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EIC | Economic Intelligence Center

January - June 2012

Insight
Business opportunities for services sector under the AEC

Contributors
Dr. Sutapa Amornvivat Vithan Charoenphon Dr. Chinnawut Techanuvat Tubkwan Homchampa Teerin Ratanapinyowong Pranida Syamananda Dr. Sivalai Vararuth Witchuda Chummee

Business opportunities for services sector under the AEC
Progress towards the ASEAN Economic Community (AEC) thus far has been rather slow with few tangible results, which may have helped explain a correspondingly slow adjustment by the business sector. Even the reduction in import duties to 0% in accordance with the ASEAN Free Trade Area (AFTA) took 17 years to materialize, while the liberalization in trade and services which started in 1996 is still behind schedule. In particular, the endeavor to allow up to 70% equity participation by ASEAN investors in 4 priority services sectors by 2010 has not met with much success as there remain member countries who ask for extension. Such type of delay can pose a risk for the businesses to adjust to major leap of changes should all the commitments have to be met within 2015 as targeted. As a result, the business sector should make a head start in making necessary adjustments. …because waiting until the full integration of AEC would result in business opportunity loss. The European Union (EU), despite its countries sharing borders and a supranational governing entity, still took 25 years to fully implement a free trade agreement that allows for trade to occur within the EU without customs. However, waiting for the full implementation of the AEC will be too long a wait, and the current progress has already allowed enough opportunities for businesses to utilize in order to expand into the ASEAN market, such as the 0% import tariffs and the free movement of labor in 7 professions which have previously been agreed upon, or the raise of the maximum equity participation allowed in services sectors which, whilst yet to reach the intended 70%, have created attractive investment opportunities. Business opportunities from now until 2015 will include agricultural business opportunities arising from both growing demand for agricultural outputs and potential growth from new forms of agricultural businesses such as contract farming. Moreover, AEC also offers greater prospects for further liberalization of the CLMV economies, which will put greater importance on trade and investment, as well as opportunities from the ongoing liberalization of the services sector in these countries. Besides the relevant short-term risks, the liberalization of the services sector also brings along stronger competition, as more countries are considering the services sector as one of the key economic drivers. This can be seen in the higher percentage of the services sector as part of economic contribution and foreign investment. Especially in Singapore, the services sector accounts for 72% of its GDP and has the highest amount of foreign investment among ASEAN countries. By 2015, the services sector as percentage of GDP in the Philippines, Malaysia, Indonesia and Thailand is expected to increase to 56%, 50%, 45% and 44%, respectively. The services sector, therefore, can implement various strategies depending on different factors that arise. Some should expand business into countries with a high market potential, while some can grow from expanding domestic markets as a result of the AEC. Others will have to anticipate and handle opportunities and threats from the inevitable increase in competition. Retail business that focus on product differentiation and penetration into middle-to-high income customers will have better opportunities in Malaysia, Indonesia, and Vietnam. The urbanization, coupled with a higher share of middle-to-high income consumers has led to a change in spending behavior. For example, in the past 10 years, consumers have spent less on fresh food and more on packaged food. They also have a higher demand for more variety of goods and services, in particular non-grocery items, and other amenities for their daily life. Such changes in the spending behavior will undoubtedly have an impact on the investment decision. Despite the AEC's liberalization of foreign investment in the retail business, there are still domestic rules and regulations that may pose challenges.

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Medical tourism is one of the services businesses where Thailand has an advantage and can expand its market into ASEAN, especially Indonesia as a result of increasing ease of traveling within the region. Thailand already possesses reputed specialties, for instance, in plastic surgery and dental care. Its worldwide status as one of the top tourist destinations will also create an excellent opportunity to expand its medical tourism business within ASEAN, in addition to being the leading medical destination for traditional customers from Japan and the Middle East. Moreover, the AEC will allow for greater mobility of nurses, which would help alleviate the current shortage in Thailand. Logistics business can use opportunities offered by the AEC to increase domestic and foreign investment, and forge a network of partnership for integrated services. Business operators can benefit from basic infrastructure and transport development, as well as government support to attract investment in provinces with logistics potential. For instance, distribution centers and warehouses should be set up along the transport routes to the neighboring countries in order to facilitate the higher volume of goods transfers caused by the AEC trade liberalization. A logistics network should be developed domestically and internationally to create more flexibility and foster linkages and connectivity in transport management. An advanced logistics and technological system can also provide the competitive advantage over other competitors. Thai services sector should, therefore, start building up its own arsenal and look for the right timing to adjust and upgrade business competencies to reap the growing benefits from ASEAN market. Expertise in a particular field will be a much-needed strength in the competition for foreign investment into ASEAN in the services sector, which is fast outgrowing the investment in manufacturing sector. Furthermore, research on market potential as well as international and local regulations is also important, since different businesses will have different ripe moments to tap into the ASEAN market. For some businesses, the time is now. Other businesses should adopt a wait-and-see stance. Most importantly, however, businesses should learn the implications of the AEC immediately because the AEC has begun long before 2015.

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Thai businesses have good prospects following the gradual reduction in restrictions in goods, services, and trade facilitation, although the pace of liberalization is slower than targeted. Despite the policy objective of meeting the AEC requirements by 2015, businesses can start reaping the benefits now without having to wait until 2015 since the liberalization process has been ongoing for quite some time. In particular, trading of goods among the ASEAN-6 has enjoyed the gradual reduction in import tariff to an average of 0% since 2010. Although the usage rate of AFTA benefits for Thai businesses continued to increase from an average of 20% of the export value to ASEAN during 2003-06 to 50% in 2011, the rate is still far below the 100% target. This is partly due to the misconception that the application process is too complicated, and business operators are unable to adjust to the new format and procedures. Moreover, the rules of origin require that at least 40% of raw materials must originate from within ASEAN. Although the tariff rate of Cambodia, Laos, Myanmar, and Vietnam is higher than the 0% of ASEAN-6, it has been quite low, not exceeding 5% since 2010. Nevertheless, the liberalization process of trade in goods seems to have made the most notable progress while other tracks such as services have yet to meet their targets. At the same time, challenges for Thai businesses have notably increased. Thailand is one of many countries whose share of the middle-income class is rather high and has therefore become one of the targets in marketing. The AEC would also benefit Thailand’s competitors due to the tariff reduction, while Thailand’s wage policy might reduce its attractiveness as a production base. From now until 2015, Thailand’s preparation process must intensify in many areas. The AEC is much more than free trade area, and further progress is needed on many fronts. Greater liberalization of trade in goods by CLMV, reduction in non-tariff barriers, liberalization of trade in services, and liberalization of investment-these are areas ASEAN is working on. In line with this, trade facilitation, which the private sector is looking forward to, is also key for fostering trade expansion. For example, the ASEAN Single Window (ASW) would improve customs procedures and harmonization of product standard would benefit ASEAN consumers.

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ASEAN Economic Community:

from now to 2015

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beef. some plants and vegetables. 1 . chicken. and corn. The tariffs of ASEAN-6 are 0% for all goods under the inclusion list. pork. Brunei: tea and coffee. vegetables. pork. whose rate must reach 0% 6 Thailand’s sensitive list is: coffee. buffalo meat.EIC l Economic Intelligence Center to the 1 Much remains thebe done for frombusiness sector to 0% to prepare for AEC. chicken. and sugar. coffee. dried coconut. cassava. Singapore and Indonesia have none. rice. coffee. pork. Cambodia: chicken. cassava. live fish. Philippines: some live animals. egg. Myanmar: peanut. some fruits and vegetables. Laos: live animals. potato. egg. some plants. and sugar. and cotton. dried coconut. Philippines: some live animals. silk. Myanmar: peanut. Cambodia: chicken. some plants. Brunei: tea and coffee. rice. Singapore and Indonesia have none. buffalo meat. and as agreed under the negotiation for the highly sensitive list. and 2017 for some items. From now until 2015. pork. Vietnam: some live animals. and tobacco. sugar. Malaysia: some live animals. and plants. pork. prepared meat. apart the tariff reduction 1 Thailand’s sensitive list is: coffee. egg. silk. egg. live fish. and tobacco. beef. chicken. chicken. and cut flowers. some plants and vegetables. and corn. some fruits. and tobacco. pork. and tobacco. especially for items under the inclusion list. chicken. not to exceed 5% for the sensitive list1. chicken. and plants. Vietnam: some Source: SCB EIC analysis live animals. CLMV will need to liberalize more on trade in goods to catch up with the ASEAN-6 after they have reached the target since 2010. some fruits and vegetables. sugar. vegetables. Laos: live animals. prepared meat. Malaysia: some live animals. chicken. and cotton. chicken. some fruits. CLMV will have to reduce their tariffs as agreed. and cut flowers. potato.

tires. **Non-tariff barriers means measures on trade in goods which are not tariff.EIC l Economic Intelligence Center 2 For trade in goods. They are rice for Indonesia. HSL = highly sensitive list. over half of their inclusion list is already 0%. and the Philippines. thus their process will take longer than for ASEAN-6. However. whose tariffs will be reduced to the agreed rate prior to the negotiation.2 Currently. 2 For further reading. liquid soap. please see SCB Insight: Where are the opportunities for Thai business in neighboring countries (May 2010). CLMV will provide more opportunities for the export market in the next period due to the reduction in tariffs *IL = inclusion list (list of goods to be liberalized) whose tariffs will be reduced to 0%. motorcycles. CLMV have been given some flexibility in meeting the AEC deadline. Malaysia. the average tariff rate of CLMV is only 2. while only 7% of Myanmar and Cambodia’s inclusion list is 0%. overall trade with CLMV may not increase significantly as a result of the tariff reduction because the rates have previously been brought down to a very low level. 7 . soap. For Laos and Vietnam. Thai export has already benefited from the gradual tariff reduction of CLMV in non-alcohol drinks and soft drinks. SL = sensitive list¸ whose tariffs will be reduced to 0-5%. and sugar for Indonesia. Source: SCB EIC analysis based on data from ASEAN Secretariat There will be more opportunities for trade in goods with Myanmar and Cambodia because over 90 percent of their inclusion list has to be brought down to 0%. and cleaning products.6%. although have yet to reach 0%. Nevertheless.

