Thailand 20240802: Chaotic, Unstructured, Informal
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Here is your Mekong Memo Thailand for this week.
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Headlines:
Economy Navigating Choppy Waters
Worst YoY FDI Inflows in the World
Tax Cap to Lure Thai Talent Home
Manufacturing Boost from Supply Chain Shifts
Exports Decline for First Time in Three Months
Thai Stocks Losing Their Luster
EV Push Threatens Auto Industry Shake-Up
Carbon Tax a ‘No Brainer’ for GreenTech
Restaurants Feeling the Squeeze
BOT to Loosen Foreign Exchange Reins
South Korea Ties Get a Boost
Media Habits Go Mobile
Casinos Rivaling Macao for Potential B$15 GGR
Aviation Expansion and Sustainability Push
New Erection to Ease Traffic Pain in Pattaya
Apple in Hot Water Over Stereotyped Thailand
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Economy Navigating Choppy Waters
The economy is set to grow 2.7% in 2024, a slight uptick from earlier forecasts, lifted by tourism, exports, and domestic spending. The recovery remains patchy, however, with many citizens still feeling the pinch. The new finance minister is facing an uphill battle to boost growth, as Thailand trails its ASEAN neighbors. While fiscal stimulus might provide a short-term jolt, some are worried about public borrowing. Long-term projections paint a sobering picture, with annual expansion averaging 2.8% through 2034.
Read more: Khaosod English (Economic forecast), Bangkok Post (Economic priorities), Bangkok Post (Economic outlook)
Worst YoY FDI Inflows in the World
A UNCTAD report is showing that Thailand suffered the steepest drop in foreign direct investment globally in 2023, with inflows plummeting to $4.5 billion. The slump is pinned on the prolonged political limbo following the May 2023 elections, which put crucial economic policies and budget approvals on ice. The Board of Investment says it has seen a healthy uptick in investment applications in early 2024, hinting at a rebound as political stability takes root.
Read more: Thai Enquirer
Tax Cap to Lure Thai Talent Home
Thailand has greenlit a 17% personal income tax ceiling for Thai professionals returning to work in the country. The program, kicking off this year, is designed to bring skilled talent back to Thailand, addressing the nation's brain drain to bring skilled talent back into the domestic economy.
Read more: Reuters
Manufacturing Boost from Supply Chain Shifts
The nation is hoping to cash in on the diversification of global supply chains over the next decade. As more firms adopt a China+1 strategy to spread risk, Thailand's industrial clusters, particularly in electrical, electronics, and electric vehicle sectors, are starting to pull in more investment. Government incentives and policies, coupled with a favorable business climate and skilled workforce, are making Thailand an attractive destination for manufacturing relocation.
Read more: Nation Thailand
Exports Decline for First Time in Three Months
June saw Thai exports dip 0.3% year-on-year, the first decline in three months, as agriculture and food sales cooled. This slip missed the expected 2.6% growth. Imports inched up 0.3%, resulting in a trade surplus of $0.22 billion, below the anticipated $0.60 billion. Despite this hiccup, the Commerce Ministry stands by its 2024 export growth target of 1-2%, banking on stronger performance in the latter half of the year, driven by economic recovery in foreign markets.
Read more: Bangkok Post
Thai Stocks Losing Their Luster
Once a powerhouse in Southeast Asia, Thai equities are losing their luster due to political uncertainty, weak tourism spending, and whispers of corporate misconduct. The SET Index has taken a 14% hit over the past year. As a result, Thailand is on track to lose its No. 2 spot in market capitalization to Singapore and Malaysia. Efforts to resuscitate confidence include market reforms, but investors are voting with their wallets and shifting funds to more stable regional markets.
Read more: Bangkok Post
EV Push Threatens Auto Industry Shake-Up
The automotive sector faces a seismic shift as Chinese electric vehicle makers gain ground, riding on the back of generous government incentives and tariff cuts. The EV-focused policy, which was intended to transform Thailand into an EV production hub, offers significant price advantages to Chinese imports, putting established Japanese manufacturers on the back foot. Two Japanese carmakers have already signaled plans to stop production in Thailand. Industry experts are calling on the government to recalibrate its approach, warning that the current strategy could trigger a mass exodus of incumbent automakers and potentially unravel the long-established automotive ecosystem.
Read more: Fulcrum
Carbon Tax a ‘No Brainer’ for GreenTech
Thailand will roll out a carbon tax in 2024, becoming Southeast Asia's second country to do so after Singapore. The initial tax rate will be 200 baht ($5.60) per tonne of CO2e on oil products. Future plans include expanding the tax to other sectors and introducing an emissions trading scheme, contributing to Thailand's goal of carbon neutrality by 2050. The article suggests this is all positive for Thailand.
