1. COUNTRY REPORT
POLITICS
PARLIAMENT
DISSOLVED, NEW
ELECTIONS COMING
THAI EUROPEAN BUSINESS ASSOCIATION
ECONOMICS
JAPAN’ OUTINVESTS
EUROPE BY FACTOR
0F 10 IN THAILAND
INDUSTRY FOCUS
AUTOMOTIVE
AEROSPACE
& OTHERS
QUARTER 4 - 2013
ASEAN
MYANMAR
OPPORTUNITIES
FOR GROWTH
THAILAND
COUNTRY REPORT
The all too familiar sight of protesters on the streets of Thailand’s capital have
once again made it into the international news.
Protests began over the government’s attempts to pass a political amnesty bill
through parliament that would have, amongst other things, annulled previous
court rulings against ex-Prime Minister and brother of the current Prime
Minister Thaksin Shinawatra.However, withdrawing the bill did not seem to
calm the situation and protests continued and even grew.
After weeks of
protests, the
government has
dissolved the
parliament.
Street protests grew under the leadership of Suthep Thaugsuban, who had recently resigned as an
MP in the opposition Democrat party to focus on the street protests. A rally at the Democracy
Monument on Rachadamnoen Road surprised many with the large numbers who attended. In the
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2. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
following days the protesters managed to occupy a number of
government offices.
While in the past with any widespread protests there have been
fears of a military coup, a meeting between protest leader Suthep
Thaugsuban, the Prime Minister, Yingluck Shinawatra, and the
heads of armed forces seems to suggest that the military is
completely uninterested in any more coups.
QUARTER 4 - 2013
A new chapter in
the history of
democracy in
Thailand
On December 9th, the government announced it would dissolve
parliament and new elections are to be expected within the next
60 days.
The effect of these protests on everyday business operations in the
country has been minimal. The only industry likely to feel a
significant effect will be the tourism industry. However, Thailand’s
tourism industry is surprising resilient and has bounced back
strongly following previous political upheaval and there is no
reason to expect it will not do so again this time. While the Thai
baht and stock market appear to have been affected by the
political crisis, this has been only a temporary reaction to the
events and should recover strongly. The stock market saw a
significant rise following the Prime Minister’s announcement of
new elections.
Thailand's economic growth
eased to 2.7% in 3Q
According to DBS, GDP growth eased to 2.7% YoY in 3Q from a
revised 2.9% in the previous quarter. Part of this slowdown was
caused by high base effects.
Here's more from DBS:
In sequential terms, GDP registered a 1.3% QoQ sa growth in the
period, a decent pick-up from being flat in 2Q. Nevertheless, there
are enough factors to explain why the 3Q data is still broadly
disappointing. We now look for GDP growth to come in at 3.2%
YoY in 2013 and 4.5% YoY in 2014 (from 4.0% and 5.2%
previously).
Net exports accounted for almost all the growth seen in
3Q. Export growth has ticked up slightly to 3.8% YoY in the
period, but the weakness in import growth was dominant.
While there has been some slight improvement in export demand,
export growth has remained lacklustre in 3Q. In fact, the
important manufacturing sector has registered its
second consecutive negative growth at -0.4% YoY in 3Q.
A meeting between
protest leader Suthep
Thaugsuban, the Prime
Minister, Yingluck
Shinawatra, and the heads
of the armed forces seems
to suggest that the military
is completely uninterested
in any more coups…
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3. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
That external demand remained sluggish
had been pretty much expected. It is the
sharp moderation in the domestic economy
that was disconcerting.
Private consumption growth came in at
-1.2% YoY in 3Q, the first time in the
negative since 4Q 2011.
Frontloading the delayed THB
2.2tn infrastructure projects in early 2014 is
a key assumption to our forecast.
Missing that and we may see another
sub-4% GDP growth next year.
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World Bank View
Thailand’s strong economic growth over the past decade
has recently seen it graduate from a Middle to an Upper
Middle Income Country in the World Bank classification.
Economic growth and a corresponding improvement in
access to and quality of public services has been
concentrated in Bangkok and the central region, leaving significant deficiencies in other parts of
the country including the North and Northeast and contributing to unequal human development
outcomes. Addressing these issues will be a key step in Thailand's continued development
towards high-income country status.
Currently, 72 % of Thailand's general public expenditures are being spent in Bangkok, which is
home to 17% of the country’s population and produces 26% of the GDP. In contrast, the
Northeast, which holds 34 % of the country's population, receives 6% of the expenditures.
Looking ahead, Thailand could focus on improving the efficiency and effectiveness of public
spending to help counteract regional disparities in human development and inequality. Thailand’s
expenditure policy can be refocused towards service delivery deficient areas to raise the services
delivered in those areas to similar standards as in Bangkok.
