Bangkok Business Brief - Volume 3, Issue 5 - July/August 2014 by Mango Mango Ltd. Part.

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BUSINESS BRIEF Vol. No. 3, Issue No. 5 • July / August 2014 Read new business briefs everyday at www.BBBrief.com

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Why ASEAN overtook China’s foreign investment last year By Chris Devonshire-Ellis of Dezan Shira & Associates Reprinted with special permission

The ASEAN 5 – the large trading countries of Singapore, Malaysia, Indonesia, the Philippines and Thailand – last year achieved Foreign

Inside

General Interest Tourism Real Estate Retail/Services Government/Economy IT/Comms Finance/Investment Production The Calendar

2 4 6 8 10 11 12 14 18

Direct Investment inflows of some US$128.4 billion, overtaking that of China at US$117.6 billion, according to figures released by Bank of America Merrill Lynch (BAML) last week. That US$128.4 billion represented a 7 percent year-on-year increase in FDI for these ASEAN countries last year, while China faced a 3 percent dip to US$117.6 billion. The BAML figures were calculated using official data and an estimate for Philippines FDI in Q4.

increase in China labour and operational costs, the decline of FDI in China is only partially to do with increased costs. A major driver for the re-positioning of FDI into Asia is rather two other major forces converging – regional demographic change, and the ASEAN-China Free Trade Agreement.

In terms of the demographic changes, China is getting older. As a result, it has reached over the hump of what is known as the age-dependency optimum and is now losing workers – and fast. 2013 saw 2.4 This trend demonstrates a num- million workers retire from China’s ber of issues coming into play. Of- labour force, these not being reten touted as being caused by an placed, while the number of elderly

Chinese is expected to reach 30 percent of the population by 2030. The Chinese government is well aware of these trends and has been reacting accordingly – and with little financial means to fund a welfare state, they have been deliberately creating an increasing wealthy society – the annual 10-20 percent increase of minimum wages being part of this. This is now creating a middle class consumer base of some 600 million by 2020 – and will steadily increase to that number over the next six years from the 250 million now extant today. That’s an average of 58 million new Chinese middle class Story continues on Page 16

P l a n n i n g , S u p p l y i n g a n d B u i l d i n g A s i a ’s R e c r e a t i o n a l I n f r a s t r u c t u r e

BANGKOK BUSINESS BRIEF

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Educating Ah Wei Thailand will remain a destination of choice for Asean students but must steadily raise the quality of its universities and find its niche amid tougher competition driven by the Asean Economic Community (AEC) late next year. Although Singapore has been the leading education destination of all time due to its top university rankings and globally competitive economy, and Malaysia has welcomed a large number of foreign students, Thailand has also been considered a key education destination in Asean. This is because the country has many highly regarded state and private universities and an open culture with many fun-factors for foreign students. The onset of the AEC is expected to attract a higher number of international students from Asean countries. But at the same time it will also mean stiffer competition among Asean universities. The question is: are Thai universities really... Full story: http://goo.gl/rzqI75

Need for Asean supply chain integration Southeast Asian economic integration next year will create a competitive market of 600 million people with a combined GDP of $2.1 trillion, solid growth, low manufacturing costs and a rising middle class hungry for the consumer experience across 10 countries. The AEC vision calls for improved logistics infrastructure, manufacturing incentives, fewer restrictions on movement of talent, more tariff reductions, and streamlined administrative procedures. There will be a free flow of goods, services and investment capital and improved access to skilled labour… at least that’s the plan. Southeast Asia has long been a prime manufacturing base. But the heart of its potential today lies in its emerging domestic market with increasingly affluent consumers, and as a source of highly educated, highly productive workers. However, achieving the new vision for Asean will depend on developing world-class supply chain capabilities. Inconsistent quality and availability of transport.... Full story: http://goo.gl/8Xz1sM

Green roof: the urban Listed state firms access to nature told to get serious It is widely understood that Thailand is against corruption a tropical country with temperatures increasingly rising each day, especially in the capital. This is because there are few green areas in Bangkok as compared with the population density. Environmentalawareness campaigning therefore becomes important, and has given rise to the “Green Roof, Living Roof” concept. This refers to roofing covered with green vegetation growing in proper soil to help reduce heat access through the roof. As a direct benefit, when the first ceiling reduces the heat, the house’s interior will become cool, helping us cut the electricity cost incurred from air-conditioning. Moreover, it can reduce noise from the outside and filter falling dust. In some places, green roofing is used for increasing space for utilities or living, instead of leaving the deck unused. A green roof also helps maintain the condition of the deck’s floor and the leak-proof system. However, what makes the green roof really attractive is its positive impact on the environment. First, it can produce fresh air and filter pollutants and carbon dioxide from the air. Second, it reduces heat reflection on the air and filters pollutants and heavy metals from rainwater. And third, it reduces the volume of... Full story: http://goo.gl/ULKOfc

The private sector’s Collective Action Coalition against Corruption has called for the five listed state enterprises to elevate their efforts to put in place high compliance standards for tackling corruption, providing prudent examples for other state agencies, amid ever-increasing demand for good governance nationwide. As the ruling NCPO has promised to uproot corruption and claimed that it will not tolerate any form of bribery in the public sector, listed state enterprises should be among the first public entities to respond, said CAC secretary Bandid Nijathaworn. They should put their antigraft commitments into action and win CAC acknowledgement that their compliance standards to prevent corruption have been established. While board replacements at several public enterprises are under way, the time is right for boards at the five listed state firms to get serious on fighting graft and demonstrate their commitments to follow the NCPO’s policy in gearing their organisations towards greater transparency, he said. “Listed state enterprises have already been through a certain extent of corporatisation. This should give... Full story: http://goo.gl/xEYXYk

Moving goods? Your Consider alternative tariff classification models to manage strategy human-capital needs All items imported into or exported out of Thailand must be assigned a tariff classification code from the Thai Customs tariff schedule. Assigning a suitable and correct tariff classification code to products is important as it determines many things – including whether your products would be eligible for preferential duty rates or whether anti-dumping duties apply. The tariff classification of products is complex and requires a thorough understanding of products as well as a good understanding of the complex classification rules of the Thai tariff schedule, as well as the local interpretation of these rules by Customs. Typically, challenges to the classification code arise at two points with respect to imported goods in Thailand: either during the clearance process at the port of entry, or during a postclearance audit or investigation. When goods arrive at the port, Customs officers usually focus on the general description of the goods, quantity, and the tariff classification of imported goods. If the declared classification codes are not considered to be significantly “odd”, Thai Customs would normally not challenge the declared codes, especially where the duty rate is low or exempted. However... Full story: http://goo.gl/yyMaZT

As many countries continue to struggle with persistently high unemployment rates, Thailand is one of the few with a jobless rate well below 1 per cent. While this is generally viewed very positively from a macroeconomic perspective, employers in Thailand know all too well a corollary effect of low unemployment is high employee mobility. Because of the extremely tight labour market in Thailand, most employers find themselves dealing with some level of unanticipated staff turnover on a frequent basis. In addition to staff attrition, employers may need additional resources for maternity leave or to deal with higher seasonal workloads and special projects. Depending on the urgency of the position that needs to be filled, employers often find themselves making a quick decision to hire a replacement out of necessity rather than investing the time and effort to identify the most qualified and suitable candidate. One way to deal with temporary staffing needs is to consider a short-term secondment from a reputable professionalservices firm. These firms can provide highly trained, versatile professionals with a wide range of capabilities and industry exposure, who are highly adaptable to complex work environments. These... Full story: http://goo.gl/sRrEYR

