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The Stock Exchange of Thailand, 20 September 2012

20 September 2012 www.nesdb.go.th 1

Outlines
1 2 3 4

Overview of Thailand s Competitiveness and Logistics Sector Expected Changes: Global and Regional
Challenges and Opportunity of Thailand s Logistics Business in ASEAN

Policy Outlook

20 September 2012

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Overview of Thailands Competitiveness


Competitiveness Ranking Ranking by Factors WEF 2012

From 147 countries Thailands Strengths & Weaknesses by WEF WEF Infrastructure Quality Ranking Comparison
Countries Hong Kong Infrastructure Macroeconomic Stability Large domestic market & Strong labour market conditions Poor health related factors Technological readiness Quality of national institutions Singapore Korea Taiwan Malaysia Thailand
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Strengths

Weaknesses

2011 2 3 12 19 27 46

2012 4 2 18 25 23 47
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Source:
20 September 2012

World Banks Logistics Performance Index: What Rank is Thailand? World Bank s Logistics Performance Index (LPI) for 2012 ranks Thailand at number 38 out of 155 economies worldwide, scoring 3.07 out of 5 Thailand still needs to further improve customs, logistics competency, infrastructure and tracking and tracing categories as their scores are considerably low compared to other ASEAN Comparison of LPI of ASEAN and Other Economies for 2012 by Scores
Category
LPI Rank (1) Customs (2) Infrastructure (3) International Shipment Preparation (4) Logistics Competency (5) Tracking and Tracing (6) Timeliness

Singapore
4.13 1 4.10 4.15 3.99 4.07 4.07 4.39

Japan
3.93 8 3.72 4.11 3.61 3.97 4.03 4.21

Hong Kong

China
3.52 26 3.25 3.61 3.46 3.47 3.52 3.80

Malaysia
3.49 29 3.28 3.43 3.40 3.45 3.54 3.86

Thailand
3.07 38 2.96 3.08 3.21 2.98 3.18 3.63

Philippines 3.02 52 2.63 2.80 2.97 3.14 3.30 3.30

India 3.08 46 2.77 2.87 2.98 3.14 3.09 3.58

Vietnam
3.00 53 2.65 2.68 3.14 2.68 3.16 3.64
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4.12 2 3.97 4.12 4.18 4.08 4.09 4.28

Source: World Bank 2011


20 September 2012 www.nesdb.go.th

Progress of Thailands Logistics Sector Development

During the past 5 years, Thai logistics businesses have moved away from the first base of being physical distribution that emphasized mainly on delivering products to consumers, towards the internally integrated logistics phase that pays importance to the integration of all related internal processes ranging from procurement to product delivery.

More emphasis on commodity transportation to consumers


20 September 2012 www.nesdb.go.th

Source: World Bank and NESDBs Analysis


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Overview of Thailands Logistics Performance & Potential


Trend of Thailands Logistics Cost to GDP
International Comparison of Logistics Cost to GDP

Source:
20 September 2012 www.nesdb.go.th 6

Capability of Thailands Logistics Sector:


Assessment of Thailands First National Logistics Development Plan 2007-2011
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Business Logistics Improvement


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Transport and Logistics Network Optimization


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The majority of Thai entrepreneurs, especially those in the industry sector, are more aware of the importance of logistics system. SME entrepreneurs have not yet been developed and had sufficient roles in the nation s supply chain administrative management. Logistics in agriculture sector still lacks efficiency, thereby, resulting in high operational costs and unnecessary waste There has been a lack of proper business model in the nation s infrastructure development during the past years. As a result, the nation s competitiveness may have not yet been appropriately enhanced. Nation s rail system development has been drastically slow while the water transportation system has not been adequately developed, resulting in intangible multimodal system development.