Another key issue for Thailand is ensuring that the inter-governmental fiscal framework is
properly constituted to support more efficient and accountable service delivery of public services
across the country. Current monitoring and evaluation systems can be further improved to
provide the necessary information for both effective central monitoring, as well as fostering local
accountability and participation. This could include developing national minimum service
delivery standards and publishing annual reports for LAOs against these standards. Requiring
submissions of performance based indicators (for financial and service delivery) as a prerequisite
for grant release can also be considered.
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4. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
2014 Outlook
In 2014, the Thai economy is expected to grow
in the range of 4.0 -5.0%, mainly contributed
by 7.0% expansion of export value, together
with a 2.7% growth of private consumption
and a 7.1% growth of otal investment. In 2014,
headline inflation will lie in the range of 2.1 3.1% and the current account balance is likely
to record a deficit of 0.6% of GDP.
For 2014, Thailand expects again significant
foreign investment - mainly from within Asia
with Japan clearly dominating the scene. In
2012, Japan invested about 10 times more
than all European nations combined. This
clearly represents a great opportunity for the
European private sector, who could use
Thailand as a low-cost manufacturing base
and gateway to the 600 million people in
ASEAN.
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5. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
Automotive Industry
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Thailand’s automotive industry is the 9th
largest in the world and the largest in Southeast
Asia. Thailand is currently second in the world
for production and export of pickup trucks.
January-October 2013 vehicle production
reached over 2.2 million units and motorcycle
production reached 1.9 million units. Over half
of the tier 1 manufacturers are foreign majority
owned. Of the top 100 global auto parts
manufacturers, 50% have factories in Thailand.
In 2013, 1,327,703 vehicles are sold with Honda overtaking Toyota for the first time in
terms of passenger cars sold (213,155 vehicles when compared to 190,101). While Toyota
commercial vehicle still lead the market at 213,155 vehicles sold.
Manufacturering and Export figures
Total vehicle production in 2013 also exceed 2012 due to an increase in export volume.
Current as it stands the ratio between domestic sales and export is 56:44.
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6. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
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The eco car project from the Thai government was a big success with a number of major
players investing in additional capacity to be part of the program. Since the project was
launched in 2010, some 712,000 vehicles have been produced, with almost half of these
being exported (343,000 vehicles exported versus 369,000 for the domestic market). The
market share of eco-cars has also risen dramatically, from 5% in the passenger car market
in 2010 to as much as 27% this year. The second phase of the eco car project is set to
begin, but with stricter requirements. It is expected to attract five or six major automotive
manufacturers. There is a requirement of investing 6.5 billion baht in production systems
and reaching an annual production capacity of 100,000 units by year four of the project.
Engines for the second phase must be of the Euro 5 standard type, with carbon-dioxide
emissions of not more than 100 grams per kilometer, fuel consumption of not more than
4.3 litres per 100km, and an engine size of not more than 1,300cc for petrol and 1,500cc
for diesel with safety standard requirements to meet UNECE Regulations.
Recommendations
Thailand is continue to be a major hub of automotive production base of Asia with already
existing half of top 100 global suppliers active in Thailand which helps create more value
added to the country with strong domestic auto-parts industry. TEBA is working closely
with Thai government to help create and promote opportunities with our campaign on
how to become a world-class automotive supplier. This covers range of topics such as
operations management, supply chain management, logistics, quality management,
standards and certifications, manufacturing optimisations, technology design etc.
At the same time, we also encourage Thai government to facilitate product export since it
is accountable for half of Thailand output currently and more in the future. We encourage
that … foreign trade, trade negotiation, customs, standards/conformaty assessment.
Aerospace Industry
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Thailand is on the way to become an aerospace hub and major player in ASEAN’s multibillion dollar aircraft maintenance and manufacturing industries.
With the region expected to be the largest air
travel market in the world within the next
decade, Thailand is positioned to become a
crucial player in the Asian aviation industry.
Bangkok’s airport is 15th busiest in the world,
and is one of seven international airports in
the country. The Boeing Company forecasts a
market for the Asia-Pacific region of about
8,960 new airplanes for the 2009 to 2028
period, worth $1,130 billion.
US companies like GE, Chromalloy and Triumph and European companies such as Senior
Aerospace have already made significant investments in Thailand and take advantage of
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7. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
the country’s electronics and automotive industries that provide developed suppliers for
cost-effective and efficient production.
Regional low-cost airlines have seen significant growth over the last few years with more
and more Thais using them for travel.
In line with the new investment scheme, Thailand’s Board of Investment is considering
how the country could help incentivise aerospace industry development. For that, Royal
Thai government is also preparing the Aerospace Roadmap that will help identify
opportunities and business segment to be focused.
Recommendations
This project can provide significant opportunities for European technology providers.
