 Thailand,
The Gem of Southeast Asia
Originally
appearing in EXPORT AMERICA May-June
2004
By
U.S. Commercial
Service,
Thailand
During
his visit to Thailand in
October 2003, President Bush
and Thailand's Prime Minister
Thaksin announced plans to
launch negotiations for a free
trade agreement. On February
12, 2004, the Bush
Administration formally
notified Congress of its
intent to begin negotiations
with Thailand in mid-2004. If
negotiations conclude
successfully, Thailand will
become the second Asian nation
to have a free trade agreement
with the United States. The
prospect of a free trade
agreement with Thailand,
coupled with the Kingdom's
strong economic performance,
is encouraging U.S. exporters
to take a closer look at the
Thai market.
RECEPTIVE
ENVIRONMENT
FOR U.S. BUSINESS
In
the past couple of years,
Thailand's economy has enjoyed
a significant rebound from
slow growth following the
Asian financial crisis of the
late 1990s. In 2003,
Thailand's GDP growth rate hit
6.7 percent, among the highest
growth rates in the world.
Projected GDP growth in 2004
is 7 to 8 percent. These
strong growth rates combined
with the prospect of a free
trade agreement offer U.S.
exporters from a variety of
industries a good opportunity
to enter the Thai market.
The
United States has a longstanding
commercial relationship with
Thailand, and friendly
bilateral relations have
existed between Thailand and
the United States for more
than 150 years. Under the 1966
Treaty of Amity and Economic
Relations, U.S. companies
operating in Thailand are
afforded national treatment,
or treated equally with Thai
companies, a privilege offered
to no other Thai trading
partner. Investment matters
will be discussed as part of
the negotiations with
Thailand. Thailand also
maintains strong political and
military ties with the United
States.
Thailand's
economic clout and political
stability have enabled it to
extend both political and
commercial influence across
borders to its surrounding
neighbors, Cambodia, Laos, and
Burma.
Thailand
has a relatively stable
democracy, and experienced
years of strong economic
development prior to the 1997
Asian financial crisis. After
a coup by the military in
1991, civilian rule was
restored in 1992 following
middle-class pro-democracy
protests and royal
intervention. Since then,
Thailand has continued its
political maturation;
enactment of a new
constitution in 1997 brought
substantial reforms to the
Thai political process,
expanding the rights and civil
liberties of individual Thai
citizens. The current
government, elected in January
2001 and led by Prime Minister
Thaksin Shinawatra, a
successful former businessman,
enjoys popular support in its
fourth year of governing.
Strong economic growth due to
low interest rates, modest
inflation, an accommodative
monetary policy, and fiscal
stimulus have contributed to
Prime Minister Thaksin's
overall popularity. Thailand
has also paid off its IMF
debts resulting from the
Asian financial crisis two
years ahead of schedule, which
further strengthens Thailand's
international credit standing.
Demand
for Thai exports by developed
nations as well as foreign
direct investment related to
that demand have seen
lackluster growth in recent
years. The current economic
recovery has been marked by
stimulated consumer demand as
well as a rise in exports to
regional neighbors,
particularly China. Strong
domestic demand in
automobiles, motorcycles,
and mobile phones has been
aided by the growth of
consumer credit, and stimulus
programs of the current
government designed to
stimulate the economy and
redistribute the benefits of
growth. And the recent
recovery in some key export
markets has Thailand's industrial
base back to almost full
capacity in several sectors.
Meanwhile, in addition to a
potential free trade agreement
with the United States,
Thailand is pursuing, or has
in place, agreements with
several key regional trading
partners, including Japan,
Australia, India, and China,
which should help to further
fuel the Kingdom's growth.
According
to the Executive Director of
the American Chamber of
Commerce in Thailand, Judy
Benn, "Thailand is an
attractive place for American
and other foreign companies to
invest because of its
political and economic
stability. The economy is very
receptive to new products
and investment, and, as the
second fastest growing economy
in the world right now, the
timing could not be better for
American firms to explore this
market. The American Chamber
of Commerce in Thailand has
seen the number of members
growing in recent years and an
increased interest
in American companies wanting
to do business in
Thailand."
Best
Prospects for US Companies
In
2003, the United States
exported nearly $6 billion in
goods and services to
Thailand, an increase of more
than 20 percent from the year
before, making Thailand the
23rd largest export market for
the United States. Present and
emerging opportunities for
U.S. firms are strong across a
broad spectrum of industries,
including franchising,
computer services and
software, electrical power
equipment,
telecommunications, and
medical and laboratory and
scientific equipment. In the
past year, the Commercial
Service in Bangkok has hosted
trade missions targeting
industries that offer some of
the best opportunities for
U.S. firms in Thailand
including electrical power,
medical devices, environmental
technologies, and information
and communications
technology.
Franchising
The
Thai franchise industry is
expected to continue to grow
at an average of 15 percent
over the next few years due to
changing consumer buying
patterns and urbanization.
Thailand's government has set
a national policy goal to
promote small and medium-sized
enterprises and has realized
that franchises are a fast
route to developing these
smaller firms. International
franchises comprise 70 percent
of the total market value. The
United States is the leader
among international
franchises, controlling 65 percent.
