailand 2014
Despite the political and social challenges that marked late 2013, Thailand’s economy has remained stable and is poised for further growth in the coming years. However, concerted action by the public and private sectors will be needed for the country to avoid the middle-income trap of stagnating productivity and to maintain its stance as a top Asian economy. Although the country’s political future appeared uncertain in the latter part of 2013 and into 2014, Thailand has remained vibrant and many of its economic sectors remained unaffected by recent tensions. On the cusp of ASEAN Economic Community (AEC) integration, due to be completed by the end of 2015, Thailand is in a strategic position to benefit from increased regional competition and cooperation, and so are foreign investors. Thailand has competitive strengths to draw on, including a central geographic location, a regional manufacturing centre for a broad array of goods and a relatively solid infrastructure base.
Country Profile
Inheritors of an ancient land and a complex culture, today’s Thais once again face difficult social and political challenges. Yet, despite the confrontation that has resulted from these tensions during much of late 2013 and early 2014, the country continues to grow and develop, with much of it unaffected by the turmoil that has been focused primarily on certain high-profile districts of Bangkok. Thailand’s 2007 constitution established a system of parliamentary democracy, with the prime minister as the head of the executive branch, who then appoints and leads the cabinet. An early general election held in February 2014 was declared invalid by the Constitutional Court in late March 2014. At the time, the country was headed by a caretaker government led by Prime Minister Yingluck Shinawatra. Over the past several years, the country has prepared for the ASEAN Economic Community (AEC), due to take effect from 2015. In 2013 it had already met 86% of the targeted AEC measures – higher than the ASEAN average of 80%. This chapter contains a viewpoint from His Majesty Bhumibol Adulyadej, King of Thailand, and an interview with Le Luong Minh, Secretary General of ASEAN.
Explore chapterEconomy
The second-largest economy in South-east Asia and the 34th-largest worldwide, Thailand had a GDP of $366bn and a per capita income of $5168 in 2012. Over the past decade, the economy has expanded at an average rate of 4.3%. Since 2008, however, there have been large economic swings that have been exacerbated by seasonal changes. As a major exporter, Thailand is exposed to fluctuations in global demand, and weak growth in its key export markets of the EU, the US, and Japan has been a constraint in recent years. Exports contracted by 4% year-on-year by November 2013. With household debt increasing dramatically, the central bank has raised concerns over the pace of loan growth. Over the longer term, the economy will need to boost higher value-added production to drive growth and ensure it is spread more evenly among the population. Political stability will be key to sustaining strong tourism performance and to the public investment that is so crucial for Thailand to achieve its longer-term growth potential. This chapter contains interviews with Kittiratt Na Ranong, Deputy Prime Minister and Minister of Finance; and Kan Trakulhoon, President and CEO, SCG.
Explore chapterTrade & Investment
Thailand is the second-largest recipient of foreign direct investment (FDI) in South-east Asia after Indonesia, with exports accounting for 62.3% of GDP in 2012, or 75% including goods and services. Japan has cemented its position as the largest source of FDI: its share of investment reached 44% in the first three quarters of 2013, up from the 30-40% annual range in the decade to 2012. Trade in China has been instrumental in supporting Thai Exports throughout the global financial crisis, growing 21.03% in 2011. As the Chinese economy slowed in 2013, however, exports to the mainland shrunk 1.61% year-on-year in the first three quarters of 2013. Although trade with ASEAN has grown swiftly in recent years, accounting for 16% of total exports in 2012, slowing regional growth and the effect of slumping currencies caused exports to ASEAN to grow at a slower 6.3% year-on-year in the first nine months of 2013. This chapter contains interviews with Udom Wongviwatchai, Secretary-General, Thailand Board of Investment (BOI); Håkan Buskhe, President & CEO, Saab; and Takanobu Ito, President & CEO, Honda Motor Company.
Explore chapterBanking.
