Thailand is located centrally in the mainland of South-east Asia, making it a key ASEAN logistics and transport hub. The country is emerging as a regional supply chain management hub and overseas companies have already discovered opportunities in the logistics market of the country. More than 30 Thai provinces share boundaries with Laos, Cambodia, Myanmar and Malaysia. With foreign manufacturers scouting for alternate production and sourcing hubs, Thailand is well positioned to benefit for the trend.
Starting a business in Thailand would most definitely be affected by some the factors listed in this blog.
The most suitable area as of present is the Greater Mekong Sub-region. Myanmar and Vietnam are the countries that investors had been eyeing and now everyone is turning to Thailand as the next logistics hub for ASEAN Region. The search for alternative bases continues, with Thailand occupying the position as the regional manufacturing powerhouse. It fulfills its role as the key logistics hub for the region. More than half of Thailand’s GDP is earned through exports. The manufacturing industry accounts for more than 80% of the total exports of the country. Thailand is not just the largest automotive producer for ASEAN, the country is also responsible for being the trade bloc’s largest leading supplier of components and electronic equipment. These parts then go to other countries for further processing in the Asian or ASEAN Region.
In addition to supplying raw materials to other countries, Thailand is also a major producer of electrical appliances. As a matter of fact, electronics form the largest export category for Thailand. The output consists of computer parts mainly, leading to a huge growth in Thai business. There are integrated circuits and other similar materials for electrical items. Thailand has a key role to play in the sophisticated regional supply chain as the second largest exporter in ASEAN. One of the main challenges is to maintain the rising demands of cross-border logistics services. This includes transporting machinery with components and parts, in addition to the management of supply chain functions, from the source to distribution.
In the period of 2014 – 2019, exports from Thailand grew by an annual average of 12% to the other ASEAN countries. The rate of growth was much more rapid to the neighboring countries – Cambodia, Laos and Myanmar, which expanded by 20% annually in the same period. Looking at the opportunities in the logistics industry of Thailand, a lot of foreign logistics companies like UPS, DHL and Kerry Logistics from Hong Kong made their way into the inner reaches of Thailand. As the political situation of the country stabilized in 2015, the prospects of the country in terms of market diversification have improved in recent years. Startup Consulting services can help to grow a business in these scenarios.
Regional connectivity and improved Logistics Infrastructure
The transport infrastructure development and improvement of customs efficiency in the country have been continuous. This has really brought down the cost of logistics in Thailand over the past decade. According to the Logistics Performance Index of the World Bank in 2014, Thailand ranked 35 among the 160 countries and ranked 3rd among the countries in ASEAN. Thailand had outperformed most of the other ASEAN countries, namely Cambodia, Myanmar and Laos. Thailand has shown very significant growth in the sub-indicator of trade and the infrastructure related to transport throughout the previous 2012 LPI. Setting up a business in Thailand can be quite competitive in these scenarios, where consultancies can offer their insights.
The logistics sector of Thailand is dominated by road transport which is about 80% of the total volume of the freight. The most developed mode of transport in Thailand is its roadways. As much as 98% of the highways in the country are paved. If you are to consider the ASEAN highway network, there are 13 highways that connect Thailand with its neighbors, which is the highest for any ASEAN country. At present, the major highways that link Thailand to the other GMS countries are the routes within the East-West Economic Corridor, the Southern Economic Corridor and the North-South Economic Corridor. These corridors make up the backbone of the GMS transportation infrastructure.
The major routes that connect Thailand to the other GMS countries include the North-South Economic Corridor, connecting Thailand, Laos, and China, extending over 2000 km, the East-West Economic Corridor, connecting Myanmar, Thailand, Laos, and Vietnam with a total length of 1,320 km and the Southern Economic Corridor, connecting Thailand, Cambodia, and Vietnam, extending 1030 km. The most frequently used corridor used by the cross-border logistics companies in the East-West Economic Corridor, which runs from Mawlamyine Port in Myanmar through central and north-eastern Thailand to the eastern port city of Danang in Vietnam. If you are looking at business opportunities in Thailand, you can use the help of these logistics growth.
Such an extensive route allows faster and easier access to the seaport in Vietnam from the regions of Thailand and Laos. This reduces transportation costs as it allows land-sea multimodal transport. Thailand spans about 800 km of the East-West Economic Corridor and more than half of it, is a 4-lane highway and is maintained in very good condition. These conditions are certainly responsible for the tremendous growth of the logistics industry.
