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

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%. CLMV have been given some flexibility in meeting the AEC deadline. please see SCB Insight: Where are the opportunities for Thai business in neighboring countries (May 2010). soap. over half of their inclusion list is already 0%. 2 For further reading. **Non-tariff barriers means measures on trade in goods which are not tariff. tires.EIC l Economic Intelligence Center 2 For trade in goods. Nevertheless. thus their process will take longer than for ASEAN-6. 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. the average tariff rate of CLMV is only 2. liquid soap.6%. and sugar for Indonesia. and the Philippines. For Laos and Vietnam. However. SL = sensitive list¸ whose tariffs will be reduced to 0-5%. Malaysia. motorcycles. HSL = highly sensitive list. although have yet to reach 0%. They are rice for Indonesia. 7 .2 Currently. 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%. and cleaning products. whose tariffs will be reduced to the agreed rate prior to the negotiation. while only 7% of Myanmar and Cambodia’s inclusion list is 0%. Thai export has already benefited from the gradual tariff reduction of CLMV in non-alcohol drinks and soft drinks.

meat. sugar. a portion still 3 Althoughdown to 0% within 2015. 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. while others have yet to be. Thailand should therefore look into these windows of opportunities since it is geographically suited for trade with CLMV. automobiles. 8 .EIC l Economic Intelligence Center CLMV have reduced their tariffs significantly. and beverages. there will be more opportunities for Thailand. 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. Some of the items are already being exported to these countries.

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

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

despite the tariff reduction to 0% for trade in goods. businesses are faced with more and more of this type of measures. the food industry. i. While the reduction and elimination of non-tariff barriers is part of the AFTA agreement.e. Technical Barrier to Trade (TBT) and Sanitary and Phytosanitary (SPS) measures. despite the tariff reduction to 0%. 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. to be in line with the technological advancement of the country imposing the measures. is expected to be adversely affected by these measures. goods is non-tariff barriers. 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 .. which has somewhat derailed intra ASEAN trade. citing the necessity to protect human life and health.EIC l Economic Intelligence Center Furthermore. some ASEAN countries have added measures on non-tariff barriers. In particular. which is Thailand’s main export product to ASEAN. Therefore. thus delaying the AEC process. in practice many countries have resorted to more non-tariff barriers than before. Some measures have direct impact on production procedures and business operators because they have to upgrade to a higher standard. For example. which is allowed under the AEC.

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

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

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

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

The major impact from the single market policy is higher competition among product brands distributed within the EU. including indirect taxes. After the Single Market Program became effective in 1992. One example is the growth of e-commerce business. for the ASEAN integration process. such as of product standard. to help cut cost and ease the effort to search for different products from different countries. to a certain extent. pushing prices down. Source: SCB EIC analysis bassed on data from Eurostat Structural Indicators 16 . 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. as well as business mergers among the EU to benefit from economy of scale. business competition strengthened. which eventually led to a reduction in price and profit and a chain of changes for European businesses. leading to an adjustment in resource allocation.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. given the liberalization in various sectors to create a single market and harmonization of rules and regulations. The changes and adjustment taken place in Europe therefore may be telling.

With stronger competition. 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. while increasing their investment in member countries. European businesses concentrate on their core businesses. from 5 to 3 businesses. The single market policy also facilitated business expansion into other countries. from the average of 3 to 6 countries. During 1987-2000. Some businesses were able to differentiate their products from others and gained market force. where they have the compentency and can benefit from economies of scale. on average. Bowen (2004). “European Integration: The Third Step” 17 . leading European companies have reduced their businesses. 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.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.

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

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

and 65% share after the convergence. Moreover. while the share of the EU is as high as 66%. Currently. Because ASEAN does not have a supranational body. This is a stark contrast to Europe. its borders are not connected throughout the region. although the magnitude would be different due to the different structure. 20 . such as in China and India. ASEAN. which does not give incentives for integration. a major investor abroad. 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.EIC l Economic Intelligence Center Furthermore. ASEAN relies more on the external market. In parallel. intra-ASEAN trade is only 25% of the value of total trade by ASEAN. 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. in particular Singapore. has tendency to invest outside its own region. 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. which enjoyed a 55% share for intra-EU trade prior to the Single Market Program. when it comes to foreign investment destination.

