International Business Analysis and Opportunity of Thailand: July 2017
International Business Analysis and Opportunity of Thailand: July 2017
International Business Analysis and Opportunity of Thailand: July 2017
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Abstract
Thailand is an emerging business tiger at the Southeast Asia, his economic development has been astonishing to
its neighbouring countries. This paper is to discuss on Thai economy global position, its potential business
opportunities, its challenges ahead and its solutions for future survival.
Keywords: Thailand, economy, development, business, finance.
1. Introduction
Thailand is the second economy of Southeast Asia, it has a good geographical location to occupy regional markets
and beyond. The official name for Thailand is The Kingdom of Thailand; its government follows constitutional
monarchy system. Their head of state is His Majesty King Bhumibol Adulyadej, their current head of government
is General Prayut Chan-o-cha. Its present population is estimated around sixty seven (67) million, this country has
an area of five hundred and fourteen thousand kilometre square (514,000 km2) with a long coastline of three
thousand two hundred and nineteen kilometre (3,219 km). Its capital, Bangkok, consists of fourteen (14) million
people; other important cities including Nakhon Ratchasima, Chiang Mai, Hat Yai and Udon Thani also possess
high density of population. Thailand is located at the time zone of Greenwich Mean Time plus six hours (GMT
+6), its currency is in Thai Baht (THB) whereby one Euro (EUR 1) is approximately exchangeable to forty THB
(THB 40) (Wikipedia, 2015a).
2. Position in Global Business
In 2014, Thailand had a low inflation rate of one point three percent (1.3%), it achieved a ranking of thirty first
out of one hundred of forty four (31/144) in the global competitiveness index (GCI) and eighty fifth out of one
hundred and seventy five (85/175) in the global corruption perception index (GCPI). Currently, Thailand is
graded as top twenty sixth out of one hundred and eighty nine countries (26/189) for the index of ease of doing
business (EDBI). Its active memberships include World Trade Organization (WTO), Association of Southeast
Asian Nations(ASEAN) with the subgroup of ASEAN+3 and ASEAN+6,Bay of Bengal Initiative for Multi-
Sectoral Technical and Economic Cooperation (BIMSTEC), Transatlantic Free Trade Area (TAFTA), Japan–
Thailand Economic Partnership Agreement (JTEPA) and Thailand-European Free Trade Association Free Trade
Agreement (TEFTA). Thailand expressed interest to join Trans-Pacific Partnership (TPP) in 2012.
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Presently, it score trading counterparts are United States of America (USA), China, Malaysia, Japan, Singapore,
Indonesia, United Arab Emirates (UAE), Australia, Hong Kong, South Korea and European Union (EU)
(Kohpaiboon and Jongwanich, 2015). In 2014, Thailand was the second economy of Southeast Asia after
Indonesia possessing a gross domestic product (GDP) of United States Dollar (USD) four hundred and five (405)
billion. It is an upper middle income country; it possesses a liberal and export-orientated economy with exports
occupying almost half its GDP (World Bank, 2014).
Distinguish medical consultancy and renowned class hospitals with a great variety of choices and reasonable
prices. Annually, at least two and a half (2.5) million patients come from all over the world to Thailand for a great
range of therapy including minor dental service and sophisticated transplant procedures. Thailand has prepared
itself with several biotechnological and public health plans to strengthen their healthcare system, they are ready to
face any unexpected outbreaks. To maintain itself as the top medical hub in Asia, certainly this is a great business
chance for FDI to supply and sustain their medical equipment, services and medications in Thailand (IMTJ, 2015).
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Urbanisation in Thailand has drawn rural population into city, this reduces the rural workforce for the agriculture
sector. Thailand has a rigid law on hiring foreign worker, this has further aggravated on labour deficit (Ducanes,
2013).
4.2Global Slowdown
Decline of industry is another big challenge for Thailand. Since the 2011 flood crisis, foreign investors have
started to shift their hard disk manufacturing and car production service to elsewhere. They are eyeing on the
neighbouring countries such as China and Philippine because they are offering ludicrously low wages, unlikely
Thailand with a fixed minimum wage as set by the legislation. Beside, due to global economic downturn and the
reduction of demand on these industries, foreign investors are also dismissing their local staffs to sustain their
operation (Ducanes, 2013).