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BANGKOK BUSINESS BRIEF

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July / August 2014

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Tourism

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Operators reject free visa plan Tourism operators are urging the government not to offer free visas to Chinese tourists citing concern about the country’s stability. The idea of free visas has become a hot topic among private tourism operators. Many argue that while it helps boost tourism it would also allow foreigners to bypass the immigration process. They suggest that Chinese tourists should still be required to process visas but the fees should be reduced or waived. The Yingluck Shinawatra-government floated the idea to waive visa fees for Chinese travellers with the aim to boost the number of visitors from China, but the idea did not get off the ground. It hoped the increased number of Chinese tourists would help the country achieve the tourism revenue target of 2 trillion baht in 2014 and 2.2 trillion baht in 2015. But the Tourism Authority of Thailand conducted a survey on the issue and found that while free visas would be convenient... Full story: http://goo.gl/nf33o1

Send positive message to halt Bangkok’s tourism decline

The junta needs to bolster tourists’ confidence to save hotels in the capital, said Marc Begassat, general manager of Pullman Bangkok King Power Hotel. “Giving vision is the most important [thing] to help restore the tourism sector. Vision can be from the government or the tourism authority,” he said. He added that people outside the country may not know about the real situation and could misunderstand, so government leaders should provide them with the right messages. This is the best kind of communication during a crisis. Hotels in Bangkok have suffered since the Army seized power and slowed travel businesses to a crawl. Pullman King Power lost 1,500 booked room-nights, causing the occupancy rate to drop from 70-75 per cent in June last year to 50 per cent this month. Key affected markets are mainland China, Hong Kong and Singapore, while Japan and long-haul markets remain unchanged. To cut its losses, the hotel is targeting its promotions mainly at locals. It is offering online bookings from Bt2,590 and up, down from Bt2,873, through the end of July. Moreover, it has added more optional deals for meetings... Full story: http://goo.gl/gsRS3p

ATTA urges crackdown on proxies The Association of Thai Travel Agents has called on the National Council for Peace and Order to crack down on local tour agents acting as proxies for foreign operators and dominating certain tourist markets. Even though the tourism industry has begun to pick up after the lifting of the curfew nationwide, many tourismrelated problems need to be solved for sustainable growth. The ATTA wants the junta to tackle foreign tour operators who have Thai proxies, as they take a 30% share of tourismrelated revenue from Thai operators to their home countries. In addition, the association’s honorary secretary-general Charoen Wangananont said these nominee companies engaged in price wars that affected the price structure and created unfair competition. “It’s not easy to crack down on nominee tour companies, as each proxy has a big-name backer. We hope the NCPO will help us to solve this... Full story: http://goo.gl/MWBfmt

Centara to add two more Pattaya hotels Centara Hotels & Resorts has unveiled plans for two more hotels in Pattaya, as it continues to expand in the Thai resort town. The upscale Centara Avenue Hotel Pattaya and midscale Centra Avenue Hotel Pattaya are both scheduled to open in the fourth quarter of 2014, as part of the same city centre development. The hotels will share the same management and facilities. The two new properties extend Centara’s position as the biggest hotel operator in Pattaya, taking its total citywide portfolio to eight hotels either operating or under construction. Centara Avenue Hotel will have 96 rooms, while Centra Avenue Hotel will have 51 rooms. “Pattaya is a destination of great importance and potential to us, and we are delighted to announce the opening of two new hotels in the central district of the city,” said Thirayuth Chirathivat , Centara’s CEO. “This is an ideal location for our core ‘Hotels & Resorts’ brand, and we are confident that our facilities and location will attract both international and Thai guests. We are also very proud of the fact that this new development sees the introduction of our value Centra brand to Pattaya.” Centara Avenue Hotel Pattaya becomes Centara’s second upscale property in... Full story: http://goo.gl/3e8BIP

Tourism agency Thailand gets Indian bidding for return of wedding boost foreign tourists ahead Thailand remains a popular tourist destination for Indian weddings and events, of high season it has been revealed, despite the recent The Tourism Authority of Thailand is preparing a three-month plan to rebuild tourism, but the country would probably still fail to achieve its arrival target for this year. The recovery plan is set to run this month until August to draw tourists back before the high season arrives. The plan starts with a fam trip bringing about 1,000 travel and blog writers from around the world to Thailand to see the situation here for themselves. Street festivals would be organised particularly in Bangkok to show that local lives continue to go on and tourists continue to come to the capital. A foreign super star singer will be invited to Thailand to help promote tourism.

troubles in the country. According to the Tourism Authority of Thailand’s (TAT) New Delhi office, at least four large wedding groups with more than 1,500 guests have either already visited or confirmed their trips to Thailand between May and September 2014. The Gulf coast resort town of Hua Hin hosted a wedding with 400 Indian guests in May, and this week a party with 120 guests will be held in Phuket. Two further events comprising 400 and 600 guests will be held in Hua Hin and Bangkok respectively later this summer.

Thawatchai Arunyik, governor of TAT, appeared before the international media in Bangkok during the Thailand Travel Mart Plus the Greater Mekong Subregion to ensure that Thailand remained one of most popular destinations in the world. There have been declines in arrivals from some short-haul markets, while many others are still doing well. Huge losses were seen from Brunei, Hong Kong,... Full story: http://goo.gl/pfFhEs

These events add to the three large Indian incentive groups with 1,600 delegates that visited/plan to visit Thailand in MaySeptember 2014. These include approximately 250 representatives of CNBC, who will be travelling from India for the company’s network meeting in Bangkok this month, and 1,200 members of the Travel Agent Federation in India (TAFI), who will be coming to Bangkok for their annual conference... Full story: http://goo.gl/lX3jGB

Bleak prospects for Amazing Thailand sales

Thailand’s Montara launches hotel training programme

Political tension is expected to further take a toll on the Thai tourism sector, including the upcoming annual shopping festival Amazing Thailand Grand Sales.Air bookings to Thailand have seen a fall since the military took power and declared curfew last month. The Tourism Council of Thailand has once again revised down the number of arrivals due to the continuing political tension. It estimated that 1.2 million tourists would skip travelling to the Kingdom over the next few months due to security fears.

Thailand’s Montara Hospitality Group is launching a new training academy designed to boost the skills of Thailand’s hospitality workforce.

This may have an enormous impact on the annual two-month shopping festival, scheduled to take place nationwide from June 13 to August 15. Hundreds of shopping malls, stores and related business will offer up to 70 per cent discount at the Amazing Thailand Grand Sales. Tourism council vice president, Pornthip Hirunkate said tourist spending per head during the festival is usually more than an average of Bt4,000 per head, which means the country risks further losses.Rival competitors like Hong Kong and Singapore also hold similar events to attract tourists during the low season. And they are expected to benefit from the arrival of more tourists shifting from Thailand. The council believes that inbound arrivals... Full story: http://goo.gl/BiXDE7

To be officially launched on 21 July 2014, the Trisara Academy takes the name of Montara’s luxury resort in Phuket, and will provide “education and knowledge transfer to improving the lives of all Thais”, according to the company. The project is the brainchild of Montara’s owner, Narong Pattamasaevi, and will be headed up by seasonal hotel professional, Bill Black. “The aim of establishing Trisara Academy is to create professionals for the growing hospitality business by offering short- and long-term courses ranging from a single day up to three months,” said Black, who also serves as Montara’s president. The academy will initially offer three programmes. The Trisara Internship Programme will start in September 2014, offering on-the-job training in all aspects of hotel operations, including English language skills, potentially resulting in employment one of Montara’s hotels. Also starting in September, the Trisara... Full story: http://goo.gl/FpyQH0

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Real Estate

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Real condo market rises on lower supply Lower supply in Bangkok has raised the real occupancy rate in condominium market, says property consultant Plus Property Co. The latest survey has found demand for condominium for real residential purpose remains strong and is rising further. The company researched into the supply and demand of condos located in Bangkok in which 52 projects have been completed with a combined 12,657 units, all of which have ownership rights transferred. The research findings revealed that 82% are occupied and resided by the owners with the rest inhabited by tenants. The real occupancy rate has increased from 77% in 2013, reflecting limited new supply into the market. The data show that the Phahon Yothin Road road and outer areas such as Chaeng Wattana, are the zones that see the highest real occupancy rate. The Sukhumvit area has the highest density of the tenants especially Japanese... Full story: http://goo.gl/jI1YiH

