COUNTRY REPORT THAI-EUROPEAN BUSINESS ASSOCIATION (TEBA) QUARTER 1 2014

Preface

Business continues amid political uncertainty...

The Center for Economic and Business Forecasting (CEBF) of the University of the Thai Chamber of Commerce (UTCC) says the Thai economy may have passed its lowest point and will bounce back if no political violence occurs.

According to CEBF Director Thanawat Polvichai, economy-related figures and statistics compiled by the Bank of Thai-land and the Ministry of Finance have shown some positive signs which indicate that the Thai economy is recovering and may have bottomed out from its economic hardship.

He made known that Thailand should see its economy bounce back after the second quarter under the circum-stance that the political situation does not exacerbate.

Furthermore, he said the government’s decision to revoke the emergency decree had regained confidence from foreign nations as more foreign tourists have been seen since the decree’s withdrawal.

In the first quarter TEBA has organized a number of Thai-European bilateral business activities such as a business mis-sion to Germany and seminars on Investment in Europe for Thai businesses. Participants agree that future business growth depends on today’s activities.

The AEC advantage

In spite of the political uncertainty, Thailand is still positioned as a fully functional hub for many industry sectors and shows significant potential for growth not only in Thailand but in the entire region.

Decisions like Volkswagen Group’s participation in Phase II of the Eco Car program speak a clear language that busi-ness opportunities in Thailand and ASEAN persist.

Bangkok, May 2014

Ulrich Kaiser

PresidentThai-European Business Association

Hugh Vanijprabha

Executive DirectorThai-European Business Association

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Political Situation1

The poll on 2nd February being nullified by a court order, un-paid farmers in the rice-pledging scheme, ongoing smaller street protests by both pro- and anti-government support-ers, court cases against key politicians including the care-taker Prime Minister - “judgement day” will determine the future of Thailand’s ongoing political turmoil.

As key political figures have been more open for discussions and foreign capital has returned to Thailand, these are the signs to demonstrate the belief that there is some light now at the end of this gloomy tunnel.

How will the ongoing political crisis end? The nation agrees on the need for an election but how do we get there, respect-fully. All eyes are focusing on three independent regulatory

Hopeful signs, but many devils lie in the details

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agencies for the next couple months, namely the Constitu-tional Court, the Election Commission (EC) and the National Anti-Corruption Commission (NACC).

Government scrutinized for abuse of power

The court has ruled against the Prime Minister for unconstitu-tional removal of National Security Council Chief Thawil Pli-ensri; the NACC is scrutinizing the government on corruption in the rice-pledging scheme.

In all cases, a new election would be held but the “re-spected” one differs in the details. Pheu Thai politicians want to return to power as soon as possible via the earliest possi-ble election date. The Democrats have not made it clear whether they would contest an election.

Scenario 1 - If the cabinet can still retain its caretaker status until an election is held, Pheu Thai is in favour to win again.

Historically, the Pheu Thai stronghold is from the provinces with a lower GDP per capita. Hence they are strongly support-ing the election to be held as soon as possi-

ble and have already suggested that the 20th July date set by

the EC may be too late.

Scenario 2 - If the whole cabinet is removed from office, there will be a “vacuum” period in which a “transitory admini-stration” will take control of the reform process before the

next election. Though very few legal experts believe it is pos-sible, the Supreme court and the Senate can potentially ap-point an interim government invoking Section 7 of the Consti-tution, which states that, “Whenever no provision under this Constitution is applicable to any case, it shall be decided in accordance with the constitutional practice in the demo-cratic regime of government with the King as Head of the State.” But, whether a public referendum should be held and what areas are to be reformed, and most importantly, how can we establish a “neutral” Prime Minister accepted by all parties is yet to be determined.

On the other hand, it is undeniable by all that it is in the best interests of the country to have a fully-functional administra-tion and that a conflict with no end in sight will further dam-age the country’s economy. The various parties’ financial sup-porters and big conglomerates will ensure that normality must be returned at the earliest possible time. Hopeful signs, but many devils lie in the details.

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Macro Economic Overview

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A number of economists and organisations have come out recently with predictions for Thailand’s economic growth rate for 2014.

The Asian Development Bank (ADB) says that if a working government is installed in the latter half of the year, then growth could be 2.9 percent this year and then increase to

4.5 percent in 2015. Before the political instability, the ADB had been predicting a growth rate for 2014 of 4.5-5 percent.

The International Monetary Fund (IMF) is currently predicting a similar 2.5 percent growth for the Thai economy this year - down from the 5.2 percent it had previously predicted. The IMF’s sister institution the World Bank is currently estimating three percent economic growth for Thailand. The Bank of

Applications for investment privileges rose 28 percent in the first three months of the year [Board of Investment]

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Thailand (BOT), meanwhile, is predicting 2.78 percent growth for this year if a new government is formed in the second half of the year and that a delay to 2015’s budget implemen-

tation is no longer than one quarter.

In its Montery Policy Committee Decision on 23rd April, the Bank of Thailand states:

Growth of the Thai economy in the first quarter of 2014 is ex-pected to contract by more than previously assessed from domestic demand. Private investment and tourism have felt greater impact from political uncertainties. Exports of goods gradually improved but could not offset the overall subdued growth. Looking ahead, the prospect for economic recovery hinges importantly on the political developments. Economic expansion this year is expected to be lower than previous as-sessment, and driven mainly by exports.

Investment

Thailand’s Board of Investment (BOI) has reported that appli-cations for investment privileges reached 234 billion baht in the first quarter of 2014, a decline in value of 10 percent com-pared to the first quarter of 2013. However, when looking at foreign investment, applications for investment privileges

rose 28 percent to 201.97 billion baht in the first three months of the year compared to the same period last year.

While overall investment applications have declined, the automotive/components and machinery sector has seen a dramatic 265 percent increase in investment due mainly to preparation for the second phase of the eco-car project.

Japan remains the leader in terms of foreign investment in Thailand in the first quarter of 2014, followed by investment from the United States, China and South Korea, with invest-ment from the latter three countries rising significantly during the January-to-March period.

According to the Ministry of Commerce, new business regis-trations in the first quarter of 2014 reached 15,419, a 22 per-cent decline from the same period last year. However, part of the decline in registrations has been attributed to tougher controls on the registration of lottery distributors, something not considered as having a serious effect on the rest of the economy.

The situation was looking up towards the end of the quarter with registrations in March increasing by eight percent month-on-month over the number of registrations in Febru-ary. The Ministry of Commerce has projected that new busi-ness registrations this year will be similar to last year. By the end of March, there were a total of 561,245 businesses regis-tered in Thailand with a combined 10.77 trillion baht’s worth of registered capital.

Trade

Thailand’s total foreign trade during the first two months of 2014 reached 73 billion US dollars. This was a decrease of 8.70 percent from the first two months of 2013 when total foreign trade was at around 80 billion US dollars.

Total exports from Thailand during January and February 2014 were 36.27 billion US dollars, showing a slight 0.20 per-cent increase over the 36.20 billion US dollars achieved in the first two months of 2013.

Imports from the rest of the world totaled 37 billion US dol-lars in January and February this year. This is a 16% de-crease from the 44 billion US dollars of imports in the begin-ning of 2014.

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In terms of Europe, total trade between Thailand and Europe decreased by 17.67 percent in the first two months of the year compared to same period of the year before. Total trade with Europe reached just 9 billion US dollars compared to the 11 billion US dollars that was achieved in January and February 2013.

