Features

Thailand: Corridor of power

29 Aug 2018 by Tamsin Cocks

Despite being one of the strongest ASEAN members – it boasts the second-highest GDP after Indonesia according to the International Monetary Fund – Thailand has found itself stuck in the “middle-income trap”. The kingdom has watched its economic growth rates slow in comparison to emerging rivals, especially the CLMV countries (Cambodia, Laos, Myanmar and Vietnam), who’ve stepped up competition for traditional industrial and manufacturing areas.

According to the Nikkei Asian Review, Thailand has grown just 2.7 per cent over the past five years, placing it an uncomfortable ninth out of the ten ASEAN members. In 2016, the government responded with “Thailand 4.0” – the tagline for a wave of investment and initiatives set to dominate the economic landscape for the next 20 years and drive the country into a high-value and innovation-driven economy.

Underpinning this plan, the country has pinpointed ten “S-curve” industries on which to focus that include new and emerging sectors as well as upgraded versions of Thailand’s strongest performers. Naturally, tourism, food and health feature high on the list of golden industries, while investment is planned in cutting-edge fields from bioenergy to robotics and aviation.

Major infrastructure projects are also in the works, encompassing air, land and sea, along with financial reforms that will deliver tax breaks, smart visas and a foreigner-friendly business environment. Nichapa Yoswee, senior vice president of business at Thailand’s Convention and Exhibition Bureau (TCEB) welcomes the plan, saying, “[Thailand 4.0] clearly defines the direction of growth and focuses all relevant governmental effort towards an uncompromising goal to drive the nation in one streamlined direction. Such clarity ultimately provides confidence in foreign direct investment.”

Thailand Eastern Economic Corridor (EEC) map

Air, land and sea

The heart of the initiative lies in the Eastern Seaboard provinces of Chonburi, Chachoengsao and Rayong, which will receive the lion’s share of investment and economic incentives, and form the new Eastern Economic Corridor (EEC).

This strategic region lies on the Gulf of Thailand, in close proximity to Bangkok, and has been a powerhouse for industrial production in Thailand for the past 30 years. Home to 3,788 factories with integrated deep-sea ports and rich in energy sources and raw materials, it has been a major backbone in shifting the country from an agricultural economy to an industrial-focused one. Now it’s once again being looked upon as the gateway to the next future economy – Thailand 4.0 – and is expected to create 100,000 jobs, garner an annual income of THB450 billion (US$13.5 million) and boost the country’s annual GDP growth to 5 per cent.

The government has pledged THB1.5 trillion (US$43 billion) to be allocated to EEC development schemes over the next five years. A hefty portion of this will be poured into vast infrastructure projects to create a fully integrated transport network. This will foster connectivity in the EEC, but also give the country greater links with Cambodia, and ultimately help to sync with China’s massive One Belt One Road connectivity project.

A key investment is the US$5.7 billion allocated to expand and improve U-Tapao International Airport – sometimes referred to as Pattaya airport – with a second runway, a third passenger and cargo terminal and the creation of the MRO Campus dedicated to aircraft maintenance. Passenger capacity is expected to soar from a current maximum of 20 million to 60 million when complete, with a number of new routes already having launched. In January, for example, Qatar Airways became the first Middle Eastern carrier to launch direct flights to U-Tapao, with a three-times-weekly service. But predominantly, the air slots are being snapped up by mainland Chinese carriers: new services launched in the last 12 months include Hainan Airlines, Donghai Airlines, Shenzhen Airlines and Kunming Airlines.

Major investment in the region’s busy deep-sea ports will also see dramatic expansions. Laem Chabang in particular will see THB150 billion (US$4.5 billion) spent to increase from 11 million teus (a measurement of cargo capacity) to 18 million teus per year, making it the world’s 15th busiest cargo port. Smaller but significant investments in Map Ta Phut and Sattahip will see the creation of shipbuilding facilities and offshore oil rig assembly plants, as well as upgraded docking facilities for ferries, luxury yachts and international cruise liners.

Investments in land transport infrastructure are also huge, with about THB200 billion (US$6 billion) allocated to the development of a new high-speed railway from Bangkok to Rayong, which will connect three international airports (Don Mueang, Suvarnabhumi and U-Tapao) within one hour. Additional dual-track railways and modern motorway expansions will further complement the new highly connected transport system.

Zones of influence

In tandem with these heavyweight infrastructural upgrades, a slew of reforms are helping to shape the 13,000sq km EEC region into a vibrant future-facing business hub. Currently 21 “industrial promotional zones” have been designated, creating specialised industry clusters with a range of economic incentives.

Among these are the EECi (Eastern Economic Corridor innovation zone) – a collaborative network spanning university, public and private sectors for scientific research into areas like robotics and biochemicals. Another is Digital Park Thailand, flagged as an economic and commercial centre with a focus on digital innovation – think IoT, AI, big data, virtual reality and smart devices, to name a few.

The grand ambitions have already caught the attention of the international business community. “Since the introduction of this transformative policy, Thailand has welcomed large business missions from Japan, Korea, China and Hong Kong exploring investment opportunities,” reveals TCEB’s Yoswee.