Beachside real estate markets look set to lead recovery Among five main tourist destinations, the property market in Cha-am, Hua Hin and Pran Buri will be the first to pick up as it relies on Thai buyers, whose sentiment and confidence have resumed after last month’s coup, says Colliers International Thailand. Sunchai Kooakachai, associate director of Colliers’ provincial department, said a market recovery in these three beachside destinations on the peninsula is fastest, with condo units sized between 35-45 square metres and priced below 4 million baht, the best sellers. “Thai buyers dominate this destination,” he said. Last year the location recorded a take-up rate of 64% in the condo segment, followed by Pattaya and Phuket with 61% each, Chiang Mai (60%) and Khao Yai (55%). “The most popular location for new property development is currently Hua Hin Soi 112 as the road is being extended to four lanes. Now it is 80% complete,” Mr Sunchai said. Land prices on this soi soared from 3 million baht a rai two years ago to 10 million... Full story: http://goo.gl/5AFS3L

Foreigners still Luxury condo market interested in property defies political woe Although the political turmoil and ecodespite coup Foreign investors have continued to expand in the property market even though the country has been under the management of the junta, according to Knight Frank Chartered (Thailand) Co. “Last week, we roadshowed in Singapore. We [were able to] sell 12 condominiums on Sathorn Road to foreign buyers from both Asia, such as Singapore and Hong Kong, and Europe, such as the UK,” executive director Frank Khan said. Foreign investors have understood what’s happening here and also have continued to have confidence to invest, especially in residential projects, because prices are still lower than in other countries in Asean, he said. European buyers especially from Britain and Russia are looking for units in the resort destinations of Pattaya and Phuket at prices ranging from Bt5 million to more than Bt10 million. The company plans to promote the Thai property market in Singapore, Hong Kong and Britain in the second half of this year with the focus on condominiums and resort residences. Local investors are interested in properties in Asia and Europe, as returns on real-estate... Full story: http://goo.gl/YD8lJx

Warehouse magnate Residential market in Charn Issara Dev. profits from key provinces faces confident it can career change state of oversupply grow with Thailand Somyos Anantaprayoon, president and chief executive of WHA Corporation Plc, is a new name on the Forbes list of the richest businessmen in Thailand this year. He was ranked 42nd among 50 highnet-worth people. The doctor-turnedbusinessman is estimated to be worth US$515 million, wealth that the self-made millionaire built from his warehouse leasing firm in a short period of time. Just one and a half years after listing on the Stock Exchange of Thailand in mid2012, the company’s net profit rose sixfold to 1.46 billion baht at the end of 2013. Its market capitalisation surged three times to 29.9 billion baht as of March 31, 2014. Dr Somyos and his wife Jareeporn founded WHA in 2003 and took it public in 2012 to mobilise funds. WHA recently sold some assets to an affiliated property fund, WHA Premium Factory and Warehouse Freehold and Leasehold Property Fund and is now forming a real estate investment trust. The company has also diversified into solar energy. Dr Somyos, 54, obtained his medical degree in 1984 and worked at Siriraj Hospital for years. But with his family running a warehouse business, love of property courses through his veins. He went on... Full story: http://goo.gl/9mJeQn

The residential market in provinces such as Khon Kaen, Phuket, Chiang Mai, Prachuap Khiri Khan (Hua Hin) and Chon Buri is in a state of oversupply, with the number of new projects launched since the start of 2012 exceeding demand, according to property experts. A joint survey by the Government Housing Bank’s Real Estate Information Centre and the Agency for Real Estate Affairs, along with another by Pruksa Real Estate’s research department, shows the number of residential projects launched in the major provinces outside greater Bangkok had grown grow by more than 200 per cent since the beginning of 2012. This rate of growth exceeds the ability of demand to absorb them from the market. For example, the supply of detached housing, townhouse and condominium projects launched in Chiang Mai in 2011 was worth Bt2.1 billion, but the value of new launches had risen to Bt14 billion last year – nearly 600 per cent higher in the space of just two years. In Chon Buri province, the supply of residential projects was worth Bt22 billion in 2011, but this had risen to Bt50 billion by the end of last year after Bangkok-based property firms such as Sansiri, LPN Development, NC Housing, Supalai and CP Land... Full story: http://goo.gl/ZtVpn0

Charn Issara Development Plc (CI), founded in December 1989, is in the core business of developing residential housing and condominiums, residential resorts for sale, office and retail space for rent, hotels and property management services for two property funds and related companies. CEO Songkran Issara discusses the company’s strategy and outlook. What is CI’s business model? CI is a boutique real estate developer, looking for the best locations that stand out from the crowd and developing a more exciting product design. We have always aimed to provide top-quality construction and materials for our customers and so far it has been successful with our projects in Hua Hin and Cha-am, Phuket, Bangkok, Chiang Mai and now in Khao Yai. Today our company has strong diversity in projects ranging from residential property to resort residential, hotels, offices and two property funds, which has given us a strong recurring income base from which to continue expanding. How are current projects developing? We have several projects ongoing in Bangkok, Phuket, Chiang Mai, Hua Hin/ Cha-am and Khao Yai. In Bangkok, we are continuing to transfer units at Issara... Full story: http://goo.gl/0O2xcS

nomic slowdown in late 2013 had an impact on the overall property sector, they had minimal impact on the high-end condominium market, especially luxury and well-located projects, says CBRE Thailand. This was due to a fall in new luxury condo supply and continued strong demand as well as the high purchasing power of buyers. In the fourth quarter of 2013, four new condo projects were launched and represented by CBRE with 1,369 units offered for sale. Sales volume reached more than 8 billion baht, with a sales rate of 90% in most projects and one project sold out. “Key factors leading to the successful sales performance despite the overall market slowdown included the developers’ in-depth understanding of their target markets, which led them to create products that matched high-end buyers’ requirements,” said Aliwassa Pathnadabutr, managing director of CBRE Thailand. “In today’s competitive market, developers creating a high-end or luxury product need to match customers’ requirements, especially in terms of unit size, layout... Full story: http://goo.gl/KtHzXT

Chinese contractor to payroll CGD plan Beijing Construction Engineering Group International, one of China’s largest contractors, will invest US$60 million to acquire a 30% stake in Landmark Holdings, a wholly owned subsidiary of MAIlisted firm Country Group Development Plc and co-develop a riverside mixed-use project worth 29 billion baht on Charoen Krung Road. CGD chief executive Ben Taechaubol said the funding will be injected and used to construct the Landmark Waterfront Project, requiring investment of 13.6 billion baht for construction. BCEGI will become the main contractor of the project. Landmark Holdings is a holding company investing in the project, due to start construction this month and be completed in 2018. Last October the Export-Import Bank of China signed an 11.6-billion-baht financial framework agreement with CGD to finance the project. The luxury project will be located on a 36-rai plot by the Chao Phraya River on Charoen Krung Road where the Fish Marketing Organization was formerly located and 300 other tenants stayed. It will comprise a hotel, a resort with 312 rooms and a 73-storey residential building with 350 units with 75-year rents. After transferring this project from the... Full story: http://goo.gl/0V933G

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Fast boat to new ventures

Street protests boost fashion channel Zalora

‘The first generation builds the business, the second makes it a success, and the third wrecks it,” goes an old Chinese saying. The proverb, however, does not apply in the case of Natapree Pichaironarongsongkram. For her, the third generation of Chao Phraya Express Boat — the express boat service operator with a concession to provide river transport services since 1971 — a new horizon to expand the family business has just sprung up.