Some of the items are already being exported to these countries. there will be more opportunities for Thailand. automobiles.EIC l Economic Intelligence Center CLMV have reduced their tariffs significantly. especially for MyanmarlargeCambodia has to be brought and Average tariff rate in ASEAN member countries Source: SCB EIC analysis based on data from ASEAN Secretariat Thai exports which are likely to benefit from further reduction in tariffs of CLMV are petroleum oils. meat. sugar. while others have yet to be. Thailand should therefore look into these windows of opportunities since it is geographically suited for trade with CLMV. Given the fact that there are many items on CLMV’s inclusion list and sensitive list which have to be brought down to the target within 2015. 8 . and beverages. a portion still 3 Althoughdown to 0% within 2015.

securities. i. Source: SCB EIC analysis based on data from ASEAN Secretariat The export items which already enjoy relatively high demand and are expected to perform better after further reduction in tariffs are. Other kinds of cooperation such as customs arrangement. For instance. Thai businesses will therefore have more investment channel and easier access for funding due to the high liquidity in the region after financial integration and liberalization.e. The export items that are performing only moderately but will benefit from greater reduction in tariffs by CLMV are beer. liquor. and public transport vehicles. electrical power. wine. for example. processed meat. meat. the capital market liberalization involves services related to the capital market. Ethyl alcohol. and beverage CLMV are petroleum oils. to be more harmonized and integrated. and meat. there are many sectors under the AEC which can unlock opportunities for Thai businesses. These will provide ample of opportunities for trade between Thailand and CLMV. cement. including the ASEAN Exchange Linkage which will facilitate cross border trade for ASEAN exchanges. automobiles.. sausages. automobiles. motorcycles and sided-cars transport trucks. asset management.EIC l Economic Intelligence Center benefit from further tariff reduction by 4 Exports which are tosugar. Apart from trade in goods. 9 . sugar. would also help facilitate ASEAN trade due to faster and more efficient services. non-alcohol and soft drinks. petroleum oils.

although Thai businesses may have more time to prepare for further liberalization. but they ended up negotiating to liberalize additional sectors instead. while other countries including Thailand still cap the foreign equity participation at 49%. this may be counterproductive should they fail to adjust and are faced with a sudden and major leap to full liberalization as targeted. This is because the ASEAN negotiation process relies on cooperation. According to the latest round of negotiation. Thus the target date of 2015 can be pushed out. Implementation of the action plan has to therefore allow some flexibility to the parties. for healthcare service. which is beyond the commitment under the AEC. or it may become just a starting point for a gradual liberalization as committed under the negotiation. many countries still maintain the ceiling on foreign shareholding to below the agreed target. Each country still retains the right to regulate its services.This may reflect the fact that Laos and Vietnam rely on foreign investment in healthcare service. with the exception of trade in goods. second to trade in goods. it was agreed that ASEAN investors could hold up to 70% shares in priority integration sectors. Ministry of Commerce 10 . most efforts. As a result. One notable delay is the negotiation on trade in services. which is gaining in importance. with no supranational body in charge like the EU. to reach the AEC target are still behind schedule. for preparations because the AEC implementation is 5 Thai businesses hane timefronts behind schedule on many foreign ownership limits in some Priority Integration Sectors according to the latest 7th package of commitments under AFAS Source: SCB EIC analysis based on data from Department of Trade Negotiation.EIC l Economic Intelligence Center However. For example. Previously. only Laos and Vietnam allow ASEAN investors to hold shares up to 100%.

For example. the application for a halal certificate from the Department of Islamic Development Malaysia may take more than 30 days because the approval has to come from a panel which meets at long intervals. i. thus delaying the AEC process. Therefore. Some measures have direct impact on production procedures and business operators because they have to upgrade to a higher standard. Technical Barrier to Trade (TBT) and Sanitary and Phytosanitary (SPS) measures. 6 The major obstacle for trade inafter the reduction in tariffs introduced by many countries Example of non-tariff barriers introduced after tariff reduction in 2010: food industry Source: SCB EIC analysis based on data from Technical Service Network Center (TSNC) 11 . businesses are faced with more and more of this type of measures. goods is non-tariff barriers. the food industry. which has somewhat derailed intra ASEAN trade. despite the tariff reduction to 0% for trade in goods. is expected to be adversely affected by these measures.e.. in practice many countries have resorted to more non-tariff barriers than before. which is allowed under the AEC. to be in line with the technological advancement of the country imposing the measures. despite the tariff reduction to 0%. some ASEAN countries have added measures on non-tariff barriers. While the reduction and elimination of non-tariff barriers is part of the AFTA agreement.EIC l Economic Intelligence Center Furthermore. citing the necessity to protect human life and health. In particular. which is Thailand’s main export product to ASEAN.

many countries have resorted to introducing new type of measures that do not breach the agreement so as to protect their consumers and industries. In addition to efforts by ASEAN governments. and (2) greater use of non-tariff barriers which are not inconsistent with the agreement under the AEC. Consumers will have more choices of quality goods and services at an appropriate price. After a successful integration. businesses will enjoy a larger market and different channels for cost reduction. ASEAN will become a more important force in the world economy. Therefore. the AEC target would not be out of reach. support and cooperation from the private sector will also be crucial in ensuring a successful AEC implementation that will be beneficial to all parties. 12 . business operators will need to be prepared for two scenarios: (1) a decline in non-tariff barriers. the business environment will change for the better. and the benefits will be for all parties. if businesses have awareness for the upcoming change and make gradual preparations accordingly.EIC l Economic Intelligence Center In this light. In the end. who may not be ready for the liberalization and increased competition. from enhanced competition and greater trade and investment facilitation. which means more intense competition in the future. While the AEC will continue to adhere to the free trade principle and to abolish or reduce non-tariff barriers. especially small and medium enterprises. One of the reasons for the delay in implementation is the concern for domestic operators.

The value of FDI registered in Vietnam also peaked at about 1400 percent against the year before the easing. USD Million (RHS) Source: SCB EIC analysis based on data from Central Statistical Office of Vietnam 13 . similar to Vietnam’s case since the start of US sanction easing in 1991-92 Vietnam’s FDI environment. 1994 was the year the US abolished its economic sanctions. Given the richness in natural resources. 7 It is possible that Myanmar’s FDI will increase dramatically. and Australia and Japan also sending similar positive signals. as well. as well as an extended period of economic and infrastructure underdevelopment. with the US. Myanmar promises overwhelming business opportunities and attracts huge investment funds into the country.EIC l Economic Intelligence Center BOX: Investment outlook in Myanmar …after easing of economic sanctions The lifting of economic sanctions will be the most important factor in fostering foreign direct investment into Myanmar. For the next 2 years.1997 Unit: Projects (LHS). as well as services sectors such as construction. potential for consumer market of over 60 million people. and the cheap labor market. tourism.e. and transportation. the value of registered FDI rose significantly. hotel. with the investment funds having been diversified into heavy and light industries. EU and Canada announcing temporary suspension of economic sanctions. 1988 . major economic powers were quick to offer rewards to Myanmar. and it was the year the number of approved projects had the sharpest increase. i. The behavior of FDI flows into Myanmar should be similar to what happened in Vietnam after the relaxation of US economic sanctions that began in 1991-92. which was reflected by the increase in the number of approved foreign-owned projects by 400% compared to the period prior to the easing. during 1995-96. After the successful by-elections in April 2012. Vietnam’s FDI continued to increase steadily in the next 4-5 years after the relaxation..

and their technological know-how is far less superior to that of the large corporations of advanced economies. Thai businesses must differentiate themselves from other multi-national corporations. They should aim to penetrate this market using the good relations with Myanmar as their advantage to find a strategic partner. Thai businesses are not all endowed with sufficient investment funds necessary to improve Myanmar’s basic infrastructure to facilitate businesses. To help Thai SMEs. it may be essential to emphasize a sense of mutual benefit and long-term commitment to the country’s development through local staff employment. Thus. distribution. with a condition to put up at least 35% of the registered funds. which will be beneficial especially if the Thai companies are not yet familiar with the risks of foreign direct investment. On the other hand. For example. information and technology. Thailand has overall advantage over the giant economic powers in its long standing relationship and close cultural and religious ties with Myanmar.EIC l Economic Intelligence Center Given such scenario. These executives can be sales agents for imported goods or purchasers of Thai franchises. they will need to concentrate on their strengths and build a new business model suitable to the sizes and types of their businesses. Tapping on Myanmar’s cheap labor market and rich natural resources. they can also consider setting up a production base in Myanmar. and distribution of quality goods to the domestic market at a reasonable price. …As for large Thai corporates with sufficient investment funds. small and medium enterprises (SMEs) should consider Myanmar as a large and fresh market. and after-sales service. if Thai investors are unable to turn these weaknesses into strengths in the near future. it shares border of over 2. the Board of Investment and the Federation of Thai Industries regularly organize roadshows to meet with business executives in Myanmar in order to find the right partners through business matching. Thai companies with strong potential and adequate funds can also enter into a joint venture with a company in Myanmar to set up a small to medium factory. Thai businesses should not be complacent. 14 . They should find their own strengths and weaknesses so as to adjust their strategies for the more intense competition. perhaps by also fostering the quality of life for the citizens. knowledge and technology transfer. In this regard. For Example. The Myanmar counterpart can. facilitate in the marketing. Moreover. Thai companies will be able to enhance production efficiency and sell the products back to Thailand or export them worldwide. in turn.000 kilometers across 10 provinces.

the hidden costs from rising employment benefits in order to be more generous to workers. underdeveloped logistics system3. such as frequent power outages. i. 3 See additional information on comparison of the logistics system in ASEAN countries in figure 35. However. Furthermore. and the unsophisticated financial system which may not necessarily be able to absorb the influx of foreign funds. Myanmar is poised for substantial foreign investment Source: SCB EIC analysis Although the overall investment climate in Myanmar is improving. The floatation of the kyat in the beginning of April.e. as well as planned amendment of investment laws and a new law on special economic zone to facilitate foreign investment. and from higher land lease price which is already experiencing manifold increases over the past few years especially in key cities such as Yangon and Mandalay. many challenges remain. 15 . there remain a number of hurdles for Myanmar that are considered business risks. foreign investors will have to cope with the impact of the reform process.. Thai investors will have to be aware of these shortcomings and formulate their strategies accordingly to minimize the impact. have reduced some investment risks.EIC l Economic Intelligence Center 8 With rich natural resources and a long period of closed door policy. As a result. shortage of skilled labor.