Accounting for 30.1% of bank lending in the second quarter of 2013, consumer lending has been the key driver of loan growth. Household debt rose from 56% of GDP in 2007 to 77% in 2012. Dominated by Thai lenders, the banking sector remains well-capitalised and liquid. Strong fee-revenue growth is offsetting pressure on net interest margins. Due to increased competition for deposits, net interest margins declined from 3.07% in 2012 to 2.53% in the second quarter of 2013, according to Bank of Thailand data. Although the banking sector is open to majority acquisitions by foreign investors on the finance minister’s approval, Thai-owned lenders dominated the market until 2013. The key to system stability will be for authorities to ensure fair competition between commercial lenders and state-owned institutions. As Thai corporates continue to expand regionally and further afield, Thai banks will face growing competition from their regional peers in ASEAN. Domestically, government spending plans will prove key determinants of the banking sector’s short- to medium-term growth trajectory. This chapter contains interviews with Prasarn Trairatvorakul, Governor, Bank of Thailand; Chartsiri Sophonpanich, President, Bangkok Bank; Frank Krings, Chairman, Association of International Banks, and Chief Country Officer, Deutsche Bank Thailand; Kannikar Chalitaporn, President, Siam Commercial Bank; and Noriaki Goto, CEO and Director, Krungsri (Bank of Ayudhya).
Explore chapterCapital Markets
With the market capitalisation of its bourse at around BT11.97trn ($391.42bn) as of late March 2014, Thailand has relatively deep and liquid capital markets by regional standards. A derivatives market has grown significantly since 2007, with particular interest in index and single stock futures, as well as gold futures. Following the Asian financial crisis, brokers in Thailand have remained more cautious in their leverage, with margin lending in 2013 at $2.6bn, compared to $3.9bn prior to the crisis. The value of outstanding bonds on the Stock Exchange of Thailand has reached $291bn by June 2013, up 11.8% year-on-year. Government bonds are the most widely traded fixed-income securities, accounting for roughly 880% of daily trades. The kingdom’s large domestic investor base, with strong retail participation, is a sound basis for future expansion. Although the growth of corporate earnings will slow from its peak in 2012, the outlook for Thai equities remains strong. This chapter contains interviews with Vorapol Socatiyanurak, Secretary-General, Securities and Exchange Commission, Thailand; Charamporn Jotikasthira, President and CEO, Stock Exchange of Thailand; and Chaipatr Srivisarvacha, CEO, KT ZMICO Securities Company.
Explore chapterEnergy
For many years Thailand has focused on increasing energy generation so that it could power its industrial growth and meet the energy needs of an increasingly prosperous society. Achieving this objective was a requirement in terms of sustaining economic growth and, so far, the country’s energy production has succeeded at keeping pace. Thailand has one of the highest electrification rates in South-east Asia. As a percentage of total generating capacity, the share claimed by hydropower has dropped considerably, from 21.8% in 1986 to 3.1% in 2013. Demand for natural gas has recently outstripped Thailand’s supply of dry gas, forcing the country to increasingly rely on imports of more expensive liquefied natural gas (LNG). Capacity will grow, but renewables, LNG, imports and conservation will play a greater role in helping the country meet its energy needs. Overall, the sector may become more interesting, as new solutions will be required to sustain ongoing economic growth, while at the same time appeasing the environmental demands of the people. This chapter contains interviews with Pailin Chuchottaworn, CEO, PTT Group; Veerasak Kositpaisal, CEO and President, Thai Oil; and Wandee Khunchornyakong, CEO and President, SPCG.
Explore chapterIndustry & Retail
On the economic road from farms to factories to services, Thailand has come a long way. Through a combination of low costs, sound policy, a good work ethic and a relative lack of labour activism, the country has managed to make the transition from an economy based on agriculture and commodities to become one of the most industry-oriented nations in the world. Manufacturing makes up 34% of the Thai economy, a larger portion than in all of its regional competitors, and Thailand is the world’s 17th-largest manufacturer and number 14 car maker. Industry value-added in Thailand rose from 18.5% of GDP in 1960 to a high of 44.7% in 2007. Exports grew rapidly over the same period, while agriculture shrank as a portion of GDP. Thailand’s minimum wage law was applied across the country as of January 1, 2013, settling the rate at $9.09 per day. This raised the average wage by 22.4% nationwide, and in some provinces by as much as 70%. Investors in manufacturing are attracted by the prospect of having assemblers and suppliers in multiple ASEAN countries, which would reduce risk as there would be no single bottleneck. If Thailand can move gently to the next generation of production, great rewards await. This chapter contains an interview with Prasert Boonchaisuk, Minister of Industry.