Logistics Service Internationalization


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Thai LSPs have business disadvantages in terms of integrated services, international standard administrative management, IT innovation sufficiency and difficulty in accessing finance source
Logistics related laws and regulation has NOT been significantly appropriately amended to help facilitate imports and exports The National Single Window (NSW) development has not been effectively implemented, due to the insufficient number of personnel and amount of government budget. Despite the relatively impressive logistics personnel development during the past 4 years, there is still a shortage of skilled new graduates A large number of educational institutes curriculums and training courses have not been designed to truly reflect the market s demand of logistics personnel, while researches and studies are not usually publicly published for business uses.
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Trade Facilitation Enhancement


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Capacity Building

Source: primary data collection and logistics expert interviews under NESDBs Logistics Development Plan 2007-2011 Assessment www.nesdb.go.th 20 September 2012

Global Trade Facts and Trends: Shift in Centers of Economic Growth to Asia
Exports within Asia and Real Value Added by Manufacturing for Major Countries/Regions in the World Intra-regional Trade in Asia compared to EU and NAFTA

Source: World Bank

Source: World Bank

Asias Export Components and Destinations

it has been forecasted that centers of the economic expansion and growth will be shifted from the West to the East or Asia during the next 20 years with Asia being the world s economic and production hub, dominating more than 50 percent of the world GDP
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Source: : Department of Commerces Thailands International Trade Strategy Planning Final Report , 2012

20 September 2012

Trades in the Greater Mekong Sub-region and ASEAN Region


Proportions of Intra-ASEAN and Extra-ASEAN Trades of ASEAN countries in 2010 Exporting Markets of Low-income Country Group (% to GDP)

Source: www.aseansec.org

In 2010, the top 5 commodities with the highest Intra-ASEAN trade values were Electric machinery, Mineral fuels, Nuclear reactors, Vehicles parts and accessories, and Plastics The top 5 commodities with the highest Extra-ASEAN trade values were Electric machinery, Nuclear reactors, Mineral fuels, Vehicles and Rubber

Note: *Emerging Asia = 7 Emerging Asian Market Economies including China, India, Indonesia. Malaysia, Philippines, Sri Lanka and Thailand ** Asian LICs = 7 Low-income Countries including Bangladesh, Cambodia, Lao PDR. Mongolia, Myanmar, Papua New Guinea and Vietnam

More than 30 % of the total exports of each ASEAN member countries are traded within the ASEAN region .
20 September 2012 www.nesdb.go.th

Lao PDR and Myanmar s exports will still continuously be reliable on the ASEAN market, while Cambodia and Vietnam have already been expanding their exporting markets to United States of America .
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Changes after ASEAN Community in 2015

Population
67 millions 575 millions

Areas
513,115 sq.m. 4,464,322 sq.m.

New Competition Landscape/Challenges Market expansion with new forms Thai English of trading arena and investment. Regional production supply chain Thai English Malay Myanmar rearrangement Chinese (Mandarin) Tagalog Javanese Khmer Lao Raw material sourcing acquirements Vietnamese in the region

Language

Challenging Issue
How can local businesses that has historically been engaging in relatively small markets improve their competency and capability to compete, thereby survive, in much larger markets as a result of ASEAN Integration?
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Thailands Opportunities for Industrial Production Base Expansion


Effective Link for ASEAN Connectivity
The linkage will be an effective link within the region corresponding to "ASEAN Connectivity" Power up investment opportunities along GMS Southern Economic Corridor Build up a strong connection between ASEAN countries.
132 km 300 km

Dawei

New Logistics Short Cut of the Region


Distance to India from Vietnam, Thailand and Cambodia through Dawei port could be shorten to 3,500, 2,500 and 3,000 km. reduce from distance through the Strait of Malacca: 4,200, 4,500 and 4,200 km.

