Resolute and poised, Thailand is performing like a true Asean tiger and stands ready to take a leading role in supporting and coordinating the development of the upcoming Asean Economic Community
Thailand, one of the most active and central players in the Association of Southeast Asian Nations (Asean) alliance is committed to cultivating a robust business environment.
Paiboon Nalinthrangkurn, Chairman of the Federation of Thai Capital Market Organizations (FETCO), notes that Thailand’s economy has rallied back from the financial crisis of 1997 when the country virtually went bankrupt with the shutdown of 50 financial institutions, leaving only the strongest to survive. Its GDP growth rate plummeted from 9% in 1996 to -10% in 1998. Since then, the Thai economy has weathered global slowdowns and growth has been steady, ranging from nearly 4% to 7%.
The Asean link project is one of the initiatives that Mr. Nalinthrangkurn is taking on to facilitate retail investment. The project currently connects the markets of Thailand, Malaysia and Singapore.
“These are the major markets in Asean, and we hope that once we have fully integrated or connected the markets, everything can be done a lot easier,” he says.
“The priority is to take care of domestic infrastructure first, and then think about linking with the other markets like the Philippines, Indonesia and Vietnam later. It’s a work in progress and at least three markets are willing to work together now. In terms of full integration and having the same tax regimes etc., it is going to be a long-term process.”
Another work in progress is the AEC or Asean Economic Community, created with the aim of reducing the economic and development gap between Asean member countries and strengthening the Asean community as a whole. Thailand is taking a lead role in conducting development cooperation and opportunities in bilateral and trilateral forms. Once the AEC goes into effect in 2015, the region is expected to become a hub for the free flow of goods and services.
“The AEC will create the free flow of goods as well as investment and skilled labor,” says Udom Wongviwatchai, Secretary General of Thailand’s Board of Investment. “It will create a lot of opportunities for business with China. The opportunity is market expansion, as the market increases from 60 million to 600 million across the Asean countries. We will have the opportunity to get cheaper raw materials from other countries.”
|"The priority is to take care of domestic infrastructure first, and then think about linking with the other markets like the Philippines, Indonesia and Vietnam later” |
Chairman of the Federation of Thai Capital
Market Organizations (FETCO)
Other advantages for Thailand include supplementing its skilled labor force and creating growth opportunities for Thai companies to sell their goods to huge domestic markets like Indonesia, which has a population of 280 million.
Exports currently account for 70% of Thailand’s GDP. About half of the country’s workforce is in the agriculture sector. It is the world’s top exporter of rice; while automotive and electronics are other major contributors, making up 19% of the nation’s exports.
Although the AEC is expected to create opportunities for Thailand, it will also bring challenges as it will increase competition for foreign investment.
“There are still some differences between Asean countries especially in terms of market behavior,” says Mr. Udom. “Right now the countries Thailand trades with appreciate Thai products. They believe Thai products are high quality. That is why it is a very good way for us to convince foreign investors to invest here.”
Foreign investment has practically doubled since 2010 under the chairman’s watch, which he explains was due to a number of factors.
“Economic growth has been over 5% for many years,” says Mr. Udom. “That will increase confidence among foreign investors. We will launch a megaproject infrastructure development to build logistics capabilities, especially in the rail system and water management. That is very important for foreign investors.”
Proof lies in the Thailand Foreign Investors’ Confidence Survey 2014, which has found that 98% of foreign investors remain confident in Thailand, with 24% of them planning to expand their investment.
“This corresponds to the improving investment climate after the BOI approved 18 project applications worth 122,837 million baht ($3.8 billion) and continues to approve projects and to conduct weekly project application screenings,” adds Mr. Udom.
Also important is corporate social responsibility and sustainability, which the government is addressing, according to Dr. Chaiyawat Wibulswasdi, Chairman of the Executive Board for CSRI, the Corporate Social Responsibility Institute of Thailand.
“We try to instill awareness amongst leaders of the companies, regarding things that need to be done and push them to world standards,” says Dr. Wibulswasdi, whose organization is tasked with raising CSR standards in the Thai business community, particularly among small and medium-sized enterprises, which traditionally have not viewed CSR as an internal issue.
“We try to make them aware that CSR is good for business, because stakeholders want to do business with a good company,” adds Dr. Wibulswasdi.
As an incentive to inspire companies to become good corporate citizens, the CSRI is working toward creating a Sustainability Index that will rate firms based on their CSR performance. Companies in different sectors will compete against their counterparts in other emerging countries to achieve international status.
“It will list top performing companies in terms of sustainability in one basket,” says Dr. Wibulswasdi. “When U.S. companies or companies in Asean countries want to come into Thailand it can serve as a guide for them to look for good companies to do business with.”
Raising the CSR quotient is one way to combat corruption, a formidable issue in Thailand, concedes the MIT graduate.
“Right now there is a group of institutional investors in Thailand, the largest one being the government pension fund for civil servants. In the future they will only invest in companies with strong CSR policies; they will not engage in corrupt business,” says Dr. Wibulswasdi.
Social media reaction to bad business practices is also having an effect on changing corporate attitudes, he adds.
CSR is also one of the key missions for the American Chamber of Commerce in Thailand (AmCham), where it provides social and business networking support to its 700 members.
While big multinationals like Ford Motor Co. already incorporate transparency, accountability and corporate governance into their businesses, the same themes may be new for local partnerships.
AmCham’s Vice-President Matt Bradley suggests that the role Thailand plays in the Asean bloc and globally will be critical, and key to that role is continued transparency, and consistency in policy formulation.
“The ability of the private sector to have an input in government policy formulation, whether it is just for Thailand or for trade beyond Thailand, is important,” says Mr. Bradley.
The land that is known for happiness and smiles is one that promises growth, says Mr. Nalinthrangkurn of FETCO.
“Despite the political issues I am confident that the Thai corporate sector and financial sector will continue to grow. We are determined to be a major force, first in Asean, then Asia. You can see Thailand as the gateway to China and India.”