This means that trade with Europe now represents just 12.44 percent of Thailand’s total foreign trade, down from the 13.80% that it represented in the first two months of last year.

Thai exports to Europe in the first two months of the year showed a significant increase, rising 16.46% over the 3.9 billion of last year’s period to 4.6 billion this year. This means that exports to Europe now represent 12.74 percent of Thai-land’s total exports, an increase from the 10.96 percent in the first two months of last year.

Thai imports from Europe have fallen 36.72 percent in the first two months of 2014 compared to the same period of 2013. In 2013, Thai imports from Europe were worth 7.1 bil-lion US dollars. This has now decreased to 4.5 billion US dol-lars this year.

Exports still to meet its 5% target

The Commerce Ministry said Thai exports dropped by 3.12 percent in March and one percent in the first three months of 2014 but was optimistic that overall exports for the whole year will meet its five percent target.

Permanent secretary of the ministry Srirat Rastapana said exports in March declined to 19.94 billion US dollars while imports fell 14.19 percent to 18.48 billion US dollars, result-ing in a trade surplus of 1.46 billion US dollars.

But for the first quarter, exports dropped by one percent to 56.21 billion US dollars while imports shrank 15.41 percent to 55.50 billion US dollars, representing a trade surplus of 706 million US dollars, she said.

If the political situation returns to normal quickly, exports could grow by 10 percent for the whole year, largely due to the IMF’s 3.6 percent world economic growth projection, up from 3 percent in 2013.

Monetary & Currency Issues

According to Siam Commercial Bank’s Economic Intelli-gence Center, Thailand is not at immediate risk of capital out-flow pressures that have affected other Emerging Market economies such as Indonesia, India, and Turkey.

Emerging market economies have seen their currencies un-der pressure from the threat of capital outflow.  EIC believes that Thailand is in a fundamentally better situation than those countries in at least two major ways.  First, Thailand has a low and stable inflation rate of around 2-3% […] Second, Thailand does not have a chronic current account deficit. […]

For 2014, EIC expects that these fundamentals will remain sound. Headline inflation will continue to remain stable at around 2.2% on average, and core inflation will remain sub-dued at around 1.3%, on the low side of the Bank of Thai-land's target range of 0.5%-3.0%, owing to weak domestic demand. […] The current account is expected to improve to a surplus of around 0.5% of GDP from a deficit of 0.6% of GDP last year.

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According to Dr. Prasarn Trairatvorakul, Governor of the Bank of Thailand (BOT):

The Thai economy may not confront a sudden shock, when one looks back at the private sector's situation during the time of the Asian economic crisis in 1997. The private sec-tor's debt-to-equity ratio presently averages 1 time, whereas back in 1997, it stood at 8-9 times. Moreover, commercial banks are presently cautious about their business operations and have strong loan-loss provisions

In its latest assessment, the financial ratings agency Moody’s says:

Thailand's Baa1 government bond rating with a stable out-look remains underpinned by the government's strong finan-cial position, marked by low funding costs and a favorable debt structure, and also by limited external vulnerabilities.

In many respects, Thailand's credit metrics remain well posi-tioned compared with its immediate rating peers.

Inflation

Thailand’s consumer price index (CPI) was two percent year-on-year in the first quarter, with month-on-month inflation being 0.22 percent at the end of March. Core inflation in March was at 1.21 percent and headline inflation at 2.11 per-cent. The country’s Ministry of Commerce predicts 2.24 per-cent inflation for the second quarter, with 2.12 percent infla-tion for the first half of the year. Recent hot weather and a drought has led to reduced supplies of agricultural raw mate-rials and this as pushed up food prices. The Bank of Thai-land (BOT) has said that it expects headline inflation for this year to be around 2.5 percent, largely due to rises in cooking gas costs.

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Automotive Industry3

While a number of commentators are expecting a decline in domestic automotive demand this year, Kasikorn Research explains that part of this is due to the very high base of com-parison that lasted until mid-year due to the first-car-buyer program.

Due to the excessively high levels of demand in 2012 and first half of 2013 from the first-car-buyer program that

brought forward much future demand, Thailand’s domestic automotive industry is currently in a period of market normali-zation.

Kasikorn Research: We believe that this plunge will be short-term since foreign investors still view Thailand as a major re-gional production base that is full of investment potential. Fu-ture investments would assist us in gaining larger export mar-

Thailand’s domestic market enters “period of market normalization”

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Assembly of Mini Cars at BMW Manufacturing (Thailand)

kets, as well as technological developments that would yield higher quality products.

A report in The Nation newspaper on the recent Bangkok In-ternational Motor Show states that bookings at the event were down just four percent compared last year when very high levels of bookings were seen as consumers made the most of the last chance to take part in the first-car-buyer tax program.

A further report in the Nation explains that while demand was down for the sub-compact car segment, the biggest beneficiary of the first-car buyers program, the luxury car segment did particularly well.

Eco Car Project – Phase II kicks off

Another major event in the Thai automotive industry in the first quarter of this year has been the closing date for applica-tions to take part in the second phase of Thailand’s eco-car project. The success of the first phase looks sets to be re-peated in the project’s second phase, which includes stricter environmental requirements on manufacturers. Thailand’s

Board of Investment (BOI) has stated that the response has been better than expected.

A total of 10 companies have registered for the project, com-mitting a combined total of 139 billion baht of additional in-vestment. This will lead to an eventual 1.5 million units per year being manufactured under the project.

Volkswagen Group comes to Thailand

Five of the project’s participants had already participated in the first phase of the project. These are: Toyota, Honda, Nis-san, Suzuki and Mitsubishi. They will be joined by Mazda, Ford, General Motors, and Volkswagen, the latter of which will be making its first investment in production facilities in Thailand. Bangkok

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Additional Purchase of NGV buses

In other news, the Bangkok Mass Transit Authority (BMTA) plans to purchase 3,183 additional NGV buses. However, the current interim administration does not have the authority to approve the purchase. The purchase deal is suggested by the National Anti Corruption Commission (NACC) to be opened up for auction instead of being an exclusive deal with a particular company.

Skill Development Program

The Office of Industrial Economics is pushing for a project to develop human resources in the automotive industry, which has set a target to produce three million cars per year with 2017.

The Director of the Office of Industrial Economics, Somchai Harnhirun, says the project seeks to educate and train auto-motive personnel as trainers, assessors and operators. The program's curriculum covers three main disciplines, includ-ing production and management, quality assurance and test and engineering and research

Thailand Automotive Institute introduces new President

The Thailand Automotive Institute (TAI) has introduced its newly-appointed president, Mr. Vichai Jirathiyut, who is deter-mined to add a pollution tax to automobiles.

After taking office, President Vichai unveiled the organiza-tion’s future plans and policies, saying it would focus on auto-motive technology, research and development, and environ-mental preservation; adding that the institute would push for-ward with the idea of establishing an automotive testing cen-ter as well as making Thailand an automotive production hub of the ASEAN region.

According to him, the first project to be initiated would be an automobile tax imposed based on the levels of carbon emis-sions. He however said the matter would have to be thor-oughly discussed with the Excise Department and other re-lated agencies, while expecting the project to be launched in 2016.