One example is the growth of e-commerce business. as well as business mergers among the EU to benefit from economy of scale. prices 9 Lowermarketdue to higher competition from Europe’s single policy benefits the overall consumers Price convergence between EU Member States* * Definition: coefficient of variation of comparative price levels of final consumption by private households. leading to an adjustment in resource allocation. given the liberalization in various sectors to create a single market and harmonization of rules and regulations. business competition strengthened. for the ASEAN integration process. which eventually led to a reduction in price and profit and a chain of changes for European businesses. to a certain extent.EIC l Economic Intelligence Center 2 From Europe to ASEAN Many may expect that the final target of the AEC will be similar to that of the EU. including indirect taxes. The changes and adjustment taken place in Europe therefore may be telling. pushing prices down. such as of product standard. After the Single Market Program became effective in 1992. to help cut cost and ease the effort to search for different products from different countries. The major impact from the single market policy is higher competition among product brands distributed within the EU. Source: SCB EIC analysis bassed on data from Eurostat Structural Indicators 16 .

The single market policy also facilitated business expansion into other countries. 1987-2000 Note: EU defined as EU12 in 1987 and 1993 and EU15 in 1997 and 2000 Source: SCB EIC analysis based on data from Harry P. on average. leading European companies have reduced their businesses. while increasing their investment in member countries. Some businesses were able to differentiate their products from others and gained market force.EIC l Economic Intelligence Center Leading companies in Europe began to focus on their core businesses and expand investment into other countries in the region. During 1987-2000. European businesses concentrate on their core businesses. Bowen (2004). from the average of 3 to 6 countries. “European Integration: The Third Step” 17 . With stronger competition. business where they 10 European companies concentrate on themember countries have comparative advantage and expand investment into Trend in geographic and product segment diversification of leading EU f irms. where they have the compentency and can benefit from economies of scale. from 5 to 3 businesses.

Source: SCB EIC analysis based on data from Adriaan H. F. firms which give importance to advertisement had more marketing power. especially those which were not prices Producer concentration* of industries in Europe. For firms with homogeneous products. During 1987-2000. the share of output of the 5 large companies in each business which produce differentiated products and do not compete on prices rose substantially from 30% to almost 40%. Khalid Sekkat. benefit large 11 European integration seemed tocompeting oncompanies. the share went up from 15% to 20%.EIC l Economic Intelligence Center There was also a concentration of output production as large companies enjoyed more marketing force. 1987-2000 Unit: % * Producer concentration means total output of the 5 largest companies divided by total output in one business. especially developmental research and marketing firms. Dierx. Moreover. “European integration and the functioning of product markets” 18 . Ilzkovitz.

AEC integration is therefore not going to be all that simple. liberalization in labor movement. which was rather costly and time-consuming. Prior to 1993. but the real free trade among members only took place 25 years later-in 1993. Source: SCB EIC analysis 19 . Intra-EU trade became simple for the transport of goods. integration took a long time. Prior to this. 12 AEC has some characteristics which are different from the EU. and lifting of customs and inspection procedures for trading among members. even for the EU which has connecting borders for most of its members and a supranational body. transport trucks had to stop at border checkpoints for inspection and go through customs.EIC l Economic Intelligence Center However. there have been tariff reductions. It took 10 years. for 6 of the originating EU members to reduce their tariffs. with no customs procedures. from 1958-68. which are critical for a successful integration Characteristics Remark * Single Market Program (SMP) was announced in 1992 and became effective in 1993. This was effective after the Single Market Program (SMP) came into force in 1993. causing a long line of queue.

intra-ASEAN trade is only 25% of the value of total trade by ASEAN. which does not give incentives for integration. Because ASEAN does not have a supranational body. 20 . Currently. This is a stark contrast to Europe. In parallel. has tendency to invest outside its own region. such as in China and India. although the magnitude would be different due to the different structure. ASEAN relies more on the external market. a major investor abroad. ASEAN. has no plan to issue a common currency and to have common external tariff. foreign direct investment among ASEAN is only 13% of total FDI in ASEAN. in particular Singapore. which enjoyed a 55% share for intra-EU trade prior to the Single Market Program. and 65% share after the convergence. when it comes to foreign investment destination. its borders are not connected throughout the region.EIC l Economic Intelligence Center Furthermore. of the AEC’s key challenges is 13 Onetendency to invest outside thethat its own major investor has region Share of outward FDI of each ASEAN country to total in 2010 Unit: % Source: SCB EIC analysis based on data from UNCTAD and Singapore Department of Statistics It is expected that the AEC process will be beneficial to businesses in the same way as the EU process. Moreover. while the share of the EU is as high as 66%. ASEAN businesses will not be able to reap the full benefits from the larger market and single production base as in the case of the EU.

cashew nut. has rubber plantation and is building factories for processing rubber products in 3 locations in Laos. investment in the agricultural sector between Thailand and other ASEAN members can reach a new high. Indonesia is the most attractive country to Thai investors. eucalyptus. rules of origin. cassava. quality of output. both in the form of contract farming and government concession for cultivated area. green bean. For instance. business entrepreneurs or investors will provide support in terms of capital. In particular. regulations on the quality of agricultural output..000 rai of sugarcane and produce sugar in Laos. especially in Java and Sumatra islands. Furthermore. crops under this economic cooperation include soybean. and ship these farm produce to process further and add more value in Thailand. freer movement of labor and capital would substantially benefit the ACMECS’ initiatives already underway while enhancing and diversifying investment as well as agricultural development within ASEAN. sweet corn. Indonesia is endowed with the largest cultivated area in ASEAN.e. sanitation and phytosanitation (SPS). At present. 21 . and another 3 energy crops. while its labor force in agricultural sector is approximately 2. cocoa.. unmet demand from over 240 million consumers in Indonesia. designing product packages and promoting markets for value-added products. it is worth noting that the key to success is removal of non-tariff barriers. outbreak of insect pest. oil palm. price. and it still needs substantial investment for processing agricultural products. Moreover. Mitr Phol Group has granted concession to grow 60. seeds. Charoen Pokphand Group (CP) has granted concession to grow corn and forage crops in Myanmar and Laos. In the past. Chaiyo-AA Group (double A) grows eucalyptus in Laos. lots of Thai investors have already made substantial investment in the neighboring countries. Likewise. Thai investors can tap into the processed agricultural product industry. and coffee is still not sufficient for domestic consumption. In the first phase. namely oil palm. Since these are the areas where Thailand has more expertise. all of which are encouraged by the Indonesian government. At present. The main objective was to encourage the Thai private sectors to cultivate and harvest crops in these countries in order to reap the benefits of cheaper land and labor cost. we can expect to see a dramatic increase in investment and business expansion in a foreseeable future. Laos. The contracting parties will agree in advance upon the volume. and Myanmar) under the Ayeyawady . corn. potato. PCL. is doing sugarcane contract farming model in Myanmar. Co. with the AEC to become effective in the next 3 years. or ASEAN-6. These are rather sensitive issues for ASEAN and are currently the major obstacles for investment in the agricultural sector. Meanwhile. which have to rely on raw materials and agricultural labor force. At the same time. sharing knowledge and advice to local farmers to improve production efficiency. and timing of purchase.EIC l Economic Intelligence Center BOX: AEC and agricultural opportunities among ASEAN ASEAN integration under the AEC platform will also create bigger opportunities for the agricultural sector among members. Thai Hua Rubber. almost 3 times larger than Thailand. Nevertheless.Ltd. especially for processed agricultural products. and sugarcane. Thai investors can also benefit from the reduction in tariffs or tariff waiver for farm produce originated from these countries which have Least Developed Countries (LDCs) status. peanut. For the founding members. i. Indonesia also has high potential in agricultural production. production of its major crops such as rice. they also serve as a channel for product distribution and an export base to the third countries outside ASEAN. Sutech Engineering. such business expansion also means bigger opportunities to bridge huge.5 times larger. One of the key objectives of the AEC is to promote the development of a single market and production base to foster free flow of factors of production among the member countries. millet. cassava. Thailand’s investment in ASEAN was largely in the form of contract farming in neighboring countries (Cambodia. or domestic protection. and production technology.Chao Phraya . These investments have enhanced the value of border trade between Thailand and its neighbors significantly. or even export them to the third countries. In addition.Mekong Economic Cooperation Strategy (ACMECS). castor bean. If these barriers are significantly lessened or removed.

which is lower than Thailand by almost 40%. while some will be brought into the production process in Thailand. second only to Malaysia. Co.Ltd. 22 . At the same time. the establishment of the AEC in 2015 and tariff reduction of oil palm among members will mean it is cheaper to buy imported oil palm from Indonesia and Malaysia than to produce it in Thailand. and 20% higher than Thailand. the production cost also went up accordingly. while labor force in agricultural sector is approximately 2. This is in line with Thailand’s energy policy in promoting alternative energy and biodiesel as the price of crude oil in the world market is on an increasing trend. Thus.EIC l Economic Intelligence Center 14 Indonesia has the largest cultivated area in ASEAN. a subsidiary of Petroleum Authority of Thailand. Of which some output will be sent to the central market in Indonesia. According to a study by the Center for International Trade Studies. a major oil palm market in the world. The demand for oil palm in Thailand both for food and energy crops continues to rise at a faster rate than output. has already been active in cultivation and setting up oil palm factory in Indonesia. but also bring down the risks associated with food and energy shortages. seeking government concession for cultivated area in Indonesia will not only help reduce production cost. University of the Thai Chamber of Commerce.5 times larger than Thailand! Cultivated area (2009 data) Unit: Million hectares Agricultural labor force (2008 data) Unit: Million persons Source: SCB EIC analysis based on data from Food and Agriculture Organization (FAO) One interesting example is the expansion of cultivated area for oil palm in Indonesia. expansion of cultivated area within ASEAN has therefore become one of the strategic solutions. To ensure sufficient supply of palm fruit and raw oil palm in the future. PTT Green Energy. It also has the comparative advantage in terms of production cost. Indonesia has the second highest oil palm yield per hectare in the world. PTT PCL.

