CAPTURE THE OPPORTUNITIES IN THAILAND - BUSINESS SWEDEN THAILAND May 2018
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CAPTURE THE OPPORTUNITIES IN THAILAND BUSINESS SWEDEN THAILAND May 2018
EXECUTIVE SUMMARY
THAILAND IS THE 2ND LARGEST ECONOMY IN SEA WITH
A GROWING GDP AND A DEVELOPED INFRASTRUCTURE
MARKET OVERVIEW
Thailand is the second largest economy in ASEAN with a growing GDP and a
developed infrastructure which rank the country high for investments
The economy in Thailand is diverse but the manufacturing sector is important
which is reflected in the exports by Swedish companies where machineries for
transport and power sector is dominating
KEY TRENDS AND OPPORTUNITIES
Investments in the infrastructure in combination with changed demographics and
digital focus from the government will grow needs for new solutions
Sweden, with many innovative and technological advanced companies, can
benefit of such changes and there are opportunities within transportation,
healthcare, manufacturing as well as digital solutions & services
HOW TO SUCCEED
Swedish companies planning to enter in Thailand should ensure they understand
the market in-depth as well as having a local presence with a customized
approach to stay competitive in the market
Challenges within red tape exist in the country but comparing with countries in
the region, Thailand is ranked better and are showing signs of improvement
BUSINESS SWEDEN 18 JUNE, 2018 2
TABLE OF CONTENTS INTRODUCTION TO THAI MARKET OPPORTUNITIES FOR SWEDISH COMPANIES SUCCESS FACTORS & CHALLENGES BUSINESS SWEDEN 3
INTRODUCTION
STRATEGIC LOCATION AND THE 2ND RANK IN EASE OF
CROSS BORDER TRADE MAKE THAILAND ATTRACTIVE
VIETNAM
Population: 93 million
THAILAND
GDP: 216 BUSD
Population: 69 million
GDP per capita: 2,306 USD
GDP: 438 BUSD
GDP per capita: 6,336 USD
PHILIPPINES
Population: 103 million
GDP: 321 BUSD
GDP per capita: 3,022 USD
MALAYSIA
Population: 31 million
GDP: 310 BUSD
GDP per capita: 9,660 USD INDONESIA
Population: 261 million
GDP: 1,011 BUSD
GDP per capita: 3,859 USD
SINGAPORE
Population: 6 million
GDP: 306 BUSD
GDP per capita: 53,880 USD
THAILAND HAS QUALITY LOGISTIC NETWORK TO ACCESS OTHER MARKETS WITHIN THE SEA
SOURCE: IMF, THE WORLD BANK NOTE: ALL FIGURES ARE FOR 2017 IN CURRENT USD VALUE
BUSINESS SWEDEN 18 JUNE, 2018 4
INTRODUCTION
POSITIVE PROSPECT FOR THAILAND AS FUTURE
INVESTMENTS ARE IN PLACE
FUTURE GROWTH IN THAILAND
~35 Heavy online user,
Thailand million tourist ranked 3rd
arrivals in 2017, up
have had a 9% from previous
year
globally for time
spent online
slowdown
but is
Promising investment
destination,
~ 23 USD
expected to ranked 8th of billion
the “2018 Best Country to investments in
infrastructure for
grow Invest In”
EEC* development
(2017-2021)
*Eastern Economic Corridor
SOURCE: WORLD BANK, SCB EIC, BOI, REUTERS, THAILAND BUSINESS NEWS
BUSINESS SWEDEN 18 JUNE, 2018 5
INTRODUCTION
THE THAI ECONOMY IS RESILIENT PROVEN BY
IMPRESSIVE GROWTH UNDER DIFFICULT TIMES
THAILAND GDP* (BILLION USD) GDP CONTRIBUTION BY SECTOR (2016)
Export- Asian Political Military Manufacturing
Orientation Financial Crisis conflict coup took Thailand 4.0
Started control 27%
527.1
Automobiles Agriculture
trade 8%
15%
Transportation
Financial & & storage
insurance
activities 6%
44.5 8%
8%
1986 1996 2006 2016 2020f
Despite economic and political crisis, Thai economy still managed to grow The contribution from each sector remains almost
at 7.7% CAGR over the past 30 years (1986-2016) the same for the past 5 years, with all sectors
growing positively except agriculture
SOURCE: IMF, NESDB, THAMMASAT ECONOMIC JOURNAL *GDP SHOWN AT CURRENT VALUE, DATA FROM 2017 ONWARDS ARE IMF ESTIMATES
BUSINESS SWEDEN 18 JUNE, 2018 6INTRODUCTION
THAILAND OFFERS FOREIGN INVESTORS WITH LARGE
POTENTIAL CUSTOMERS AND LOCATION ADVANTAGE
KEY HUBS IN THAILAND WHY IS THAILAND ATTRACTIVE
Chiang Mai
Agricultural and A center of SEA region –
Strategic
Tourism Hub ideal for setting business
location
hub for regional expansion
Ayutthaya
Industrial zone and Extensive road and rail
agricultural area Developing networks span across the
Khon Kaen
infrastructure nation with access to nearby
Gateway to Laos and
Vietnam. Trading and countries
services hub to eastern
neighbours.