TEBA has been working closely with National Aviation Committee to assess the market
potential and identify the gaps thailand would be required in particularly to fill in order to
achieve industrial competitiveness. It is also encourage that European companies to
contribute to this study to be done under the Thai government to ensure that appropriate
infrastructure is in place to establish aerospace footprint in Thailand for destination of
choice along with other players that are already active in the country including right
incentives and skill development programme.
Agro-Food industry
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Thailand is a main food producer of the world generating more than EUR 1.5 billion
exporting income. the background…
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The “Thailand: Kitchen to the world” project
aims to publicise food products and raise
awareness concerning food security among
people including production of food produce
that are of high qualities and meet with
international safety standards, this ranges
from raw materials, transportation,
production, value adding, and distribution
center. The main strategies 1. to extend
agricultural and food business network 2. to
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8. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
add values on industrial agriculture products by utilising advanced technology 3. to
enhance regional and international cooperation in particularly in research and
development 4. to support investment promotion in Thailand and overseas.
Recommendations
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Oil & Gas Update
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Investment in the Thailand oil and gas sector
over the past 30 years has exceeded Baht 1.3
trillion, of which over Baht 640 billion, or half
of the total amount, has been during the past
five years. During this past five years over
38,500 kilometres of 2D and 10,000 square
kilometres of 3D seismic surveys have been
conducted, with 273 exploratory wells and
2,229 development wells.
In 2011, natural gas supply reached 930,257.4
billion BTU, condensate supply
27,521.6 MMbbl, and crude supply
36,346.3 MMbbl. With continuing exploration,
onshore and offshore, reserves continue to be discovered. There is particularly good
potential for new discoveries in the Malaysia-Thailand Joint Development Area, already in
production, and the Thailand Cambodia Overlapping Claimed Area, which is in dispute.
Corporate activity in upstream oil and gas is dominated by two major companies: PTTEP,
the exploration and production arm of PTT, the national oil and gas company, and
Chevron. There are 24 other, mostly international companies, engaged onshore or
offshore. Natural gas is sold to PTT, which operates pipelines and gas separation plants.
Oil and gas companies are allowed to import duty-free equipment, with an average import
total approaching US$ 1.5 billion per year. Foreign experts are also given special
facilitation, with 1,500 to 2,000 per year granted entry.
There are over 300 platforms in the Gulf of Thailand, of which 279 are production or
processing platforms. Thailand has a strong complement of locally established drilling,
contracting, consulting, service and supply companies. There is now a strong oil rig and
platform construction industry, with cranes and other major equipment items now also
being planned for local production.
There are good opportunities for European suppliers to enter the Thailand market.
Thailand is an excellent base to access the Greater Mekong Region, especially the
expanding Myanmar market.
A local presence through an agent or representative is the best approach to reach the
market.
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9. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
ASEAN Watch
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In the year of 2013, the term AEC
or ASEAN ECONOMIC
COMMUNITY became a familiar
term in Thailand whether
academic, journalists, diplomats,
business both local and foreign
policy sectors included. News
stories regards ASEAN and its
community will continue to get
more attention in 2014 that and
the 10 nations of ASEAN circles
will have its focus on
“Myanmar”, the chairman of
ASEAN
First, the people of ASEAN is to recognize that ASEAN chairmanship is “Myanmar”
through its alphabetical rotation order and that its country first time since joining the pact
17 years ago as a result of its democratic reforms.
Under the theme of the ASEAN community to promote unity, political problem of
Myanmar continues. The “constitution” of Myanmar is still a mismatch between the
government and the opposition. Daw Aung San Suu Kyi has publicly announced that if the
government does move to the constitution, her party will boycott the elections in 2015. In
particular the section stated that a person with a spouse and children who are foreigners
will not be eligible to stand for presidential election. This will automatically rule out her
rights of a presidential debate. Meanwhile, on January 31, 2014, Myanmar Commission on
Constitution Review is scheduled to issue a report on amending the constitution.
Hence, this year will be marked as important for Myanmar for its political situation along
with a supporting role in ASEAN for the first time.
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"Vietnam", economic trend
Later this year, Vietnam 's average GDP 5.42% better than in 2012, which stood at 5.25%,
the lowest rate in 13 years, the annual inflation rate in 2013 fell to 6.04% from 6.81 % in
the year 2014 the Vietnamese government said that the country began to improve its
economic conditions with the service, industry and construction sectors including
agricultural expansion, respectively. This economic performance has due to its ability to
reduce inflation rate along and with more foreign direct investment. While analysts agree
that the Vietnamese government has now a better understanding of the sustainable
economic development, but also emphasise also the needs to crack down on corruption to
enable distribution of funds into stimulating country economy and make investments in
the country even more effective.
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10. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
The major problem is the debt rot in the banking system remained high and while the
Vietnamese government is targeting GDP in 2014 at 5.8 % and inflation at 7%, it is yet to
be seen whether the country will sustain macroeconomic stability or not.
