Thailand: Full steam ahead towards regional integration

Bundles of one-thousand baht banknotes are arranged for a photograph inside a Bangkok Bank branch at the company's headquarters in Bangkok on Dec 12, 2013.
Bundles of one-thousand baht banknotes are arranged for a photograph inside a Bangkok Bank branch at the company's headquarters in Bangkok on Dec 12, 2013. PHOTO: BLOOMBERG

Big Thai corporate names like Bangkok Bank, Charoen Pokphand Foods, Siam Cement Group and Thai Beverage - all representing different industries - share a similar view that the domestic economy is becoming too small, and are venturing overseas to take advantage of growth opportunities that the Asean Economic Community (AEC) has to offer.

Bangkok Bank, for instance, already has branches in nine countries, all of the Asean states except Brunei. Charoen Pokphand Foods has operations in Cambodia, Laos, Malaysia, the Philippines and Vietnam, outside of Thailand, in Asean.

In recent years, more Thailand- based firms have looked outward to gain from the integration process that promises free flow of investment, capital and skilled labour.

Among the 50 companies in the Stock Exchange of Thailand's SET 50 Index calculation basket, more than 35 companies, or 70 per cent, have established operations in one or more Asean countries.

At the national level, several plans have been introduced to assist companies.

Thailand lies at the centre of the East-West Economic Corridor, a road link extending from Vietnam to Myanmar. Road upgrades have been carried out and plans are under way to invest in new railway projects that will facilitate passenger and goods transportation.

Chief among them is the 873km, north-south, double-track route from Nong Khai on the Lao border to Map Ta Phut, at the heart of the country's eastern seaboard industrial zone.

Deputy Prime Minister Somkid Jatusripitak has also envisaged an east-west rail link to complement the north-south project and to make Thailand a true connectivity hub.

The new project would link Thailand with Laos and Myanmar.

To cash in on the connectivity, the Thai Cabinet recently approved in principle the establishment of special economic zones in six border provinces.

Thailand is also prepared to play a major role in Mekong sub-regional trade. Bank of Thailand recently raised the maximum amount of Thai currency one can carry across the border from 500,000 baht (S$19,500) to two million baht in an attempt to increase baht-denominated trade in the region.

Foreign companies can also borrow in Thai baht even if they do not trade with Thai companies or establish a business presence in the kingdom.

The opportunities are huge, but not all Thai companies are embracing the integration wholeheartedly.

Those in the service sector could be affected the most as the AEC promises free flow of skilled labour in eight professions comprising doctors, dentists, nurses, engineers, architects, accountants, surveyors and those in the tourism industry.

Small and medium-sized enterprises, constituting over 70 per cent of the more than 600,000 registered companies in Thailand, are wary of the possible negative impact, fearing the AEC will toughen competition and threaten their viability.

To address these fears, the commerce ministry has held over 200 training courses during 2012-2015, involving more than 25,000 participants. Information on the AEC is available at the AEC Centre in Bangkok. Similar centres have been established in all the other provinces.

Still, more needs to be done by Thailand to fully capitalise on the opportunities that come with regional integration, said Mr Surin Pitsuwan, Asean's former secretary- general.


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A version of this article appeared in the print edition of The Straits Times on December 28, 2015, with the headline Thailand: Full steam ahead towards regional integration. Subscribe