The quality, standards,
brands, and innovations
offered by U.S. franchises are
well known to potential Thai
investors.
Computer Services,
Peripherals, and Software
The
combined market for computer
services and peripherals,
including data communication
equipment, was estimated at
$1.5 billion in 2003, with an
annual growth rate of 12
percent. Demand for networked
computer systems and PCs grew
continuously at annual rates
of 11 and 7 percent,
respectively. Sales of individual
PCs in 2003 grew at a 20
percent rate, far outpacing
single-digit demand in other
markets. U.S. firms also enjoy
a strong presence in the
computer services market,
controlling over 60 percent of
the market. Beyond systems
maintenance, the strongest
opportunities for service
providers include networking,
systems integration,
processing, and education and
training. The overall packaged
software market grew 13
percent in 2003, with strong
demand for business operation
and analytical applications,
networking management and
security, e-commerce and Web
service solutions. However,
despite efforts by the Thai
government, software piracy is
still a concern.
Electrical
Power Equipment
With
Thailand's return to strong
economic growth, the demand
for electric power is surging
again. Following the downturn
in 1997, Thai planners did not
anticipate the rapid increase
in electrical power needs
brought about by the current
boom. Current capacity will
only provide adequate power to
Thailand for the next few
years. New capacity must be
developed to accommodate
future demands. The need for
new power generation facilities
and distribution capabilities
is driving the need for
generators and parts,
transmission lines and
systems, substation equipment,
high voltage distribution
lines, connectors, switches,
and control components.
Telecommunications
Equipment
Fast-changing
technology, competitive
prices, and the entry of new
strong financial players have
intensified the competition in
Thailand's telecommunications
market. Although fixed line
growth has maintained steady
growth at 5 to 7 percent,
mobile phone growth has
continued to expand at
double-digits. Internet
usage continues to grow at 20
to 30 percent per year. Even
though Thailand is lagging
behind the implementation of
new technologies, the
country has followed developed
market trends on wireless
technologies from analog to
digital, then W AP to
broadband. Despite this strong
growth, Thailand has made little
progress in reforming its
telecommunications industry,
although the country committed
to the WTO in 1995 that the
industry's liberalization
would be complete by 2006.
Imports of U.S. equipment
continue to grow at
approximately 5 percent per
year, with US firms selling
approximately $105 million in
equipment in 2003.
Medical
Equipment
The
market for medical equipment
in Thailand has rebounded from
a flat growth rate in 2001,
and is expected to maintain a
steady growth rate of 10
percent over the next two
years (2004-2005). Imports
dominate the market with a 70
percent share, with local
production strong in lower
technology and less
sophisticated medical devices
and accessories. Imports from
the United States lead the
import market with a 30
percent share and are expected
to grow approximately 12
percent a year for the next
few years. Although a
universal health care scheme
has limited public hospital
purchasing power recently,
private hospitals are
observing strong growth
potential and are demanding
new and more modern medical
devices and supplies.
Cultural
Considerations
U.S.
businesses generally find a
receptive environment for
doing business in Thailand.
English is widely spoken among
Bangkok businesspeople, many
of whom have a long history of
dealing with foreign companies
and have traveled abroad
frequently. Business
relationships in Thailand are
not as formal as those found
in Japan, China, or South
Korea, but neither are they as
relaxed and impersonal as is
common in the West. Business
relationships, as in many
Asian countries, are carefully
cultivated and valued.
Thailand's predominantly
Buddhist culture also values
patience, respect for status,
and not losing face or
respect. Losing one's
composure is frowned upon, as
are direct answers that might
cause someone else
dissatisfaction or hurt
feelings. It is important in
business negotiations
to restate and reconfirm the
elements of an agreement, as
it is often difficult for
Westerners to be sure they
have received accurate and
complete responses to
questions.
Although
Thai law does not require U.S.
firms to use local agents and
distributors, it can be one of
the most efficient ways to
enter the market, particularly
for small and medium-sized
U.S. firms. The importance of
interpersonal relationships
is still a vital factor for
successful business transactions,
and a local partner can help navigate
local business practices and
requirements, as well as
handle any regulatory affairs
and import permits required by
the Thai government. In
addition, U.S. companies
interested in government
projects should carefully
choose a partner that they can
trust to meet the U.S. firm's
obligations under the Foreign
Corrupt Practices Act. Since
1997, there has been more open
criticism of corruption and
cronyism in government
contracts. The Royal Thai
Government continues to make
strides towards greater
openness and transparency in
public procurements, however
in reality the system is still
not entirely transparent.
The
Commercial Service in Bangkok
can help U.S. firms identify
suitable local partners in
Thailand, through the Gold Key
Matching Service and
International Partner Search
among other services. Visit http://www.buyusa.gov/thailand/en
for more information.
Once
a firm establishes initial
sales, "the importance of
demonstrating a long-term
commitment to the Thai market
cannot be underestimated"
according to Senior Commercial
Officer Judy Reinke.
"Even with a local
partner, a U.S. firm must
provide proper training and
support to that partner, as
well as put the infrastructure
in place for reliable
after-sales service and
support."
Date Updated: March 27, 2007
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