Read more: CNA
Restaurants Feeling the Squeeze
The restaurant industry is bracing for more turbulence in the second half of 2024 as consumer spending dwindles and raw material costs climb. Despite a tourism boost in the first quarter, post-Songkran festival spending has taken a nosedive. High household debt and short stays by foreign tourists are making the decline worse. The industry is asking for government lifelines, like tax rebates and financial aid. Small operators are particularly vulnerable, while larger chains seem to be better able to weather the storm.
Read more: Bangkok Post
BOT to Loosen Foreign Exchange Reins
The Bank of Thailand plans to further relax foreign exchange regulations in the fourth quarter to grease the wheels of business operations and the foreign exchange ecosystem. Changes include hiking the annual outflow limit from $50,000 to $200,000 and reducing restrictions on foreign exchange management for both residents and non-residents. The bank hopes to strike a balance between ease of doing business and exchange rate stability, allowing businesses and investors to manage their own foreign exchange risks more efficiently.
Read more: Bangkok Post
South Korea Ties Get a Boost
South Korean Prime Minister Han Duck-soo and Thailand's Foreign Minister Maris Sangiampongsa met in Seoul to talk bilateral relations and cooperation. Han spoke of Thailand's historical support during the Korean War and asked for its backing against North Korea's nuclear threats. Sangiampongsa emphasized the importance of people-to-people exchanges underpinning their partnership. Further talks are scheduled between Sangiampongsa and South Korean Foreign Minister Cho Tae-yul.
Read more: Nation Thailand
Media Habits Go Mobile
A Marketbuzzz survey has revealed Thai media consumption patterns: high engagement on social media, internet browsing, and video streaming. LINE and Facebook dominate social media, while YouTube leads video streaming. The study suggests successful brands need to adapt to diversified media use, with time-of-day targeting being crucial. Mobile devices reign supreme for media consumption, meaning that mobile-friendly content is a must.
Read more: Bangkok Post
Casinos Rivaling Macao for Potential B$15 GGR
Thailand is inching towards legalizing casino gaming, potentially generating $15.1 billion in annual gross gaming revenue and positioning itself as the world's third-largest gaming market. Analysts are predicting the first entertainment complex could open its doors by 2029. Despite potential competition, Macau is expected to hold its ground due to established infrastructure and geographic advantages. Thailand's proposed 17% gaming tax rate and lower regulatory barriers make it an attractive investment destination, with big economic benefits on the horizon.
Read more: Asia Gaming Brief (Market Analysis), Casino.org (GGR Potential)
Aviation Expansion and Sustainability Push
Thai AirAsia plans to expand its fleet with 25 new Airbus A321neo aircraft over the next five years to meet travel demand. Airports of Thailand has given the go-ahead to a five-year expansion plan for Suvarnabhumi Airport, including new terminals and a cargo building. Thailand's National Energy Plan calls for the introduction of a 1% sustainable aviation fuel target by 2026, increasing to 8% by 2036, supporting the country's commitment to reducing greenhouse gas emissions.
Read more: Bangkok Post (AirAsia), Bangkok Post (Suvarnabhumi), Ethanol Producer Magazine (SAF target)
New Erection to Ease Traffic Pain in Pattaya
Pattaya City is set to introduce a Red Line monorail, a 17.37-kilometer route with ten stations designed to ease traffic woes in the eastern seaboard city. Starting at Thappraya Intersection and ending at the Eastern National Sports Training Centre, the monorail promises to significantly reduce congestion in the area. The project, based on a public-private partnership model, is expected to come with higher construction and maintenance costs, but should go some way to breathing new life into the city's tourism sector.
Read more: Bangkok Post
And now for something completely different.
While the focus of The Memo is on news for business, we often wrap with a less business-focused article.
Topics of discussion around the water cooler this week included one about the State Railway opening Thailand’s longest train tunnel only to have to close it again right away due to poor planing thick dust, behavior modification training for wild elephants, a celebration of Thai language by foreign diplomats, the arrival of Electric Daisy Carnival to Thailand’s shores this year, and this story that whipped some netizens up into a frenzy:
Apple in Hot Water Over Stereotyped Thailand
Apple's new short film, "The Underdogs: OOO (Out Of Office)," has ruffled feathers with its portrayal of Thailand. Social media users criticized the ad for its use of a sepia filter, making the country appear underdeveloped, and for allegedly outdated depictions of local infrastructure and culture. The film, part of Apple's "At Work" series, is meant to show off various Apple products through four employees' business trip to Thailand. Apple has responded, stating no offense was intended, and has disabled comments on the video. You should watch it.
Read more: Bangkok Post
That’s it for this week, thanks for reading!
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