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Aviation & Aerospace Industry

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The air transport industry is growing rapidly, especially in the Asia Pacific region. Thailand, with a growth rate of 13.7 per-cent, shows incremental passenger demand for air travel due to the rapid expansion of low-cost airlines fostering com-petition in fares, which allows low-income people access to affordable travel by air. In addition, the integration of the countries in the region with the ASEAN Economic Commu-

nity (AEC) by 2015 will help facilitate greater movement of investment, goods, services and labor within the region of Southeast Asia. This includes an “open sky” policy. The sin-gle aviation market will further the growth of the aviation in-dustry and hence it will become much more advanced.

The aviation industry is likely to grow as well as the air trans-port industry. While the demand for travel increases, airliners

Asia is the region with higher growth rates than any other region.

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Suvarnabhumi Airport, Bangkok

are looking to increase the fleet to meet demand. After pur-chasing, it is necessary to maintain the aircraft to an interna-tional standard set by the Department of Civil Aviation (DCA). In the past, most manufacturing and aftersales services were located in North America and Europe. However, such busi-nesses are likely to expand into different regions in order to cater to growing demand and reduce production costs.

In Thailand, there are 49 licensees for engaging in the air transport business with 334 commercial aircraft and 188 private aircraft, which makes a total of 552 registered civilian aircraft. One of the ma-jor costs in operating an aircraft is its mainte-nance. However, cur-rently, aircraft repair cen-ters in Thailand are scarce. Large operators such as Thai Airways International have their own aircraft mainte-nance center, but this is not able to accommo-date the needs of other a i r l ines adequate ly. Other air maintenance centers in the country are of a smaller size with a very limited ca-pacity for maintenance of aircraft. Hence, air-craft in Thailand must be maintained or re-paired at aircraft mainte-nance centers in other countries, especially those in Singapore, which results in a loss to the Thai economy.

The aviation maintenance and repair industry, as a part of the industry’s value chain, grows with respect to air transport demand. In 2012, the number of aircraft worldwide was ap-proximately 20,840 and is expected to grow to a total of 29,955 aircraft by 2022, an increase of 3.7 percent per year. Meanwhile the aircraft maintenance industry worldwide was

valued at approximately 79,500 million US dollars in 2012 and is expected to increase to about 68,400 million US dol-lars by 2022, an increase of 3.3 percent per year.

The aviation maintenance and repair industry, as a part of the industry’s value chain, grows with respect to air transport demand. In 2012, the number of aircraft worldwide was ap-proximately 20,840, and this is expected to grow to a total of 29,955 aircraft by 2022, an increase of 3.7 percent per year.

Meanwhile, the aircraft maintenance industry worldwide was valued at approximately 79,500 million US dollars in 2012 and it is expected to increase in value to about 68,400 million US dollars by 2022, an in-crease of 3.3 percent per year.

Asia has higher growth rates than the other re-gions. The aircraft main-tenance industry is an activity that utilises com-plex and advanced tech-nology. It is generally referred to as MRO (Maintenance, Repair and Overhaul), and can be divided into four main segments: line maintenance, airframe and modification, en-gine maintenance and c o m p o n e n t m a i n t e-nance. Airlines around

the globe instead of operating in-house aircraft maintenance will increasingly look to the outsourcing option as a future trend. Hence, this industry provides good prospects for serv-ice providers in Asia that have strengths in lower costs and an availability of skilled workers. Thailand has a major role in driving forward the ASEAN aviation single market and has been assigned as the main coordinator of ASEAN air trans-portation. It must make the most of such opportunities to the benefit of the country.

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The Ministry of Transportation has a policy to develop the country's aviation industry and reduce dependence on for-eign countries. The policies will help promote Thailand as a regional hub for aircraft maintenance. Thailand has an advan-tage in terms of its geography and supporting industries, this has provided the country with high potential, which can be developed as alternatives in the manufacturing of aircraft parts and setting up repair centers supporting Singapore:• Target local and foreign airliners in particular those from

neighboring developing economies with potential for ex-pansion of aviation.

• Establishing industrial and aviation repair center will create jobs, technology transfer and utilization of other local in-dustries, thereby stimulating the economic growth of the country in support of the liberalization of ASEAN.

Hence, the Office of Transport & Traffic Policy & Planning’s (OTP) current mission is to study, analyze and develop a mas-ter plan on transport and traffic in the country, including analysis and reporting of transportation, safety and environ-mental matters related to the transportation system, as well as to study the development of provincial airports under the responsibility of the Department of Civil Aviation, which will lead to the formulation of policy for the development of 28 provincial airports.

Nok Air’s profit nosedives

Nok Airlines Plc’s net profit plunged 90.2 percent in the first quarter, which it attributed to more intense industry competi-tion, Thailand’s political turmoil and the weaker baht against the US dollar. The budget carrier’s earnings for January to March were 40.9 million baht, down from 416 million in the same period last year, it said in yesterday’s filing to the Stock Exchange of Thailand. Nok Air, 39 percent owned by Thai Airways International, highlighted intense competition in the domestic airline industry, both from full-service airlines and low-cost carriers (LCC). The entry of a new LCC — Thai Lion Air — was also blamed for depressing profitability.

Airport City for Phuket

Airports of Thailand Plc (AoT) is soliciting interest from the private sector to take part in developing what it calls the Phuket International Airport City on over 24,000 square me-tres now in use as an outdoor car park.

An architect's impression of Phuket airport after the expan-sion is finished.

Phuket International Airport City

The multi-billion-baht scheme is part of AoT's unprece-dented push to transform areas within six airports under its purview into commercial zones to create extra revenue and lessen dependence on earnings from aeronautical opera-tions.

Phuket airport was chosen as one of the three initial sites, in addition to Suvarnabhumi in Samut Prakan and Don Mueang in Bangkok, because of its heavy passenger traffic.

Phuket is the country's third-busiest airport, with nearly 12 million passengers expected to pass through this year. Capi-tal expenses for the three priority locations are estimated at over 30 billion baht.

Phuket's proposed Airport City will be up to 23 metres tall, the maximum height permissible by law for buildings located 500 metres from the seashore, according to the AoT's con-ceptual plan.

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Oil & Gas5

While the oil & gas sector in Thailand is not quite as big as in Malaysia and Indonesia, nevertheless, the sector is quite ac-tive, with numerous foreign and local companies conducting activities of late.

Foreign investors in the oil and gas industry consider Thai-land's prolonged political tensions as just a blip, according to Deloitte.

"It's just a short-term thing. From the business perspective, [the political turmoil] has not jeopardised Thailand. It's busi-ness as usual," says Steven Yap, partner for energy and re-sources and mergers and acquisitions tax leader for South-east Asia.

Increased activities and new investments in the Thailand oil & gas sector

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Oil Platform, Gulf of Thailand

“Streets remain safe and the country's fundamentals are still sound with a sizeable population of 60 million peo-ple,” he said.

“However, the high tax bur-den on O&G concessions has made investors think twice about Thailand and going to other destinations,” said Stuart Simons, E&R leader and a tax partner at Deloitte Thailand.

Besides the 50-per-cent pe-troleum income tax, inves-tors in Thailand's O&G fields are subjected to royalties and other levies.

"Certainly, the government should look at cutting taxes on marginal oil and gas fields," he said.

Yap said Thailand may also consider applying the production sharing system, which has been used in many other coun-tries, to replace the current taxation regime for O&G conces-sions.

