Thailand Is Set to Be ASEAN's Logistics Hub

Online, January 13, 2014 (Newswire.com) - Thailand is expected to be the logistics hub of ASEAN in the light of upcoming ASEAN Economic Community (AEC) due to its centralized geographical position. A change in its competitive landscape of the transportation, logistic and trade industries - fuelling a strong growth momentum on all trades via Thailand linkage with CLMV (Cambodia, Lao PDR, Burma, and Vietnam) countries, according to a white paper entitled "Thailand's Logistic Opportunities" recently released by Solidiance, an Asia-focused B2B management consultancy firm.

Thailand's logistics sector potentially generates about 300 billion baht added value to the economy annually, and the country has been witnessing a decline of share of logistic costs to GDP over the last few years. The sector still relies heavily on land transport (accounting for 83% share) despite the increase in oil price which impacts transportation costs. Fuel subsidies are likely to be maintained over the near future as the government tried to contain inflationary pressures from soaring global oil prices in 2012. The government is now also working on improving its trade systems, such as an e-logistics system which is intended to cut logistics cost, reduce paperwork and the time spent on import and export.

The Impending Changes Brought by AEC 2015

The AEC which will come into realization in 2015 will increase the demand for logistics services in Thailand. Goods and services will be more freely transferred, especially for border and transit trade which are expected to expand substantially. The distribution of raw materials, goods, and labor will also increase significantly - boosting the demand for logistics services throughout the supply chain.

The AEC is expected to bring various benefits for ASEAN's logistics industries in terms of legal aspects and others such as simplified and harmonized customs procedures, improved road network, reduced tariffs/free trade agreement.

As for the trade of goods, CLMV countries will provide more opportunities in the export market over the next period due to the tariffs reduction.
Given such situation, opportunities are available for Thai logistics firms to expand their production base and overall investment into other ASEAN countries, as done by Siam Cement Group (SCG) which set up their logistics and transport business in Laos and Cambodia.

Mickael Feige, the Manager for Solidiance's Thailand operation remarks, "currently, the maximum ownership for foreign logistics companies in Thailand is 49% - and this will increase to 70 with the upcoming AEC." As this sector is gaining more attractiveness, it is believed that there will be more foreign companies trying to get into the logistic business in the country, Mickael added.

Growing Cross-border Trade in Thailand

Thailand's border trade with neighboring countries is targeted to increase this year, even ahead of the formation of AEC in 2015. Thailand's total border trade value in 2013 is estimated to record over 1 trillion baht, a jump from 770 billion baht in 2010.

Thailand Cross-border Transportation Modes and Opportunities

Road has been the major transportation mode for the past years, and this trend is expected to last in the next years due to continuing investments on roads, spurring growth of demands for trucks and other commercial vehicles. Malaysia is currently the biggest yet also the slowest growing market for cross-border, and therefore providing more potential for growth within Laos, Myanmar and Cambodia in the light of the upcoming AEC by 2015.

Although there is a challenge to increase the regional road connectivity in certain CLMV countries, an increasing number of companies opt for land transportation rather than sea or air, as it is viewed as a balanced choice of cost and time.

Another trend seen in the market is the increasing potential for long haul truck usage indicated by the high value of cross border trade between Thailand and its neighbors, providing opportunities for relevant businesses throughout the supply chain.

The transportation market in Thailand remains highly fragmented, but all logistics firms are trying to leverage on transportation market growth according to their capabilities and competencies. Trends in the market such as the increasing needs of outsourcing logistics services to 3PL and the usage of heavy commercial vehicle (HCV) / truck and long-haul transportation already start to happen in the market.

More detailed insight and strategies on the realization of Thailand's goal to become the logistic and transportation hub of ASEAN in the light of upcoming AEC are available in the complete version of "Thailand's Logistic Opportunities" white paper, which is free to download on : http://www.solidiance.com/whitepaper/thailands-logistic-opportunities.pdf.