In June, The Bangkok Post reported Minister of Industry Uttama Savanyana discussing talks with European companies: “Investors from Britain are interested in biotechnology and electric cars, and we will meet with France’s Airbus to talk about investment for maintenance repair and overhaul centres in the EEC provinces as Airbus signed a memorandum of understanding last year,” he said.

New business ventures, heavy investment and entrepreneurial spirit create a fertile breeding ground for meetings, exhibitions and events (the MICE industry), which is expected to receive a major boost from the EEC development.

For TCEB the focus is particularly on attracting conference and trade shows relating to the ten S-curve industries. “So far we have been able to attract CEBIT ASEAN 2018 from Germany, to showcase digital innovation, Future Energy Asia 2018 from the UK, and Medical Devices ASEAN 2018,” says Yoswee.

Beachside city Pattaya, half an hour from U-Tapao, is already a strong player in the EEC MICE market, with two international convention centres (including the Pattaya Exhibition and Convention Hall (PEACH) and the Nongnooch International Convention and Exhibition Centre), 30,000 business-friendly hotel rooms, plus a raft of entertainment and incentive options.

“Pattaya’s strength lies in the fact that it can be an alternative to Bangkok. It has a vibrant mood of business like Bangkok, but at the same time it has a seaside setting, international restaurants and various attractions. The fact that in the future it will be linked with Bangkok via high-speed train will also make it a strong choice,” says Yoswee.

Cutting the red tape

So if you’re not already doing business in Thailand, should you be? Thailand is currently ranked 26th out of 190 economies in terms of ease of doing business by the 2017 World Bank ratings, and according to Ulrich Eder, managing director of Bangkok-based law firm Pugnatorius, there are lots of pre-existing incentives for foreign businesses.

“Traditionally, Thailand’s investment promotion agency, the Board of Investment (BOI), grants tax holidays for foreign investments, allows foreign land ownership and up to 100 per cent foreign shareholding in Thai companies,” he says. “Within the Eastern Economic Corridor, these benefits have now been taken to the next level, by extended tax holidays, tax reductions, smart visa schemes, additional opportunities to acquire property and a bundle of other benefits.

“The huge investment in Thailand’s infrastructure also opens the door for public-private partnerships with the government and handsome profits for foreign corporations.”

At the same time, Eder highlights the need to be cautious in a country known for “U-turns” on legal framework. “Thailand’s cluster development sometimes seems like a moving target,” he adds, suggesting disproportionate favouritism is also sometimes shown to multinationals like Alibaba over foreign SMEs, but he admits the scheme shows huge promise. “The EEC is a rough uncut diamond – the next five years will show if everything falls into place.”

While Thailand 4.0 is still very much in the conceptual stages, things are starting to shift into gear. All of the billion-dollar contracts for the vast infrastructural upgrades will be finalised by the end of this year, with projects scheduled to come to fruition as early as 2021. Legal reforms are also under way: the EEC Act was passed in March 2018 to formalise a number of relaxed tax and visa legislations, as well as financial incentives.

Traveller highlights

Of course, one of Thailand’s key strengths as a business destination is that it’s not all about business. Travellers to Thailand will come across qualities such as high standards of service, an inherent friendliness, wonderful food, alluring beaches and gala venues full of character. Tourism is naturally one of the key industries for development under the Thailand 4.0 drive, encompassing everything from wellness retreats and spa resorts to ecotourism initiatives and medical facilities.

Neighbouring Gulf hotspots Pattaya and Hua Hin are prime candidates for development, targeting leisure tourists, business travellers and MICE delegates, and a raft of new hotels have opened in the past year.

In June 2017, Onyx announced US$100 million investment in a new Ozo hotel, plus improvements to its existing Amari Pattaya property next door. Other new entrants to the market include Renaissance Pattaya Resort & Spa (opened September 2017), Golden Tulip Pattaya Beach Resort (opened July 2018) and X2 Pattaya Oceanphere luxury villas, expected to be open by the end of the year.

While Hua Hin is a quieter seaside destination, it boasts a number of five-star hotels including Hilton, Marriott and Intercontinental, with more developments on the way. “Plans include a new convention centre and ongoing development of themed attractions and new accommodation, so it can easily attract more investment and MICE travellers in the near future,” says Yoswee.

However, the EEC will also be positioned as a new tourist-friendly destination in its own right, with eco-initiatives ranging from mangrove reforestation to fruit gastronomy. Other highlights range from the high-octane and family-friendly Cartoon Network Amazone water park to a cultural showcase of Buddhist and Hindu art at the Sanctuary of Truth.

“Thailand’s Eastern Economic Corridor is a diverse region and offers a huge range of attractions to tourists and visitors,” said Yuthasak Supasorn, governor of Tourism Authority Thailand (TAT). “We want people coming here for work or travel to have the chance to explore the culture of the area. They’ll find communities offering unique local experiences from exploring 100-year-old water markets to making connections with people via homestay and fishing excursions.”

Thailand 4.0: Ten S-curve industries