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

Thus. PTT PCL. At the same time. a subsidiary of Petroleum Authority of Thailand. University of the Thai Chamber of Commerce. but also bring down the risks associated with food and energy shortages. 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.EIC l Economic Intelligence Center 14 Indonesia has the largest cultivated area in ASEAN. 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. PTT Green Energy. The demand for oil palm in Thailand both for food and energy crops continues to rise at a faster rate than output. expansion of cultivated area within ASEAN has therefore become one of the strategic solutions. Indonesia has the second highest oil palm yield per hectare in the world. Co. and 20% higher than Thailand. which is lower than Thailand by almost 40%. a major oil palm market in the world. According to a study by the Center for International Trade Studies. It also has the comparative advantage in terms of production cost.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. the production cost also went up accordingly. while labor force in agricultural sector is approximately 2. seeking government concession for cultivated area in Indonesia will not only help reduce production cost. To ensure sufficient supply of palm fruit and raw oil palm in the future. Of which some output will be sent to the central market in Indonesia. has already been active in cultivation and setting up oil palm factory in Indonesia. while some will be brought into the production process in Thailand. second only to Malaysia. 22 .Ltd.

its agricultural yields of many major crops are still relatively low compare to other ASEAN countries. Myanmar has the largest share of agricultural sector to GDP. agricultural know-how.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. over 19 million farmers. Meanwhile. there will be plenty of opportunities for Thai investors to assist Myanmar in terms of capital. 23 . 12 million hectares of cultivated area. It is worth noting that the hiring cost of one Thai worker can hire as many as 9 Burmese workers. and modern technology for cultivating and harvesting crops to improve production efficiency and enhance yields. and the lowest minimum wage among the CLMV. As a result.

Republic of the Philippines However. The increased carbon monoxide (CO2) in the atmosphere can aggravate global warming situation and climate change related problem. especially at the border areas which have extensive amount of contract farming projects. 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. between agricultural development and investment on the one hand. Food and Agriculture Organization (FAO). Therefore. and Department of Labor and Employment. Yet. For instance. 24 . Similarly. 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. 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. and its impact on the environment and community on the other. the increased cultivated area for mono crops has been seriously blamed for forest encroachment. a right balance must be achieved. we need to be aware of the environmental impact which may result from rapid expansion of cultivated area for commercial purposes.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.

implying that more room for branch expansion Source: SCB EIC analysis based on data from World Bank. For Vietnam and Indonesia. 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. it is found that Malaysia. and Indonesia are the most attractive destination for modern trade investment. which is targeted customers of retail business (4) share of modern trade and (5) ease of doing business. after taking into account the number of population. Vietnam. and Indonesia. 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. United Nations. 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. Although the size of the retail sales in Vietnam and Indonesia is rather modest.3 17 EIC l Economic Intelligence Center Impact of AEC on service sectors Retail business Modern trade in ASEAN has substantial growth prospects. Vietnam. especially for Malaysia. According to EIC analysis. Overall. The Nielsen Company and CEIC 25 . it has the highest retail sales per capita.

resulting in the continued growth of the retail sales. However. This shows that modern trade has growth opportunities while retail sales continues to perform well. Malaysia’s retail sales per capita is 4 times higher than that of Thailand. the share of modern trade is relatively low. it continued to grow due to the increase in purchasing power. Malaysia has a higher share of middle-to-high income population. 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. far below the ASEAN’s average of 50%. 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. 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 . Malaysia’s share of modern trade to urban population is much smaller than those of Thailand and Singapore. Malaysia is still an attractive investment destination. Retail sales per capita of Indonesia and Vietnam is relatively moderate compared to Malaysia.to . retail sales grew at 12% and 15% per year.EIC l Economic Intelligence Center 18 Although the share of retail sales per capita of Indonesia and Vietnam is only slightly lower than Thailand. As a result. respectively. but the share of modern trade is close to Thailand’s at around 50%. while the share of modern trade is at only 30%. During the past 5 years (2006-11). Moreover. and CEIC Source: SCB EIC analysis based on data from United Nations. 26 .high income consumers.

