thailand country report 2013 q4

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  • COUNTRY REPORT POLITICS PARLIAMENT DISSOLVED, NEW ELECTIONS COMING THAI EUROPEAN BUSINESS ASSOCIATION ECONOMICS JAPAN OUTINVESTS EUROPE BY FACTOR 0F 10 IN THAILAND INDUSTRY FOCUS AUTOMOTIVE AEROSPACE & OTHERS QUARTER 4 - 2013 ASEAN MYANMAR OPPORTUNITIES FOR GROWTH THAILAND COUNTRY REPORT The all too familiar sight of protesters on the streets of Thailands capital have once again made it into the international news. Protests began over the governments attempts to pass a political amnesty bill through parliament that would have, amongst other things, annulled previous court rulings against ex-Prime Minister and brother of the current Prime Minister Thaksin Shinawatra.However, withdrawing the bill did not seem to calm the situation and protests continued and even grew. After weeks of protests, the government has dissolved the parliament. Street protests grew under the leadership of Suthep Thaugsuban, who had recently resigned as an MP in the opposition Democrat party to focus on the street protests. A rally at the Democracy Monument on Rachadamnoen Road surprised many with the large numbers who attended. In the !1
  • COUNTRY REPORT THAI EUROPEAN BUSINESS ASSOCIATION following days the protesters managed to occupy a number of government offices. While in the past with any widespread protests there have been fears of a military coup, a meeting between protest leader Suthep Thaugsuban, the Prime Minister, Yingluck Shinawatra, and the heads of armed forces seems to suggest that the military is completely uninterested in any more coups. QUARTER 4 - 2013 A new chapter in the history of democracy in Thailand On December 9th, the government announced it would dissolve parliament and new elections are to be expected within the next 60 days. The effect of these protests on everyday business operations in the country has been minimal. The only industry likely to feel a significant effect will be the tourism industry. However, Thailands tourism industry is surprising resilient and has bounced back strongly following previous political upheaval and there is no reason to expect it will not do so again this time. While the Thai baht and stock market appear to have been affected by the political crisis, this has been only a temporary reaction to the events and should recover strongly. The stock market saw a significant rise following the Prime Ministers announcement of new elections. Thailand's economic growth eased to 2.7% in 3Q According to DBS, GDP growth eased to 2.7% YoY in 3Q from a revised 2.9% in the previousquarter. Part of this slowdown was caused by high base effects. Here's more from DBS: In sequentialterms, GDP registered a 1.3% QoQ sa growth in the period, a decent pick-upfrom being flat in 2Q. Nevertheless, there are enough factors to explain why the3Q data is still broadly disappointing. We now look for GDP growth to come inat 3.2% YoY in 2013 and 4.5% YoY in 2014 (from 4.0% and 5.2% previously). Net exports accountedfor almost all thegrowth seen in 3Q.Export growth hasticked up slightly to3.8% YoY in the period,but the weaknessin import growth wasdominant. While therehas been some slightimprovement in exportdemand, exportgrowth has remainedlacklustre in 3Q. Infact, the importantmanufacturing sectorhas registered its secondconsecutive negativegrowth at -0.4%YoY in 3Q. A meeting between protest leader Suthep Thaugsuban, the Prime Minister, Yingluck Shinawatra, and the heads of the armed forces seems to suggest that the military is completely uninterested in any more coups "2
  • COUNTRY REPORT THAI EUROPEAN BUSINESS ASSOCIATION QUARTER 4 - 2013 That external demand remained sluggish had been pretty much expected. It isthe sharp moderation in the domestic economy that was disconcerting. Private consumption growthcame in at -1.2% YoY in 3Q, the first time in the negative since 4Q 2011. Frontloading the delayed THB 2.2tninfrastructure projects in early 2014 is a key assumption to our forecast. Missingthat and we may see another sub-4% GDP growth next year. ! World Bank View Thailands strong economic growth over the past decade has recently seen it graduate from a Middle to an Upper Middle Income Country in the World Bank classification. Economic growth and a corresponding improvement in access to and quality of public services has been concentrated in Bangkok and the central region, leaving significant deficiencies in other parts of the country including the North and Northeast and contributing to unequal human development outcomes. Addressing these issues will be a key step in Thailand's continued development towards high-income country status. Currently, 72 % of Thailand's general public expenditures are being spent in Bangkok, which is home to 17% of the countrys population