EIC RSS Insight

Build smart real estate: strategies to capture the modern consumers

Thu, 14 Jun 2018 15:42:00 +0700

Contents

Executive Summary
Chapter 1: Global trends in residential demand
Chapter 2:Investigating home choices by Thais
Chapter 3: Home marketing in the 4.0 age

Residential housing market in Thailand will likely recover after having slowed down from the expiration
of stimulus measures by the government, but the competition continues to intensify with rising
number of unsold units. Nevertheless, residential transfers in Bangkok and its vicinities are projected
to recover at around 7% in 2018 supported by an economic recovery, an expansion in transportation
infrastructure, smaller household size, as well as demand for residentials in high potential locations which
encouraged developers to continue launching residential projects and resulted in intensifying competition.
However, developers need to be cautious in launching new projects and expedite in selling unsold units
especially in the condominium market. Moreover, the market situation which currently depends on demand
from home buyers becomes a difficult proposition for developers in developing new projects going forward.

Different lifestyles of new generation consumers like the Millennials and consumers in an aging
society like the Baby Boomer, and consumption trends as well as technological innovation will all
influence the development and sales of residential projects in the future. EIC found that trends in
residential demand in Thailand to be monitored include 1) condominium market that will still dominate
the market although most buyers prefer low-rise residences 2) consumers that value having communal
areas, multiple functionalities of the project area, and green areas 3) consumers that prefer living close
to communities in addition to living close by the sky train 4) Smart home that will become the new
normal in the future and 5) consumers that will increasingly compare information from multiple digital
sources and prefer advanced visualization and presentation.

Although most Thai consumers prefer to live in low-rise residences in particular single-detached
houses, condominium will still dominate the market especially market for the new generation
entering the working age where condominium seems to be the most ideal choice given location and
purchasing power. Meanwhile, the Gen X and consumers in an aging society like the Baby Boomer also
prefer condominium to cater for various needs such as less burden on household chores, buying for
investment, while some are buying for their children. However, according to EIC’s survey, if there is not
much constraints, most consumers prefer to own low-rise residences.

Thai consumers give importance to residence with communal areas, functionality of the project area,
and green areas. Thai consumers place importance on the work-life balance, independent work-life and
are increasingly accepting social sharing. As a result, communal and shared areas in the residential project
increasingly affect residence purchasing decision. Thus, developers should consider the design with multiple
functionalities of the project area such as the co-working space and co-recreation in the residence as well
as areas that can accommodate sharing in other aspects in the future such as communal parking spaces.
Moreover, trends in demand for energy-saving residences with green areas have garnered much interests.

Convenient location close to the electric train remains important, but location close to communities
and facilities is no less important. Residential location close to the electric train and workplace may
not be sufficient to meet lifestyles of consumers. Consumers demand for necessities and facilities to be
closer to them, be they food and beverages, hospitals and healthcare centers, and department stores.
As a result, mixed used projects have gained much interests.

Technology has come to play a role in smart home. Although it is not yet popular in Thailand, but
its selling point earns much attention especially from the new generation. Meanwhile, the digital
channel will become the primary channel in reaching residential buyers, both in marketing and
after-sales services through new platforms. Smart home has become more popular, particularly for
its security system and energy management system in the residence. Moreover, consumers’ access to
technology offers the digital channel an increasing role in residential purchasing decision as consumers
increasingly compare information. Thus, developers should give importance to adopting prop tech to the
development of new platforms such as presentation on after-sale services in a range of styles, presentation
of information for consumers to easily compare among projects, and presentation of information in new
styles like AR or VR, as well as the adoption of prop tech as a tool to manage the project.

Intensifying competition in the residential market encouraged developers to focus on differentiation
strategies and deep understandings of consumers in order to enhance competitiveness. The 3 key
differentiation strategies to that should not be overlooked include 1) the design that mainly respond
to users’ demand such as the universal design that best satisfies the use by various groups of consumers.
Meanwhile, customized design will help differentiate developers from competitors to penetrate into the
niche market like the luxury market with higher potential to buy, 2) forming business partners to develop
new products, transfer knowledge, gain access to new buyers, and improve brand images. Business
partnership can occur in a variety of ways through, for example, joint venture with specialized experts
such as development of the mixed use project in the project with high potential where choices of real
estate compositions respond to the need of consumers from various groups. Moreover, it can also occur
though collaboration with start-ups to offer innovative technology in residences such as smart home, and
through forming partnership to improve brand images such as partnering with world’s leading chainedbrand
hotels which help add more value to the project, and 3) developing new after-sale platform
to increase sales opportunity and use Big data to improve products and services. Examples include
development of central platform that combines all after-sale services or the use of Big data that not only
helps reduce operating costs but also allow utilization of consumers’ behavior data or data on problems
arising from after-sale services to develop residential projects that meet consumer demand in the future.