its agricultural yields of many major crops are still relatively low compare to other ASEAN countries. It is worth noting that the hiring cost of one Thai worker can hire as many as 9 Burmese workers. As a result.EIC l Economic Intelligence Center oil 15 Demand forthanpalm in Thailand both for food and energy crops is rising at a faster rate output Demand and supply of oil palm in Thailand Unit: Tons Oil palm output (2010 data) Unit: Index Source: SCB EIC analysis based on data from office of Agricultural Economics (OAE) and Food and Agriculture Organization (FAO) Myanmar has the greatest potential for agricultural business among the CLMV economies. Myanmar has the largest share of agricultural sector to GDP. and the lowest minimum wage among the CLMV. there will be plenty of opportunities for Thai investors to assist Myanmar in terms of capital. 23 . over 19 million farmers. Meanwhile. and modern technology for cultivating and harvesting crops to improve production efficiency and enhance yields. 12 million hectares of cultivated area. agricultural know-how.

we need to be aware of the environmental impact which may result from rapid expansion of cultivated area for commercial purposes. especially at the border areas which have extensive amount of contract farming projects. the oil palm plantation in Indonesia is currently under close watch of world environmental organizations like Green Peace due to the heavy deforestation and forest fires in the area. For instance. Yet. and its impact on the environment and community on the other. Similarly. Commercial agricultural production and expansion in investment and cultivated area abroad have been the main strategy in dealing with shortage of certain crop outputs and relatively high cost of production in Thailand. Republic of the Philippines However. Therefore. Food and Agriculture Organization (FAO). a right balance must be achieved. 24 .EIC l Economic Intelligence Center has the greatest potential 16 Myanmaramong the CLMV economiesfor agricultural business Yields of major crops (2010 data) Unit: Index Source: SCB EIC analysis based on data from World Bank. between agricultural development and investment on the one hand. The increased carbon monoxide (CO2) in the atmosphere can aggravate global warming situation and climate change related problem. the increased cultivated area for mono crops has been seriously blamed for forest encroachment. and Department of Labor and Employment. the smog and haze situation in Northern Thailand is likely a result of illegal burning of rice fields and forest area after cultivation process in the neighboring countries.

after taking into account the number of population. especially for Malaysia. implying that more room for branch expansion Source: SCB EIC analysis based on data from World Bank. United Nations. the 5 factors driving growth of modern trade are: (1) retail sales per capita (2) share of urban population (3) share of labor force with age 15-64. Vietnam. and Indonesia are the most attractive destination for modern trade investment. it is found that Malaysia. According to EIC analysis. they have a sound customer base and room for branch expansion Investment climate indicators in ASEAN retail business Unit: Index * higher number means small share of modern trade. the number of modern trade stores is somewhat modest even though the growth of urban population and labor force indicates that they still have room for branch expansion. Although Malaysia appears to have lower retail sales value than Vietnam and Indonesia. which is targeted customers of retail business (4) share of modern trade and (5) ease of doing business. Although the size of the retail sales in Vietnam and Indonesia is rather modest. and Indonesia. Overall. The Nielsen Company and CEIC 25 . Vietnam.3 17 EIC l Economic Intelligence Center Impact of AEC on service sectors Retail business Modern trade in ASEAN has substantial growth prospects. it has the highest retail sales per capita. For Vietnam and Indonesia.

to .EIC l Economic Intelligence Center 18 Although the share of retail sales per capita of Indonesia and Vietnam is only slightly lower than Thailand. Malaysia has a higher share of middle-to-high income population. During the past 5 years (2006-11). retail sales grew at 12% and 15% per year. As a result. However.high income consumers. Malaysia’s share of modern trade to urban population is much smaller than those of Thailand and Singapore. Malaysia’s retail sales per capita is 4 times higher than that of Thailand. but the share of modern trade is close to Thailand’s at around 50%. respectively. resulting in the continued growth of the retail sales. while the share of modern trade is at only 30%. the share of modern trade is much lower 19 The number of modern retail stores in ASEAN countries does not keep pace with the rising trend in urban population Retail sale per capita and share of modern trade in ASEAN countries Modern trade branch per Share of urban population urban population in 2009 Unit: % Unit: branch per 1 million urban population Source: SCB EIC analysis based on data from The Nielsen Company. Retail sales per capita of Indonesia and Vietnam is relatively moderate compared to Malaysia. The Nielsen Company and CEIC Modern trade in Malaysia has room for further expansion owing to the high retail sales per capita and the rising share of the middle . 26 . Although the share of retail sales per capita in Indonesia and Vietnam is somewhat close to Thailand. from 30% in 2002 to about 60% in 2010. Moreover. far below the ASEAN’s average of 50%. Malaysia is still an attractive investment destination. it continued to grow due to the increase in purchasing power. the share of modern trade is relatively low. This shows that modern trade has growth opportunities while retail sales continues to perform well. and CEIC Source: SCB EIC analysis based on data from United Nations.

and Nachang.e. Kantho. for both grocery and non-grocery stores. for instance. This reflects a bright outlook for the retail market on account of city expansion. more ASEAN are moving into cities. especially for Vietnam and other CLMV. For Vietnam. 27 . Indonesia and Vietnam have only 50 modern trade stores per 1. Danang. Haifong. on while the shares of processed food items are on the 20 The spending structure of ASEAN is and householdwith a lower sharerise fresh food. retail sales on non-grocery store in Vietnam is expected to grow by 7% per year and grocery store growth of 3%. Share of household spending in ASEAN countries Unit: % Source: SCB EIC analysis based on data from CEIC and IMF There are opportunities for retail business. The share of non-food items also rose steadily. This is expected to further generate higher growth of retail sales.000 populations. more diverse. following higher income which led to more demand on diverse goods and services and modern amenities. such as furniture and household items and electrical appliances.EIC l Economic Intelligence Center Growth of urban population. This is owing to expansion in grocery stores. The share of spending on fresh food for Malaysia and Thailand is only 20%. Indonesia and Vietnam. compared with Thailand’s 370. Hanoi. retail sales in 6 key cities. Due to the higher income and growing urbanization. which has become more diverse. especially in Indonesia and Vietnam. during 2011-15. the share of grocery stores is higher than non-grocery in some countries. have a lower share of spending on fresh food and spend more on processed food. Furthermore. combined is almost half of its total retail sales. investors should take into account consumers’ spending behavior. Although the demand for non-grocery has increased.000. reflecting the change in spending behavior from grocery to non-grocery items. Although many countries in ASEAN still spend mostly on food. Nevertheless. in the past 10 years the spending structure has begun to change. According to Euromonitor. which means modern trade has not kept pace with the growth of urban population. According to a study on urbanization. especially Indonesia. the share of retail sales on non-grocery store is quite large and shows good prospects since the higher income leads to more quality lifestyle and increases demand on diverse products other than food and necessity items. which diversify their products to non-grocery items such as electrical appliances and household items. for Malaysia and Vietnam. in particular hypermarkets. the spending behavior of consumers has changed noticeably. whose share of urban population is expected to rise to 45% within 2030.. is a major driving force for retail sales expansion. To penetrate into ASEAN retail market. Ho Chi Minh. i. stealing some of the market share of the retail sales on non-grocery.

with compound annual growth rate of 15% per year during 2006-09.EIC l Economic Intelligence Center on non-grocery 21 Although retail salesstore is still quitestore demonstrates good prospects. especially for hypermarkets. This is largely attributed to branch expansion of the multi-national corporations. which have intensified competition in the retail market. However. the share of grocery large in some countries Grocery and non-grocery retail sales Unit: million USD Source: SCB EIC analysis based on data from Euromonitor International 2011 Despite fiercer competition from multi-national corporations’ rapid retail branch expansion. and cash and carry) is at around 45% of total retail sales. will provide important opportunities for Thai investors. Carrefour. 28 . share of the traditional grocery stores are still large at 90% in Vietnam. Casino. convenient stores. especially in Vietnam. the relatively low number of branch per capita. It is therefore possible to penetrate the modern grocery market since Vietnam has 1. supermarkets. such as Tesco. ASEAN’s market share of modern grocery (consists of hypermarkets.2 times more population than Thailand but 50 times fewer hypermarket branches per capita.

especially department stores and specialty stores in clothes and shoes. Thus the department stores or specialty stores are expected to continue to perform well. leisure and personal products. the products offered in non-grocery stores are more diverse and able to satisfy consumers’ demand. and home and garden products. and electronics. The categories with good prospects include clothes and shoes.EIC l Economic Intelligence Center 22 Hypermarket has the largest share in modern grocery.000 populations.000 populations. leisure and personal products.000. have good growth prospects. compared with developed countries’ average at 1 shopping mall per 100. electronics. The potential for Vietnam is therefore promising. in particular. with substantial investment from foreign investors 23 Branches of hypermarkets and convenient stores have high growth while that of supermarket moderated Share of modern grocery and major retail players of ASEAN countries Unit: % The number of modern grocery Unit: branch per million population Source: SCB EIC analysis based on data from PWC and The Nielsen Company Source: SCB EIC analysis based on data from PWC. According to Euromonitor’s estimates. and Vietnam. non-grocery category is expected to pose a high growth rate averaging around 8-10% per year during 2010-15. home and garden. The Nielsen Company and CEIC In Malaysia. Although the fast-growing hypermarket has gained market share from non-grocery stores. 29 . non-grocery stores. has only 1 shopping mall per 1. Indonesia. Vietnam.

In addition to Malaysia. 30 .to . leisure and personal products. and luxury products in Vietnam grew on average 22% per year during 2004-09. such as Debenhams and Sogo. from 20% in 2010 to 50% in 2015.to . the purchasing power is increasing rapidly. clothing. accessories. Moreover. reflected by the number of debit card and mobile phone users which went up thirty-fold during 2003-09. Furthermore. the department stores in Indonesia are highly concentrated. electrical appliances.middle income consumers with the market share combined at 50%. According to Research and Markets. and they accounted for about 8% of total retail sales in 2009. with only 2 major stores. especially homegood growth products.high income consumers because the share of these consumers has increased. they buy more brand names from overseas and luxury items. …For Vietnam. shows prospects Retail of non-grocery store by store type Unit: million USD Source: SCB EIC analysis based on data from Euromonitor International 2011 To effectively penetrate the market. Their combined market share is still relatively low at around 10%. Vietnamese consumers with higher income are expected to spend more substantially. and consumers are spending more on luxury items and brand names from abroad. Indonesia is also expected to have a larger share of middle -to-high income consumers. investors must be able to differentiate their products and concentrate more on middle . catering towards the low .EIC l Economic Intelligence Center and garden 24 Retail sales for department store and specialty store. For example. This group of cunsumers has high purchasing power and has potential for increasing retail sales. the EBITDA margin of these department stores during 2009-11 was moderately high at 15%. compared with department stores for low . Matahari and Ramayana.middle income customers at 9%. whose competitors are chain department stores from abroad. Thus it would be easier to penetrate the middle -to-high income market.to .

