Thai firms 'must embrace Asean'
To Kosit Panpiemras, Asean countries are attractive destinations thanks to the regional single market under the Asean Economic Community, which will take shape in 2015 and ensure free flows of trade and investment. While big Thai companies like Siam Cement Group, PTT and Banpu led the first wave of expansion abroad, small and medium-sized enterprises will follow, particularly those in the automotive, food, electrical-appliance and textile industries - which are the underlying economic strengths of the Kingdom.
"Venturing overseas is a must, given the challenges we're facing. Asean is now the most important market for Thailand, more important than the US or Europe," he said at a seminar on "Thai-Asean Economic Linkage" hosted by the bank yesterday.
He sees huge potential in Laos, Vietnam, Cambodia and Burma, reflected through the continued increases in Thai exports to the countries.
"Yet, such expansion plans must be carefully mapped out, with an understanding of the diversity of the region," he added.
The banker believes Thailand's domestic market will shrink, as elderly Thais, aged 60 and above, now comprise about 11 per cent of the population. As the birth rate will be in decline from 2015 onwards, the working-age population will fall - exacerbating the labour shortage and reducing consumption. Coupled with the policy to hike wages, this would add to the operating costs of Thai businesses, he said.
Meanwhile, several other Asean countries' domestic markets are bigger than Thailand's, thanks to their bigger populations. Indonesia is the star, with children aged 1-14 years accounting for 26 per cent of its 240-million population. This guarantees a huge labour supply. The Philippines' ratio of children is also high, at 33 per cent.
Kosit added that several Asean countries had begun to shine more brightly, and this explained why Thailand is losing its attractiveness in the eyes of foreign investors. This is reflected in the Kingdom's smaller piece of the pie in terms of foreign direct investment (FDI) in the region. During 2004-2009, Thailand attracted 17 per cent of all FDI flowing to Southeast Asia. The ratio dropped sharply to 6 per cent during 2010-2011. Indonesia, on the other hand, saw its ratio rise from 13 per cent to 21 per cent in the period.
"This is a sign. Even outsiders are overlooking Thailand, as they have new choices," he said. "Yet, despite huge potential, Asean is diverse in terms of population, age groups, income, regulations, competition in domestic markets and cultures."
Kosit admitted that venturing out is not easy, as it's like "competing in unknown territory, against unknown competitors who are in some cases better than us".
Thailand's overseas investment in 2009 was valued at US$3.81 billion (Bt116.6 billion), compared to Malaysia's $8 billion. Singapore invested only $5.97 billion in the year, but that was down from $11.21 billion in 2005.
Kosit noted that Thai businesses are new to this area, but Asean should be their focus as they take their first steps, as its 600-million population and economic growth forecast of 5.5 per cent this year make it attractive to the entire world. To prepare, they must have sizeable share in the domestic market, the necessary human resources for such expansion, as well as the right products for Asean consumers, the banker said.
"Asean is attractive to the world. If we don't go and others do, once they're settled, we won't be able to set up there, no matter how much we want to. We'll be shut out," he said.
Bangkok Bank president Chartsiri Sophonpanich noted that the bank had opened a representative office in Beijing in 1985, 20 years before getting a licence to open a full branch in 2005. He admitted that venturing overseas is hard, adding that it requires patience and thoroughness.