High demand for goods and
Bangkok Large
services in various industries
Capital city and customer
both from local users and
business center base
Eastern Economic Corridor foreigners in Thailand
(EEC)
Key industrial area, sea port
logistics Increase consumer spending
Rising middle which influencing higher
class competition and improved
Phuket quality of goods and services
Tourism hub and international
services outsourcing
SOURCE: BOI, SCBEIC, BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN 18 JUNE, 2018 7INTRODUCTION
SWEDEN IS AHEAD OF NORDIC PEERS IN EXPORTING TO
THAI MARKET – MAINLY HIGH VALUE PRODUCTS
EXPORT OF NORDIC COUNTRIES TO THAILAND SWEDEN EXPORTS TO THAILAND BY INDUSTRY
(MILLION USD) (TOTAL 621 MILLION USD, 2016)
CAGR
22,000 2007-16
18,000 Manufactured goods Others
2% 10%
14,000 EU
10,000 Aeroplanes & parts were 3.7% Iron and steel
the largest contribution 4%
6,000
900 Paper and
2,000 related paper
manufactures
Power generating
600 8%
machinery and
Sweden equipment
6.7% 46%
300 Machinery and
transport
equipment
- 30%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Denmark Finland
Norway Sweden
Although, Sweden exports experience a decline in the past High value products like engineering machines are of high
years, its market share of total EU exports remains at 4% for demand for Thailand – almost 80% of Sweden’s total
the past 2 years (also 4% on the 10-year average) exports to Thailand was turbine & boiler and machinery &
transport equipment
SOURCE: UNCTAD, FTA DEPARTMENT OF TRADE NEGOTIATIONS
BUSINESS SWEDEN 18 JUNE, 2018 8INTRODUCTION
MAIN FDI ARE IN FINANCIAL AND MANUFACTURING
SECTORS WITH JAPAN BEING THE TOP INVESTOR
ACCUMULATED FOREIGN DIRECT INVESTMENT FDI NET INFLOW BY SECTOR (2017)
2015-2017 (MILLION USD)
Nordic 797 Others
5%
Trading of motor
USA 1,799 vehicles Financial &
13% insurance
activities
36%
China 2,323
Total 9.1 billion
Real estate
activities USD in 2017*
Europe 4,087 Include only western European countries 20%
Asia 6,063 + Other Asian countries
(exclude Japan, China) Manufacturing
26%
Japan 21,906
Japan and intra-ASEAN are the largest contributors to foreign Electronics and automobile industry are the top
direct investments in Thailand, while Nordic countries account highest contributors to the manufacturing sector,
for relatively small fraction of total Thailand’s FDI 32% and 22%, respectively
SOURCE: BANK OF THAILAND, FORBES THAILAND, FDI MARKETS *Bank of Thailand estimated
BUSINESS SWEDEN 18 JUNE, 2018 9TABLE OF CONTENTS INTRODUCTION TO THAI MARKET OPPORTUNITIES FOR SWEDISH COMPANIES SUCCESS FACTORS & CHALLENGES BUSINESS SWEDEN 10
KEY TRENDS
SOME KEY TRENDS ARE SHAPING THE ECONOMY AND
OPPORTUNITIES IN THAILAND
INFRASTRUCTURE
CHANGING DEMOGRAPHICS DIGITAL 4.0
INVESTMENTS
TRENDS & CHARACTERISITCS
Major investments and projects in the A rising middle class is under way in Thailand is focusing on becoming a
infrastructure sector are carried out in Thailand as well as increased min. value driven economy to take steps
Thailand wage will make people have more into the new S curve
money in the pocket
Thailand is in the center of the growing Heavy focus on digitalization to cater
ASEAN region which will need Further changes Thailand’s population for smart cities, smart manufacturing
emphasize on logistic solutions when is facing is a growing number of as well as digital solutions for
trades in the region will increase elderly as well as urbanization consumers
OPPORTUNITIES &
IMPLICATIONS
TRANSPORTATION HEALTHCARE MANUFACTURING DIGITAL SOLUTIONS &
SERVICES
SOURCE. BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN 18 JUNE, 2018 11SECTORS IN FOCUS TRANSPORTATION
THAILAND IS DOING INFRASTRUCTURE INVESTMENTS
AND IS IN THE HEART OF THE GROWING ASEAN
Overview of Thailand has a strategic location for Major projects in Thailand
Transportation transport with possible sea, road and
sector in railway routes to India, China and Chiang Rai – Ayutthaya High Speed railway,