AEC will facilitate investment in complicated would be a 25 Although theand restrictive rulesmore foreignmajor obstaclethe retail business. which should allow Thai investors to perform well in the ASEAN market. domestic regulations remain a hurdle for foreign investors. a booming urban population. robust demand for diverse products and services and for amenities. where city planning law is used to control branch opening by retail stores. but also have other restrictions for retail business. rising income and purchasing power. Against western corporations. however. Malaysia and Indonesia not only require investors to form partnership with local business and a minimum amount of investment. and the close cultural. while investment in large retail like department stores or hypermarket is allowed. if Thai investors could adapt their business model to be in line with the rules and regulations of each country. ASEAN has a large market. There are also regulations on zoning similar to Thailand.000 persons per 1 branch. social. Malaysia keeps hypermarkets 3.EIC l Economic Intelligence Center Liberalization under the AEC will open doors for the retail business in some countries. this may be an opportunity for a major business expansion. Yet. 31 . At the same time.5 kilometers away from the city. Foreign share holder Unit: % Foreign restrictions and regulations on wholesale and retail business Source: SCB EIC analysis based on data from ASEAN and Asian Development Bank (ADB) Thailand has competitive advantage in the retail business despite the existence of multinational corporations and restrictive domestic regulations that are hindrances. and population density of 350. Thailand also has the advantage in terms of benefits from the liberalization in goods and services under the AEC. the small and medium retail stores (SMEs) are protected against foreign investors. For instance. Indonesia restricts them to be located on major roads with high-speed traffic. and economic ties.

the quality and friendliness of service which are well-known worldwide. 26 At presentin terms of number of international patients over other ASEAN International patient market of selected ASEAN countries Source: SCB EIC analysis based on data from Singapore Ministry of Health (2006). In terms of efficiency. measured by the number of hospitals being recommended for treatment of foreign patients. Thailand has the comparative advantage in medical tourism over regional competitors like Singapore and Malaysia due to its reputation as a tourist destination. Nevertheless. translation services. Thailand’s private hospitals. Besides. This reflects the overall advantage of private hospitals in Thailand in servicing foreign patients. Most of the financial ratios are in a better position. It is worth noting that Indonesia. one of the key players in medical tourism. and relative price. and the extra efforts by many Thai private hospitals in providing information and coordination centers for foreign patients. effective marketing campaign. which has the largest population in the region and a growing middle class.EIC l Economic Intelligence Center Medical tourism At present Thailand is the market leader in medical tourism in terms of the number of international patients. Thailand is the market leader in medical tourism members. 32 . have greater potentials than regional competitors. and ability to generate profit. growth. The AEC implementation will facilitate the related business and also expand market for Thailand as it makes intra-region travel more convenient. but is not so well received by ASEAN patients. as well as the reputation of the Thai hospitals. owing to the comparative advantage of Thai hospitals over other ASEAN members like Singapore and Malaysia. our ASEAN patient market share is still relatively small as the majority is from the Middle East. and overseas network and representative offices further strengthen our competitiveness and would maintain Thailand’s position as the leader in medical tourism in ASEAN. The Malaysia Healthcare Travel Council (MHTC) (2009) and Department of Export Promotion. This is partly a result of the 9/11 event which made it difficult for Middle Eastern patients to receive treatment in the US. Ministry of Commerce (2008) It may not be too difficult for Thailand to retain the leading position in medical tourism after the implementation of the AEC. presently prefers to receive medical treatment in Singapore and Malaysia over Thailand.

Thai hospital has particular strength on plastic surgery and dental treatment.com and many hospital websites Combining strengths in plastic surgery and dentistry with the reputation in tourism may be the successful ingredients in expanding the medical tourism market in ASEAN.com ** Includes representative office Source: SCB EIC analysis based on data from Bloomberg. Furthermore.EIC l Economic Intelligence Center services. Patientsbeyondborders. According to a survey. more marketing focus on heart diseases would be another business opportunity because myocardial ischemia and heart disease caused by high blood pressure are the two leading causes of death in ASEAN4 4 Details can be found in SCB Insight: How should Thai businesses cope with AEC (February 2011) 33 . Thailand 27 For a related business like hospitalthe price factor has many important advantages other than * Number of hospitals recommended for medical travel by Patientsbeyondborders.

we have seen the emergence of many low-cost airlines.EIC l Economic Intelligence Center 28 Thailand’s strengths in medical tourism are plastic surgery and dentistry Number of hospitals recommended for medial travel in well-known website Source:SCB EIC analysis based on data from Patientsbeyondborders. Airlines are able to increase as many flight routes as they want. and liberalization in air transport services. Thailand can differentiate itself by focusing on plastic surgery. which lead to fiercer competition. In particular. Greater convenience in intra-ASEAN travel after the AEC comes into force is one of the supporting factors for Thailand’s medical tourism. With such little convenience. this may partially explain the low popularity of medical tourism in Thailand for Indonesian patients. Indonesia’s international flights are most heavily concentrated in Malaysia and Singapore. more convenience in traveling. as part of the AEC implementation plan. It is expected that the Open Sky Policy and liberalization in air services due to the AEC implementation will increase more flights between Thailand and Indonesia. 34 . with cheaper price than in Singapore and Malaysia. under the trade in services agreement. This may also help facilitate medical tourism due to more services available for the patients. has reduced restrictions in the conduct of business. with a 55% share. as it is the only country in ASEAN listed on the top 20 of the world in terms of the number of plastic surgery per year. which now accounts for half of all the seats for ASEAN flights. ASEAN Open Sky Agreement. Consumers have therefore benefited from improved services.com In addition. Since 2001. and cheaper price. while Indonesia-Thailand has only 4% share.

weekly Unit: % (November 2010) Source:SCB EIC analysis based on data from CAPA-Centre for Aviation with data provided by OAG a UBM Aviation Business 35 . 2001-2012 Unit: % of all seats Share of international flight in Indonesia by destinations.EIC l Economic Intelligence Center under the is expected 29 ASEAN’s Open Sky Agreement travel and AEC number of ASEAN patients to increase convenience in air the Share of low-cost carrier seats in ASEAN.

Nevertheless. and IMF Yet the main risk to Thailand is impact from the liberalization in trade in services. Singapore and Malaysia are expected to be able to manage the number of nurses in line with domestic consumption in the next 10 years. Thailand. Singapore Ministry of Manpower. Although the 70% target has been delayed.S. Thailand National Statistical Office. the large market of medical tourism in Thailand is likely to attract more ASEAN investment after the AEC enters into force. and according to Asia Nursing Workforce Forum 2010’s estimates. 36 . Filipino nurses chose to work in the US. many 30 While facilitationoftonurses greater mobility ofchallenges remain Source: SCB EIC analysis based on data from Asia Nursing Workforce Forum 2010. Department of Labor.EIC l Economic Intelligence Center Furthermore. however. with the share of 83% of total foreign nurses in the US. In the past. which would allow ASEAN to hold up to 70% shares in a Thai business. Philippines National Statistical Office. As a result. the commitment remains. facilitated mobility of nurses is expected to ease the shortage of medical personnel. The Philippines is the only country in ASEAN which has sufficient number of nurses. and it is expected that the AEC may facilitate mobility of nurses to Thailand. allow labor may help reduce shortage in Thailand. Hospital is ASEAN’s key sector. it should be noted that Thailand’s salary scale may not be attractive enough. the supply will exceed demand in the next 10 years. U. suffers from continued shortage. it is 1 in 4 of the priority integration sectors.

Thailand is preferable. with many attractive tourist sites and price advantage. The AEC implementation will have impact on liberalization of the related service businesses.com 37 . Singapore is of business and thus a more 31 Despite Thailand’s advantagepopular MICE destinationmore accepted as a center Source: SCB EIC analysis based on data from CEI (Conferences Events Incentives ) Asia. Although Thailand is most equipped for meetings and conventions in terms of venue. and Thailand may have the advantage due to its reputation for the value for money. catering of food and beverages. on venue. This implies that travel for rewards may choose destination with lower cost. especially for tourism relating to incentive travel. especially for Europe and the US which are facing an economic downturn. It has therefore become a favorite destination for international organizations and world-class exhibitions. the budget per head for promotional sales set by leading companies is showing a declining trend. such as hotels. According to the 2012 Incentive Travel Survey5. event organizers.EIC l Economic Intelligence Center BOX: MICE market In addition to medical tourism which is gaining importance in ASEAN. As an advanced economy. the MICE (Meeting Incentive Convention Exhibition) market is also a major source of income for tourism in ASEAN. international organizations and regional. and public relations and advertisement. Singapore also offers great convenience for both domestic and international travel. International Congress and Convention Association (ICCA). and an English-speaking nation.and world-class exhibitions tend to prefer Singapore. To replace Singapore as MICE destination is thus a challenge. Thailand already has an edge on management of these services and may have greater opportunities for investment in ASEAN. a center of business. It creates value added to the economy in terms of income and employment. Singapore has the advantage to position itself as a hub for MICE. and The Global Association of the Exhibition Industry (UFI) Nevertheless. 5 Surveyed by MEETINGNET.