Investigating potential booming industries in the EEC

Fri, 23 Feb 2018 16:33:00 +0700

Contents

Executive Summary
Chapter 1: EEC - the landmark project to kickoff thai investment
Chapter 2: Aviation industry- with great opportunity comes great challenges
Chapter 3: Digital industry - with great opportunity comes great understandings
Chapter 4: Robotics and automation system industries - with great opportunity comes great risks
Epilogue

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The Eastern Economic Corridor (EEC) is an important government initiative aiming to attract investments into 10
targeted industries to help drive the economy. The initiative sets out roles and duties of the government, as well
as a framework for development in 3 pilot provinces including Rayong, Chonburi, and Chachoengsao, which are
currently major manufacturing bases of Thailand. The EEC is expected to attract a new wave of investments into
10 targeted industries, comprising 5 First S-curve industries (those with existing investments and operations) and 5
New S-curve industries (future industries leading toward creating new knowledge base for country’s development).

In addition to the EEC Act which is a development policy framework, the government also supports both hard and soft infrastructure. Most of hard infrastructure development projects are transport projects covering all modes
of transport and shipping -such as via rail, road, water, and air- and energy and public utilities infrastructure
projects. The latter includes development of supply and distribution system of electricity, water storage and
distribution system for consumption, environmental development for tourism and public health. In terms of soft
infrastructure, support measures include tax benefits (both corporate and income taxes), exemptions of import
duties on machinery and raw materials used for production of export products, as well as funding and facilitation
for businesses investing in the EEC.

EIC sees strong potential for 3 industries of the future in the EEC during the initial stage including digital, aviation and logistics, and robotics and automation, taking into account capabilities and skills of labor, economic impact,
and types of related industries.

The Maintenance, Repair, and Overhaul (MRO) tailored for narrow-body aircrafts will open doors for Thai businesses into aircraft manufacturing industry in the future. The narrow-body aircrafts used by low-cost carriers account
for over 70% of all aircrafts flying in and out of Thailand’s airports and are expected to grow by over 1.5 times
in the Asia-Pacific region. Moreover, development of the U-Tapao International Airport to cater for rising tourism
will be important driver for Thai businesses in aircraft maintenance and manufacturing of main parts (tier 2) and
secondary parts (tier 3) of the aircrafts.Currently, Thailand’s exports of aircraft parts are valued at over 50 billion
baht per year. These comprise of 60% of exports of aircrafts parts, 30% exports of electrical wire systems, and
the rest are engine and tires exports.

Digital infrastructure can potentially attract investment in the Internet of Things (IoT) which will offer opportunity for IoT solution development in various industries. Today, Thailand’s expenditure on IoT are still concentrated
in manufacturing industry and logistics, Meanwhile, agricultural sector has only limited use of such technology
as suggested by only 0.1% usage of embedded software which is a technology that enables communications
among devices, compared to as much as 76% in manufacturing. Thus, EIC believes that applications of IoT in
agriculture for water control, disease and pest control systems, and soil monitoring can help raise production
per rai by 30-50% and if used in economic crops, such as in rice farms, production per rai will increase to the
global average production of 480 kilograms per rai.

Value on investment in robotics and automation at present and a move toward aging society are opportunities for

Thai businesses to set foot into the System Integrator (SI) businesses. Considering capabilities of robots to replace
human labor and costs of investment, EIC found that adoption of robotics and automation will likely breakeven
within 6-10 years. Meanwhile, current industrial robots, which last approximately 12 years, will create opportunity
for Thai businesses to step into SI businesses by providing advisory and design services, and seek automation
system from manufacturers of robots and software developers to be installed for end-users as requested. In the
future, around 650,000 workers may be replaced if such systems are to be fully adopted. However, creation of
related job is likely to be taking place.