Opportunities are developing from further Regional Integration
Since Thailand is very close to the emerging manufacturing bases in ASEAN, the country is a major source of components, parts and assembly plants that are scattered all over the place. The country exports the most automotive parts among the ASEAN countries. The country has automobile parts, numbering more than 2300 throughout the country. Half the out these suppliers’ offer is exported to the other production bases in south-east Asia. All of these factors combined offer a significant contribution to the development of Thailand as a logistics hub. Getting some positive insight from Startup Consulting firms can prove to be very helpful for businesses.
Thailand is the most developed among the GMS economies. The capital of the country, Bangkok, is one of the key metropolitan cities and a center for commerce in south-east Asia. The city has earned a lot of popularity as a very good sourcing platform for lifestyle products and has attracted a host of international traders that target the regional consumer market. The leading logistics companies have mentioned that a lot of ASEAN and Chinese buyers and exporters prefer to conclude the sourcing deals in Bangkok, especially those from Myanmar, Laos, and Vietnam. The logistics companies can be conveniently appointed to manage the shipments to the markets in the region.
There are increasing chances of subsequent regional integration through the ASEAN Economic Community (AEC) who would create more business opportunities for everyone. The AEC would create a single production base and market in ASEAN. This will allow the free flow of capital, services, goods and skilled labor. There will be tariff cuts too to remove the barriers that exist between the trade routes. Along with the more harmonized and simpler customs procedures, the AEC will boost trade between Thailand and other countries.
Due to the intra-regional trade patterns and industrial development which are becoming more complex, the demand for sophisticated and integrated logistics services is growing. This is especially true for the MNCs who are expanding their reach to the ASEAN markets. Hong Kong logistics companies might find growing opportunities in offering customized supply chain management for exporters and foreign manufacturers who are targeting the ASEAN markets.
Trade with neighboring countries continue to flourish
There has been an increased level of manufacturing activities. Customer markets in the GMS are also growing, fostering trade between GMS neighbors and Thailand. The border trade of the country with its neighbors contributes highest to its GDP in terms of volume. Malaysia accounts for about half of the border trade with Thailand. The next countries in order are Myanmar at 21%, Laos at 15% and Cambodia at 11%. These cross-border trades have become an important part of the logistics industry of Thailand. There are plenty of companies that are offering acute services in these areas.
The economic liberalization of Laos and Myanmar is expected to continue in the coming years. It is expected that the Thai border trade with these countries will continue to flourish due to these very reasons. There are some companies that are trying to expand the border trades in the north and north-east of Thailand in order to capitalize on the opportunities that arise from the economic integration of Laos and Myanmar. It is a development that will certainly stimulate the cross-border logistics industry. Considering all of these facts, the logistics services in Thailand are booming and having an effect on the ASEAN economy.
Thailand will be turned into AEC Logistics Hub
There is an undergoing plan to mold the country into a key logistics hub by improving the transportation infrastructure of the country. It will become the key logistics hub of the ASEAN Economic Community when the projects end around 2022. The main goal of this huge project is to develop the logistics services and integrate every transportation platform – air, road, rail, and water, which even stretches beyond the borders of the country. This is because some of the projects form a part of the plan that links the transportation system of the country with that of the neighboring countries.
Developing 10 rail routes surrounding Bangkok and the suburbs are being given the highest priority. This should be done at the end of the year. These lines would contribute to the inner-city transportation system and the expansion of the city from the heart of Bangkok to its suburbs. Crowding would be reduced in the central business districts through this effort. As the next part of the investment, the wider transportation system would be improved.
The link between Thailand and the neighboring countries through rail would be improved, deploying a double-track system. Investments in this crucial plan would vastly develop the logistics industry. Construction under the project had started in 2015 and it is targeted to be completed in the upcoming 2 years. The double-track routes will help Thailand become the key strategic gateway to the AEC and this will come into effect next year.
The infrastructure investment planned for the capital will keep it from being an overcrowded city by keeping residential areas beyond the central business districts and into the suburbs. The listed residential developer would expand the investment in the peripheral provinces of Bangalore. With all these developments underway, Thailand is on its way to becoming the key to the logistics industry for ASEAN. The slow transformation of the country into a thriving economy can be attributed to this factor.
Interesting Reads :
- Thailand Startup Business Options
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- Why Thailand Is A Good Business Destination
- Business in Thailand – How Different it is from Rest of the World
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