At the "Deloitte O&G Summit" held in Bangkok recently, the consulting firm's energy experts predicted a continued up-trend in foreign direct investment (FDI) in the global O&G in-dustry.

PTT Expects Increased Profits in 2014

PTT PCL, Thailand’s largest oil & gas company, has stated that it aims for a net profit in 2014 of 100 billion baht (3.10 billion USD), an increase from the company’s profits last year of 94.6 billion baht. However, Thomson Reuters is forecast-ing the company making a profit of 105 billion baht this year.

Profits are expected to increase this year due to the com-pany’s fifth gas separation plant running at full capacity this year as well as profits last year having been depressed due to significant costs following a major oil spill last year off the

coast of the popular tourist destination of Samet island in Thailand’s Rayong prov-ince.

Other news from the com-pany includes PTT Explora-t ion & Product ion PCL (PTTEP), the largest publicly listed oil and gas explorer in Thailand, agreeing to pur-chase oil & gas assets in Thailand belonging to US energy company Hess Corp. for around 1 billion USD. The purchase will give PTTEP shares in the Pailin, Morokot and Ubon oil fields as well as two currently producing gas fields.

The deal follows a similar deal last year when PTTEP together with Indonesia’s PT

Pertamina paid 1.3 billion USD for assets in Indonesia also belonging to Hess.

The recent Thailand acquisition will increase PTTEP’s produc-tion by around 17,000 barrels of oil equivalent per day ac-cording to PTTEP. PTTEP now has investments in over 40 projects in Southeast Asia, Australia, the Middle East, North and South America and Africa.

Singapore Company Buys into Thai Concession

A wholly owned subsidiary of Singaporean company Loyz Energy has just completed a 65 million USD purchase of a 20 percent interest in three producing concessions in Thai-land’s Petchabun basin 300 km north of Bangkok. The main operator of the concession is ECO Orient (Thailand), with Carnarvon Thailand having the remaining 20 percent stake. Output from the concession has reportedly increase to 3,000 barrels per day in April from the 1,200 barrels per day that was being produced back in February. The company ex-pects that the concession will be delivering 4,000 barrels per day within May. The concession is estimated to have re-

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Construction & Infrastructure

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The Thai government is currently working on a plan to re-duce logistics costs to 13 percent of GDP from the current level of 15 percent by 2016. However, this will require very large investments in infrastructure. The means for achieving this are currently on hold due to the Constitutional Court re-cently ruling that the government bill for raising two trillion baht in loans to finance infrastructure projects was unconsti-

tutional. From 2007 to 2011, Thailand managed to reduce its level of logistics costs from 17.1 percent of GDP to 15.5 per-cent of GDP. Thailand is currently ranked 38th in the world in the World Bank’s 2012 Logistics Performance Index.

Infrastructure projects will boost Thailand’s economic output by as much as one percent

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Commercial Property

The office property market is looking healthy at the moment according to a recently released research report on the Asia Pacific office market by CB Richard Ellis (CBRE). The report says that the political crisis hasn’t so far appeared to affect Bangkok’s office market and that competition for office space is expect to intensify with vacancies being at or close to historic lows. The report goes on to say that the growth in the amount of occupied space in 2013 was 200,000 square meters, the best rise since 2006.

Residential Property

The latest market figures for Bangkok’s residential property market show that in the first quarter of 2014 presales have fallen by 42 percent. This has been attributed to reduced pur-chasing power due to rising household debt and the political instability. Research by Maybank Kim Eng Securities (Thai-land) shows that residential launches in greater Bangkok in the first quarter delivered 20,433 units and 56.47 billion baht of value, representing a 42 percent and 43 percent decline year-on-year respectively.

However, a recent survey by the Nation newspaper shows that land prices on the Bangkok-Nonthaburi road in northern Bangkok have tripled since 2010 due to the construction of

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the Purple Line extension of Bangkok’s mass transit rail sys-tem. The survey shows condominium prices in this area ris-ing on average by 20 percent per year since 2010. Industry experts say that when the Purple Line extension is complete next year then demand will increase even further.

The Purple Line extension is just one of five other mass-rail transit extensions currently under construction in Bangkok, with even more at the planning stage. The total length of rail lines in the current plan total 508 kilometers, and will be con-structed between 2010 and 2029. The Mass Rapid Transit Authority of Thailand has also prepared next cabinet ap-proval for the construction of three skytrain extended routes: Green, Pink and Orange with a total budget of 225 billion baht. (www.mrta.co.th)

The State Railway of Thailand (SRT) is due to begin a six bil-lion baht program of track renewals and earthworks enhance-ment to begin this quarter on the main line running south from Bangkok. However medium-term investment in the main line network, particularly the high-speed train, is in doubt after the program was declared ‘unconstitutional’ in a court ruling. Any revival of the ambitious proposals, which included funding for a network of four standard gauge fast passenger lines, double-tracking of the metre-gauge net-work and a series of urban rail projects in Bangkok, is de-pendent on the election of a permanent government. (www.railway.co.th)

Implementation of three motorway projects by the Depart-ment of Highways under a public-private partnership (PPP) for the Bang-Pa-In – Saraburi – Nakhon Ratchasima highway (a total of 196 kilometers) worth 84.6 billion baht; an EIA ap-proved Western Intercity motorway (Bang-Yai – Ban-Pong – Kanchanaburi), which covers a distance of 96 kilometers

worth 55.6 billion baht; and Pattaya and Rayong’s Map-Ta-Phut needs an investment of 16 billion baht to construct a 32 kilometer motorway link. (www.doh.go.th)

The Airports of Thailand Plc (AoT) also plans to develop “air-port city” projects at six key airports nationwide (Suvarnab-humi Airport, Don Mueang Airport, Phuket Airport, Chiang Mai Airport, Chiang Rai Airport and Hat Yai Airport), with an initial investment of more than 30 billion baht for the first three locations.

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ICT7

The major development in the telecommunications & ICT sec-tor in the beginning of 2014 has been the launch of digital TV channels. They will immediately reach around 70 percent of the country’s 22 million households.

Around 10 million households will receive vouchers from the country’s telecoms regulator giving them discounts on pur-

chasing the set-top boxes needed to receive the digital sig-nal.

It is expected that digital TV will attract 10 percent of the tele-vision audience within this year, a share worth around THB 7.69 billion. TV advertising spending in 2014 is expected to increase by around 7.4 percent

Digital TV will attract 10 per-cent of the television audi-ence within this year

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Thaicom Satellite

Mobile Operators Prepare for Signal Auctions

Later this year, Thailand will be holding two separate mobile communication spectrum auctions. The two spectrums are 1,800 and 900 MHz. Two licenses are available for the 1,800 MHz spectrum worth THB 11.6 billion each and will be for a period of 19 years. The winners of the licenses will be re-quired to cover at least 40 percent of the population within four years.

It is expected that these auctions will be an “important driver for the telecom business and the Thai economy,” according to Siam Commercial Bank. The auction of the two band-widths will support rising demand for 3G and 4G mobile com-munication services that is coming from a greater ownership of advanced smartphones.

In addition to the extra government revenue, the auctions will lead to further investment in the mobile network infra-structure as well as mobile communication content and appli-cations. The infrastructure investments are expected to amount to more than 100 billion baht over the next 3-5 years following the auctions.