Distribution Center & Production Base


The linkage will profit traders both from Myanmar and Thailand; Because of the link to ASEAN highway system, Dawei could emerge as a trading hub linking Southeast Asia with the Indian Ocean, the Middle East, Europe and Africa, spurring growth in ASEAN region. The linkage will attract rising FDI flow into the region and create the most complementary production bases in the region.
Source: * DHL Interview in The Nation March 5, 2012, **UNESCAP report

Source: Italian-Thai Development LtD and Siam Commercial Bank www.nesdb.go.th 11

20 September 2012

Events that Caused Global Supply Chain Disruption

Euro Zone Debt Crisis (2008-present)- economic system disrupted, lower purchasing power Piracy at main straits such as Malacca damages to goods shipment and higher cost of logistics Major Earthquake in NZ industries disrupted Disasters, both natural and man-made, are expected to be on the rise with more intensity
2012

Terrorist attacks on September 11, 2001 caused global supply chain disruption
2001 2008 2009 2010

2011

Eruption of Icelandic volcano Airports closure, freight and passenger transport disrupted

E.Coli Outbreak in Europe Massive Earthquake and Tsunami in Japan Massive floods in Thailand- global supply chain effected
Political unrests in Libya, Syria and Norway- economic system disrupted

20 September 2012

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Implications to Thailands Logistics Development from Expected Global and Regional context changes Expected Economics Changes
Shift Economics Growth to Asia

Implications to Thailands Logistics Development


Need to expand businesses (production, trade and LSPs) to other markets in neighboring countries Need to improve national logistics administration system to be able to provide high standard logistics services to deliver high valued products and support expansion of logistics service networks for integrated solutions

Regional Connectivity

ASEAN Community in 2015 Thailands Production Base Expansion to the West of Thailand Supply Chain Disruption

Both transport and LSPs business will expand within the region, thereby, helping promote Thailand to become the regions logistics hub The need for qualified logistics personnel will

significantly increase to undertake the growing trading activities with neighboring countries as a result of AEC Intense competition in the logistics labour market as there will be more foreign logistics personnel in the country and region.
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20 September 2012

Opportunities for Thai Logistics Business in AEC

Larger Market

2 Capacity/Competency Development

Niche Market for Local LSPs

Increasing number of logistics related activities in Thailand due to the larger-sized market

Thai logistics entrepreneurs will hastily develop their capability and ability in order to be able to compete in the new larger-sized market, the incentive arisen from increasing competition

Small and medium sized Thai LSPs will be beneficial from increasing number of local operations and activities from foreign LSPs, who will still require their services, especially in rural areas

Implications
Thailand can start investment expansion to Cambodia to as one of the nation s production bases for exports while planning to further exporting goods to Vietnam
Source: NESDB
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Thailand has quite a great Thailand should expand logistics opportunity for export expansion services to Lao PRD and to Indonesia and Philippines as Myanmar, as will continue to be consumers have reasonably high Thailand s important raw material purchasing power. sources

Challenges for Thai Logistics Business in ASEAN Community

Regional production supply chain rearrangement Single large market will bring about relocation and expansion of production bases to other more cost-effective locations. Hence, reliance on road transport will increase, making Thailand as one of the DC options for the region. Intense logistics labor market competition for Thai logistics personnel as a result of increases in the number of foreign logistics personnel in the country Threat of Thai LSPs Increasing LSP outsourcing competition, possibility of being merged with other SME Thai LSPs or bought out by foreign companies
20 September 2012 www.nesdb.go.th 15

Policy Outlook for Thailands Logistics Development

Develop Thai LSPs and Businesses to reach a level of professionalism in order to enhance competitiveness of Thailands main targeted production sectors

Promote Thai LSPs to shift away from asset-based towards solution-based logistics services Promote collaborative cooperation among Thai SME LSPs in order to bring about the development of effective integrated services for domestic customers. Support potential large LSPs to have capability and readiness to provide services at regional and international levels, together with business collaboration with SME LSPs, while utilizing the geographical knowledge advantage of Thailand to increase bargaining power and secure business partnership with foreign owned LSP companies
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Thank You for Your Kind Attention www.nesdb.go.th


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