4.3 Export Stagnant
When two elephants fight, it is the grass that gets trampled; this applies to the regional currency war. If a country
currency is deflated, their export should be cheaper and more competitive. However, its neighbouring countries
perform similar strategy with a greater measure, Thailand does not gain any advantage and its import and
production costs are tremendously elevated. Furthermore, the economic slowdown and falling commodity prices
in China and South Korea have triggered these countries to reduce on their import; Thai export is forecasted to be
decreased. The Bank of Thailand attempted to salvage the situation by cutting the policy interest rate to improve
exports, but it did not show remarkably good result; its public investment is reduced to six percent (6%) in 2014
and the 2015 predicted Thai GDP growth is around three and a half percent(3.5%) only (Sriring and Thaichareon,
2015).
4.4 Trading Deficit
For the past five year period, Thailand has suffered from USD six point three (6.3) billion trading deprecation, i.e.,
around sixty percent (60%), their import has gone beyond the import with a financial deprivation of at least USD
sixteen and an half (16.5) billion. Although its other current account transactions yielded an excess of USD three
point three (3.3) billion, in 2014 its current account balance was subjected to a loss of USD thirteen point two
(13.2) billion, i.e., eight point one percent (8.1%) of GDP. Thus this has indicated a huge negative discrepancy
between domestic savings and investment. A country’s balance of payments in its capital accounts is comprised of
incoming and outgoing of trade credit, FDI, portfolio investment, bank loan and other global monetary deals.
Luckily in 2014, its net incoming funds achieved USD twenty two (22) billion, this surplus was able to resolve the
national current account deprecation, and the remaining positive balance was put into its central reserves
(Wikipedia, 2015b).
4.5 External Debt
Currently, Thailand is liable to a total external debt of USD eighty three (83) billion, it is around half of GDP. The
private entity is responsible for the international financial transaction; the government has nothing to do with it. In
fact, these loans are short term; they take benefit of lower interest rates at elsewhere to sustain their domestic
expenses, they loan foreign currencies and turned them to THB for business. Thus the Thailand’s exchange rate
policy plays an important role for the market. Due to high dependent on foreign currency and exchange rate,
Thailand has adopted a policy of THB Peg with USD, ie, a comparative fixed rate of THB twenty five point two
(25.2) per USD. When USD stays strong, Thailand reduces trade competitiveness and cost of foreign loan for
their domestic companies; if USD declines, its trade competitiveness are strengthened but their cost of foreign
loan is higher. In short, Thailand bares high dependency risk on export levels and growth rate, import levels and
growth rate, balance between domestic investment and trade deprivation, FDI, interest rate on foreign loan and
foreign debt (Wikipedia, 2015b).
5. Suggestions and Conclusion
A financial system reform is crucial for Thailand to improve on export competitiveness in World Economy, an in
depth and wider financial system will open its economy to a better global financial flows and rivalry from other
overseas financial holdings. Their monetary policy operations should aim to reduce its dependency on commercial
loan with banks.
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So far no more than six hundred (600) companies are listed in their stock exchange, establishment a larger and
liquid stock and bond markets may give benefits for short and long terms (Jotikasthira, 2011).Easing on foreign
exchange encourages people to trade freely, this may lead Thailand to be a regional exchange centre and enhance
global economic flows. This certainly narrows their current account deprivation. Giving out more bank license
promotes further currency flows; reduction in tax with more incentive surely boosts the market remarkably. Thai
monetary policy should shift from direct policy such as setting loan and interest limit to indirect policy including
open market operations and market oriented free floating interest rates. Beside, facilitating Thai securities market
allows more domestic developments and operations; funds are able to float readily (ADB, 2015). At last, banks
and other financial institutions should provide a greater choice of financial service such as safeguarding on
insurance and disposal of securities and trading on mutual funds. Central bank should be firm on its supervision
and screening of commercial banks, it must ensure all the commercial banks have achieved international and
national standards (ADB, 2015).In summary, Thailand is still a good and potential investment place for
international business, in time it will thrive better.
Reference
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