For instance. Its large MICE market provides business opportunity for other ASEAN countries. for the food and restaurant business in Singapore. Thai businesses relating to MICE can seek greater returns for their investment in larger markets like Singapore. and every year two high-level staff will need to attend a 3-day training course. Nevertheless.EIC l Economic Intelligence Center With the advent of the AEC. AEC enhances Thai businesses to larger markets 32 TheMICE to invest inopportunities forlike Singapore relating Related businesses Foreign ownership limit ( = 100%) Source: SCB EIC analysis based on data from ASEAN Secretariat 38 . Singapore has opened up its market the most after the 7th round of negotiation on trade in services. there are areas of concern in making overseas investment. especially with regard to laws and regulations of the host country. The National Environment Agency (NEA) will also send its staff for inspection 2-3 times a year without advance notice to check on cleanliness. While other countries retained their flexibility and restrictions on certain related sectors. every staff involved in cooking needs to have at least half-day training on sanitation.

which are expected to expand substantially. and Malaysia. raw material. these restrictions will be reduced considerably or totally eliminated. raw material. especially for border trade and transit trade. such as Myanmar. The reduction in tariffs has so far increased border trade and transit trade. the transfer of raw materials. Laos. Expansion of production base and overall investment into other ASEAN countries is likely to increase in order to maintain advantage in terms of cost. and Vietnam. and Cambodia. Myanmar/Laos. and Myanmar. Southern Economic Corridor-connecting Thailand. Thailand. Laos.EIC l Economic Intelligence Center Transport and logistics business The AEC will increase the demand for logistics since goods and services will be more freely transferred. business operators have set up factories in ASEAN under certain restrictions on labor. under the AEC. Singapore. with numerous highway networks onto Vietnam. Cambodia. and labor. and regulation. “Emerging Asian Regionalism. China. respectively. East-West Economic Corridor-connecting Vietnam.. and India. during 2008-11. 33 Development of international highway networks would facilitate Thailand as a logistics and transport hub of the region Source: ADB. Laos. with the total distance of 6. Cambodia. The Southern Economic Corridor has a connecting route further to Dawei Deep Sea Port in Myanmar that can distribute products to the Middle East and Europe. Thailand is geographically advantageous. Therefore. expanding by 8% and 6%. Thailand has connecting borders with Myanmar. which will give rise to the demand for logistics in order to manage goods and services throughout the supply chain. At present. and labors will increase dramatically. It needs development in transport infrastructure to connect with neighboring countries. with potentials for being the logistics and transport hub of the region. However. North-South Economic corridor-connecting Thailand. A partnership for Shared prosperity” 39 . Business operators which rely heavily on labor. market. land transport in the region mostly has to go through Thailand. and China and.693 kilometers approximately. There are also major transport development projects along the Greater Mekong Sub-region. i. When the AEC comes into force in the next 3 years. such as clothing and shoes manufacturers are expected to set up new factories in countries with cheaper labor cost. there are 12 ASEAN highway networks in Thailand. goods. Up to the present. Some businesses may move their production base to the country which is their main market for greater convenience in marketing.e.

Vol. the share of transportation cost is the largest. The government will therefore need to expedite the rail system and maritime transport development since they have lower energy cost than land transport by 3. from 18% to about 15%. with an 83% share. 40 7 . is declining but is considered high relative to other 34 Thailand’s share of logistics cost to GDPcountries Thailand Logistics Cost to GDP Unit: % Source: SCB EIC analysis based on data from NESDB. Thailand should continue to reduce the transport and inventory carrying cost.4. for example. for instance. followed by the inventory carrying cost. respectively. W. The increase in oil price also has a major impact on transportation cost. pp.3 and 5 times. Domestically. keeping full truck load services for both headhaul and backhaul in order to reduce transportation cost. Data from NESDB and World Bank. C. Logistics Research. Thailand still relies heavily on land transport. “About the impact of rising oil price on logistics networks and transportation greenhouse gas emission”. adopting the “Just in Time (JIT)” technique so that the products need not be kept in inventory too long. Although the share of logistics cost to GDP is on a declining trend. To reduce inventory carrying cost. 147-156. Hayden and C. UNDP and Economist 6 SCB EIC analysis based on data from Gross. It is estimated that a 1 US dollar per barrel increase in oil price will increase the cost of transport by 9 baht per 100 kilometers6. they will need to improve efficiency.EIC l Economic Intelligence Center In this regard. Butz (2012). it is relatively high when compared with Singapore (8%) and Malaysia (13%).7 As regards business operators. For Thailand’s overall logistics cost. it is necessary to enhance efficiency of the supply chain management.

competency 35 Thailand’s logisticsMalaysia is inferior to Singapore and Logistics Performance Index 2010 Unit: Index Remark: The number in parentheses is the rank of country’s logistics competency out of 155 countries Source: SCB EIC analysis based on data from World Bank 41 . and fast and efficient international transport at a reasonable price. introduce e-Logistics system to cut logistics cost. It would be quite a challenge therefore to overtake Singapore. on-time delivery. To compete with Malaysia.EIC l Economic Intelligence Center Meanwhile. reduce paperwork and time spent on import and export. Singapore is the center of air transport in the region and has a world-class sea port. the quality of logistics service providers needs to be improved by having a reliable tracking system. the Thai government needs to improve the customs system. According to the World Bank. Thailand ranks 35. quite a distance from Singapore (2) and Malaysia (29). As regards the private sector. The World Bank has conducted the 2010 Logistics Performance Index and ranked logistics competency of 155 countries. the government and private sector should enhance the efficiency of Thailand’s logistics sector to be able to compete in the region. such as develop the National Single Window.

such as Chiang Saen. Phitsanulok. Chiang Khong (Chiang Rai). maritime and railways. such as Chiang Khong. for example. 42 . waiving import tariffs on logistics equipment and waiving corporate income taxes. number of documents and time to import and export of ASEAN Source: SCB EIC analysis based on data from World Bank The private sector should explore investment opportunities in the provinces with potential and tap into Thailand’s Logistics Development Strategy. It is to develop the multimodal transport infrastructure. the Board of Investment grants some investment incentives for logistics business. Mukdahan.EIC l Economic Intelligence Center high substantial paperwork 36 Thailand has relativelyprocesscost. At the same time. and Baan Phu Nam Ron. and Hat Yai (Songkla). The private sector therefore should make use of transport infrastructure and government’s supports. It plans to set up an industrial estate on logistics at key strategic points. Baan Phu Nam Ron (Kanchanaburi). The government has a development plan for a comprehensive integration of the logistics network. which is the gateway to China. and explore investment opportunities in provinces with potential to set up distribution centers and inventories in key strategic points. Mae Sot (Tak). which connects with Dawei Deep Sea Port. such as land. import and export and time-consuming for A comparison of cost. to be connected domestically and internationally.

according to different factors Source: SCB EIC analysis based on data from Ministry of Transport.EIC l Economic Intelligence Center 37 Logistics operators should seek investment opportunity in provinces with potential. Ministry of Labour and Thailand Board of Investment 43 .

Loxley has a logistics investment plan with a multi-national corporation to co-invest in the neighboring countries. 44 . and petroleum oil. Currently many Thai corporations have already set up a logistics business in the neighboring countries. Some training programs are thus needed. It should be noted that transport businesses are suffering from human resource shortage. Moreover. For example. It is possible that such reduction would increase the trade volume and transport of these goods markedly. some domestic rules and regulations are subject to change periodically. Such goods are automobiles and parts. and decreased tariff under the AEC Unit: % Source: SCB EIC analysis based on data from ASEAN Secretariat and International Trade Centre Thai logistics operators should take this opportunity to expand their business to the neighboring countries so as to support other businesses by Thais. Business operators must therefore monitor these rules on a regular basis to have a competitive edge over other logistics service providers. 38 Logistics business will gain more opportunity from goods which are expected to benefit from the lower tariffs under the AEC Share of trade value between Thailand and ASEAN. international traffic signs. like the weight allowed for a truck to carry. sugarcane.EIC l Economic Intelligence Center An area worth exploring is the investment to facilitate the transport of goods which will receive benefit from the reduction in tariffs due to the AEC enforcement. international license test. Their current tariffs under the AFTA are higher than the target rate in 2015 by over 6%. and language lessons. has logistics and transport businesses in Laos and Cambodia. electronic circuit. in particular truck drivers. a logistics company may buy a trailer to transport automobiles while importers/exporters may need to study more intensively the customs rules for each country so that they can provide the services more efficiently. for example. Transport businesses or importers/exporters should be prepared for growth in the logistics business and the supply chain of these relevant products. Siam Cement Group (SCG). such as truck driving lessons.

they should invest in technology for logistics management. familiarity with the travel route. Furthermore. provide multimodal transport from land. world-class logistics operators offer more comprehensive services than Thai logistics operators. Logistics businesses which offer integrated services. For example. if the conduct of business is environmentally friendly or use of alternative energy. understanding of language and custom. and air. they offer every type of fleets (from vans to large airplanes). such as the Vendor Managed Inventory (VMI) system. sea. foreign investors may see potential for strategic partnership. repackaging. offer customs brokerage service that takes care of the paperwork.EIC l Economic Intelligence Center Thai logistics operators have the advantage in knowledge and expertise in local transport. to reduce logistics cost. Thai operators can learn from this business model in order to offer a complete line of services in the future. In this regard. 39 World-class logistics operators offer more extensive services than domestic operators Source: SCB EIC analysis based on data from company’s website 45 . rail. foreign investors may be more inclined to join because many businesses in the developed countries place emphasis on sustainable development. by adding value to the process during inventory and distribution. With advantages in the local transport. and use of technology will have an edge over their competitors. One of the challenges of the AEC is that foreign investors with high potential may become a major competitor in the logistics business and drive small businesses off the market. such as making specific labels. packing different products in the same box to promote sales. building a network of local businesses would attract foreign investors to become a strategic partner. At present. As a result. which enables the supply chain and transport to have continuity from beginning to end. the Thai operators should strengthen their own business by forging partnership with other operators in order to offer more integrated services. have expertise in transport of particular industry. It would also be useful to upgrade to advanced logistics. This would create diversity of transportations and vehicles and expertise for both domestic and overseas markets. Thai logistics operators can tap into the benefits of the AEC by forming a network of strategic partners and expanding into the ASEAN market. As such. advanced logistics. and offer logistics management solutions.

Asset Light business is a logistics service provider that has made little investment in assets. Normally. Asset Heavy is a logistics company that has huge value of assets. it is a large corporation which handles every activity by itself but may have networks as local businesses in foreign countries. such as having no fleet for transportation or warehouse for its own use. For small operators. to prepare for logistics business growth in the region after the AEC implementation. Thai operators with small capital should thus adopt the Asset Light model. This type of business will need to have extensive network and partnership to cover all the key logistics activities and to save logistics cost. the Asset Light Model may be a key to expanding services to a full coverage. forging partnership with other operators domestically and internationally. This reflects that Asset Light appears to generate relatively higher returns without having to invest in that many assets. 40 Case study of Asset Light Model shows that it will relatively generate more returns than Asset Heavy Model Source: SCB EIC analysis based on data from company’s website Large Thai logistics businesses have developed their potential and made preparations for the AEC. For the Asset Light. On the contrary. they also need to make the appropriate adjustment for fiercer competition and explore opportunities to be offered by the AEC. such as fostering a network with world-class logistics corporations and investing in information technology system.5.EIC l Economic Intelligence Center For Thai businesses. especially ASEAN. The difference between Asset Light and Asset Heavy is the value of the asset of the company. but has to rent instead. its share of revenue to total asset is over 2. 46 .