Thaicom 8 Satellite Project Gets Approval

The Thai Telecom Committee has recently given approval to the Thaicom 8 satellite project. The satellite will be launched in the 78.5 degrees east orbital slot. The license for the satel-lite will last for 15 years

Michael Araneta, head of operations for IDC Research Thai-land states that ICT investments will grow to a projected 7.2% in 2014 over the previous year, in a clear sign that the market is moderating. Araneta states, "The political tension is definitely one factor, as several decision-makers are taking a wait-and-see approach for how ongoing issues will be re-solved.

The market is also seeing the holding back of government-backed schemes such as the One Tablet per Child, Free Wi-Fi, and Smart Cities.

However, there are other factors too such as rising house-hold debt, slowing corporate and consumer sentiment, and the emergence of disruptive technologies that change IT strategies of Thai companies." Araneta remarked, "The slow-down is caused not just by political turbulence."

New sources of growth for the ICT market

IDC notes that the local ICT market needs to quickly shift to-wards IT projects that are led by large private enterprises. Fortunately, there will still be strong spending from several sectors that are working on a clear business-as-usual mode such as manufacturing, financial services, telecoms and lo-gistics. Araneta continues, "The use of Thailand as a hub for the ASEAN Economic Community (AEC) is also gaining mo-mentum, and is bringing new sources of growth to the ICT market in general."

IDC Research Thailand's top ten predictions for 2014 are the following

1. Annual ICT spending growth will moderate to 7.2%, but will present a steep inflection point in the second half of 2014.

2. The industry's renewed focus on Business Continuity Planning (BCP) will make Thailand a testing ground for new disruptive technologies in the ASEAN region.

3. In order to move towards CYOD, Thai companies need to develop their mobility masterplans.

4. New players will accelerate competition in Fiber to the x (FTTX).

5. Digital TV uptake will be strong, but will come below plan for 2014.

6. Japanese manufacturing firms will make Thailand rele-vant in the Internet of Things (IoT) discussion.

7. 40% of ICT spending in Myanmar will originated from or be sourced through Thailand.

8. The phablet is the winning consumer device for 2014. 9. The next-5 markets will grow by at least 15%, making

Metropolitan Bangkok less a center for ICT spending.10.High growth in mobile financial transactions will bring

Thailand closer to a digital economy.Despite political tensions, the Thai market will see the first successful use cases of disruptive technologies such as Big Data and Cloud Computing. These will make Thailand rela-tively ready to take on the Third Platform of IT in the next three years.

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Tourism8

The Tourism Authority of Thailand (TAT) will adjust the pro-jected figure of foreign visitors this year of 28.4 million down due to ongoing negative factors that continue to hit the tour-ism sector. Thailand’s political turmoil has started to take toll on the number of Chinese tourists visiting the Kingdom with arrivals declining over 50%.

The Vice president of Thai-Chinese Tourism Association Mr Anek Sricheewachart said Thailand’s political turmoil has dampened tourism industry with now the number of Chinese tourists visiting the Kingdom saw a year-on-year drop of 41-68%.

In 2014, the Tourist Authority of Thailand (TAT) expects 28.01 million international tourist arrivals.

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Overall, foreign tourist arrivals fell 5.85 percent year-on-year during the January-to-March period. There were 6,598,240 trips to Thailand over the first quarter of the year, down from the 7,007,904 trips during the same period last year. How-ever, with the recent revocation of the state of emergency in Bangkok and a period of relative calm in terms of protest ac-tion, it is hoped that tourism may recover.

Interestingly, Europe was the only tourism source market dis-playing a growth in arrivals during the first three months. There were 680,728 tourist trips from Europe in the first quar-ter of the year, a 2.25 percent increase over the 665,722 trips

in the same period of last year.

Breaking down the European region into an individual coun-try level, there were declines in tourist arrivals from Belgium (-20.36 percent), Norway (-14.17 percent), UK (-13.14 per-cent), Germany (-10.98 percent), Ireland (-9.04 percent), Spain (-5.81 percent), Switzerland (-2.10 percent), and Aus-

tria (-1.32 percent). Meanwhile, the biggest growth came from Finland (+49.25 percent), Italy (+18.08 per-cent), Eastern Europe (+15.02 percent), Russia (+9.86 per-cent) and Sweden (+7.22 percent).

When looking at the outlook for the rest of the year, Kasikorn Research estimates that assuming the political instability con-tinues into the second quarter of 2014, “the Thai tourism mar-ket may experience further deceleration, with the number of tourists totaling 178.0 million (based on the number of travel-lers per trip), growing 7.9 percent YoY, thus generating THB 725 billion in tourism-related revenue, rising 8.2 percent YoY.”

VISITOR ADVICE

To provide the best service possible during the current politi-cal situation, Suvarnabhumi Airport has prepared the Airport Operation Center (AOPC), open 24 hours daily, situated be-hind check-in counter row R, Departure Hall, 4th floor of the Passenger Terminal.

Also, the Passenger Assistance Center (PAC), open 24-hours daily, situated between Entrances 7 and 8, Arrival Hall, 2nd floor of the Passenger Terminal. Furthermore, passengers can contact Airport Information Counters available through-out the Passenger Terminal. Suvarnabhumi Airport also has foreign language interpreter/translator available in Chinese, Japanese, Russian and Korean to help passengers.

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Agro-Food Industry9

A recent report by TMB Bank’s TMB Analytics division sug-gests that Thai food exports are likely to do very well this year due to the growing world economy. The food industry currently brings in revenues of 500,000 million baht per year. Most of Thailand’s exports go to Japan (22 percent), the EU (18 percent) and the US (14 percent). Last year food imports by the US and EU grew by 7.0 and 3.6 percent respectively.

In Japan, issues with the exchange rate led to food imports shrinking by 12.7 percent. However, there is positive news from Japan in that the country has recently allowed the im-port of frozen chicken from Thailand for the first time in around 10 years. This could be a massive benefit to Thai-land’s poultry sector.

One of the Thailand’s strongest sectors with opportunities to export to major markets.

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The TMB Analytics report suggests that the most promising sectors are the seafood and meat sectors. In regard to sea-food, Thailand had recently been seriously affected by early mortality syndrome (EMS) that has caused problems with the shrimp industry. However, recent investigation shows that this problem is now declining. Another sector mentioned in the report that has a positive outlook is the canned and proc-essed fruits sector, which the report says is currently in high demand globally.

Thai Restaurants Get Seal of Approval

Thailand’s Ministry of Com-merce will be awarding 300 more “Thai Select” awards to Thai restaurants overseas in an effort to pro-mote Thai food and give high-quality Thai restau-rants an award to highlight their high level of quality. So far a total of 484 restau-rants have so far been

awarded, and the ministry will be giving out 300 more to qualifying restaurants.

Rice Troubles

News on Thailand’s agrofood industry has been dominated recently by the problems surrounding the country’s rice-pledging scheme. Numerous rice farmers have been unable to receive payments for the rice they have previously deliv-ered. The situation has been complicated further by the status of the current caretaker government with constrained abilities to take action.

In addition to criticisms of the implementation of the rice-pledging program, there have been other criticisms of the actual effect of the program on the rice industry. As the pro-ject artificially raised the price of rice, this has led to Thailand losing competitiveness in the international market. Thailand has slipped from being the world’s number one rice exporter into the No. 2 slot behind India. However, part of this can be

attributed to India deregulating rice exports, allowing more of the country’s output to reach the world market.