Zalora, Asia’s leading online shopping destination for fashion products, now anticipates a 100-per-cent increase in sales in Thailand this year, against the 50-percent growth targeted by the company at the beginning of the year. This was largely because the prolonged political unrest in the country that caused many Thais to change their shopping behaviour in favour of the online channel. About 45 per cent of Zalora’s online orders are made from smart phones and tablets, with the remainder from portable PCs.

Natapree, 28, graduated from Cornell with a bachelor’s in hotel administration and a master’s in real estate development from Columbia. She vows to expand the family’s business empire into the retail, rental, condominium and apartment markets on top of its express and ferry boat services and hospitality business through Supatra Real Estate, established late last year. The new retail and property ventures will be developed largely on the land bank the family has acquired over... Full story: http://goo.gl/6F01RE

Thanks to disruptive marketing strategies and innovative services, Zalora has overcome many challenges in just two years to become the No-1 online fashion destination and a major pillar of the fashion industry in Thailand. “During the months of protest, our business grew significantly, due to the fact that we could serve our customers as normal. Because some offline stores were closed during that time, we saw a significant number of new customers trying online shopping... Full story: http://goo.gl/dRcrWV

Thai AirAsia X expanding overseas destination network

Bangkok-based long-haul budget airline Thai AirAsia X is spreading its wings overseas to serve tourists going into and out of Thailand. By the end of this year, the airline will operate direct flights from Bangkok’s Don Mueang International Airport to at least three big cities in South Korea and Japan. It has started daily flights to Incheon in South Korea; Tokyo’s Narita and Osaka will be added in September. The airline is also eyeing other potential long-haul markets with flying times between six and nine hours, including China, Russia, Australia, Eastern Europe and Africa. The expansion overseas is aimed at luring mainly individual tourists as well as business travellers. “The airline has received advance bookings that show average loading factors as high as 75 per cent for the next three months for the Bangkok-Incheon route,” said Nadda Buranasiri, CEO of Thai AirAsia X. He added that the political turmoil in Thailand should not reflect the carrier’s overseas network expansion, so it had maintained a target of 200,000 passengers for this year and revenue of Bt10 billion. Thai AirAsia X was established last year to serve budget travellers on longhaul flights... Full story: http://goo.gl/tjxJMm

Retail giants preparing for AEC Major retailers including Central Group and The Mall are expanding into several high-potential locations, particularly in the border provinces and tourism cities, to cash in on next year’s implementation of the AEC, which will attract more customers. The AEC will likely increase regional economic prosperity and stability as well as bring new business opportunities, they believe. Suthichart Chirathivat, vice chairman of the board of the Central Group of Companies, said he did not expect any significant change in the domestic retail market due to the AEC, which will be fully effective next year. “The local retail sector has reached maturity as the big local players have fully penetrated the market and gained a high competitive advantage over foreign retailers. However, the implementation of the AEC will allow major local retailers to penetrate new markets in other AEC countries,” he said. Suthichart said this was the right time for Central Group to expand its retail business abroad, especially in countries such as Vietnam and Indonesia, as well as Europe. “We may phase out our retail business in China as we are facing tough... Full story: http://goo.gl/N9AOfZ

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July / August 2014

Academy offers adventure for leadership training

Japan’s used-car giant drives into Thai market

Kris Ruyaporn believes leadership can be taught through rock climbing. The leadership trainer at the Asia Pacific Innovation Centre bought a 111-rai piece of agriculture land in Kanchanaburi about three and a half years ago and turned it into a playground for company executives to discover their leadership potential.

Gulliver International, Japan’s largest used-car company, has a grand vision – to do what 7-Eleven did to conquer the Thai grocery market – of modernising the entire used-car business in this country. In this bid, which represents Gulliver’s first renewed overseas expansion ambition since the global “Hamburger” crisis in 2008, the company has dispatched Katsushi Nomura, 33, a former secretary to a co-president of the Japanese parent firm, to head the Thai unit.

To date, Kris said his Rai Jai Yim academy has provided adventurous leadershiptraining courses to about 20 organisations including Banpu, GlaxoSmithKline (Th.), Royal Canin (Th.), the Securities and Exchange Commission, Cerebos (Th.), Osotspa, Kasikorn Securities, Volvo Asia Pacific, and Tanyarak Hospital. He said tools often offered by consulting firms could theoretically help executives find their own strengths and weaknesses, but learning through “stretch experiences” had proved to be more effective. Kris cited the “Tri-Fold Path of Leadership” concept of the Wharton School of the University of Pennsylvania, which emphasises “stretch experiences” as one of the three avenues for leadership learning, besides attending classes and coaching and mentoring. According to the US... Full story: http://goo.gl/bn8AHH

“I thought a top manager would have come by himself,” he said. He was also surprised to learn about the assignment last year. However, his work for co-president Takao Hatori was much more than a traditional secretary’s job. Besides closely following the work and thoughts of Hatori, whose family founded and still holds some stake in the public-listed company, the young secretary was assigned to implement a new showroom format for Gulliver called “Wow Town”. After its founding in 1994, Gulliver expanded its showrooms to more than 400 locations all over Japan in four years. Named as one of the top-20 best employers in Japan, Gulliver bucks the trend in Japan... Full story: http://goo.gl/QT54Zg

BMW sees singledigit sales growth BMW Group Thailand has succumbed to the unfavourable economic and political climate, projecting single-digit sales growth this year. “Due to cloudy economic prospects, many customers have baulked at purchasing new cars both in the mass and luxury segments,” said the company president Matthias Pfalz. BMW has seen active sales growth in previous years in Thailand. Last year it reported record sales with 8,147 BMW and Mini vehicle deliveries, a rise of 33% from the previous record year, 2012, marking the second-highest growth rate within BMW Group worldwide. BMW’s Motorrad motorcycle unit also reported a robust sales growth of 38% last year, shifting 400 units. But for the first four months of this year, sales of BMW and Mini fell 9% to 2,402 units. BMW Motorrad was fortunate to secure sales of 129 units, unchanged from the same period last year. “Although the group’s sales fell, I hope consumer and business confidence will... Full story: http://goo.gl/EVv64W

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Marketing tries to keep pace with trends Amid the economic and political uncertainties, fast-moving consumer goods firms have adopted marketing innovations and techniques to deal with today’s consumers, who demand affordable basics to help them budget better. Today’s consumers are more connected and digitally savvy, and many would like the brands they buy to communicate with them as individuals. Many consumers are looking for products that multi-task, combining benefits and attributes, or just make their lives simpler. Howard Chang, general manager of market research agency Kantar World Panel, said that consumers are spending less and less money and purchasing fewer items. Many major brands have posted slowing sales. Consumers are more attracted to promotions, especially discounts, and have increased their purchases by 20 per cent on average. Compared to developed markets like South Korea, Thailand is in the early stages of online shopping, which covers certain products, such as cosmetics and make-up. However, the online market would move to other products like... Full story: http://goo.gl/iMa1VZ

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2015 projects could run to B100bn The first-year investment budget for the 2.4-trillion-baht infrastructure plan to be proposed by the transport strategy committee is expected to reach 100 billion baht. The infrastructure plan will be forwarded to ACM Prajin Juntong, head of the economic team at the National Council for Peace and Order (NCPO), for consideration. Later the plan will go to NCPO chief Gen Prayuth Chan-ocha for final approval. Chula Sukmanop, director-general of the Transport and Traffic Policy and Planning Office, said the seven-year plan, starting in 2015 and ending in 2022, is likely to get the go-ahead, although some details and budgets could be further revised. Most railway projects will be financed by the fiscal budget and loans, while most road projects will be funded by the fiscal budget and public-private partnerships. The massive infrastructure plan is a reworking of the 2-trillion-baht proposal of the former Pheu Thai Party-led government. The revised plan has shelved highspeed train projects worth about... Full story: http://goo.gl/pHVmVs