Thailand value: 10.8 B USD
Southeast Asia covering ~3.3 billion
people
Port Authority of Thailand
Thailand has dropped in infrastructure announced to invest 4.3 B USD
to invest in its ports, focusing
competitiveness but are aiming to on Laem Chabong and
improve the coming years with focus on Bangkok
sustainability and environmental impact
Projects worth 51 B USD until 2022 is AoT announced to spend 5.5 B
USD to upgrade and expand
expected to be financed through public- airports, for example both
private partnerships (PPP) Suvarnabhumi and Don Meuang
Airport in Bangkok
The foreign participation in
infrastructure projects is high in
Thailand with 36% of the market share
Opportunities
for Swedish
companies
Industrial equipment Safety and Communication Infrastructure services Green
surveillance system system and management infrastructure
SOURCE BMI
BUSINESS SWEDEN 18 JUNE, 2018 12SECTORS IN FOCUS HEALTHCARE
THE HEALTHCARE MARKET IN THAILAND IS GROWING
WITH OPPORTUNITIES FOR SWEDISH COMPANIES
Overview of Thailand is the second largest healthcare market in Healthcare expenditure (B USD)
CAGR: +6.2%
Healthcare in ASEAN where government spending is the major
CAGR: +3.8% 22.9
Thailand drive behind the growth 18%
18.0
15.5 20%
The population in Thailand is expecting a shift in its 23%
population dynamics where the portion of elderly 82%
80%
people will increase which will require focus on 77%
increased care
2013 2017 2021
Medical tourism is on the rise and the country is Government Private
globally viewed as a top destination where private
Imports (B USD)
hospitals are the ones focusing on this target group
Medical 962
As domestic producers focus on low-generic drugs devices 1,103
and basic medical products, Thailand is highly
dependent on import of pharmaceuticals and Pharma- 1,800
ceuticals 1,943
medical devices to satisfy the needs for healthcare
sector 2012 2016
Opportunities
for Swedish
companies
Medical equipment Pharmaceuticals Healthcare
management
SOURCE BMI, ALLIANCE EXPERT, OXFORD BUSINESS GROUP, PACIFIC BRDGE MEDICAL
BUSINESS SWEDEN 18 JUNE, 2018 13SECTORS IN FOCUS MANUFACTURING
THAILAND IS MOVING TOWARDS MORE TECH-DRIVEN
WITH INCREASING USE OF AUTOMATION AND ROBOTICS
Overview of Thailand’s manufacturing sector is one of the strongest
Value added of manufacturing sector (B USD)
Manufacturing manufacturing bases in the ASEAN region and the second-
in Thailand largest economy within the trade block. CAGR 4.8% 126.2
Automobiles and electronics industries are among the top 90.8 61% Others
contributions to the manufacturing sector – driving industrial
8% Automotive
robotics and automation growth 8% Electronics
22% F&B
Largest automotive producer in SEA – total production 2009 2012 2016
growing at 2.7% CAGR since 2014 to 2019 with mature
automotive value chain comprising with leading global players Estimated annual shipments of industrial
robots (no. of units)
The 2nd largest hard disk drive producer in the world – being
a production base for leading players like Western Digital and CAGR 18.6% 5,000
Seagate Technology 2,646 3,000
The government Thailand 4.0 initiative is in the effort to move
the manufacturing sector into more technology-driven 2016 2017* 2020*
aiming to attracting investment to these industries. *Forecasted by IFR World Robotics 2017
Opportunities
for Swedish
companies
IOT/ Robotics/ Engineering services/ Materials & components
Smart sensor Efficiency solutions Advisory for next generation vehicles
SOURCE BMI, THE INTERNATIONAL FEDERATION OF ROBOTICS (IFR)
BUSINESS SWEDEN 18 JUNE, 2018 14SECTORS IN FOCUS DIGITAL SOLUTIONS & SERVICES
DIGITAL SOLUTIONS IS OF HIGH IMPORTANCE FOR THE
GROWTH OF THAILAND ECONOMY
Overview of Thailand has high internet penetration at 67% of the
Digital
Solutions &
Services in
population and is at global Top 10 for social media usage
Under the Thailand 4.0 economy plan, Digital Economy
25%
of Thailand’s GDP will
~974