Since the dissolution of parliament to pave the way towards new elections last year, the rice-pledging scheme has ended. This has led to the market price for rice dropping gradually. Rice is now at 7,000 baht per ton, whereas it was previously at 15,000 baht per ton before. Effort by the government to raise money to pay the farmers that have so far not been paid through selling the government’s stockpile of rice has further pushed down the price of rice. At the same time, pro-duction costs have been increasing, meaning profits have declined.

Thailand’s rice exports have now increased in volume by 33.65 percent compared to the amount in the first quarter last year to a total of 2.2 million tons. However, in terms of export value, exports have dropped by 6.8 percent to 1.03 billion US dollars but down 0.5 percent in Thai baht terms due to the weaker value of the baht.

The caretaker government’s immediate priority is to pay those rice farmers that have yet to receive payment. How-ever, the next government that Thailand has will have to look at the longer-term issues with Thailand’s rice sector.

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ASEAN Views10

Myanmar: Economy to grow 7.8 percent in next two years

Myanmar’s economic growth is expected to pick up to an annual rate of 7.8 percent in the next two fiscal years (2014-

15 and 2015-16), according to the Asian Development Bank (ADB).

The country’s economic growth for the 2013-14 fiscal year which ended in March is estimated at 7.5 percent, Xinhua reported citing an ADB press release made available on the bank’s latest Asian Development Outlook.

Sustained growth ahead for ASEAN nations

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A recent ADB study noted that Myanmar could reach upper middle-income status by 2030 if it overcame development challenges, but currently about 25 percent of the population lives below the national poverty line.

“The ADB is keen to support investment in the energy, trans-port, urban, agriculture, and social sectors such as education and health, which will help build the foundations for inclusive growth,” Takehiko Nakao, president of the ADB said during a meeting with Myanmar President U Thein Sein on the side-lines of the ASEAN Finance Ministers Meeting in Nay Pyi Taw.

Vietnam: Economy will grow 5.5 percent this year

Vietnam’s growth is expected to rise modestly to 5.5 percent in 2014 in the absence of visible progress in addressing structural problems, the World Bank said in a recent report.

The trade and current accounts are expected to remain in surplus this year, although by a smaller amount than in 2013.

Meanwhile, inflation is likely to stay within the government’s target of seven percent in 2014 given the modest credit growth and assuming that no major supply-side shocks ma-terialize, the Washington-based lender said in the East Asia Pacific Economic Update.

Vietnam’s economy expanded 5.4 percent last year from 5.3 percent in 2012. Inflation slowed to 6.6 percent in 2013 from 9.1 percent in 2012.

It said that strong exports and a sustained flow of external capital and remittances have helped the country turn around its external balances.

Domestic demand in Vietnam remains weak on account of subdued private sector confidence, overleveraged state-owned enterprises, undercapitalized banks, and shrinking fiscal space.

Cambodia: Economy projected to grow at 7.2 percent this year

Cambodia's economy is forecast to grow at 7.2 percent this year, driven by continued robust growth of the garment and tourism sectors in combination with continued global recov-ery and political stability, the World Bank said in its Eco-nomic Update report released recently.

"Economic growth for 2014 is projected to reach 7.2 percent based on a continued global economic recovery, the return of stability to the domestic economic environment and re-newed confidence over the rest of the year," the report said. "Potential further political uncertainty and labor unrest and an economic slowdown in China may pose downside risks."

"Cambodia's economy has withstood domestic pressures and managed to sustain its high growth," said Alassane Sow, the World Bank Country Manager. "This strong growth may help Cambodia to achieve its goal in reducing poverty by 1 percent a year."

Political disputes and wage hike demands in the garment industry remain hot issues in this Southeast Asian nation. So far, the country's main opposition party is still boycotting par-liament after a contested election in July last year that handed victory to the Prime Minister Hun Sen's ruling party.

Indonesia: Q1 GDP Growth Slower Than Expected

Indonesia’s economy grew at a much slower than expected pace in the first quarter as investments and exports weak-ened, the statistics bureau said recently.

Gross domestic product in the January to March quarter rose 5.21 percent from a year earlier, against 5.72 percent in the fourth quarter and compared with 5.60 percent forecast in a Reuters poll.

On a quarterly basis, the economy expanded 0.95 percent.

Growth in Southeast Asia’s biggest economy has been sup-ported by buoyant domestic demand and underpinned by strong consumption from a rising middle class.

Indonesia reported a narrower trade surplus in March of $670 million on Friday, due to a modest decline in imports, while exports eked out growth of 1.24 percent against a fall the previous month.

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Thai-European Business Relations

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Conference on Thailand Investment Opportunities in the European Union

On 27 March 2014, the Thai Embassy to the EU in partner-ship with the Department of European Affairs, Ministry of For-eign Affairs hosted a conference on the topic of Thailand In-vestment opportunities in the European Union at the Royal Orchid Sheraton Hotel & Towers in Bangkok, with about 150 people from both the public and private sectors in atten-dance. Guests inlcuded H.E. Nopadol Gunavibool, Thai Am-bassador to the European Union, presided at the opening ceremony. Director General Saran Charoensuwan of the Euro-pean Affairs Department, M.R. Pongsvas Svasti, Former Min-ister of Industry, the Ambassador of Greece to Thailand, the Ambassador of Germany to Thailand and the Ambassador of France to Thailand also attended the opening ceremony.

The conference aimed to provide knowledge and understand-ing and promote opportunities for businesses and investors between Thailand and Europe with the relevant authorities of

11 EU member states participating as a speakers to provide information about the policies and measures to promote in-vestments in EU Member States. There were also business representatives from various sectors such as agriculture and food that shared their experiences of investing in the EU. These included representatives from S.Khonkaen, the CEO of KC Fresh, and Thai Smart Life. In addition, the Thai gov-ernment also provided information on measures to strengthen and encourage investors to invest in foreign coun-tries.

Furthermore, to enhance the ability to compete and push business opportunities for trade and investment between Thailand and Europe, this meeting also took the opportunity to launch the Thai-European Business Dialogue, which is based on the inspiration of the Permanent Secretary of the Ministry of Foreign Affairs.

TEBA Booth at IZB 2014

Reaching out to European Automotive Buyers: As part of the 'World Class Automotive Supplier' initiative and the Thai-

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European Business Dialogue, the Thai-European Business Association (TEBA) will showcase the Thai automotive clus-ter at the IZB International Automotive Supplier Exhibition. The Thai-European Business Association (TEBA) has organ-ized a booth at the IZB, Europe’s most important automotive supplier exhibition. It is organized at a fairground next to the headquarters of Volkswagen Germany and will give opportu-nity to connect with buyers from around the world

Thai exports to the EU to be halted

Thailand may temporarily halt the sale of fresh vegetables to the European Union (EU) until March 2014 to avoid being banned from future exports over issues with contaminated p r o d u c e .

That's according to a report in the Bangkok Post, which noted that the restriction on exports could cause a shortage of Thai products in the UK.

The paper reported that that last year, the EU discovered in-sects in 16 fresh vegetables exported from Thailand for use in traditional Thai cooking, including basil, chilli and cap-sicum peppers, aubergine, bitter gourds and parsley.

The EU put Thailand on a warning notice and said it would ban the import of Thai products if further insects were found on produce more than five times over the space of 12 months from March 2013.

However, the Bangkok Post reports the EU has found in-sects in Thai vegetable exports five times already so far this year.