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July / August 2014

Bt120 bn projects okayed To boost the business climate, the juntacontrolled Board of Investment approved 18 projects worth Bt122.8 billion, clearing the first batch of some 200 applications for privileges that have been backlogged since the previous government went into caretaker mode. BoI secretary-general Udom Wongviwatchai said the green light heralded a better investment climate in Thailand because it would help hesitant investors to regain enough confidence to dust off their projects and submit them in the rest of this year. “The go-ahead for projects over the next few months will also positively impact the economy due to inflows of funds from the approved projects, boosting supporting industries and the hiring of several hundreds of thousands of workers from 2015,” he said. Automobile-related projects made up the bulk of the approved projects, including Toyota Motor Thailand’s Bt51.5 billion project to produce 570,000 pickup trucks and 4.8 million auto parts a year in Samut Prakan and Chachoengsao. The junta has pledged to clear all 700 pending applications worth Bt800 billion within two months. Army chief General Prayuth Chan-ocha reportedly told the BoI to give priority to investments that helped strengthen the economy and enabled the country to stand... Full story: http://goo.gl/KJH5ZO

When many coups turn the economy resilient

Junta’s policies could be good for economy into H2, Deloitte says

The political crisis that gripped Thailand over the past six months was, in many respects, bad for the economy. Rice farmers did not receive payments, delays in crucial infrastructure work curbed public and private investment, and protests in Bangkok hurt tourism. The lack of a functioning government caused numerous other hiccups as well. Then, as swift as lightning, the military coup on May 22 brought the promise of an end to economic gridlock. But at what cost? We’ll stake our professional careers on the following controversial analysis.

The NCPO’s policies are so far helping the Thai economy recover from the recent political unrest and boosted the confidence of consumers and investors, local as well as foreign, according to Deloitte Touche Tohmatsu Jaiyos. Based on Deloitte’s analysis, the junta’s economic road map could stimulate growth in the latter half of 2014 and promote infrastructure investment for long-term economic development. Several public and private agencies have revised their estimates for this year’s growth in gross domestic product in a range of 1.5-3.0 per cent.

How does political instability affect economic growth? Investigating the impact of events such as cabinet changes, constitutional changes, coups and revolutions is a tricky business because causes run both ways. Bad economic performance can bring political instability and vice-versa (think of Greece and Cyprus last year). So it’s not usually obvious if coups deter economic growth, although economists generally suppose a negative relationship. A study by Nauro Campos and Jeffrey Nugent, published in 2002, found no evidence of a supposed negative and causal relationship between political instability... Full story: http://goo.gl/QRs8JN

The NCPO’s urgent measures could boost domestic consumption and investment for the remainder of the year, Deloitte said. These include a Bt92-billion payment to rice farmers, approval for projects that asked for investment promotion privileges, leaving the 7-per-cent value-added-tax rate unchanged for one more year, acceleration of 2014 statebudget disbursement of Bt1.3 trillion, and assistance for small and medium-sized enterprises. If global GiDP expands by 3.7 per cent this year as forecast by the International Monetary Fund, Thai export growth could achieve the Commerce... Full story: http://goo.gl/3lJFgb

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July / August 2014

IT / Comms

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Baidu offers marketing tools for firms eyeing China Baidu Thailand officially launched a package of online marketing tools for Thai businesses targeting the Chinese market. Baidu Chinese Advertising Services (Baidu CAS), consists of four services: Baidu Search Engine Marketing (Baidu SEM), Baidu Union, Baidu Brand, and Baidu Travel. Baidu SEM allows Thai businesses to buy keywords in order to be at the top of a search result page. Baidu Union lets them display adverts on Baidu’s 600,000 Chinese-language websites. With Baidu Brands, Thai businesses can advertise with text, banners and video alongside Baidu search results. There are two kinds of advertising display. Baidu Zone is a one-third-page display at the top of the search result page, while Baidu Landmark is a banner ad located on the top right. The fourth service allows businesses to advertise on the Baidu Travel website, which is accessed 20 million times per day. Banner adverts, travel guides and marketing campaigns are... Full story: http://goo.gl/0Yq94Z

Thai YouTube site unveiled

Google’s YouTube, the world’s largest video-sharing website, unveiled a Thailanguage site to offer affordable ad services in a move that could trigger huge consumption of local online video ads. The website YouTube.co.th is also expected to broaden business opportunities for local online video creators and copyright owners to earn ad revenue. Google initially planned to launch a Thai-language site a few years ago, but internet censorship such as the notoriously vague Computer Crime Act of 2007 posed a major concern to the company. It feels it cannot afford to wait any longer now that rivals such as Dailymotion SA, the Paris-based online video platform, have established local sites here. “YouTube Thailand is expected to raise digital ad revenue to 5% of total ad spending this year, up from 1% in 2011,” said Ariya Banomyong, country head of Google Thailand. Tom Pickett, vice-president for YouTube content in the US, said more than 100 hours of video are uploaded every minute on YouTube globally. More than 1 billion users visit YouTube each month, and 80% of its traffic comes from outside the US. In Thailand, millions of hours of video are... Full story: http://goo.gl/CYCgFy

Socially-driven television: To share or not to share

With the recent improvements of infrastructure and technology, people around the world are now adapting their behaviour when consuming content on television. They are now more open to talk about what they have watched through means such as social media. To them, television has changed from a static medium into an interactive medium through this shift, coining a new trend called “social television”. With this global movement, Thais have already jumped on to the bandwagon, giving marketers and content providers operating in Thailand a large-scale opportunity for businesses as digital TV in Thailand steps into its infant stage. So, how can this trend spark new opportunities in Thailand? If humans are social animals, Thais must be the kings of the jungle. Thais are very open when it comes to sharing their thoughts about what they have watched and enjoyed. According to a connection-panel study conducted by IPG Mediabrands, 91 per cent of Thais like to talk to other people about the shows they have seen on TV, while 87 per cent would discuss with others the adverts they have seen. To make the social-TV trend more imminent, the... Full story: http://goo.gl/sgJhvF

Motorola introduces ‘connected shopper’ concept to Thai retailers via ‘mobility’

Motorola Solutions has introduced its enterprise mobility solutions to the retail industry in Thailand, as the US-based company seeks to enable businesses to meet the needs of omni-channel consumers under the “connected shopper” concept. It has joined forces with the Thai Retailers Association to demonstrate its solutions for retailers, enabling them to connect better with their online and on-ground – or in-store – customers and give them a seamless shopping experience. This marks Motorola’s first move in terms of introducing the concept via its solutions in Southeast Asia. Neale Joseph, Motorola Solutions VP of enterprise sales for Asia-Pacific and Middle East, said people could shop in a variety of ways – in-store, online and via mobile – and technology was helping retailers to improve every aspect of the shopping experience. “We expect to have some shopping centres implement our solutions in the next six to 12 months. We currently have no customers here [for these] in Southeast Asia. This is the first time for us in regard to these solutions in the region,” he said. It usually takes between six and nine months for shopping centres to get a full understanding... Full story: http://goo.gl/f5w8RF

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July / August 2014

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Finance / Investment http://goo.gl/wKeiJ

Markets rebound on coup confidence Financial markets are improving following the coup with the private sector showing increased confidence in the political situation, officials said. The baht strengthened slightly against the US dollar, following months of decline, and stocks are up more than 4 per cent over the past month. Bank of Thailand spokeswoman Roong Mallikamas said political uncertainty at the beginning of the year had weighed down the financial market, which led to a decline in foreign fund flows into Thailand compared to other countries in the region. The apparent stability that has followed the coup reversed this trend. Domestic investors regained confidence earlier this month and foreign investors have begun to follow suit, Roong said. “Rising consumer confidence and an economy that is once again moving forward have brought an increase of inflows of foreign funds this month,” she said, adding that... Full story: http://goo.gl/TEXlgS

