(source: Thailand Investment Review, September 2016)
Thailand Rapidly becoming ASEAN’s Logistics Hub
With its well-developed infrastructure and centrally located position in ASEAN, Thailand is rapidly emerging as the key logistics hub for multinational companies around the world. In fact, the country is favored as a regional hub by many industries, ranging from the automotive, logistics hub, electrical and electronics, tourism, medical, and food sectors, among many others.
With the establishment of the ASEAN Economic Community (AEC) in 2015, the increasing regional economic integration will offer even more opportunities for investors as a result of more liberalized regional trade. With Thailand’s extensive network of roads, waterways, and air routes as well as the government’s effort to boost Thai infrastructure, evident in its Infrastructure Development Plan (2015-2022), Thailand is the ideal location for foreign investors who are looking to expand their network into ASEAN to establish a production base and sales network offices and enjoy an enormous THB 90 trillion (USD 3 trillion) market.
A Snapshot of Thailand’s Logistics Market
The logistics sector is a large industry in Thailand. The country is making significant progress in further developing this sector. According to the Office of the National Economic and Social Development Board (NESDB), logistics costs as a percentage of GDP in Thailand have declined significantly over the past 10 years, from 18% in 2007 to about 14% currently.
In terms of Thailand’s transportation structure, domestic transport relies on roads while international transport relies on waterways. According to the Ministry of Transport, the total volume for the domestic transport of goods as of 2015 was 494 million tons, of which 97.68% accounted for road transport, with 2.30% and 0.02% from rail and air routes. As for the international transport of goods, the total volume as of 2015 stood at 235 million tons, of which 86% accounted for waterways, 13% for road transport, with the rest accounting for rail and air routes.
Thailand’s Strategic Location Offers Tremendous Opportunities
With Thailand’s geographic advantage bordering four neighboring countries, many foreign investors see a unique opportunity in establishing a presence in Thailand given its regional hub status.
This advantage along with the establishment of the AEC gives rise to both strategic and lucrative opportunities in cross-border trade. According to the Bank of Thailand, the Thai border trade reached THB 12 billion (USD 354 million) at the end of 2015, an increase of 30% from 2014.
In addition to increased cross-border trade, there is another significant trend in logistics that is happening globally, especially in the Asia-Pacific region. According to a Third-Party Logistics Study (or 3PL), global usage of 3PL in the Asia-Pacific Region was roughly THB 24 trillion (USD 689 billion) in 2014, with strong growth of 16.3% over the past five years.
While demonstrating steady growth, there is still room for additional investment in logistics, particularly for investors who want to take advantage of growth opportunities in 3PLs.
Government fully behind Infrastructure Development Plan
The Cabinet has approved the Ministry of Transport’s Infrastructure Development Plan (2015-2022) which calls for an investment of at least THB 1.8 trillion (USD 51 billion) for 20 mega-projects in all modes of transportation, covering roads, rail, air transport and ports throughout Thailand. The Action Plan on Transport in 2016 under the Office of Transport and Traffic Policy Planning (OTP) will cover three motorway projects, five dual track rail system development projects (meter gauge), five dual track rail system development projects (standard gauge), expansion of mass rapid transit networks, and an expansion of capacity for air and maritime transport both at Suvarnabhumi Airport and Lam Chabang Port.
In addition to the Infrastructure Development Plan (2015-2022), the government is taking further steps to increase the efficiency of Thai logistics operations by incorporating e-logistics, paperless customs procedures across the borders of the Greater Mekong Sub-region; and a One Stop Export Service Center, which comprises 17 public and private export related organizations, to reduce the time required to obtain export documentation and consultations. This demonstrates both the government’s focus and effort in increasing the country’s competitiveness as well as facilitating and enhancing trade. Any investors looking to invest in Thailand, in logistics and other sectors, should therefore feel confident that the necessary building blocks are being put in place providing an ideal opportunity to take advantage of future growth.
The Thailand Board of Investment (BOI) is also helping to promote this growing sector by granting numerous tax and non-tax incentives to logistics projects. The wide range of eligible activities includes logistics parks, distribution centers, transport of bulk goods, international trading companies and support offices, and much more. Additional information about specific activities related to the logistics sector is available on the BOI’s website or by contacting any of the BOI’s offices worldwide.