and produces 26% of the GDP. In contrast, the Northeast, which holds 34 % of the country's population, receives 6% of the expenditures. Looking ahead, Thailand could focus on improving the efficiency and effectiveness of public spending to help counteract regional disparities in human development and inequality. Thailands expenditure policy can be refocused towards service delivery deficient areas to raise the services delivered in those areas to similar standards as in Bangkok. Another key issue for Thailand is ensuring that the inter-governmental fiscal framework is properly constituted to support more efficient and accountable service delivery of public services across the country. Current monitoring and evaluation systems can be further improved to provide the necessary information for both effective central monitoring, as well as fostering local accountability and participation. This could include developing national minimum service delivery standards and publishing annual reports for LAOs against these standards. Requiring submissions of performance based indicators (for financial and service delivery) as a prerequisite for grant release can also be considered. ! ! ! "3
  • COUNTRY REPORT THAI EUROPEAN BUSINESS ASSOCIATION QUARTER 4 - 2013 2014 Outlook In 2014, the Thai economy is expected to grow in the range of 4.0 -5.0%, mainly contributed by 7.0% expansion of export value, together with a 2.7% growth of private consumption and a 7.1% growth of otal investment. In 2014, headline inflation will lie in the range of 2.1 3.1% and the current account balance is likely to record a deficit of 0.6% of GDP. For 2014, Thailand expects again significant foreign investment - mainly from within Asia with Japan clearly dominating the scene. In 2012, Japan invested about 10 times more than all European nations combined. This clearly represents a great opportunity for the European private sector, who could use Thailand as a low-cost manufacturing base and gateway to the 600 million people in ASEAN. ! ! "4
  • COUNTRY REPORT THAI EUROPEAN BUSINESS ASSOCIATION QUARTER 4 - 2013 Automotive Industry ! Thailands automotive industry is the 9th largest in the world and the largest in Southeast Asia. Thailand is currently second in the world for production and export of pickup trucks. January-October 2013 vehicle production reached over 2.2 million units and motorcycle production reached 1.9 million units. Over half of the tier 1 manufacturers are foreign majority owned. Of the top 100 global auto parts manufacturers, 50% have factories in Thailand. In 2013, 1,327,703 vehicles are sold with Honda overtaking Toyota for the first time in terms of passenger cars sold (213,155 vehicles when compared to 190,101). While Toyota commercial vehicle still lead the market at 213,155 vehicles sold. Manufacturering and Export figures Total vehicle production in 2013 also exceed 2012 due to an increase in export volume. Current as it stands the ratio between domestic sales and export is 56:44. "5
  • COUNTRY REPORT THAI EUROPEAN BUSINESS ASSOCIATION QUARTER 4 - 2013 ! The eco car project from the Thai government was a big success with a number of major players investing in additional capacity to be part of the program. Since the project was launched in 2010, some 712,000 vehicles have been produced, with almost half of these being exported (343,000 vehicles exported versus 369,000 for the domestic market). The market share of eco-cars has also risen dramatically, from 5% in the passenger car market in 2010 to as much as 27% this year.The second phase of the eco car project is set to begin, but with stricter requirements. It is expected to attract five or six major automotive manufacturers. There is a requirement of investing 6.5 billion baht in production systems and reaching an annual production capacity of 100,000 units by year four of the project. Engines for the second phase must be of the Euro 5 standard type, with carbon-dioxide emissions of not more than 100 grams per kilometer, fuel consumption of not more than 4.3 litres per 100km, and an engine size of not more than 1,300cc for petrol and 1,500cc for diesel with safety standard requirements to meet UNECE Regulations. Recommendations Thailand is continue to be a major hub of automotive production base of Asia with already existing half of top 100 global suppliers active in Thailand which helps create more value added to the country with strong domestic auto-parts industry. TEBA is working closely with Thai government to help create and promote opportunities with our campaign on how to become a world-class automotive supplier. This covers range of topics such as operations management, supply chain management, logistics, quality management, standards and certifications, manufacturing optimisations, technology design etc. A