Thonburi Group clinches JV in M’mar Thonburi Hospital Group signed a memorandum of understanding with Aung Kyi Soe, MD of Aung Shwe Thee International, a leading property group in Myanmar, for a joint venture to invest in a 150bed private hospital in that country at the cost of Bt1 billion. A majority 51-per-cent stake in the JV will be owned by Thonburi Hospital Group, and the rest by the Myanmar partner. Boon Vanasin, chairman of Thonburi Hospital Group, said the agreement was part of a three-year plan to invest more than Bt5 billion jointly to build private hospitals in three major cities in Myanmar, namely Yangon, Mandalay and Tantabin. The first will be opened in Yangon by the end of next year or at the beginning of 2016. The group also plans to open 10 small clinics in those three cities. “Myanmar has been recognised as a land of tremendous opportunities for investment in medical services,” Boon said. “After being closed [to investment] for a long time, Myanmar is now lacking good... Full story: http://goo.gl/Yb4fl5

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KBank sees the $10-billion megawisdom of catering to project JV planned wealthy clients Kasikornbank is putting more emphasis on its wealthier clients, as this segment generates higher income for the bank than run-of-the-mill customers, and it has made a considerable investment in products and services under its “Wisdom” programme. The service includes Wisdom Lounges. KBank executive vice president Pakorn Partanapat said some of these were in bank branches and luxury hotels, while the latest one is at Central Embassy, a new high-end shopping mall in Bangkok. KBank has invested more than Bt70 million to install 1,602 “intelligent” safe-deposit boxes in the Wisdom Lounge @ Central Embassy and the Wisdom Lounge @ Siam Paragon. A Wisdom client is defined as one with assets under management with the bank of at least Bt10 million. Customers in this segment hold around seven products on average, compared with three held by middle-income clients and two by mass customers. However, KBank’s portfolio of Wisdom clients is only growing by 3 per cent a year, while the slightly poorer “Premier” segment – those with AUM of less than Bt10 million but more than Bt2 million – are increasing at a rate of 8 per... Full story: http://goo.gl/j5qZJU

Malaysian investor Asean Union Group has launched its second venture overseas – the Asean Paradize Savan City – in Laos with total investment of Bt320 billion, comprising an offshore financial centre, entertainment, casino, and communities for foreigners. Chew Chai Jin, CEO of Asean Union Group of companies, said the development is a joint venture involving three parties – the Laos government, Asean Union Group, and the Savan City Co of Thai investor Chanchai Jaturaphagorn. The Lao government has granted a 99year exclusive bidding for the project, which is expected to start construction in July. By 2020, the Lao government plans to develop about 45 areas throughout the country as special economic zones. Many areas have already been promoted overseas to draw foreign investors. “Located in a special economic zone in Savannakhet province, this project will be one of the largest developments in Laos in terms of investment,” said Chew. He said the investment in Laos is part of the group’s expansion in order to prepare for the AEC. The group runs various businesses and development projects in Malaysia. The project in Laos is its second... Full story: http://goo.gl/aM37ej

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July / August 2014

More developers turn to M&A for survival, growth Mergers and acquisitions are one means for small and medium-sized developers, both listed and non-listed, to survive and even grow at a time of intense competition from the major players in the sector. There has been much M&A activity of late, with deals totalling nearly Bt13 billion having been agreed since the beginning of December for the acquisition of fellow residential developers. “We [bought a listed developer as we] wanted to survive the market competition after the country’s two beverage tycoons, Charoen Sirivadhanabhakdi and Santi Bhirombhakdi, expanded their investment in the industry,” said Chainid Adhyanasakul, CEO of Property Perfect Plc. During the past seven months, Santi took over a major stake in Rasa Property Development Plc for Bt8 billion, Property Perfect announced a takeover deal with Thai Property Plc worth up to Bt3.9 billion, and Chewathai Co Ltd took over Rojtaj Development Co Ltd for Bt1 billion. Moreover, Charoen took over both Univentures Plc and Golden Land Property Development Plc two years ago. While mergers and acquisitions can be a fast track to growth, success in M&A is far... Full story: http://goo.gl/m81550

Japanese credit-card eyes GMS expansion from Thai base

Japan-based credit-card provider JCB International has set its sights on expanding its business in the Greater Mekong Subregion by seeking more financial-institution partners and offering proactive marketing as a key strategy to drive the card base. The company has assigned JCB International (Thailand) to be the centre of operations to oversee the GMS countries of Myanmar, Vietnam, Laos and Thailand, plus the Nepal and Bhutan markets. JCB International currently issues its credit cards in 17 countries, with a combined total of 84 million cards. MD Naoya Michishima, who was tipped for the top position at the Thai unit in April, said the GMS had become more of a focus for the group due to its population size and growing economic strength. Other markets in which JCB International has a footprint in East Asia have reached a stage of mature growth, he said. Among the GMS countries targeted, Thailand is the key focus because consumers are already familiar with using credit cards, as shown by the fact that there are some 19 million cards nationwide. JCB International sees room for growth in the Kingdom, as more Thais travel to Japan and the two countries have a... Full story: http://goo.gl/tlG2r5

Banks submit agenda Scheme offers money advice to rural poor The Thai Bankers’ Association will soon submit five proposals to the National Council for Peace and Order for its financial sector development plan, says TBA chairman Boontuck Wungcharoen. The proposals include implementation of the Foreign Account Tax Compliance Act (Fatca), an upgrade of Thailand to a financial hub for the Greater Mekong Subregion and enhanced competitiveness by local banks. Banks in Thailand stand ready to comply with the US anti-tax-dodging regulations, said Mr Boontuck, who is also chief executive of TMB Bank. The Revenue Department earlier said Thailand was set to forge an agreement with the US this year. Fatca is a US federal law requiring Americans including those living abroad to report their financial accounts held outside the country. Foreign financial institutions must report on their American customers to the US Internal Revenue Service. The Thai Revenue Department and US Treasury are to share the financial information of customers of both nationalities using financial institutions in both countries including banks, mutual funds and life insurance firms to prevent tax... Full story: http://goo.gl/Qbwg1H

The JPMorgan Chase Foundation has joined hands with Chulalongkorn Business School and the Townsend Thai project to establish a financial communications centre in a bid to improve financial management among Thai households. The centre will train financial advisers to provide educational services regarding financial management to people in rural communities to help them manage their household finances as well as prepare for financial risks such as fluctuations in income, chronic illness and premature disability. ML Chayotid Kridakon, senior country officer at JPMorgan Thailand, said the project would equip rural residents with the necessary information and access to expertise to improve their financial management. “It also provides invaluable information to our country’s banking system to improve their products and services,” he said. The training course is a five-year programme focusing on low- and middleincome households in four rural and semi-urban provinces: Buri Ram, Si Sa Ket, Chachoengsao and Lop Buri. Data made available for this project... Full story: http://goo.gl/BsRjkg

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Goal to make 3m cars by 2019 remains Thailand’s ambitious plans to make 3 million vehicles a year by 2019 remains intact despite the country’s current weak market demand. “The eco-car project will play a crucial role to drive domestic production to achieve that goal,” said said Chokedee Kaewsang, deputy secretary of the Board of Investment at the automotive summit 2014 held at Bangkok International Trade and Exhibition Centre. Thailand’s car output was expected to drop by 5-10% this year from 2.46 million vehicles made last year. Mr Chokedee said details of investment plans by the car makers that signed up for the second phase of the eco-car scheme in late April were likely to become available and approved by the BoI sometime this year. The government allowed interested car makers to apply for the second phase between October 2013 and March 2014. Ten car makers including five existing eco-car manufacturers officially... Full story: http://goo.gl/rTtPb0

