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Thailand moves full steam toward One Asean

/ 12:14 AM February 15, 2016

BIG THAI corporate names like Bangkok Bank, Charoen Pokphand Foods, Siam Cement Group and Thai Beverage—representing various industries—share the view that the domestic economy is becoming too small so they venture overseas to take advantage of growth opportunities that the Asean Economic Community (AEC) offers.

Asked how ready his company is for the AEC, Charoen Pokphand Foods president and chief executive officer Adirek Sripratak said: “We have established a strong footprint in Asean, not in recent years but over 30 years ago.”

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Before the regional economic integration took effect to transform the Asean as a single market and production base, these Thai companies have long made their presence felt in many of the 10 member-states of the sub-region.

Big business ready

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Bangkok Bank already has branches in nine countries, all of the Asean states except Brunei. In Asean outside of Thailand, Charoen Pokphand Foods has operations in Cambodia, Laos, Malaysia, the Philippines and Vietnam.

Siam Cement Group in 2014 saw an 18-percent increase in annual sales revenue in the Asean, including exports from Thailand, to 100.9 billion baht or about $2.84 billion , accounting for 21 percent of the group’s total sales revenue. More than one-fourth of its 35,000 employees are non-Thai Asean citizens manning overseas operations.

In the past five years, many more Thailand-based companies have looked outward to gain from the integration that promises free flow of investment, capital and skilled labor. Among the 50 companies included in the SET 50 Index calculation basket, about 35 companies or 70 percent have established operations in one or more Asean countries.

Bank of Thailand data show that net investment outflows from Thailand to other Asean countries have constantly increased over the past four years. Thai direct investments in Asean hit 84 billion baht or some $2.36 billion in 2012, rising from 69 billion baht $1.94 billion in 2011. The amount fell in 2013 when Thailand was hit by international political instability, before hitting the 100-billion baht ($2.81 billion) mark in 2014.

Blueprint compliance

Regulations-wise, Thailand is at the forefront in complying with the AEC Blueprint. According to the Commerce Ministry, Thailand has implemented more than 80 percent of the measures outlined in the AEC Blueprint.

At the national level, several plans have been introduced to bring about seamless connectivity.

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Thailand lies at the center of the East-West Economic Corridor, a road link that extends from Vietnam to Burma (Myanmar). Road upgrades have been carried out in the past few years and plans are underway to invest in new railway projects that will facilitate passenger and goods transportation. Chief among them is the 873-kilometer, North-South double-track route from Nong Khai on the Lao border to Map Ta Phut at the heart of the country’s Eastern Seaboard industrial zone.

Role in sub-regional trade

Deputy Prime Minister Somkid Jatusripitak also envisaged an East-West rail link to complement the North-South project and make Thailand a true connectivity hub. The new project would link Thailand with Laos and Burma.

“This will immediately turn Thailand into the center of the AEC,” he said.

The road and rail links are expected to boost trade among Asean nations and other neighboring countries. To cash in on the connectivity, the Thai Cabinet recently approved in principle the establishment of special economic zones in six border provinces, aiming to draw foreign investors who hope to benefit from the integration.

Thailand is also prepared to play a major role in the Mekong sub-regional trade. The Bank of Thailand recently raised the maximum amount of Thai currency one can carry across the border from 500,000 to 2 million baht or from $14,000 to $56,337, in an attempt to increase baht-denominated trade in the region. Foreign companies can also borrow in Thai baht even if they do not trade with Thai companies or establish a business presence in the Kingdom.

The opportunities are huge, but not all Thai companies are embracing the integration wholeheartedly.

Services a major challenge

Those in the services sector could be affected the most as the AEC promises free flow of skilled labor in eight fields: Medicine, dentistry, nursing, engineering, architecture, accounting, surveying and tourism.

Dusit International Group, the oldest Thai hospitality group, foresees that the AEC would bring about greater demand for business and leisure travel. Yet, it remains to be seen how the group would be affected by the free flow of personnel in the tourism industry.

Small and medium-sized enterprises—constituting over 70 percent of the more than 600,000 registered companies in Thailand—are wary of the possible negative impacts of the integration on them, fearing the AEC will toughen competition and threaten their viability.

To address these fears, the Commerce Ministry has conducted more than 200 training courses from 2012 to 2015, covering more than 25,000 participants who are small and medium-sized entrepreneurs, farmers, educators, government officials and the general public. Through a network of 18 government agencies and private organizations, an additional 41 sessions have been held for more than 9,100 participants.

But there’s still more that needs to be done to fully capitalize on the opportunities that come with regional integration, according to Surin Pitsuwan, former secretary general of the Asean.

“Given the relatively small intraregional trade, Thailand needs to do more to reap the maximum benefits to be offered by the AEC,” he said at a recent conference in Bangkok.

Despite the challenges posed by the AEC, Thailand as a whole looks set to move forward, to grow together with its increasingly close regional neighbors.

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