Laos. capital mobility. At the same time. Cambodia. In the future. and improve efficiency of the ASEAN capital market. So far. and Vietnam. Laos. whereas CLMV have a rather open policy toward foreign investment. Capital market development and liberalization under the AEC will increase the channel for fund mobilization for businesses. a regional reference index. Cambodia. and Vietnam have international payments systems which meet international standards. Currently Thai investors who wish to invest overseas can transfer the capital out of Thailand relatively freely. especially when the banking system needs time for development of international cooperation. only Vietnam has a developed capital market with ample liquidity and diverse listed companies. and capital market. electronic securities trading will be allowed via ASEAN Trading Link for Malaysia. and CLMV’s accommodative policies on foreign direct investment are all supporting factors for Thailand to increase trade and investment in these countries. and Laos have their own stock exchanges. with a plan to also allow investors to buy currency futures in the derivatives market to hedge against the exchange rate risk by 2012. regulations on capital outflows have been relaxed to allow more direct investment and securities investment abroad. While Thai commercial banks have some advantages over the local banks in international transactions. The financial sector liberalization comprises 4 main components: the payments system. The rapid growth prospects of CLMV. will be constructed on the securities of 180 large ASEAN corporations. and business cooperation contracts. the financial sector will therefore be liberalized according to readiness and the reciprocity-based agreements. ASEAN Stars. Liberalization of the capital market has made more concrete strides than other financial sectors. Singapore. There is no amount limit for a juristic person. but for an individual investor the limit is set at 100 million US$ per year. with the exception of some key sectors such as banking services and businesses related to national security. Cambodia. Business operators who wish to penetrate these markets will therefore need to have a good understanding of the financial options while the liberalization process is in the initial phase. has made a slower progress than trade in goods and services. the ATM services have been increasingly integrated within member countries. the Bank of Thailand has entered into negotiation with ASEAN members to set the framework for the Qualified ASEAN Bank. they need to deepen their understanding of the regional markets to be able to give relevant advice to Thai businesses. Repatriation of profits and dividends can be made freely after deducting taxes and the relevant fees. The Bank of Thailand has eased regulations on capital movement. foreign direct investment in almost all types of business is welcome. As regards CLMV. For the banking sector. joint-ventures with no less than 30-35% foreign-owned equity. allowing fund transfer for setting up a business or for a joint-venture abroad with no less than 10% shareholding. especially for banking. At present. Yet. i. CLMV allow a wide variety of investment options. For CLMV. In the first phase. although Vietnam. The fund transfer to CLMV can also be made in Thai baht. Thailand’s relaxation of capital account measures. CLMV have weaknesses in the number of paperwork and the time 47 . In addition. and Thailand within August 2012. enhance liquidity. the banks which meet the standard can conduct banking business in every ASEAN member country. Thailand has already made preparations on many fronts. financial liberalization.e. and development of the international electronic payments system is under way as per the 2012-16 Strategic Plan on Payments. For the payments system. Such trading through the Single Window will render great convenience for investors. Fund mobilization in other CLMV countries is therefore rather limited to the banking sector.4 EIC l Economic Intelligence Center Financial options for Thai investors in Indochina Financial sector liberalization is one of the agreements under the ASEAN Economic Community (AEC).. Moreover. Because ASEAN countries are at different stages of development. Seven stock exchanges from six countries have signed the cooperation agreement of ASEAN Exchanges. Myanmar. banking system. including foreign enterprises with 100% foreign-owned equity. liberalization in the financial sector still lags behind the real sector. The full-fledged free trade necessitates liberalization of the financial services. although the AEC sets the goal that all member countries fully liberalize the financial sector by 2020.

due to recent floating of the kyat. which will further encourage transactions to take place within the banking system. and Laos. the official rate of exchange now matches the market rate. 48 . Likewise. the international payments system will likely be improved. Nevertheless.EIC l Economic Intelligence Center needed for government’s business-related approval. Cambodia. For the payments systems. electronic international transfer (SWIFT) is common and the letter of credit (L/C) is now widely accepted in Vietnam. according World Bank (2012). but not for Myanmar where trading largely takes place along the border and often involves payments outside the banking system.

and Thai embassies 49 . Ministry of Foreign Affairs.EIC l Economic Intelligence Center are open to foreign direct and a variety 41 CLMVallowrelatively of investment options investment Foreign direct investment in CLMV countries Source: SCB EIC analysis based on data from the Board of Investment of Thailand. the Thai Chamber of Commerce. the Export-Import Bank of Thailand.

The banking system in Cambodia. ATMs Source: SCB EIC analysis based on data from the IMF and the Consultative Gap to Assist the Poor (CGAP). the size of credit in every CLMV country except Vietnam is small compared to other ASEAN countries. despite the robust credit growth of CLMV during the past 5-6 years. which results in the higher cost of bank borrowing in CLMV. and Myanmar is rather small. 50 . Laos and Vietnam also have a high loan-to-deposit ratio. both in terms of volume and the percentage to the country’s gross domestic product.5-17. access in 42 FinanciallimitationsCLMV still has Access to banking in ASEAN Credit and Deposits to GDP Unit: % GDP Access to branches and ATM services Unit: branches. This may be attributed to the limitation of fund mobilization options. and it is in a developmental stage. compared to the size of their economies.000 adults ranges between 1. Their people still have limited access to the branch services and ATMs. The ratio of branches per 100. In terms of bank lending.0.EIC l Economic Intelligence Center However. financial access in CLMV is still somewhat limited. while that of ATMs is 3. and fund mobilization through the banking system as liquidity in some countries might have been low. Laos.6 and 4. These are lower than other ASEAN members’ average.6. both in terms of access to branches and automated teller machines (ATMs).

EIC l Economic Intelligence Center 43 Credit size in Cambodia. Laos. and Myanmar is rather small compared to other countries Credit by commercial banks in ASEAN Note: Size represents credit by commercial banks Source: SCB EIC analysis based on data from the IMF and the World Bank have of borrowing 44 CLMVother a higher costASEAN than countries in Borrowing from commercial banks Loan .to-Deposit Ratio (%) Unit: % Commercial Bank's Lending rate (%) Unit: % Source: SCB EIC analysis based on data from the International Monetary Fund and the World Bank 51 .

and investment in CLMV can be made in Thai baht. RP = Representative Office Source: Source: SCB EIC analysis based on data from commercial banks’ websites (April 2012) 52 . foreign banks to set the representative only. and Vietnam.EIC l Economic Intelligence Center Thai businesses wishing to invest in CLMV should start by mobilizing funds in Thailand and transfer these funds through Thai commercial banks or foreign banks which have local branches in CLMV. Laos. a few Thai commercial banks are already operating in Cambodia. Larger banks from other ASEAN member countries are also operating in CLMV. Myanmar has yet to allow foreign banks to provide banking services. which helps mitigate the exchange rate risk. Currently. Thailand’s regulations on capital outflows have been relaxed substantially. but some Thai banks have already set up a representative office in Yangon to prepare for provision of services in the future. Note: JV = Joint Venture. especially those from Singapore and Malaysia. and countries are 45 Currently commercialupbanksinfrom Thailand officeother ASEAN memberwhich allows providing financial services CLMV. Presence of select commercial banks in CLMV * Siam Commercial Bank has been granted the license to establish the representative office in Myanmar. with the exception of Myanmar. Funds outside CLMV are cheaper and offer more mobilization options.

Access to economic and business information may also be constrained by the use of local language. and key players in each business. the government will have to push for a common standard for the financial and banking system under the AEC. 53 . Although Thai commercial banks have the advantage over local banks in providing financial services to Thai businesses. Thai commercial banks in CLMV will therefore need to make the necessary adjustment in organizational structure and strategy formulation to better understand the local markets. the government should promote a common standard in the financial and banking system as well as the rating system.EIC l Economic Intelligence Center To better serve Thai businesses in trade and investment in CLMV. through the negotiation framework of the AEC. At the same time. credit guarantee. limitations remain in terms of advice for investment in CLMV since their local customer base is not extensive enough. Thai commercial banks will need to assert their role as the advisor for their customers. This would help in making comprehensive and practical advice for Thai businesses. or tariff structure so as to create a common understanding among the relevant parties and allow for Thai business operators to formulate the right business plan. customers’ demand. At the same time.

they need to study the markets and relevant businesses to have an early start. and investors may well stay put for now. Despite the delay in increased ceiling for foreign shareholding. Moreover. it is important to start early and be at an advantageous point. Healthcare service in Laos is a case in point. for example. but with remaining obstacles that will have major impact on foreign investors. the ASEAN+3. LATER: for certain sectors which have already been liberalized and Thai business is ready to invest but is faced with a structural problem on cost. which will have implications on the type of investment. but few investors have made an investment. it may not be cost effective for investors at this stage. NOW: the service sectors in which Thailand has the ability to compete and clearly has the advantage should start entering the ASEAN arena now.EIC l Economic Intelligence Center 5 Thai services sector at a crossroad Although the path towards the AEC has taken some time and may face further delay. The rising demand from each country due to insufficient number of domestic service providers and higher share of elderly and middle-income class will result in reduction in barriers to facilitate more ASEAN investment. regional cooperation is likely to intensify to another level. the valid question for Thai service business is: how and when to respond to the changing business environment. as demonstrated by the strength and role of the EU to the world economy. only Thailand and Vietnam on lab services. and the fact that the well-to-do in Laos often choose to receive treatment abroad. For instance. Japan. WAIT and SEE: some sectors will be liberalized according to the AEC. x-ray. 8 Further details can be found in SCB Insight: : How should Thai businesses cope with AEC (February 2011) 54 . and CT scanner. especially for the sector which has been fully liberalized or has reduced most barriers. and 300 beds for investors outside ASEAN. Examples of these situations are a store selling imported goods and asset management companies which invest in other ASEAN countries. such as ultrasonography. “Understanding the competitors and preparing ourselves. While there may be some negative impact on certain businesses. each with interesting features8. Thai businesses will need to go abroad more. It is quite liberalized. which may actually be one of the basic strategies in facing opportunities and challenges. it is better to wait for the right moment. healthcare is one of the priority integration sectors which is expected to meet the target date soon. on balance the increase in cooperation and competition in the region will be beneficial. This may largely be due to the small size of market. for example.” is an old Thai saying. for the healthcare service of hospital. Investors and business operators should familiarize themselves with the rules and regulations which are about to change owing to the various agreements under the AEC. and South Korea. As competitors will think alike and share the same interest. Nevertheless. and its reputation has been widely accepted. Each business should know what its core competency is because fully leveraging it will be advantageous in tapping the opportunities from the ASEAN markets. set the size of the hospital at 200 beds for ASEAN investment. Indonesia. Thus the appropriate investment at this stage may rather be advertisement and packaged medical tour to Thailand. While there may not be limitations by the host country. most financial ratios show that Thailand has the advantage. the overall target will eventually have to be met. An example of this is the problem of market size. It is essential to start exploring opportunities while making preparations for the increased competition in the period ahead. Therefore. Although Thailand may be at the advantage at this level of competition. using ASEAN as a starting point in strengthening its position. these businesses will need to monitor the situation closely so that they will not miss the right opportunity. where competition will be fiercer with China. The restrictive domestic regulations which show no sign of improvement or even become more restrictive and preference for local services (home-bias puzzle) may be important challenges.