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July / August 2014

Fleeing workers delay rice shipments Rice prices in Thailand will probably extend their gains because of shipping delays as migrant workers flee after the military coup, the Thai Rice Exporters Association said. ”As many as 70% of the workers involved in loading grain at warehouses and moving it to vessels have left the country,” Chookiat Ophaswongse, the associations honourary president, said. ”That could delay deliveries by as much as three weeks,” he said. Thailand is set to account for 22% of global rice exports this year, US Department of Agriculture data show. More than 200,000 workers from neighbouring countries left Thailand since the military seized power amid fears of a crackdown on illegal labour, according to the International Organisation for Migration. The military denies ordering such a move. Thai rice prices have increased to a threemonth high. ”We’re now facing problems of severe labour shortages and tight supplies, which will boost prices in the short term,” Mr... Full story: http://goo.gl/Fv3EmL

Producers vow to clean up act

Members of the Thai Fishery Producers Coalition made a joint commitment in April to completely eliminate child and forced labour from their ‘upstream’ supply chains to ‘downstream’ manufacturers within two years. That was before the US downgraded Thailand to the lowest level of Tier 3 in its 2014 Trafficking in Persons report. Poj Aramwattananont, chairman of the Thai Fishery Producers Coalition, which represents eight fishery associations, said Thai producers had sought to tackle forced and children labour since 2006. The industry had cooperated with government agencies and other countries to try to solve the problem but had yet to completely resolve them as the industry involves more than 40,000 boats, including some operating under foreign flags. Thailand should be upgraded in the TIP report soon, he claimed, as the industry has made serious efforts to eliminate forced and child labour for many years. All coalition members has vowed to rid child and forced labour from their facilities and pre-production process by September. In one year, they will draw up a plan to provide better facilities for workers, such as accommodation. In 2 years,... Full story: http://goo.gl/9uCewr

Sustainable road to success bears fruit for Thai Nakorn Patana

Supachai Verapuchong was 25 years old and just out of the monkhood, where he had spent one-and-a-half months after finishing his master’s degree, when he embarked on the most challenging assignment of his young career. His mission back in 1991 was to help establish Thai Nakorn Patana Co, a household name in its home market for overthe-counter pharmaceuticals such as Tiffy, Sara and Antacil, in neighbouring countries, starting with Laos. “I went to Vietnam and Cambodia in the same year. Our approach to regional expansion was based on our government’s policy back then to change ‘from battlefields to marketplaces’,” recalls Mr Supachai, who today is the company’s deputy managing director. When he went to Cambodia there were no cars, and it was hard to find even a motorbike. Public utility services were almost non-existent. “I want to share this story to demonstrate how difficult their lives were,” he explains. “I was raised in the Buddhist way to show compassion towards others. That way I can create balance within myself and do better work and do my best for... Full story: http://goo.gl/g63HVk

Australian auto parts Cutting fuel prices firms eye opportunity would be bad move: Australian component-parts manufactur- ex-energy minister ers for the automobile industry are moving to Thailand while the National Council for Peace and Order’s policy to boost the rule of law can restore foreign confidence in the country if it continues in the long run, the Australian-Thai Chamber of Commerce says. Leigh Scott-Kemmis, president of Austcham, said the chamber had found ways of helping Australia’s small and mediumsized enterprises to invest and to enter the supply chain in Thailand. And he said that given Australia would not be producing motor cars anytime soon after closing down Ford, General Motors and Toyota manufacturing plants, the auto sector in the Kingdom had become more attractive. “There are significant after-markets in Australia for supply, parts manufacture, components manufacture for the auto sector and a lot of those will now look to come to Thailand and in the last year some 12 or more companies have,” he said. Scott-Kemmis said political uncertainty in Thailand from the beginning of the year had not hurt the country’s manufacturing, supply chain or the export sector. And as most exports from here to Australia were cars, the auto sector.... Full story: http://goo.gl/64uEte

Bringing down fuel prices to win the public’s short-term favour would be a shortsighted policy, former energy minister Piyasvasti Amranand warned. “Reducing fuel prices is easy. You can just cut taxes or Oil Fund levies. But the impacts will belong to the next generation. Doing that would be irresponsible and unsustainable,” he said. The energy expert made the comment at a seminar held by CIMB Bank after the NCPO recently ordered a temporary freeze of the country’s fuel prices, as it expects to finalise ways to “reform” the country’s oil and gas price structure by the end of this month. Piyasvasti said the public has been deceived over the past four years with information that the country is as rich as Saudi Arabia in terms of petroleum reserves and because of that it should be able to bring down fuel prices. In fact, he said, the country’s gas reserves have been on a decline and will be depleted in seven years, provided there is no new discovery. “What is very frightening is that we are importing more and more gas, and the price of liquefied natural gas is double that of our gas in the Gulf of Thailand,” he said. “This will affect the electricity tariff, because about 70 per cent of our power... Full story: http://goo.gl/vXeQwf

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July / August 2014

B.Grimm seals deal for Sime Darby unit

CK looks to junta’s projects

Nissan early with new plant

B.Grimm, one of Thailand’s oldest conglomerates, has acquired the power business of Malaysia’s Sime Darby in Thailand for 5.3 billion baht and plans to seek more opportunities in Asean. Under a sales and purchase agreement signed, B.Grimm Power acquired two power plants with a combined generating capacity of 163 megawatts and 70 tonnes per hour of steam from Sime Darby Energy Pte, a wholly owned unit of the Malaysian conglomerate. The acquisition supports B.Grimm Power’s ambitious goal to boost its capacity to 5,000 MW by 2019 including installed capacity of 2,000 MW.

Ch Karnchang, a leading engineering and construction company, expects to snap up 20-25 per cent of the junta’s urgent mass-transit and infrastructure projects worth about Bt150 billion this year.

Operations at Nissan’s second Thai factory will begin next month, ahead of schedule despite the unfavourable economy and political troubles. The plant will produce the 12th generation of pickup trucks, an all-new Nissan NP300 Navara.

With the buy, the small power producer (SPP) has upgraded its 2014 revenue projection by 4.2 billion baht to 23.2 billion, out of a group total of 34 billion. The acquisition, advised by CIMB Thai Bank, aligns well with B.Grimm Power’s strategy of expanding its SPP co-generation business, with Sime Darby’s assets complementing existing plants, said B.Grimm chairman Harald Link. B.Grimm Power now operates six gasfired, combined-cycle co-generation power plants with a combined capacity of 733 MW, with four more under... Full story: http://goo.gl/TBRjXr

“We have strong experience in such infrastructure and mass-transit projects, especially double-track railways, motorways and expressways,” Prasert Marittanaporn, a senior executive VP, said. “We also agree with the NCPO on urgent development of local infrastructure and mass transit, as such projects would directly stimulate the overall economy and move the country forward. They will also generate employment.” The work would start contributing revenue to the group next year. The company was sitting on a sizeable backlog of Bt104 billion from 18 projects as of the end of last quarter. Its income before interest, tax, depreciation and amortisation was running at Bt784 million in the quarter. Ch Karnchang will sign a Bt5-billion construction contract for the Bang Pa-in Cogeneration SPP (small power producer) project in October. It will also sign a Bt17billion contract with the Laotian government by year-end for the development... Full story: http://goo.gl/iz9wBq

“Despite Thailand’s political turmoil, we are not putting off operation of the second plant,” said Hiroyuki Yoshimoto, president of Nissan Motor (Thailand). “In fact, operations will start one month earlier than scheduled.”

BANGKOK BUSINESS BRIEF

Toyo-Thai plans Bt88 bn power plant in Myanmar Toyo-Thai Corporation, an integrated engineering procurement and construction contractor, is in talks to invest Bt88 billion in a 1,280-megawatt coal-fuelled power plant in Myanmar. The company expects to finalise the deal in the third quarter, said vice president and chief operating officer Surattana Trinratana.

Nissan announced in late 2012 its ambitious plan to invest 11 billion baht in a Thai facility, and nearly 10 billion baht was spent on its second factory. The rest was spent on the Nissan Technical Center South East Asia (NTCSEA), the third testing centre outside Japan and an R&D hub for Asean that opened last August.