In addition to policy and readiness in transportation and public utilities infrastructure, the government should
also strive to build investor confidence, develop appropriate skills for workers, and be pro-active about social
and environmental impact. Investor relations cannot be overlooked, starting from communications on the permit
process to investment approval and operations, as well as the provision of relevant economic, physical and
social data. The government should also support the development of skilled workers, both in terms of technical
know-how and communication skills as appropriate to the emerging industries in the future. Last but not least,
measures to prevent and remedy environmental damages and support health and public welfare of those living in
the EEC will also be crucial for sustainable development. Eastern Economic Corridor as an investment attraction
initiative is bound to create significant social and economic impact. Public sector is advised not only to efficiently
pursue policy to attract investment in an appropriate and accurate manner, but also to consider social policy
that responds to the improved growth outlook of the economy. On the other hand, private sector is encouraged
to formulate their business strategies accordingly.

Decisive Edge: Win Big with Big Data

Wed, 29 Nov 2017 11:11:00 +0700

Contents

Executive Summary
Chapter 1: A brave new world beckons Thai companies
Chapter 2: Figuring out the "smart consumer": big data comes to the rescue
Charpter 3: The "smart company": solving big problems with big data
Epilogue: Big data all in one

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More and more of what happens in the real world these days generates a vast, ongoing flow of digital information, a kind of parallel universe made of data. Now this data has become a valuable new resource for business, thanks to "Big Data" analytics.

The data are "big" in the sense that they comprise a large, complex mass of raw datasets that lack any single defined structure or format. In our new digital age, Big Data proliferate from a wide variety of Internet technologies, data-sharing smart devices and everyday platforms such as call centers, text messages and social media. Through intensive use and constant connectivity, new contents are continually generated in all textual, visual and audio formats. This huge variegation, breadth and continuity is how Big Data is so different from traditional data types that rely on single datasets collected at a given time, such as sales statistics or a customer database.

Analysis of Big Data can boost a company's potential by uncovering hidden patterns and relationships in behaviors and events. Big Data is thus predictive and diagnostic. By contrast, traditional datasets are constrained by their structure and therefore of relatively limited usefulness in forecasting. For example, a customer survey only represents the customers’ attitudes and intentions, not their actual behavior. With Big Data, a company can tap not only its own internal data but also a vast universe of online data about factors like customer lifestyle, weather and competition data. This helps analyze existing relationships, generate new insights and make accurate predictions. Big Data illuminates consumer preferences and tastes to enable new marketing strategies and sales tactics.

EIC's survey of over 60 top firms in Thailand found that more than half have begun to employ Big Data, a trend that began within the past three years. Both the service sector and manufacturing sector use this tool especially to maximize their sales and marketing potential, e.g., to optimize prices and personalize campaigns and promotions. In businesses characterized by high competition and relatively similar products, such as telecommunications and real estate, companies can deploy Big Data to differentiate their offerings. In manufacturing, makers of electronics, appliances, autos and auto parts utilize Big Data to improve productivity.

Big Data are likely to play much bigger role in the Thai private sector during the next three years, in line with the global trend for companies to get smarter about consumers, on the one hand, and their own operations, on the other. The "smart consumer" concept is about catering to today's demanding, digitally immersed consumer. The "smart company" model is about using Big Data and other advanced technologies to enhance manufacturing, service and administrative operations. Our survey finds that among the Thai firms that do not already use Big Data, some 70% plan to do so in the near future. Gearing up to use this process takes about one to three years, however. On the sales and marketing side, companies should develop Big Data analytics to cope with complex consumer behavior, high expectations and minimal brand loyalty, as social media ramp up these pressures in the marketplace. To improve internal operations, companies should use Big Data to save costs, improve productivity and enhance human resources.

Formerly easy to please, Thai customers have become highly sophisticated and demanding. EIC found that over 80% of Thai consumers now expect that products and services will fit their preferences in an optimal way, and they prioritize quality. Yet they have little brand loyalty. Fortunately, Big Data can help. Data analytics on signals like images and comments posted on social media, search engine keywords, and Internet of things (IoT) data can lead toward strategies that meet individual customer needs via personalized marketing, price optimization, cross-selling and so on.