million USD spending on
Thailand is a focus area with the three main priorities Digital be contributed through Internet of Things by
Market Landscape, Digital Infrastructure and Digital Economy in 2027 2020 in Thailand
Innovation Ecosystem
Number of transactions (’000)
E-commerce is undergoing a rapid expansion in
combination with high growth in internet and mobile
Internet 83 841
banking which will drive needs for security solutions and banking 240 461
payment options to increase consumer confidence
Thailand has put ambition to be a world leader within Mobile 19 942
Internet of Things (IoT) which will bring opportunities in banking 584 983
many fields including manufacturing and consumer
trends 2011 2016
Opportunities
for Swedish
companies
Security solutions Payment solutions Software & Service Technology services within
IoT
SOURCE: BOI, EUROMONITOR, BANK OF THAILAND, ASIA IOT BUSINESS PLATFORM, EMARKETER
BUSINESS SWEDEN 18 JUNE, 2018 15TABLE OF CONTENTS INTRODUCTION TO THAI MARKET OPPORTUNITIES FOR SWEDISH COMPANIES SUCCESS FACTORS & CHALLENGES BUSINESS SWEDEN 16
KEY SUCCESS FACTORS
UNDERSTAND THE MARKET AND ESTABLISH LOCAL
NETWORK ARE KEYS TO ENTER THAI MARKET
KEY SUCCESS FACTORS
PREPARE MARKET ENTRY DO CONTINOUSLY
UNDERSTAND THE MARKET
DEVELOP Thorough analysis and understanding of the market dynamics is needed
UNDERSTANDING OF Engagement with all kinds of stakeholders in the local ecosystem including
MARKET & ECOSYSTEM customers, government, local community etc. is required
ENGAGE WITH THE MARKET
ENSURE PRESENCE OR Success requires active work and support to the partner
A STRONG, LOCAL Education of products and services, regular visits to the market etc.
PARTNER
Close dialogue with customers are essential
ACTIVELY EDUCATE AND DEVELOP MARKET
Find a niche and strong unique selling points
LOCALIZE OFFERING
AND EDUCATE THE Swedish products will most often be considered premium – necessary with
adapting products and business model
MARKET
In parallel, companies should educate market on long-term value proposition
SOURCE: BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN 18 JUNE, 2018 17MARKET CHALLENGES
POLITICAL UNCERTAINTY AND BUREAUCRACY ARE
ASPECTS THAILAND NEED TO IMPROVE ON
OVERVIEW EASE OF DOING BUSINESS (RANKING OF 190 COUNTRIES)
Thailand is ranked as third country in ASEAN when it comes to do Bottom 25% Top 25%
ease of doing business
Total ranking
The country has also been recognized globally as one of ten
countries that have improved the most Starting a business
Construction permits
POLITICAL SITUATION
After a military coup in 2014, Thailand is currently controlled by a Getting electricity
military junta
Registering property
There are indications that election will be held early 2019 but such
estimation has been delayed several times
Getting credit
In Dec 2017 EU decided to resume political contacts at all levels
with Thailand Protecting minority investors
Paying taxes
CHALLENGES TO DOING BUSINESS
When asking Swedish companies, bureaucracy, corruption and Trading across borders
political uncertainty is ranked high among challenges apart from
market dynamics such as price sensitivity, competition and finding Enforcing contracts
skilled labour
Resolving insolvency
In World Bank research, Thailand scores low on Registering
property, Paying taxes and Trading across borders but is still
higher than peer countries in comparison Thailand Peer average
200 150 100 50 0
SOURCE: BMI, WORLD BANK, THAI PBS
PEER GROUP: MALAYSIA, THAILAND, BHUTAN, VIETNAM, INDONESIA, PHILIPPINES, NEPAL, SRI LANKA, INDIA, CAMBODIA, LAO PDR, PAKISTAN, MYANMAR, BANGLADESH
BUSINESS SWEDEN 18 JUNE 2018 18CONTACT US BUSINESS SWEDEN IN THAILAND Contact information Business Sweden Thailand Level 10, Alma Link Building, 25 Soi Chidlom, Ploenchit Road Lumpini, Pathumwan, Bangkok 10330, Thailand T: +66 2 254 8290 E: asean@business-sweden.se W: www.business-sweden.se
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