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

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

electronics. non-grocery stores. the products offered in non-grocery stores are more diverse and able to satisfy consumers’ demand. Indonesia. and electronics. Although the fast-growing hypermarket has gained market share from non-grocery stores. 29 . home and garden. The categories with good prospects include clothes and shoes. 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. non-grocery category is expected to pose a high growth rate averaging around 8-10% per year during 2010-15. According to Euromonitor’s estimates. The potential for Vietnam is therefore promising. compared with developed countries’ average at 1 shopping mall per 100. leisure and personal products. leisure and personal products.000. especially department stores and specialty stores in clothes and shoes. The Nielsen Company and CEIC In Malaysia. has only 1 shopping mall per 1. and Vietnam. Thus the department stores or specialty stores are expected to continue to perform well.EIC l Economic Intelligence Center 22 Hypermarket has the largest share in modern grocery.000 populations. in particular.000 populations. and home and garden products. Vietnam. have good growth prospects.

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

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. the small and medium retail stores (SMEs) are protected against foreign investors. 31 . Yet. rising income and purchasing power. Malaysia keeps hypermarkets 3.000 persons per 1 branch.EIC l Economic Intelligence Center Liberalization under the AEC will open doors for the retail business in some countries. and economic ties. this may be an opportunity for a major business expansion. For instance. AEC will facilitate investment in complicated would be a 25 Although theand restrictive rulesmore foreignmajor obstaclethe retail business. At the same time. ASEAN has a large market. and population density of 350. where city planning law is used to control branch opening by retail stores. social. Against western corporations. There are also regulations on zoning similar to Thailand. Thailand also has the advantage in terms of benefits from the liberalization in goods and services under the AEC.5 kilometers away from the city. if Thai investors could adapt their business model to be in line with the rules and regulations of each country. and the close cultural. while investment in large retail like department stores or hypermarket is allowed. however. Malaysia and Indonesia not only require investors to form partnership with local business and a minimum amount of investment. domestic regulations remain a hurdle for foreign investors. robust demand for diverse products and services and for amenities. Indonesia restricts them to be located on major roads with high-speed traffic. which should allow Thai investors to perform well in the ASEAN market. but also have other restrictions for retail business. a booming urban population.

Besides. translation services. growth. presently prefers to receive medical treatment in Singapore and Malaysia over Thailand. In terms of efficiency. effective marketing campaign. and the extra efforts by many Thai private hospitals in providing information and coordination centers for foreign patients. 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. Nevertheless. The Malaysia Healthcare Travel Council (MHTC) (2009) and Department of Export Promotion. The AEC implementation will facilitate the related business and also expand market for Thailand as it makes intra-region travel more convenient. have greater potentials than regional competitors. measured by the number of hospitals being recommended for treatment of foreign patients. 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). Thailand’s private hospitals. This reflects the overall advantage of private hospitals in Thailand in servicing foreign patients. our ASEAN patient market share is still relatively small as the majority is from the Middle East. This is partly a result of the 9/11 event which made it difficult for Middle Eastern patients to receive treatment in the US. Most of the financial ratios are in a better position. 32 . 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 quality and friendliness of service which are well-known worldwide. as well as the reputation of the Thai hospitals.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. and relative price. It is worth noting that Indonesia. one of the key players in medical tourism. Thailand has the comparative advantage in medical tourism over regional competitors like Singapore and Malaysia due to its reputation as a tourist destination. owing to the comparative advantage of Thai hospitals over other ASEAN members like Singapore and Malaysia. but is not so well received by ASEAN patients. and ability to generate profit. which has the largest population in the region and a growing middle class.

