The Report: Thailand 2012
Located in the heart of South-east Asia, Thailand combines an ancient Buddhist culture with an emerging industrial economy. It is the only South-east Asian country never to have been colonised, and the monarchy dates back to the 14th century. In the modern era, Thailand saw great power competition over its neighbours in Indochina give rise to a strong military and unstable domestic politics. Since 1980, however, the country has embarked on a programme of industrialisation and export-led growth that has birthed a budding middle class. Despite a military coup, violent demonstrations and devastating flooding in recent years, the country is back on the path to stable civil governance, economic growth and social reconciliation.
Country Profile
This chapter features interviews with His Majesty Bhumibol Adulyadej, King of Thailand; Yingluck Shinawatra, Prime Minister of Thailand; Surin Pitsuwan, Secretary-General, ASEAN; Lyonpo Khandu Wangchuk, Minister for Economic Affairs, Kingdom of Bhutan; William Hague, UK Secretary of State for Foreign and Commonwealth Affairs; and Tony Blair, former Prime Minister of the UK.
Explore chapterEconomy
Thailand’s plans to climb the ladder toward becoming a high-economy country were put on hold by disastrous floods in late 2011. Real GDP contracted 9% and losses were estimated at $44.7bn, but recovery, particularly for the hard-hit industrial estates, has been relatively swift. The focus is now on mitigating Thailand’s dependence on low-cost manufacturing exports for growth, which is risky given the uncertain world economy. Policymakers are hoping that new investment incentives will help it move up the manufacturing value chain, although economists fear that a new minimum wage might drive manufacturers away before this transformation can take place. This section includes interviews with Kittiratt Na-Ranong, Deputy Prime Minister and Minister of Finance; Boonsong Teriyapirom, Minister of Commerce; Atchaka Sibunruang, Secretary-General, Thailand Board of Investment (BOI); Minoru Furusawa, President, Japanese Chamber of Commerce (JCC), Bangkok; and Joe Hinrichs, President of Asia Pacific and Africa Region, Ford Motor Company.
Explore chapterBanking
Thailand’s banking sector is well capitalised and highly conservative, a legacy of the 1997-98 Asian financial crisis, which left financiers in the region averse to systemic risk. It is also a very local affair, with less than 15% of assets held by foreign banks. This may change in 2015 when new banking regulations come into force, but little shakeup is expected for the time being. The banking sector is also expecting an impact from new caps on deposit insurance, which are being implemented by the Bank of Thailand in the hopes of pushing commercial clients toward the capital markets. This section has interviews with Prasarn Trairatvorakul, Governor, Bank of Thailand; Chartsiri Sophonpanich, President, Bangkok Bank; and Matthew Lobner, CEO, HSBC Thailand.
Explore chapterCapital Markets
Thailand’s capital markets are relatively mature, with most major private companies listed on the Stock Exchange of Thailand (SET) or one of three smaller bourses. The SET itself is somewhat unique among regional markets as it is a semi-governmental agency that borrows several features from the mutual structure. Demutualisation has been mooted several times in the past, but the current administration has opposed the concept. Meanwhile, the Thailand Futures Exchanges is seeing more trading in complex instruments like derivatives, with gold the most popular commodity to invest in, although new contracts for silver and oil futures are likely to draw interest. This section has interviews with Vorapol Socatiyanurak, Secretary-General, Securities and Exchange Commission; Asvini Tailanga, Chairman of the Executive Board, Thanachart Securities; and Charamporn Jotikasthira, President, the Stock Exchange of Thailand.
Explore chapterInsurance
The insurance industry was certainly impacted by the unprecedented flooding damage in the second half of 2011, but the disaster is leading to reform and better approaches to risk management in the public and private sectors. The damage is also expected to increase awareness of the value of insurance and raise Thailand’s below-average insurance penetration. At the same time, increased re-insurance costs have driven non-life premiums up considerably. The government has established a catastrophic risk fund that should mitigate these premium rises and safeguard against future natural disasters. Meanwhile, a new risk-based capital framework is expected to rationalise capital adequacy ratios and spur consolidation in the sector. This section has interviews with Pravej Ongartsittigul, Secretary-General, Office of the Insurance Commission; and Sutti Rajitrangson, President, Thai Life Assurance Association.