Explore chapterTransport
The Thai government is planning to build four high-speed rail lines linking Bangkok with the northern city of Chiang Mai, the Laotian border, the industrialised eastern seaboard and Malaysia, effectively joining all corners of the country. Thailand’s infrastructure plan aims to reduce the ratio of logistics costs to GDP by 2% from its current 15.2%, increase the speed of non-high-speed trains and boost the percentage of freight carried by rail from 2.5 to 5. Meanwhile, reopened to help relieve congestion at Suvarnabhumi Airport, Don Mueang Airport is also overcrowded, handling 16m passengers a year despite its capacity for 10.5m. The renovation of the airport’s second terminal will boost capacity to at least 20m. Located at the centre of the ASEAN Economic Community, which is due to take effect from December 2015, Thailand is positioning itself as the regional transport hub. It is opening transfer depots and centres in anticipation of an increase in trade, while shipping is also set to benefit. Vast improvements to neglected areas of the country’s infrastructure are also important for Thailand’s future economic wellbeing, irrespective of the AEC. This chapter contains interviews with Chadchart Sittipunt, Minister of Transport; Sorajak Kasemsuvan, Former President, Thai Airways International; and Prapat Chongsanguan, Governor, State Railway of Thailand.
Explore chapterConstruction & Real Estate
Even though the minimum wage has gone up and there is no shortage of work, the construction sector in Thailand is facing a serious dearth of labourers. As developments in neighbouring countries have increased employment opportunities there and the minimum wage has risen across Thailand, companies have faced difficulties in finding workers for building sites. However, despite some setbacks following floods in late 2011, the sector has been resilient and grew by more than 7.5% over 2012, a trend likely to continue in the years ahead. In order to facilitate new projects under the government’s infrastructure drive, a new public-private partnership law has been designed to encourage private investment by making regulations more transparent and clear. Meanwhile, the rise of the middle class has maintained the affordability of purchasing property and there is especially high demand for condominiums in Bangkok. While prospective foreign buyers, especially from Russia and China, are seeking to get onto the property ladder, restrictions on foreign ownership and financing remain in place. The advent of the AEC at the end of 2015 may have a profound effect on the market as well. This chapter contains interviews with Yuthachai Charanachitta, President and CEO, ITALTHAI Group; Apichart Chutrakul, CEO, Sansiri; and Chanond Ruangkritya, President and CEO, Ananda Development.
Explore chapterIT & Telecoms
With the country continuing its telecoms development, Thailand’s internet connectivity is about to improve exponentially. Wireless speeds are on their way up and wireless access is expanding rapidly. In 2001 the passing of the Telecommunications Business Act established three types of licenses: one for internet service providers without a network, one for those with infrastructure, and one for private networks. In the second quarter of 2013 Thailand’s broadband adoption rate was up 191% quarter-on-quarter. In addition, the country ranked 39th in the world in terms of broadband adoption and 22nd in terms of connection speed. The local data centre business is forecast to expand by 21% in 2013 to around $56m, due to the adoption of cloud computing, the need for disaster recovery and the increasing connectivity within the ASEAN region. The outlook for the telecoms sector is more positive than it has been in years. Given the 3G auction and the bright prospects for 4G, companies are set to see their business improve, and customers will likely benefit from better performance. This chapter contains interviews with Anudith Nakornthap, Minister of Information and Communication Technology; Pete Bodharamik, CEO, Jasmine International; and Jon Eddy Abdullah, CEO, Total Access Communication.
Explore chapterTourism
The 26.7m international arrivals in 2013 represented a 20% rise on 2012. China was the top source of visitors with a 6.9% increase to 4.7m. Next came Malaysia (2.99m), Russia (1.73m), Japan (1.53m), South Korea (1.29m), Laos (1.1m) and India (1.04m). The Tourism Authority of Thailand set 28.01m visitors as the goal for 2014. The Tourism Council of Thailand is more optimistic, forecasting 29.92m foreign tourist arrivals, with revenue up 18% to $44.1bn, over 2013’s estimated $37.9bn. Visitor numbers are expected to continue to grow, so maintaining infrastructure development will be key to ensuring the industry keeps up. The long-term relationships within the ASEAN Economic Community, and Thailand’s role as the largest and strongest tourist market in the region, will likely be on the agenda of many meetings. This chapter contains an interview with Manit Boonchim, Executive Director, Planning Department, Tourism Authority of Thailand.