According to a survey.EIC l Economic Intelligence Center services. Patientsbeyondborders. 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 . Furthermore.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. Thai hospital has particular strength on plastic surgery and dental treatment.com ** Includes representative office Source: SCB EIC analysis based on data from Bloomberg. 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.

34 . which lead to fiercer competition. Indonesia’s international flights are most heavily concentrated in Malaysia and Singapore. ASEAN Open Sky Agreement. Airlines are able to increase as many flight routes as they want.com In addition. Since 2001. In particular. with cheaper price than in Singapore and Malaysia. more convenience in traveling. This may also help facilitate medical tourism due to more services available for the patients. under the trade in services agreement. Consumers have therefore benefited from improved services. 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. this may partially explain the low popularity of medical tourism in Thailand for Indonesian patients.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. With such little convenience. Thailand can differentiate itself by focusing on plastic surgery. and liberalization in air transport services. Greater convenience in intra-ASEAN travel after the AEC comes into force is one of the supporting factors for Thailand’s medical tourism. with a 55% share. as part of the AEC implementation plan. which now accounts for half of all the seats for ASEAN flights. we have seen the emergence of many low-cost airlines. has reduced restrictions in the conduct of business. while Indonesia-Thailand has only 4% share. and cheaper price. 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.

2001-2012 Unit: % of all seats Share of international flight in Indonesia by destinations. 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 .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.

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

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

While other countries retained their flexibility and restrictions on certain related sectors. 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. Thai businesses relating to MICE can seek greater returns for their investment in larger markets like Singapore. for the food and restaurant business in Singapore. The National Environment Agency (NEA) will also send its staff for inspection 2-3 times a year without advance notice to check on cleanliness. For instance. and every year two high-level staff will need to attend a 3-day training course.EIC l Economic Intelligence Center With the advent of the AEC. every staff involved in cooking needs to have at least half-day training on sanitation. especially with regard to laws and regulations of the host country. there are areas of concern in making overseas investment. Nevertheless. Its large MICE market provides business opportunity for other ASEAN countries.

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

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

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

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

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

Transport businesses or importers/exporters should be prepared for growth in the logistics business and the supply chain of these relevant products. like the weight allowed for a truck to carry. 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. Currently many Thai corporations have already set up a logistics business in the neighboring countries. 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. Some training programs are thus needed. 44 . It is possible that such reduction would increase the trade volume and transport of these goods markedly. Business operators must therefore monitor these rules on a regular basis to have a competitive edge over other logistics service providers. electronic circuit. and language lessons. and petroleum oil. Their current tariffs under the AFTA are higher than the target rate in 2015 by over 6%. 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. Siam Cement Group (SCG). Loxley has a logistics investment plan with a multi-national corporation to co-invest in the neighboring countries.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. For example. sugarcane. such as truck driving lessons. in particular truck drivers. some domestic rules and regulations are subject to change periodically. Such goods are automobiles and parts. international traffic signs. Moreover. It should be noted that transport businesses are suffering from human resource shortage. international license test. for example. has logistics and transport businesses in Laos and Cambodia.

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

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

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

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

the Thai Chamber of Commerce. Ministry of Foreign Affairs. and Thai embassies 49 . the Export-Import Bank of Thailand.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.

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

Laos.EIC l Economic Intelligence Center 43 Credit size in Cambodia.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 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 .