Thai corporates now face pressures from higher operating costs, shrinking productivity, and high staff turnover. Once again, data analytics can help. It starts with switching to digital storage of relevant data. One example is installing sensors in the assembly in order to collect a large data set, which can help prevent defects and enhance productivity. Analyzing data on employees' behavior and interests can help identify the best candidates and prolong their tenure.

EIC believes that the business sectors that are best positioned to take advantage of Big Data are retail, transportation & logistics, and telecommunication & media, since they already possess an abundance of relevant data and can easily access more. Other companies can get started by digitizing their existing data. EIC studied how various Thai business sectors differ in their Big Data potential in terms of readiness and benefits. The study examined three indicators: data preparedness, potential business benefits, and preparation time. Retail, transport & logistics, and telecom & media are in a superior position because they are service-oriented businesses that interact extensively with customers. As a result, all the customer data they already collect every day -- e.g., for online purchases, GPS, voice calls and mobile internet use -- can be harnessed in sales and marketing strategies that constantly refashion products and services to suit emerging needs. Companies that believe they should move toward adopting Big Data should embrace digital platforms in order to collect real-time data, e.g., by developing the company website, establishing a social-media presence, installing sensors in the assembly line, and incorporating external data into internal data for analytical purposes. These digital platforms help a company deploy relevant data to stay competitive and grow.

Businesses are becoming ever more data-driven. But applying Big Data successfully requires clear objectives, appropriate data sources and knowledgeable analysts. Entrepreneurs and executives often rely on their own experience and instinct when making decisions. But now the abundant availability of useful data together with effective analytic tools help minimize personal bias. The key is to select the right data, adopt the right thinking process, and use the right analytical tools. But Big Data is not a short cut to success. Companies need to aim for long-term sustainable growth, which requires keeping ahead of fast-changing trends and adapting strategy proactively.

Keeping Ahead of the New Supply-Chain Dynamics

Wed, 13 Sep 2017 14:18:00 +0700

Contents

Executive Summary
Chapter 1: Re-centering the supply chain on consumers
Chapter 2: Keep an Eye on How Innovations Transform Supply Chains
Epilogue

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Technological advancements have greatly benefited consumers during the past decade. Consumers can now choose from seemingly unlimited products and services, compare prices in real time, and access detailed information on a product's origins and performance. It's clear that technology will keep changing how consumers behave and keep raising their expectations. Now firms throughout the supply chain need to be proactive in adapting to this consumer-led environment and be ready to cope with new technologies and innovations that will disrupt their businesses. Our aim in this publication is to present a conceptual framework to help Thai players navigate the changes in global supply chains. Thinking systematically will help companies recognize the potential opportunities and disruptions so that they can stay competitive.

EIC suggests 3 C’s for businesses to thrive in the era of consumer-led supply chain:

1. Collaborate – companies in the supply chain need to understand that consumers are the true determinants of which products and services need to be offered and at what prices. Firms should be ready to adapt quickly because consumer needs keep changing. Businesses have to work together more closely so that they can better manage production and inventory management.

2. Customize – companies need to be prepared to increase their use of mass customization, since this is an important way to meet today's ever-diversifying customer needs. Investing in technology to help collect data from consumers and analyzing consumer preferences is how businesses can offer a wider range of products and services tailored to their customers. This will also help companies streamline their supply chain management

3. Control – companies throughout the supply chain must be ready to meet higher consumer expectations regarding social and environmental factors. Companies need to not only improve their business operations, but also how they communicate about themselves on social media. After all, social media is the primary stage where consumers express their views on social and environmental responsibility. Any company that wants to enter into the supply chain of a big brand has to meet high standards on social and environmental issues. Small businesses should strongly consider upgrading themselves in this area.Innovation, whether a new product or a new business model, can disrupt the supply chain. Innovation will have a severe impact on the businesses that it disrupts. Companies that do not learn to manufacture the new products and use new technology in their operations won't be able to enter into innovation-driven supply chains. This is especially true for tech-related products, whose manufacturers will be forced to monitor rapidly changing technologies very carefully if they want to stay viable. Changes will also result from new business models, such as business platforms and products offered in the form of services. The rise of new models is a particularly fast-growing trend at this time, and it will have an impact on companies and supply chains in adjacent industries. Forward-thinking business models will transform consumer behavior by offering services that are different from those of legacy businesses. Some businesses in the supply chain are shrinking – for example, middlemen like wholesalers and agents – under pressure from online business platforms, e.g., Alibaba and other B2B marketplaces.
Because of these factors, a supplier must be prepared to continually upgrade its products and keep up with new innovations so that it does not forfeit its place in the supply chain.