Yesterday saw a signing ceremony for a project loan worth $100 million from the Export-Import Bank of Thailand for the development of a 120MW combinedcycle gas-turbine project at Ahlone township, Yangon. This project is under a 30-year concession from the Myanmar government. Surattana said the 1,280MW coal-powered plant would be in Mon state. If the Myanmar government approves the project, design and construction will start as soon as possible.

Nissan acquired 150 rai next to its existing factory on Bang Na-Trat Road in Samut Prakan province to build the second plant, focusing on pickup truck production with an initial output of 75,000 vehicles a year. The new factory is set to open on July 3, and the company plans to double production there to 150,000 units over... Full story: http://goo.gl/dsutwC

Funding for the project will come from the company’s cash flow, and from its subsidiary in Singapore, Toyo-Thai Power Corp, after it lists on that country’s stock exchange. The company also plans to increase the registered capital of Toyo-Thai Power in the second half of this year, also from the Thai parent firm’s cash flow... Full story: http://goo.gl/9GBKwO

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Why ASEAN overtook China’s foreign investment last year Story continued from Page 1.

cheaper labour and production options. These, together with rapidly improving infrastructure, means manufacturing no longer needs to be physically based in China to service the China consumer market. It can be based consumers being created each year from now for the next six years – a in these lower cost destinations instead, and that again is what the BAML figure equivalent in size of the entire population of Great Britain. data shows us. This aging of China is now having two effects – an increasingly expensive workforce, and a rising middle consumer class. It is the latter reason that FDI into China continues to be strong – finally, the Chinese market is maturing and those aggravating trade gaps may now start to come down as increasing numbers of companies export to fulfill China’s needs. China is a country that increasingly offers opportunities to sell to, and existing China players are remaining based in the country to oversee this. China’s middle class consumer base of 250 million now is the basis from which such investors have made their China strategy.

But what about Vietnam? Vietnam, although a member of ASEAN has not yet fully reached compliance with all its ASEAN free trade obligations – but is expected to do so by the end of next year. Vietnam has also stated it will reduce corporate income tax to 20 percent by 2016 – a full 5 points lower than China. When it does, and when it comes into AEC compliance, it can be expected that a boom in FDI into Vietnam will take place, with that production being financed also mainly being directed at the increasingly large Chinese consumer market.

India also comes into the picture, although BAML didn’t specifically mention it in the report. It too is moving into that same demographic sweet spot as the ASEAN nations, and provides an even larger available workforce. There are a number of issues that are still in the process of being sorted out in India, not least its relatively high tax rate – tax reform is on the agenda – an awkward political system, and infrastructure problems. The country is also The reasons for the rise of Asia is that same age-dependency ratio sweet due to hold elections this year; meaning not much will occur in the realm of spot, where the maximum number of workers have to support the minimal reforms until the makeup of the new Government is known. amount of elderly. With an age dependency ratio of just 10 people aged 65 or above in every 100, Asia is beginning to inherit the worker dividend that But again, it is hard to get away from those demographics. While China China – where the age dependency ratio is now 36 and climbing – is now lost 2.4 million workers in 2013, India gained 7 million, and with an average giving up. That shift covers two neighbouring regions in particular, ASEAN wage for an Indian worker in Mumbai of US$250 compared with US$760 and India. (plus another 50 percent social welfare) in Guangzhou, a Chinese worker is effectively five times more expensive than an Indian one, and that gap will In terms of the ASEAN shift, that is further enhanced by the China-ASEAN widen further. In terms of India’s infrastructure, it has been improving masFree Trade Agreement, which kicked in just over three years ago. It has re- sively, as anyone who has flown into the new Delhi or Mumbai airport terduced tariffs to practically zero on 90 percent of all goods traded between minals will be aware. Yet much remains to be done. China meanwhile is so ASEAN nations and China. That means that as countries such as those desperate to ensure an adequate supply of cheap goods for its middle class mentioned in the BAML report – and specifically manufacturing destina- and increasingly elderly society that it has made an astonishing offer to India tions such as Indonesia, Malaysia, Philippines and Thailand now provide to fund 30 percent of the estimated US$1 trillion infrastructure needs the country has. Put simply – China needs cheap Indian manufactured goods to keep its own aging population happy, and is prepared to incentivise India to supply that demand. But the difference between serving a consumer base of 250 million today and 600 million in seven years is rather different – and the FDI required to service this discrepancy of 350 million consumers is now going to Asia. That is what is reflected in the BAML data.

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Of additional note to ASEAN investors is that India, which also has a middle class consumer base of 250 million, additionally has a Free Trade Agreement with ASEAN. Similar to the ASEAN agreement with China, the deal cuts tariffs on 90 percent of all products traded between ASEAN and India to essentially zero. The two trade partners have also gone one step further than China’s agreement, by agreeing to slash tariffs on services and investment, which is a big boom for the ASEAN de facto capital of Singapore. These dynamics then will ensure that for the foreseeable future, FDI into ASEAN will increase significantly over that going into China. Manufacturing capacity to service a new market of 350 million more Chinese consumers by 2020 will head to ASEAN, while ASEAN also makes sense as an investment destination for those same global manufacturers to begin reaching out to the Indian market. The trend has already started. Foxconn are relocating their China operations to Indonesia, while Ford recently placed their non-U.S. automotive manufacturing capacity into Gujarat. Manufacturing businesses currently based in China are studying where to place future growth capacity for the Chinese domestic market – and which ASEAN nations in particular offer the appropriate solutions in terms of cost and production efficiencies. Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam, in addition to alliances in Indonesia, Malaysia, Philippines and Thailand, as well as liaison offices in Italy, Germany and the United States. For further details or to contact the firm, please email info@dezshira.com or visit www.dezshira.com.

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AMCHAM: BOT Directors Meeting http://goo.gl/9oNkfZ

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AustCham: Luncheon – Brand Development and Integrated Communications http://goo.gl/umviJp AMCHAM: SME Cmte – Modern Day to Day Online Marketing for SMEs http://goo.gl/wlcPxm

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BCCT Boardroom Briefing (Intellectual Property) http://goo.gl/It03Jj Bangkok Entrepreneurs: Business Speed Networking Session + Pitch Contest http://goo.gl/JihG3

AMCHAM: Joint Healthcare & Food & Agri Business Cmte http://goo.gl/4a30tb

AMCHAM: Canada vs USA Bowling Challenge http://goo.gl/IARAIV BCCT: Two-Day Workshop (Smart Presentation Skills) http://goo.gl/cJlXjq BCCT: Two-Day Workshop (Smart Marketing/Strategies) http://goo.gl/mdIaEg

AMCHAM/BCCT Breakfast Briefing – Transportation & Logistics Cmte http://goo.gl/wbMUWZ http://goo.gl/bJI68R

Saturday

Joint: Eastern Seaboard Networking http://goo.gl/kqxo1E http://goo.gl/5LY1fO http://goo.gl/3MtUuG

AustCham: Voluntary English Teaching http://goo.gl/z1Mj4y

Joint: Allied Pickfords Commonwealth Challenge Golf Day http://goo.gl/DhhXlN http://goo.gl/zhb9Ob

AMCHAM: CSR Cmte http://goo.gl/gJpp3l

AMCHAM: Energy & Envrionment Cmte: Renewable Energy Facility Tour http://goo.gl/yc6Cnb AMCHAM: YPC Networking Night http://goo.gl/a0HXa6

AMCHAM: Healthcare Cmte – Evolution of Healthcare Systems in ASEAN http://goo.gl/2ApDN5 Joint: All Chambers Sundowners http://goo.gl/CvdevL

14 AMCHAM: Food & Agri Business Cmte http://goo.gl/ppnUS5

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AustCham: Voluntary English Teaching http://goo.gl/qAfCr9

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15 Joint: Eastern Seaboard Stammtisch http://goo.gl/q1QXH3 http://goo.gl/64e7CE