Explore chapterEducation & Health
After years of rapid economic expansion and population growth, Thailand’s education system is facing strong challenges in areas such as quality and enrolment, the rural-urban divide, links between business and academia, and policy continuity. In September 2013 the education minister established a special committee to assess Thailand’s decline in international rankings for education and to produce a list of needed reforms. Education is the basis of Thailand’s efforts to become a more knowledge-based society, and to move away from its low-wage, low-cost model of development. Given the swift approach of more ASEAN integration and the importance of overseas markets to Thailand’s economic development, education is also vital to the country’s future competitiveness. Meanwhile, Thailand has reached nearly all of its Millennium Development Goals (MDGs) in health ahead of schedule, prompting it to pursue an MDG-Plus strategy in recent years. The biggest lunge forward for Thailand’s health care system has been the introduction of a form of universal health care. Not only has this brought many benefits to ordinary Thais, it has provided coverage to individuals who may have previously been unable to afford health care services. The public system has at the same time been working in tandem with private care, whose high-quality services have made the country a top choice for medical tourism for the region and the world. Funding the universal system is likely to be the most pressing issue in the years ahead. The private sector, too, looks likely to continue its expansion, especially in the provinces, with opportunities for foreign investors in medical education and training, equipment, and supplies. This chapter contains interviews with Pirom Kamolratanakul, President, Chulalongkorn University; and Worsak Kanok-Nukulchai, President, Asian Institute of Technology.
Explore chapterAgriculture
The agriculture sector’s contribution to GDP has fallen from an average of 32.19% during the 1960s to 23.2% in 1980 and 9% in 2000. However, by 2007 the share had risen to 10.7%, and recent estimates have suggested that the sector now accounts for some 13% of GDP. With its products renowned throughout the world, particularly its rice, Thailand has also been an important international granary at times of global food need. Today, however, the sector faces some important challenges as it seeks to develop further. Debate surrounds the role of the state in the sector’s future, particularly regarding the government’s rice support policies. Locally, raising productivity and managing the agricultural labour market are also proving challenging. Despite a reduction in the number of farmers, the sector has been able to reverse the long-term decline in its share of GDP thanks to a shift in policy towards higher-value, more specialised products, as well as increased mechanisation, diversification, and productivity. The political framework governing agriculture, particular the rice and rubber segments, is still the source of some risk. Despite challenges, however, Thailand remains a global agricultural player. There is much to be developed, which could create major opportunities for investors in the years to come. This chapter contains an interview with Krisda Monthienvichienchai, CEO and President, Mitr Phol.
Explore chapterMedia & Advertising
A long-awaited switch to digital TV and the expansion of the numbers of TV channels is taking place, bringing with it greater openness and competition within the nation’s leading media platform. Thailand also continues to develop its production side, with demand for content likely to surge as the new channels come on air, drawing on the country’s strong tradition in film and IT. Four of the six free-to-air channels are owned and operated by state bodies. The other two, which are private channels, typically draw the highest viewing figures. With frequencies assigned to the existing six channels, there has been no space left for new entrants, and broadcasters have had to move into the cable and satellite space. This will change with the implementation of the digital master plan. There is likely to be some consolidation as the number of channels expands, while those outfits with deeper pockets are likely to survive longer in an increasingly competitive environment. However, media is changing, too, and becoming more diversified and less state controlled, meaning there are plenty of opportunities for foreign investors.
Explore chapterTax
Featuring a tax viewpoint from Andrew Jackomos and Paul Ashburn, Senior Partners at BDO Advisory, this chapter explains Thailand’s tax framework and how investors can prepare for the transition into the tax regime under the ASEAN Economic Community.
Explore chapterLegal Framework
Featuring a legal framework viewpoint from Yuthana Promsin, Partner and Co-founder of Jus Laws & Consult, this chapter examines Thailand’s status as a regional investment hub while guiding business investors through the legal system, with particular focus on foreign ownership.
Explore chapterThe Guide
This chapter contains useful facts for visitors, including tips for etiquette, acquiring visas, and local business culture. It also provides a suggested list of hotels, contact information for embassies, hospitals and other important institutions, and contains a feature piece exploring the national cuisine of Thailand and its myriad influences.
Explore chapterTable of Contents
There are no articles in this chapter. To view the table of contents, please open click the "View in online reader" link above.