How can Thai industries gain footholds in global supply chains? Understanding technology and consumer behavior is the first step in developing a plan to join a new supply chain. EIC recommends three main actionable steps for business management to consider: 1) Map out a plan for technology use within the business in order to maximize efficiency, 2) invest in human resources and an optimal business structure, and 3) develop supply chain flexibility. Businesses have the opportunity to profit from technology, whether it is finding new markets resulting from new consumer demands or gaining the benefits of performance optimization such as cost reduction, operational risk management and higher customer satisfaction.

Unlocking the secrets of the digital consumers

Wed, 21 Jun 2017 11:18:00 +0700

Contents

Executive Summary
Chapter 1: Global shifts in consumption patterns
Chapter 2: Consumer trends in Thailand 4.0: What’s in and what’s out?
Chapter 3:Winning consumers’ hearts and minds in the 4.0 era: How should businesses adapt?

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Consumer behavior has undergone major changes in recent years, especially in Asia. Spending has increasingly shifted toward services, health-related products and differentiated products. Throughout developing countries in Asia, consumption has moved beyond necessities toward discretionary goods and services. Spending on services has especially increased in leisure and lifestyle categories like tourism and entertainment. Health and medical spending has gone way up, and consumers are likely to spend more and more on “wellness” goods and services. Today’s consumers tend to look for highly differentiated products, with niche characteristics or functions. They are willing to spend more on not just things but experiences. Steady growth in incomes has positioned them to now spend more on personalized goods and services and pay a premium for new experiences.

Leapfrog technologies like smartphones and apps have transformed sales channels and marketing channels. E-Commerce enables fast shopping and convenient price comparisons. The ubiquity of social media has altered customers’ referral patterns, moving away from face-to-face communications. Businesses consequently have to focus on developing online and social media platforms for marketing purposes. Moreover, advanced technologies like virtual reality, augmented reality, internet of things and 3D printing are now being used to offer new experiences and more flexibly meet consumer demand. These innovations promise to completely transform consumer behavior from the past.

Thais now consume more entertainment media than in the past, and as their incomes grow they will spend more on travel and home improvement. EIC conducted a survey that found most consumers now focus their spare time on consumption of all kinds of entertainment media, especially social media. New generation and high-income consumers spend more time outside the home than in the past 5 years. Travel ranks first among things Thais want to spend on. Over 70% say they would spend more on traveling if their income were to rise by 20%. Others would opt for home improvement projects, especially in the case of seniors, who prioritize quality of life and health.

Thai consumers are harder to please than in the past, as they search for variety and new experiences. They are also willing to pay more for better quality goods and services. This in turn pushes businesses to compete on quality or differentiate their products and services from competitors through personalization. Companies should also further develop their sales channels to meet more sophisticated consumer demands. Specialty stores provide the answer, since they offer products catering to specific needs. Competition from online businesses has forced brick-and-mortar stores to adjust, and shopping mall are being transformed into “retailtainment” complexes. One-stop shopping is not enough to attract today’s consumers, who seek new experiences and activities not offered online, such as leisure time with friends and other recreational activities.

Although Thai consumers are now more accustomed to online shopping, they do not yet buy online frequently. Nonetheless, online media’s popularity is rising. Over 69% of consumers rely on physical stores as their main shopping channel. But around half take advantage of multi-channel shopping. For example, they might check out a product in a physical store before buying it online. In addition, consumers’ decisions are increasingly shaped by online media. Around half of shoppers take online reviews more seriously than those found in print and broadcast media. One exception is senior consumers, who rely on traditional media such as television to make shopping decisions. Businesses should develop online sales and marketing channels while also continue to strengthen their reach via traditional means.

Consumer preferences are increasingly sophisticated, pushing businesses to adapt new strategies and form alliances within the value chain. Businesses in the same value chain can collaborate to meet customers' demand. They can use big data to devise and coordinate strategies throughout the value chain, from downstream retail businesses, which can best access information on consumers' needs backward to upstream producers. This will allow companies to design customized products for each market segment and apply big data to inventory management, pricing and technology-assisted marketing.

