Connectivity: shaping the game,breaking new grounds

Connectivity: shaping the game,breaking new grounds

Increased connectivity, both in Thailand and amongst ASEAN countries, is a major game changing factor that creates a new wave of economic development in which the private sector cannot overlook. The intention of the Thai government, along with that of other ASEAN countries, to develop various connectivity networks will be a significant factor in introducing numerous business opportunities for the private sector.

 Transportation connectivity: Transportation connectivity, according to the Strategic Plan for Transportation Infrastructure Development and various agreements to facilitate international transportation, will bring about clear changes in Thailand. These changes include connecting roads to neighboring countries, further expansion to China and India, supporting Thailand in becoming a regional transportation hub, and the increasing role of rail transportation. The readiness of the transportation infrastructure will facilitate and drive regional trade, and connect manufacturing supply chains. It will also provide an opportunity for businesses to invest in provinces with high potential, namely those transportation routes that connect them to neighboring countries in order to expand markets and investment opportunities.

 Cross-border trade connectivity: The free flow of goods is one of the key principles in the move toward a single market and production base. It also helps support the development of regional manufacturing networks and ASEAN's role, either as the center of global manufacturing or as a part of the global supply chain. Since ASEAN started allowing the free flow of goods under the ASEAN Free Trade Area (AFTA) in 1993, both tariff and non-tariff barriers have been gradually lessened or eliminated in order to promote the free flow of goods and strengthen economic and trade ties within the region. 

  Communications technology has greatly improved, especially the internet infrastructure, and has created more virtual connectivity than ever before, be it in the form of e-mail, conversations through web boards, and now social networks. The advantages of these types of communication are that they are cheap but instantaneous and can reach the entire population regardless of place and time. This has changed the business landscape in the modern era. Virtual connectivity has been playing an increased role in modern businesses and entrepreneurs should therefore adjust their business strategies to prepare for the myriad changes that are occurring.

ASEAN nations have agreed to enhance regional labor mobilization to support increasing intra-ASEAN trade and investment through skills recognition and certification as well as visa relaxation policies, promoting people connectivity. This opens up possibilities for the private sector to tap into a larger pool of talent to recruit qualified professionals. Furthermore, labor movement across borders allows the private sector to offer services to mobilized workers, such as fund remittance, residential real estate, and transportation services. The private sector should therefore learn to adapt their organizations and human resource strategies to prepare for foreign recruitment and retention, such as cultural improvements that will facilitate the integration of foreign workers into Thai organizations and the design of reasonable compensation schemes. In addition, companies can position their products and services to cater to the demands of foreign workers. Organizations that are well positioned to tap into these potentials will significantly benefit from greater labor movement in the region.

More liberalized and connected activities in the real sector under the AEC will requires an increase in capital connectivity to support both cross-border trade and investment. Even though fully free movement of capital in ASEAN may not occur in the near future, businesses currently do have many new channels to manage their capital. These include fund raising through registering in stock exchanges in ASEAN, which will be more accessible following the agreement to accept the IFRS accounting standards, or issuing bonds in foreign currencies, which is allowed for Thai companies, foreign government organizations, international organizations and legal bodies set up under international law. However, the difference in the level of capital account openness in each ASEAN country implies many actions toward more liberalization that need to be considered in order for ASEAN businesses to manage their capital most effectively.

Conducting business internationally motivates businesses to restructure their organization. Aside from maximizing their human resources and optimizing their sources of funding as mentioned in previous chapters, another way to stay competitive is for businesses to streamline their operations in order to reduce costs. One of the key costs arising from conducting business overseas is the tax burden as a result of the differences in tax systems in Thailand and overseas markets. These differences typically affect operating costs and are an important determinant of product prices and the form of overseas investment. It is, therefore, becoming more common for firms to look into tax planning strategies along with market feasibility studies before deciding whether or not to invest in a country. For Thailand, the ASEAN trade collaboration to reduce import tariffs among member countries to an extent will benefit exporters, while attractive investment incentives offered in each ASEAN country will also provide tax privileges to investors. But there are also other methods for businesses to leverage on, especially establishing an investment holding company or utilizing a Double Tax Agreement (DTA) to lower tax burden. Once firms are able to reduce tax expenses via corporate reform, they will be more self-assured of conducting business in ASEAN under the regional connectivity regime.

 Conducting business internationally motivates businesses to restructure their organization. Aside from maximizing their human resources and optimizing their sources of funding as mentioned in previous chapters, another way to stay competitive is for businesses to streamline their operations in order to reduce costs. One of the key costs arising from conducting business overseas is the tax burden as a result of the differences in tax systems in Thailand and overseas markets. These differences typically affect operating costs and are an important determinant of product prices and the form of overseas investment. It is, therefore, becoming more common for firms to look into tax planning strategies along with market feasibility studies before deciding whether or not to invest in a country. For Thailand, the ASEAN trade collaboration to reduce import tariffs among member countries to an extent will benefit exporters, while attractive investment incentives offered in each ASEAN country will also provide tax privileges to investors. But there are also other methods for businesses to leverage on, especially establishing an investment holding company or utilizing a Double Tax Agreement (DTA) to lower tax burden. Once firms are able to reduce tax expenses via corporate reform, they will be more self-assured of conducting business in ASEAN under the regional connectivity regime.

Increased regional connectivity provides attractive opportunities for the Thai private sector to offer their products and services into new markets in other countries, increasing abilities to secure funding at attractive prices, or attracting workers from foreign countries. While increased connectivity brings many opportunities, greater risks can emerge in various areas. Therefore, Thai private sector has to understand the risks that may occur and be prepared to manage them.