It added that the Department of Agriculture, under the Agri-culture and Co-operatives Ministry, is likely to issue a ban on the export of fresh vegetables to the EU until after 14 March, 2014 - when the 12-month warning period expires.

According to a survey by the Thai Trade Office in London, prices of Thai vegetables have risen by 40 to 50 per cent since the EU implemented strict rules on chemical residue and insects in Thai products.

Mercedes-Benz growing in Thailand

After emerging as the only luxury automaker to witness dra-matic sales growth during the first quarter of this year, Mercedes-Benz is planning to accelerate into a leadership position in the luxury fleet and used-car businesses as well.

During the first three months of this year Mercedes-Benz sold 2,205 cars, with more than 1,000 being delivered in March. This included a large number of small, fuel-efficient models such as the A-Class and CLA with starting prices be-low 2 million baht.

"The company is building awareness among target groups through online channels and marketing activities along with the active development of sales channels and people to de-velop fleet and used-car professional staff at 31 authorised dealers nationwide," said Grisnagorn Sawettanan, general manager of sales at Mercedes-Benz Thailand.

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Fishery Industry News

The European Parliament has voted that Thailand should be required to address human trafficking and forced labour in its fishing industry.

The vote coincides with trade negotiations between the EU and the southeast Asian state and the result has been wel-comed by the Environmental Justice Foundation (EJF).

The EU is Thailand's third largest trading partner and Thai-land is the EU's third largest trading partner inside ASEAN, with trade between the EU and Thailand reaching nearly €32 billion in 2012. However, evidence of widespread human rights abuses and human trafficking in Thailand's fishing in-dustry has overshadowed the negotiations.

The resolution, proposed by President of the European Parlia-ment Fisheries Committee (PECH) Gabriel Mato, highlights that: "The ILO and various NGOs have recently uncovered serious shortcomings with regard to social and labour condi-tions and respect for human rights in the Thai fishing indus-try."

The resolution calls for Thailand to: "Respect, promote and implement internationally recognised labour standards ... in-cluding those on forced labour and child labour." It also calls for Thailand to be required to cooperate in fighting Illegal, Unreported and Unregulated (IUU) fishing, citing the involve-ment of Thai-owned fishing vessels in IUU fishing in West Africa.

Steve Trent, Executive Director of EJF, said: "Our investiga-tions have shown that there is an integral link between terri-ble abuses in the fishing sector and the mismanagement of Thailand's fisheries. The abuses we have documented com-monly occur on boats trying to maintain catches by going to sea for longer and fishing further away.

"This decisive resolution by the European Parliament clearly demonstrates that any trade agreement with Thailand must be conditional on the Thai Government resolving the issues of human trafficking and human rights abuses in its fishing sector. Crucially, we need to see the Thai Government work-ing towards a sustainable and ethical fishing industry and tak-ing firm and decisive action against business owners and cor-rupt officials exploiting modern day slaves.”

Stiebel Eltron Targets Growth in Thailand

Stiebel Eltron - a manufacturer of water heaters, water filters and hand-dryers - continues to target Thai sales growth of 20 percent this year, despite the country's economic slow-down. The company, which was formed in 1924 in Germany, has its Asian headquarters and production site in Ayutthaya and is the market leader for water heaters in Thailand.

Last year, Stiebel Eltron Asia reported Thai revenues of more than 800 million baht, some 20 percent higher than in the pre-vious 12 months.

Roland Hoehn, managing director of Stiebel Eltron Asia, said the company expected its improved distribution network, increased support for key accounts and enhanced product range would add similar growth to its figures this year.

"We believe our sales will achieve the targeted growth level this year, [especially as] the company recorded sales in the first quarter that were 40 percent above the same period last year," he said.

Haco Group looks at long-term prospects in Thailand

Haco Group, the authorised importer and distributor of inter-national sanitary furnishings and tiles, has teamed up with Spanish bathroom products and ceramic tile maker Roca Group to tap into growing demand for high-end bathroom products in Thailand.

"We are looking at the long-term prospects of the Thai mar-ket, although demand and the economy right now are not quite favourable," said Dhitipong Dowpiset, director of Roca Bathroom Products Thailand. Haco has a 40 percent stake in the joint venture, while Barcelona-based Roca controls 60 percent. Roca Thailand has a registered capital of 100 million baht.

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Suzuki Boosts Thai Exports to Europe with Production Shift

Suzuki will be expanding exports from it Rayong plant in Thailand this year following the production launch of its lat-est global compact passenger car, called the Celerio. The carmaker is shifting production for the latest model from its Maruti Suzuki subsidiary plant in Manesar, India.

The Rayong plant opened in March 2012 and began produc-tion of the Swift model that year for global markets. Addi-tional production of the Celerio will begin in May this year, initially for the Thai market, but this will be followed by mod-els produced for the European market during the latter half of 2014.

“The Swift is manufactured and exported to the ASEAN re-gion,” said Takayuki Sugiyama, president of Suzuki Motor (Thailand). “With the new Celerio, the Rayong plant will now be expanding its exports to Europe, thus increasing its im-portance as a global produc-tion hub.”

Suzuki has decided to shift production of the Celerio for export to Europe to Thailand from India because the Rayong plant in Thailand will be making the Euro-5 compliant model while the Indian plant continues to manufacture the Euro-4 model for its domestic market.

The move means a drop in exports to Europe from India and they are not expected to begin again until September 2015, when a new model will be launched. Industry sources state it is most likely to be the YRA premium hatchback.

In related news, Ford has announced it is moving production of the Fiesta subcompact model from its facility in Cuauti-tlán, Mexico to Thailand. While it is not confirmed whether production will be at the carmaker’s facility, also located at Rayong, Ford does produce the Fiesta there. Ford is thought to have made the move to free up production capacity in North America for other models.

Anfaco Insists on Excluding Thai Tuna from the EU-Thailand FTA

The National Association of Manufacturers of Canned Fish and Shellfish (Anfaco Cecopesca) is to once again ask the authorities of the European Union for the exclusion of Thai tuna from the free trade agreement that the European bloc is negotiating with Thailand.

On Wednesday the general secretary of Anfaco Cecopesca and president of Eurothon, Juan Manuel Vieites, is to meet with Joao Aguiar, the chief negotiator of the European Com-mission for the bilateral trade agreement.

Vieites will argue in his request that the tuna industry in Thai-land is the main competitor of community fishermen of that resource.

He will also express to Aguiar the concern that the European industry supposes a possible tariff exemption and the aboli-tion of the rules of origin for the companies in Thailand.

Anfaco argues that the free access of canned and processed tuna products from Thailand to the

European market can seriously affect the fu-ture of the sector in Galicia, Spain and Europe.

"Thailand is highly competitive country in the canned and processed tuna sector as is

shown in the production and foreign trade data, as it is the main world producer and exporter of canned and proc-essed tuna," stated Anfaco in a press release.

According to the data presented, in 2011 Thailand exported 91,357 tons of canned and processed tuna to the EU, that is 19 percent more than during the period between 2007 and 2011.

In late September, and in order to protect national canned products, the Committee on Agriculture, Food and Environ-ment of the Congress of Spain unanimously passed an offi-cial statement in which it requested the EU to exclude the canning sector and processed tuna from the free trade agree-ment being negotiated with Thailand.