Explore chapterEnergy
The growth of Thailand’s heavy industries, as well as consumption among a burgeoning middle class, is fuelling demand for energy. On the production side, this demand is being partly met by increased lignite and natural gas extraction, while oil output continues to decline. The government is hoping that investment-friendly amendments to its Petroleum Act will help slow or reverse this decline. But natural gas growth is set to peak in 2013, and with domestic production already only responsible for one-third of Thailand’s energy needs, imports are set for a long-term increase. In response, the country is investing in liquefied natural gas import terminals and several pipelines, as well as hiking energy prices and promoting renewables. This section features interviews with Pailin Chuchottaworn, CEO, PTT Group; and Chanin Vongkusolkit, CEO, Banpu.
Explore chapterIndustry
Thailand’s most critical economic sector was hard-hit by flooding in 2011 that inundated industrial estates northeast of Bangkok, but recovery has been faster than anticipated. Moreover, factories resuming production now face a build-up of latent demand that has allowed them to make up lost ground. The industrial sector is led by electronics and electrical manufacturing, which accounts for some 23% of exports, followed by the automotive and petrochemicals industries. Manufacturers who base their production in Thailand benefit from strong cluster effects, inexpensive labour, and attractive investment incentives. Still, Thailand is hoping to shift its economy to more value-added growth, and the government is pushing reforms such as an increase to the minimum wage as a catalyst for this transformation. This chapter has interviews with MR Pongsvas Svasti, Minister of Industry; Boonchai Chokwatana, Chairman, President & CEO, Saha Pathanapibul (Sahapat); and Thapana Sirivadhanabhakdi, President & CEO, Thai Beverage Public Company (ThaiBev).
Explore chapterTransport
Years of a governmental stalemate on transport investment appear to be over, after a decision by Prime Minister Yingluck Shinawatra to approve borrowing of more than $51bn for infrastructure. High-speed rail will be one major focus: plans call for four lines of several thousand kilometres total, although the project must still be approved by Parliament and pass through environmental impact assessment. Other investments include expansions of Bangkok’s Suvarnabhumi Airport and the deep-water port at Laem Chabang. The airport expansion will not come a moment too soon for Thailand’s crowded airspace, which has forced authorities to divert low-cost carriers to secondary airports.
Explore chapterConstruction & Real Estate
Delays and reconstruction work from 2011’s flooding have left Thailand’s contractors with a backlog of public and private projects in 2012. The construction sector is highly competitive, with major contractors focusing on efficiency and looking for public contracts rather than rely on riskier private sector work. Competition has also led Thai builders overseas, securing projects in Laos, Vietnam, and lately the opening economy of Myanmar. In real estate, condominium demand is growing as economic opportunities in Bangkok increase. Fears that the flooding would lead to an exodus of manufacturers from Thailand and a drop in demand for industrial real estate have proved largely unfounded as well, as the supply-chain benefits to clustering in Thailand generally outweigh the risks. This chapter has interviews with Plew Trivisvavet, President and CEO, CH Karnchang (CK); and Apichart Chutrakul, CEO, Sansiri.
Explore chapterTelecoms and IT
Thailand lags behind its peers in several measures of connectivity and IT-readiness, although this may change in the near-term. A 3G spectrum auction is scheduled for the third quarter of 2012 after years of delay that saw neighbours adopt the standard widely and even implement 4G. Reforms to the state-owned enterprises that control the infrastructure – TOT and CAT – are being considered, which could enhance competition and lower prices. On the IT front, hardware sales dominate the market, with relatively strong growth in computer sales, albeit from a low base. Smartphones and tablets are expected to attract a disproportionate share of the hardware market, especially given the government’s plan to give tablets to schoolchildren. This section features interviews with Anudith Nakornthap, Minister of Information and Communication Technology; Thares Punsri, Chairman, National Broadcasting and Telecommunications Commission (NBTC); Jon Eddy Abdullah, CEO, Total Access Communication (DTAC); Suphachai Chearavanont, President & CEO, True Corporation; and Wichian Mektrakarn, CEO, Advanced Info Service (AIS).
