The Thais that bind – doing business in Thailand

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With the second largest economy in Southeast Asia, Thailand has plenty to offer intrepid business owners.

Whilst Thailand is known for trekking and tourism it also has a very significant manufacturing base on its eastern seaboard, a sophisticated middle-class consumer economy in its urban centres and is the economic focal point for the Mekong Delta region in Southeast Asia.

In what is known as the “land of smiles” you’ll also find a dynamic centre of commerce, a proud culture and many global connections in trade and communications that has really made the world sit up and notice – the Thais that bind.

After all, Thailand is the second largest economy in Southeast Asia and the 27th largest economy in the world.

However, in terms of GDP per capita it ranks in the middle of Southeast Asian per capita GDP, after Singapore, Brunei, and Malaysia, and is 101st in the world.

The nation is recognised by the World Bank as “one of the great development success stories” in social and development indicators with a low unemployment rate of 0.8 per cent, no inflation, a 2.5 per cent growth rate and a falling proportion of Thais living under the poverty line.

People often think that Thailand is a poor country but it’s actually a middle income country with a large urban middle class with healthy purchasing power. It’s not a low labour cost economy either like Cambodia, Laos or Myanmar.

Thailand is an export orientated economy with exports accounting for two thirds of GDP. The main sectors are manufacturing – with a large automotive sector on the Eastern seaboard – known as ‘the Detroit of Asia’ – trade and logistics, mining and construction, electronics, light manufacturing, financial, education and tourism services as well as traditional agriculture.

Thailand’s key position as a trading and logistics hub for the Mekong delta which comprises their neighbouring countries of Vietnam Cambodia Laos and the emerging Myanmar places it well in the region.

That’s why Australian transport and logistics giant Linfox sees Thailand as key to their ASEAN strategy as do other exporters and investors.

As well as to its neighbouring ASEAN states, Thailand trades mainly with China, Japan and the United States and is a significant foreign investor in Australia, sometime rivalling China but without the publicity.

Thailand, previously known as Siam, was open to trade before the industrial revolution with its ports at sea and on rivers attracting merchants from Persia, India, China and the Middle East. Chinese traders also became influential in the 19th century and also faced competition from British and European merchants. In the early 20th century, after the abolition of slavery, Siam became more globally interconnected with many Chinese traders becoming Siamese nationals. Most of the Siamese economy was in agriculture and the kingdom was one of the largest rice exporters in the world.

Thailand suffered from World War II and the Cold War, with numerous coups and instability. However they still managed with the help of American aid to invest in human capital and make some social progress.

Thailand prides itself on being a relatively easy place to do business

The 1997 Asian financial crisis with the collapse of the Thai baht dented Thailand’s confidence with economic austerity and political instability following but the Thais bounced back and achieved positive growth rates since in all years except for the 2008 Global financial crisis (GFC). Despite 12 coups since 1932 its political instability doesn’t adversely affect Thailand’s continued prosperity.

Despite the coups and instability, Thailand is largely an open economy and whatever the state of politics it’s business as usual. Thailand is also very keen on investment – inwards and outwards –  and the Thai Board of Investment provides extensive incentives. Thailand prides itself on being a relatively easy place to do business but foreigners do have to show caution and be sensitive to the political environment.

Through agreements like the Thai Australian Free Trade Agreement (TAFTA) tariffs and quota barriers were eliminated on 94 per cent of Thailand’s imports from Australia by 2010 with the remaining tariffs phasing to zero in 2015 or 2020 (with the exception of dairy which will go by 2025). TAFTA also liberalised services trade and Thailand has forged similar trade agreements with other countries. There are 2953 Australian exporters selling goods to Thailand alone.

Thailand has a proud culture and was never colonised unlike many of its ASEAN counterparts. So just be wary of a few things in socialising with your Thai business counterparts. Remember the King is revered in Thailand, and you often see purple the Royal colour. Remember Thailand is Buddhist so be respectful of temples and Buddhist symbols. And politics is often a touchy subject given the Thai history.

In conclusion, I hope you now see Thailand as a business opportunity as well as an exotic holiday (not that there’s anything wrong with that!) and take advantage of its position at the heart of the Mekong Delta region.

Tim’s Tips for doing business in Thailand

Be careful re the political situation check your own government’s travel advisory like Australia’s:  http://www.smartraveller.gov.au/

Work with your local Embassy and trade office about Thailand’s large number of free trade agreements like TAFTA

Join your respective chamber of commerce and social clubs like Sundowners

Check out the comprehensive incentives at the Thai Board of Investment.

Embrace the amazing Thai culture – which is so unique in the region and right around the world.

If you follow these tips you’ll have a great time in Thailand – the land of smiles!

If you’ve liked what you’ve seen in Thailand do check out www.theairporteconomist.com for further details and special offers from our partners.

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Tim Harcourt is the JW Nevile Fellow in Economics at UNSW Sydney and a former Chief Economist of the Australian Trade Commission (Austrade). Tim hosts The Airport Economist TV series on Sky News and Qantas.

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