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“Cambodia”, political instability
In late December Cambodian political heated when around 100,000 supporter of the
Cambodian National Rescue Party (CNRP) marched in the capital to demand the
departure of Prime Minister Hun Sen and hold a fairer election to all parties. This is belief
to be resulted from the dissatisfaction from elections in July 2013 that it is not fully
transparent the formation of Mr. Hun Sen presidential position together with the long
occupying power of 28 years. Problems of corruption, inequality in arable land rights of
the poor and especially in the capital.
Mr. Hun Sen announced decisively that he is not stepping down until the full term of five
years is served, but the protesters insisted that the protests will continue for another 3
months to pressure him to retire eventually. Cambodian political events must also be
watched throughout 2014.
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Mining Industry "Indonesian" surge
Over the past year, Indonesia has been preparing its Mining Law to ban the export of
mineral-ore for mining companies without smelters or refinery while regulating
shipments by miners that do process ore from January 12, 2014 onwards. This has created
a huge concern for the sector as it contributes to 12% of the country’s GDP and its export
volume of nickel ore to the world market accounted for 9%, bauxite and copper accounted
for 10% and 3% respectively, thus becoming the critical fear of the lost in economic
benefits and the lead to layoff thousands of people.
While currently ore processing, mainly in Indonesia is not enough, its remote mining
areas also lack the energy to build the plant. The Indonesia Mining Association will ask for
the Supreme Court’s opinion on the review of the law. Meanwhile, the government is
working on a special regulation that will likely ease the restriction that exceptionally allow
some operators with already processing ore domestically to export raw ore for a period of
2-3 years.
This is the one to monitor and see how will the private sector and government will react to
the situation next year.
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"ASEAN single visa"
Early 2013, Thailand and Cambodia agreed to declare the "Single Visa " for nationals of 35
countries to enter for the purpose of tourism including Australia, Austria, Belgium,
Bahrain, Canada, China, Denmark, Finland, France, Germany, Greece, Hong Kong,
Iceland , Ireland, Israel, Italy, India, Japan, Korea, Kuwait, Luxembourg, Netherlands,
New Zealand, Norway, Oman, Portugal, Qatar, Spain, South Africa, Sweden, Switzerland,
Turkey, United Arab Emirates, United Kingdom and the USA
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11. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
This collaboration is part of the development to have "One Visa for ASEAN". This project
piloted by ACMECS (Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy)
countries: Cambodia, Laos, Myanmar, Thailand and Vietnam is called ASV Visa (ACMECS
Single Visa) which is a partnership that looks like a Schengen visa used in the EU and act
as a catalyst to build upon ASEAN. Vietnam has expressed interest to participate in policy
at the earliest.
Among ASEAN nationals, Thailand is still the only country that requires a visa in
Myanmar. Myanmar authorities are working to make changes as they have now agreed
with Cambodia that citizens of the two countries can travel without a visa.
ASEAN member states will benefit hugely in particularly in the tourism sector if this
cooperation is fully integrated.
Telecommunications Update
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Thailand is currently in the process of expanding its digital television network and has just
announced the list of qualified bidders for the digital TV channel auctions. The date for
the auctions should be announced within the next month or so. A total of 29 companies
have applied, with 24 licenses available. Transitioning from analogue to digital TV will
free a significant amount of radio spectrum which can be used for mobile purposes.
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Tourism Sector Update
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The recent political instability has had a dampening effect on the Thai tourism sector,
which had been growing at a rate of 20% year-on-year growth up until October. Following
the onset of the instability, tourism growth has slowed to a 10% year-on-year growth.
However, the Thai tourism sector has been incredibly resilient to political crises over the
years and normally rapidly recovers once things settle down.
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12. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
Construction and Infrastructure Update
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Following massive flooding a few years back that inundated several of Thailand’s key
industrial estates, the government currently has a 350-billion-baht water management plan.
Public hearings on the plans have been held since August, with one in Bangkok that was
meant to be held on 6th December postponed due to the currently ongoing protests. It is
required that hearings be held once at the national level, four times at the regional level and
39 times in the provinces.
Official contracts for development of the nine modules are expected to be signed in
February. It is expected that 66.52 billion baht will be spent in 2014 on the water
management program.
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Thailand-EU Relations
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Perception is that Thailand is still a developing country - reality is that is has become an
upper middle-income country with sustained growth. In spite of the political instability,
Thailand is an attractive country - both for business a well as for leisure, however
Europeans
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TEBA View
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- suggestions for TEBA boards
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- suggestions for TEBA boards
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- suggestions for TEBA boards
Bangkok, December 2013
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Uli Kaiser
President
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13. COUNTRY REPORT
THAI EUROPEAN BUSINESS ASSOCIATION
QUARTER 4 - 2013
TEBA (Thai European Business Association)
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