Explore chapterTourism
Thailand, already a tourism powerhouse, is expected to see a 6.4% annual growth of tourism’s contribution to GDP through 2020, outpacing the world average. The country will benefit from the economic development of nearby China and India, where outbound tourism is exploding. Thailand’s hope for the medium-term is to boost per-visitor revenue, encouraging luxury tourism without damaging its reputation as a value destination. It is also looking to expand its repertoire beyond the traditional offerings of beaches and temples. There are plans in the works for a Cartoon Network theme park and proposals for an ASEAN family theme park. In the sports arena, golf is an increasingly popular draw for foreign tourists, and there are plans for a Formula 1 circuit.
Explore chapterEducation & Health
The education system will need serious improvement if it is to break out of the classic “middle-income trap”. Reforms on the table call for a move to learner-centred teaching and greater use of IT in the classroom, including a “One Tablet Per Child” programme. Neither will be a panacea; observers cite a chronic disregard of secondary education in favour of funding the primary and tertiary sectors. In the health sector, a decade-old universal coverage scheme is the bedrock of government policy. But several aspects of the system are ripe for reform, including an expensive fee-for-service model covering civil servants, and a government monopoly on a passel of pharmaceutical drugs. This section features interviews with Reverend Brother Bancha Saenghiran, Rector, Assumption University; and Prasert Prasarttong-Osoth, President, Bangkok Dusit Medical Services (BDMS).
Explore chapterAgriculture
With one in every three Thais making their living in the sector, agriculture is key to the country’s social makeup, even if its importance to the formal economy has diminished. The growth of industry has helped transform agriculture, and agro-manufacturing exports like processed sugars and cereals, and canned fish and fruit are multibillion dollar industries. Rice is the traditional staple, but a legacy of subsidies has distorted costs and harmed the export competiveness of Thai rice. Meanwhile, high prices over the past several years have tripled the value of Thai rubber exports, by far the most lucrative crop. The government is pushing to expand the acreage devoted to rubber plantations.
Explore chapterRetail
Economic growth, government price support for agricultural commodities, and stimulus programmes have all contributed to robust retail growth over the past several years. Modern hypermarkets such as Tesco Lotus and Big C continue to dominate the sector, although popular criticisms of their hegemony have prompted a Retail Act that if passed would restrict their expansion. The mall sector is contested primarily by two large groups, CPN and the Mall Group, although newcomer Siam Future is threatening to upset this balance. For all segments of retail, however, the upcountry provinces hold the potential for the most future growth. This chapter contains an interview with John Christie, CEO, Ek-Chai Distribution System (Tesco Lotus).
Explore chapterMedia & Entertainment
Thailand’s media sector has seen liberalisation on paper, with the passage of several laws to increase press freedom and competition. At the same time, a March 2012 decision to renew state agencies’ control of broadcast frequencies, and the restrictive 2007 Computer Crimes Act, suggest that media freedom in Thailand has a long way to go. Regardless, the sector is growing on the strength of terrestrial free-to-air television, which has very strong viewership thanks to its popular soap operas. Cable and satellite operators are beginning to add diversity to the sector, and growing computer and smartphone penetration is opening the mobile market, but TV is still by far the medium to beat. This chapter contains an interview with Supakorn Vajjajiva, President, The Post Publishing Public Company.
Explore chapterTax
In conjunction with BDO Advisory, OBG explores the taxation system. Andrew Jackomos and Paul Ashburn, Senior Partners at BDO Advisory, share a viewpoint on preparing for implementation of the AEC.
Explore chapterLegal Framework
In partnership with Tilleke & Gibbons, OBG takes a look at Thailand’s legal system. Key points include revised investment incentives and new tax breaks for foreign companies, as well as the impact of new free trade agreements. Darani Vachanavuttivong, Co-Managing Partner and Managing Director of Intellectual Property (IP) at Tilleke & Gibbins, offers a viewpoint on the importance of IP rights.
Explore chapterThe Guide
This section includes an article about Songkran, the Thai water festival celebrating the New Year, as well as a feature about the tranquil and historic city of Kanchanaburi. OBG also offers information on hotels, government and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress, business hours and electricity.
Explore chapterTable of Contents
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