Zooming in on Thailand: Opportunities, misconceptions and challenges

SEPTEMBER 17, 2018 - 2:21 PM

Ow Ee Lin, Regional Director (Bangkok) of Enterprise Singapore, sheds some light on doing business in Thailand

1. What are some of the latest developments in Thailand right now?

Supported by strong export performance which is expected to achieve 10% in annual growth (as announced by National Economic & Social Development Board in August 2018), Thailand’s GDP is expected to grow by at least 4.2 – 4.7% in 2018. The Thai economy expanded by 4.6% in the second quarter, bringing overall growth for the first half of 2018 to 4.8%.

There are two key developments to note, which are the development of the Eastern Economic Corridor (EEC), and the nation-wide push to go digital.

The EEC is the government’s new initiative to drive the Thai economy forward. It complements the Thai government’s push for public infrastructure projects and investments in the private sector. Thailand’s eastern seaboard (ESB) region, a developing economic region and Thailand’s centre for export-oriented industries, contributes to almost half of the country’s manufacturing activities and attracts the majority of foreign direct investment in Thailand.

The EEC, which covers the three eastern seaboard provinces of Rayong, Chonburi and Chacheongsao, is an enhancement of the previous ESB project to upgrade the eastern seaboard region as the centre for export-oriented industries.

To increase the attractiveness of the EEC to investors, the Thai government has initiated a number of public infrastructure investment projects to improve connectivity within the EEC. This includes the high-speed train connecting the three airports around Bangkok, the double-track rail lines as well as upgrades of highways and motorways.

The government has also identified ten “S-Curve” industries, which refer to high growth sectors for the EEC, and established investment incentives and support schemes to encourage investors. These ten industries are: agriculture & biotech, aviation & logistics, biofuels and biochemical, digital, food for the future, medical & wellness tourism, medical, next generation automobile, robotics and smart electronics.

The second development to note is the Thai government’s strong focus on digital transformation. The government has prioritised development of digital hard infrastructure and acceleration of the digital economy under the National Digital Economy Masterplan, which lays out a 20-year strategy to capture growth opportunities in the rising digital economy. This Masterplan aims to broaden outreach of digital technology in Thailand and usher the country into the “Thailand 4.0” era.

There have been both public and private efforts to help build the necessary infrastructure. For example, on the public front, the Digital Economy Promotion Agency, which was established to promote and support the development of digital industry and innovation and the digital technology adoption, and CAT Telecom, a state-owned company that runs Thailand’s international telecommunications infrastructure, are planning a Digital Park at CAT’s property in Sri Racha district, Chon Buri province, by 2022.

On the private sector front, True, a communication conglomerate in Thailand, is building the True Digital Park, which will house key players from the entire startup ecosystem including startups, entrepreneurs, tech companies, accelerators, incubators, investors, academies and the government. This will officially open in 1Q2019. Major Thai conglomerates such as CP group, TCC and SCG are also supporting the government’s digital strategy via various digital transformation initiatives.

2. What are some of the biggest opportunities? Why should Singapore businesses consider entering?

There are clear opportunities arising from developments in the EEC across the ten targeted industries. In particular, Singapore companies with expertise and capabilities in aviation and logistics can capture some of these opportunities given its connectivity and export focus, and leverage the supportive investment benefits by the Thai government.

For example, the EEC aerotropolis project requires aviation technical services and aircraft MRO (maintenance, repair and overhaul) to support Thailand’s fledging aviation sector. As investors stream in, there is room for Singapore logistics companies to support new setups and the expanded manufacturing activities in the three EEC provinces. 

We also see a surge in online shopping in recent years as consumers in Thailand become more tech savvy. As the second largest economy in South-east Asia with one of the region’s highest number of internet users, this market provides fertile ground for ecommerce businesses.

Traditional retailers have shifted their focus online and expanded their digital presence. Singapore companies in the consumer space could consider a localised online experience for the Thai consumer, for example working with end-to-end cross-border ecommerce logistics enablers to deliver their products to Thailand directly, or working through established multi-brand platforms such as Lazada, Central or WeLoveShopping to reach out to their audience.

Thailand is a growing market for startups, given the strong push from its government towards a more innovative economy from the Thailand 4.0 initiative, as well as strong support from the private sector. There is also a growing amount of capital that supports the development of startups in Bangkok, with the emergence of close to 100 venture capital firms, corporate investors and accelerators.

3. What are some misconceptions that businesses have about Thailand? 

The South-east Asia region is viewed as a populous, low cost and relatively lower skilled production base. However, Thailand with its strong automotive, electronics, food and chemical industries, and its established position in the global supply chain makes the country more suited to attract medium to high tech investments instead of labour intensive industries.

Companies often assume that as Thailand is a developing country, the costs of doing businesses would be low. However, the presence of many multinational companies and strong local conglomerates with their demand for skilled workers and prime space in Bangkok mean that the costs of doing business might be higher than what Singapore companies expect of a developing country.

For the same reason above, the Thailand market is also competitive. Though Singapore enjoys a good brand name, Singapore companies should constantly review their products, services and value propositions as there are plenty of alternatives in the market. In particular, we observe that the Thai companies are constantly innovating to capture fast changing consumers’ tastes. 

4. What are some of the biggest challenges that businesses would face and how can they overcome these challenges? 

While Thailand has a pro-business environment and welcomes foreign investments, foreign investors need to be aware of the Foreign Business Act (FBA), which regulates the extent of non-Thai participation in certain business activities, for example retail and distribution, logistics and food services.

To overcome the above restrictions, Singapore companies looking to enter the market could consider alternative business models and partnerships, such as working via a local distributor, franchise partner or a minority share joint venture with a local Thai partner. With our strong connections on the ground, Enterprise Singapore can connect Singapore companies to in-market partners and share insights on the latest market and sector developments.

Companies whose business activities fall under the Thai Board of Investment’s (BOI) list of promoted sectors (eg. logistics) could consider seeking for BOI approval on its investment projects, which could provide up to 100% foreign ownership allowance amongst other eligible incentives.

5. What’s your top advice for SMEs thinking of entering Thailand? 

An open mind set and flexibility to work with a suitable local partner is important. While Thailand and Bangkok are popular and familiar leisure destinations for Singaporeans, it may not be the same case for businesses. Working with a local partner with connections to established networks can provide additional resources to drive the business forward.

Also, the availability of internet platforms in Thailand is high. Examples include Lazada, Shopee and Zilingo. This has greatly facilitated opportunities for cross border trade. SMEs with good Singapore products for export should consider exploring using ecommerce as a way to enter Thailand and test the market before scaling up.

Beyond Thailand, Singapore companies should consider leveraging the business networks that Thai companies have in the Indochina region, which is a substantial market of over 230 million in population as compared to Thailand’s population of 68.4 million. Partnerships with such Thai companies could propel the business forward beyond the domestic market.

For more market insights on ASEAN and information on how Enterprise Singapore can work with your business to venture to the region, please visit www.enterprisesg.gov.sg/ASEAN