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

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

such as ultrasonography. As competitors will think alike and share the same interest. An example of this is the problem of market size. Indonesia. and 300 beds for investors outside ASEAN.” is an old Thai saying. they need to study the markets and relevant businesses to have an early start. the overall target will eventually have to be met. Despite the delay in increased ceiling for foreign shareholding. While there may not be limitations by the host country. these businesses will need to monitor the situation closely so that they will not miss the right opportunity. but few investors have made an investment. It is essential to start exploring opportunities while making preparations for the increased competition in the period ahead. set the size of the hospital at 200 beds for ASEAN investment. Thai businesses will need to go abroad more. and investors may well stay put for now. 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. and the fact that the well-to-do in Laos often choose to receive treatment abroad. This may largely be due to the small size of market. 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. it is better to wait for the right moment. which will have implications on the type of investment. and its reputation has been widely accepted. 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. For instance. Each business should know what its core competency is because fully leveraging it will be advantageous in tapping the opportunities from the ASEAN markets. which may actually be one of the basic strategies in facing opportunities and challenges. as demonstrated by the strength and role of the EU to the world economy. 8 Further details can be found in SCB Insight: : How should Thai businesses cope with AEC (February 2011) 54 . each with interesting features8. While there may be some negative impact on certain businesses. Healthcare service in Laos is a case in point. for the healthcare service of hospital. healthcare is one of the priority integration sectors which is expected to meet the target date soon. it may not be cost effective for investors at this stage. most financial ratios show that Thailand has the advantage. for example. and South Korea. Moreover. on balance the increase in cooperation and competition in the region will be beneficial. it is important to start early and be at an advantageous point. Japan. regional cooperation is likely to intensify to another level. only Thailand and Vietnam on lab services. 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. especially for the sector which has been fully liberalized or has reduced most barriers. Nevertheless. Although Thailand may be at the advantage at this level of competition. WAIT and SEE: some sectors will be liberalized according to the AEC. using ASEAN as a starting point in strengthening its position. NOW: the service sectors in which Thailand has the ability to compete and clearly has the advantage should start entering the ASEAN arena now. x-ray. for example. and CT scanner. where competition will be fiercer with China.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. Examples of these situations are a store selling imported goods and asset management companies which invest in other ASEAN countries. Thus the appropriate investment at this stage may rather be advertisement and packaged medical tour to Thailand. the ASEAN+3. the valid question for Thai service business is: how and when to respond to the changing business environment. Therefore. It is quite liberalized. “Understanding the competitors and preparing ourselves. but with remaining obstacles that will have major impact on foreign investors.

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

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

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

co.co.kritsophon@scb.th (662)544-1463 Tanakorn Limvittaradol tanakorn. Sivalai Vararuth sivalai.th (662)544-7413 Dr.EIC l Economic Intelligence Center SCB Economic Intelligence Center Dr.co.th (662)544-4294 Pranida Syamananda pranida.co.co.charoenphon@scb.amornvivat@scb. and may not prove to be correct. 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.th (662)544-6540 Teerin Ratanapinyowong FSVP.ratanapinyowong@scb. Head of Sectorial Strategy teerin. It does not represent or constitutes an advice.th (662)544-6413 Dr.th (662)544-7410 Amornrat Kritsophon amonrnrat.techanuvat@scb.th (662)544-6546 Alisa Tamprasirt alisa.co. Sutapa Amornvivat Chief Economist Head of EIC and Sectorial Research sutapa.co. recommendation.co. Chinnawut Techanuvat chinnawut.nuntramas@scb. This report is for the recipient’s information only.th (662)544-3085 Dr.chummee@scb. 59 . Phacharaphot Nuntramas phacharaphot.co. We or any of our associates may also have an interest in the companies mentioned herein.co. as to the accuracy or completeness of any of the information contained in this report. offer.co. 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.th (662)544-2705 Vithan Charoenphon vithan.vararuth@scb.syamananda@scb. express or implied.th (662)544-1644 Disclaimer : The information contained in this report has been obtained from sources believed to be reliable.limvittaradol@scb.tamprasirt@scb.co.homchampa@scb. However. employees or representatives makes any representation or warranty.th (662)544-2478 Witchuda Chummee witchuda.th (662)544-6103 Tubkwan Homchampa tubkwan. neither we nor any of our respective affiliates. or solicitation by us and should not be relied as such.

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