Peru. This involves studying the market potential.. and TPP (Trans-Pacific Partnership)9 in the near future. ASEAN+6 is ASEAN+3 and Australia. Chile. and Singapore. Brunei. need to face the impact from the AEC. and Korea. ASEAN+6. There will be more cooperation and competition from the ASEAN+3. 9 55 . Malaysia. The competency and expertise in a particular field will also be one of the critical success factors in the competition for ASEAN investment in services. domestic rules. all the adjustments have to start now because the AEC does not begin in 2015. the US. and having the right business model to create an advantage. rules and regulations under the ASEAN agreements. Furthermore. whose growth has already surpassed that of manufacturing. Japan. The Thai service businesses should use their advantage and find the right timing for an upgrading to access the ASEAN market. and Vietnam. Trans-Pacific Partnership (TPP) starts with 4 countries. New Zealand. i. Japan.EIC l Economic Intelligence Center Every business will.e. economic integration does not end with the AEC. New Zealand and India. and with other members in the negotiation process: Australia. ASEAN+3 is the 10 ASEAN countries and China. sooner or later. Most importantly.

consumer goods. insurance. Sutapa Amornvivat Chief Economist Head of EIC and Sectorial Research Teerin Ratanapinyowong Head of Sectorial Strategy Teerin graduated with a Bachelor of Accountancy (First Class Honors with Gold Medal Award) in Accounting Information System from Chulalongkorn University and a Master of Business Administration from Kellogg School of Management. She was a recipient of Thailand’s most prestigious King’s Scholarship. Dr.EIC l Economic Intelligence Center Contributors Dr. Sutapa sits on the Advisory Board of the Committee on National Village and Urban Community Fund-a mega-scaled fiscal microfinance project of the Thai government through granting one million baht to each of over 70. Sutapa was Economist (EP) at the International Monetary Fund (IMF) in Washington. Teerin worked with PTT Plc. DC. and the National University of Singapore. where she leads the Economic Intelligence Center. in developing cause-related programs for private sectors and end consumers to make a difference through social impact activities. Dr. Her areas of expertise include growth strategy. 56 . Commerce. Sutapa holds an undergraduate degree in Applied Mathematics from Harvard University and a doctorate degree in Economics. Kearney. In 2007. Vithan has previously held positions at the Fiscal Policy Research Institute. She had also served as Advisor to the Thai Senate Committee on the Economy. Teerin has over 10 years of management consulting experience working with the Boston Consulting Group and A. in oil business and investment management of PTT's subsidiaries. and services. He also worked in the Research and Information Department and the Strategy Development Department at the Stock Exchange of Thailand. Chulalongkorn University. Sutapa set up and headed the Risk Analytics and Research Group at TMB Bank during her secondment from ING Group. She has advised leading companies across South East Asia in various industries such as banking. Prior to joining the banking industry. competitive business model development.000 villages nationwide. as well as Director of Macroeconomic Analysis Section at the Thai Ministry of Finance.T. Sutapa was honored by the Asia Society as Asia21 Young Leaders Fellow. Prior to consulting. the Indian Institute of Technology. Building Material and Constrution Vithan received his Bachelor of Arts with Honors in economics from Chulalongkorn University and a Master of Science in economics from Thammasat University. Vithan Charoenphon Areas in charge: Hospitality and Services. selected among a diverse group of professionals under 40 from the Asia-Pacific region. Sutapa is Chief Economist and Executive Vice President at Siam Commercial Bank (SCB). Dr. and Policy from Massachusetts Institute of Technology (MIT). a part of United Nations system. working on the development of the medium-term government expenditure framework and the budget allocation model as well as conducting studies on fiscal policies. Dr. In addition to her current role at SCB. and business transformation. Before SCB. Management. Dr. Sutapa’s academic contribution includes lecturing at various universities in Asia including Hitotsubashi University. Teerin has advised World Food Program. She previously served as Head of Credit Risk Analytics Division under Risk Management Group. and Industry. energy. Northwestern University in the United States. Ministry of Finance. Besides the business focus. Dr. Dr.

He has his prior Citigroup London (Canary Wharf). Tubkwan Homchampa Areas in charge: Utilities.EIC l Economic Intelligence Center Contributors Pranida has prior work experience in macroeconomic analysis. He commenced at SCB in the Credit Risk Analytics Division responsible for monitoring. She was also an advisory staff member for the Minister of Transport. Pranida Syamananda Areas in charge: Retail trade and Electronics Pranida received her Bachelor of Arts with Honors in economics (major in International Economics) from Chulalongkorn University. Chinnawut was the Contributor Analytica and has researched in the and education. She has held positions in the Monetary Policy Analysis Team and the International Economies Analysis Team. As a MBA-exchange student. NESDB and Department of Highways. Dr.P. Chinnawut Techanuvat Economist Dr. As a central banker. Finland. having held positions in the International Economies Division. modelling principally training at the Bank of Thailand and on Thai economy and politics for Oxford fields of experimental economics. she was awarded the scholarship by the Government of India to attend the three-month training in the Promotion of Financial Markets (PFMs). monetary. Macroeconomic Team. Transport and Logistics Dr. she has worked for a leading private firm in business development and project management. In 2010. sociology on socioeconomic data. 57 . In addition. Chinnawut received his bachelor's degree (First Class Honors with Gold Medal Award) in economics from Thammasat University. she was awarded the honorable certificate for participating in the International Business Linkage Program at Helsinki University of Technology. Sivalai Vararuth Areas in charge: Petroleum and Energy. analyzing monetary policy framework and monitoring key selected countries that may have repercussions on the conduct of monetary policy in Thailand. She was awarded the Royal Thai Government Scholarship to pursue MSc program in Policy Economics at the University of Illinois at Urbana-Champaign. and a Master of Arts in economics from the University of Texas at Arlington. and fiscal policies as well as transport infrastructure at the Ministry of Finance. he completed his master's degree and a doctorate degree from the University of Oxford with his thesis on Thai education and societal changes in the twentieth century. Witchuda received her BBA with Honors from Assumption University and a master’s degree in International Business Management from Asian Institute of Technology (AIT). quantifying and managing Bank’s overall risk at portfolio and industry levels. Sivalai received her Bachelor of Economics (First Class Honors) from Chulalongkorn University. He later graduated with a master’s degree in finance and economics from the London School of Economics (LSE). She completed her doctorate degree in Applied Economics and Management at Cornell University. Dr. Sivalai has prior work experience in conducting research and analysis in economic. Witchuda Chummee Areas in charge: Agriculture and Agricultural Commodities Witchuda has prior work experience as senior economist in the Monetary Policy Group at the Bank of Thailand. Tubkwan has prior work experience as an equity capital markets analyst in the Investment Banking Division at J. Dr.Morgan Singapore. and Economic Intelligence Team for over 10 years. A Citibank/FCO Chevening scholar. Her research interests include entrepreneurship and financial market risks. Monetary Policy Group. Dr. Food and Beverage Tubkwan was awarded the King’s Scholarship to study economics for his bachelor’s degree at Yale University. and the World Bank Graduate Scholarship to pursue MSc program in Economics at the London School of Economics. at the Bank of Thailand for more than 7 years.

vararuth@scb.co.th (662)544-6546 Alisa Tamprasirt alisa.co.th (662)544-6103 Tubkwan Homchampa tubkwan.th (662)544-7410 Amornrat Kritsophon amonrnrat.th (662)544-2478 Witchuda Chummee witchuda.co.th (662)544-6540 Teerin Ratanapinyowong FSVP. Any opinions presented herein represent the subjective views of ours and our current estimated and judgments which are based on various assumptions that may be subject to change without notice.syamananda@scb. employees or representatives makes any representation or warranty. Sutapa Amornvivat Chief Economist Head of EIC and Sectorial Research sutapa. 59 . Head of Sectorial Strategy teerin.co.ratanapinyowong@scb.th (662)544-7413 Dr.EIC l Economic Intelligence Center SCB Economic Intelligence Center Dr.charoenphon@scb.co.th (662)544-6413 Dr.amornvivat@scb. Sivalai Vararuth sivalai.kritsophon@scb.th (662)544-1644 Disclaimer : The information contained in this report has been obtained from sources believed to be reliable. and may not prove to be correct.th (662)544-2705 Vithan Charoenphon vithan. Chinnawut Techanuvat chinnawut.th (662)544-3085 Dr.chummee@scb.co.nuntramas@scb.co.co. It does not represent or constitutes an advice.co.co. We or any of our associates may also have an interest in the companies mentioned herein. This report is for the recipient’s information only.techanuvat@scb. recommendation. neither we nor any of our respective affiliates.co.co. or solicitation by us and should not be relied as such. as to the accuracy or completeness of any of the information contained in this report. express or implied.th (662)544-1463 Tanakorn Limvittaradol tanakorn.limvittaradol@scb. offer. and we and each of such persons expressly disclaims any and all liability relating to or resulting from the use of this report or such information by the receipt and persons in whatever manner. Phacharaphot Nuntramas phacharaphot. However.th (662)544-4294 Pranida Syamananda pranida.homchampa@scb.tamprasirt@scb.

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