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Country Focus:The Netherlands

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TEBA is always working to provide interested stakeholders with improved information and insights on the key issues re-lating to the Thai-European business environment. As a part of this, we are kicking off our Thai-European Discussions se-ries where we will be conducting interviews with some of the key people in the sector to gain insights on the most impor-tant business trends. TEBA will be speaking to senior execu-

tives of Thai and European businesses, government officials and, as you will see from this inaugural interview, ambassa-dors.

We are delighted that our first TEBA interview is with H.E. Joan Boer, Ambassador of the Kingdom of the Netherlands to Thailand. Mr. Boer kindly invited us to the beautiful Nether-lands Embassy on Tonson Road in the heart of Bangkok for

Meeting with H.E. Joan Boer, Ambassador of the Kingdom of the Netherlands to Thai-land

31

a discussion about his role and the current trends in Thai-Dutch business relations. The large plot of green land where the Netherlands Embassy is situated stands like a calm oasis in contrast to the surrounding concrete jungle that is central Bangkok. The grounds feature a small lake, an abundance of trees and the modern embassy building standing next to the traditional turn-of-the-century Thai house - infront of which stand the herd of colourful cows representing different coun-tries.

Supporting Dutch Business in Thailand

“Well, the role of the embassy in supporting Dutch business can be divided into two categories. For the larger Dutch com-panies normally we only get involved when there is a big is-sue, where a diplomatic approach is often seen as the best way forward.

“For smaller companies, we handle everything from support-ing their initial interest in the country, and help them with find-ing producers and suppliers, conducting market research, and having discussions with the BOI. We also provide them with information on local taxes and business laws,” he tells us.

Mr. Boer explains that with the Netherland’s-Thai Chamber of Commerce is located at the Embassy; this allows them to work together closely, forming what he calls a “One-stop Hol-land House.”

Key Trends in Southeast Asia

On doing business in the region, Mr. Boer says, “It is rela-tively easy to live here in Thailand and it is a dream for many entrepreneurs. If you are in manufacturing, it is one of the best places to be.” He tells us that he sees a lot of potential in Thailand in terms of high value-added food products. “Rice is not the most interesting agricultural food product from Thailand anymore,” he says while talking about man-gos. Though, he cautions that Thai industries, for example the shrimp and tourism industries, need to be mindful of the importance of sustainability.

Mr. Boer advises Thai companies to develop a more regional view. “Thailand risks getting stuck in the middle-income trap – it needs to focus on innovation and education in order to move forward.”

While discussing improving innovation, Mr. Boer gives us an example of a business strategy from a Dutch technology uni-versity in Eindhoven, hometown of the Philips company. We are told that in this compound there is just one restaurant that everyone eats at. This way, people from different depart-ments and levels of the organisation naturally interact with

each other and that this then leads to exchanges of ideas and, therefore, to greater levels of innovation combining dif-ferent disciplines. This is clearly simple and very effective looking at the number of patented innovations coming from that compound.

We move on to talking about Myanmar, where Mr. Boer praises the English language skills of the Burmese people, saying it is an important factor for doing business. With the large oil pipeline project linking the country to China and the growth of the Dawei seaport, he feels that this may in the long term diminish the importance of Singapore as a trading zone. In other sectors, he explains that the Shan Plateau is great in terms of the potential for development of agriculture and that its proximity to China will be of benefit. Mr. Boer highlights the fact that Japan and China have been moving heavily into Myanmar and advises Dutch companies to take a long-term view of the country.

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Discussing the growth of Myanmar, Laos and Vietnam, Mr. Boer suggests that the center of business in mainland South-east Asia will likely shift northwards and that Chiang Mai in northern Thailand has a lot of potential as a future center of trade and commerce in the region. He sees business being focused on more of an East-West axis rather than a North-South one.

Welcoming Business to the Netherlands

In terms of welcoming business and people to the Nether-lands, Mr. Boer poses one question: “Do we want more peo-ple and businesses or less?” He is confident that more peo-ple going to the Netherlands from Thailand and the region is of clear benefit. There are around 30,000 Thai people living in the Netherlands, many in the second generation of immi-

grants. Mr. Boer suggests “Rolling out the orange carpet” to legitimate visitors going to the Netherlands and moving as soon as possible to multiple-entry visas. We are told that only 3% of visa applications to the Netherlands from Thai-land are refused. He feels that the 97% of legitimate visitors should not be hindered because of the 3% minority. If a po-tential business visitor has been invited to visit the Nether-lands, he wants them to be able to be there with as little has-sle as possible.

Mr. Boer explains that there are numerous investment oppor-tunities in the Netherlands. We are told that Thailand’s PTT and Indorama have invested in the chemicals and petro-chemicals industry in the Rotterdam area. Double A paper is

another example of a Thai investor in the Netherlands and food products have a promising future.

Mr. Boer praises the Netherlands’ good tax structure and lan-guage proficiency. “In fact, I have a Chinese daughter-in-law who complains that she wishes to develop her ability to speak Dutch; however, because almost everyone speaks to her in perfect English, she has no opportunity to practice,” he says.

“For Thai businesses wishing to invest in the Netherlands, there are dedicated members of staff from the Netherlands’ investment agency based at the embassy in Bangkok 100% focused on supporting Thai companies. They arrange com-pany visits and assist with information on visas and tax is-sues,” explains Mr. Boer.

With the Dutch having been around for 400+ years doing business with the Thais from the beginning of when Thailand started trading with the world, no doubt these close trade and business ties will continue well into the future.

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• Breakfast series on investment, free trade agreements, infrastructure and human resources. • Ministerial meetings with Minister of Industry, Minister of Transport, Minister of Commerce of the Royal

Thai Government and other ASEAN ministers.• Establishment of aerospace committee: Minister of Transport’s aerospace sub-committees on strategy,

human resource development and incentives. Contributed concept paper on national aviation industry development.• Contracted by Ministry of Industry to evaluate and recommend “Kitchen to the World” phase I and II in Europe promoting Thai products and restaurants.• Government delegation missions to Europe and in the region to promote both Thai and Euro-pean businesses.• Business matching and startups to Thai and European companies

• Capacity building workshops related to FTA and recommended on opportunities and challenges for local businesses.

• Promoted businesses on Automotive and Energy, smartgrids and electric mobility and other new ad-vanced technologies in policy making, supporting regulations and capacity building.

• Initiated HR development program to ensure that local business is supplied with quality workforce ade-quately.

Key Achievements in 2013

Our MissionTEBA provides a cooperation platform representing localized businesses in Thailand in the view to explore opportunities and at the same time enhance the competitiveness entering ASEAN in order to support trade and investment between Thailand and Europe.

Moving forward into 2014

• Cross sectoral breakfast series including Human Resources, Logistics, Standards and ASEAN• Sectoral specific continuous topics of interest from last year including Aerospace / Automotive / Energy / Food • SME support center - capacity building and business matching between Thailand and Europe

Join Us NowAs a member, we will keep you up-to-date with the latest development of various industrial and business devel-opment programs and access to our capacity building programmes dedi-cated to facilitate your businesses Thai-European Business Association

Contact UsThe Trendy Building Sukhumvit 13

Unit 10/27, Floor 1A, Klongtoey-NuaWattana, Bangkok 10110, THAILAND

Tel: +66-(0)2-168 7486Fax: +66-(0)2-168 7487http://www.thaieuro.biz

info@thaieuro.biz

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