Businesses nowadays have to go beyond building brand loyalty. To stay in the game in the long term, they should focus on customer engagement. Maintaining an existing customer base is as important as reaching new customers. Key strategies include developing integrated services that respond to customer demand and offering memorable experiences that will bring them back. In addition, after-sale services play a crucial role in bolstering customer relations.

Another important strategy is using multi-channel and “omni-channel” access to reach customers. While most businesses are now focusing on developing an online presence, online-only stores can benefit from developing brick-and-mortar shops. Instead of competing against each other, the online and physical stores together can give consumers an “omni-channel” shopping experience, with shops, websites, apps, social media and conventional media ads all carefully synched to offer integrated promotional campaigns. Adding or enhancing online channels can help reach international markets and strengthen sales growth.

Three megatrends to change the face of the Thai tourism industry

Wed, 22 Mar 2017 09:27:00 +0700

Contents

Executive Summary
Chapter 1: Megatrends reshape tourism industry
Chapter 2: Thai tourism industry faces new challenges and opportunities
Epilogue: Three keys to surviving change and thriving

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Megatrends are creating global waves of change that will force businesses in the tourism industry to adjust. The three major global trends are; 1) demographic change, especially rising numbers of senior citizens, who will account for an ever larger share of international trips and travel spending, 2) intensified international competition for arrivals and tourists’ spending as governments ease visas and promote tourism-related investments, and 3) the rising dominance of smartphones and social media in everyday life and consumer behavior, forcing businesses to adapt.

Tourism businesses should prioritize the senior citizen segment, which is growing fast. Older tourists have greater spending power and more free time, yet their demands vary widely. The groups with the highest potential are senior leisure travellers, which have the highest trip spending per person of any age group, and foreign retirees. The increase in travel to Thailand by senior tourists has lifted the number of foreign retirees here. Thailand can expand its market among foreign retirees by targeting rich countries with large numbers of senior citizens, such as the United Kingdom, United States, Japan and Germany.

As more and more nations vie to attract tourists and travel spending, creating a more competitive marketplace, tourism businesses should explore new niches. Throughout the Asia-Pacific region and Middle East, governments are promoting the development of new tourist attractions. Because tourists will have more and more destinations to choose from, Thai tourism business owners will encounter greater competition. Rather than promoting well-known destinations, businesses should focus on expanding new tourism market niches, such as activity-based travel and adventure tourism, which rely on value-added services and unique experiences rooted in local cultural and natural heritage.

Today’s explosion in online information and services has helped drive fast growth of free and independent travel (FIT) while also increasing tourists’ sensitivity to prices. As a result, online marketing is ever more important, and competition from new entrants is rising. New global businesses like online travel agencies enable easier comparisons but make consumers more sensitive to price. Smartphones and social media have driven the rise of marketing via bloggers and ‘influencers,’ who share their personal experiences of travel. New business models are disrupting old ones; Airbnb allows individuals to rent out their private residences to tourists. In many countries, Airbnb has had a significant impact on hotels, especially those in the mid- and low-price ranges. It is likely to pressure Thai hotels going forward. Already, over a million Chinese tourists have used Airbnb, whose number of accommodations in Bangkok has more than doubled in the past year or so.

EIC recommends three strategies for Thai tourism businesses to cope with change and increase competitiveness. The strategies are 1) differentiate to attract quality tourists, such as by promoting new market segments that face less competition and rely on the uniqueness of local places and culture, 2) partner with related businesses in order to add value, such as by taking advantage of Thailand’s strengths in medical tourism to create packages for older travelers and foreign retirees, and 3) use technology and online media to reduce costs and expand customer reach. These megatrends presents both opportunities and challenges. Thai businesses should get proactive as soon as possible.

Thai Tourism: Sustaining Success

Tue, 22 Nov 2016 14:05:00 +0700

Thai Tourism: Sustaining Success

Thailand’s vibrant tourism sector has played an increasingly important role in the economy in recent years, boosting many related businesses and helping compensate for weak growth in other sectors. International arrivals here will exceed 30 million in 2016, lifting tourism’s share of GDP to 11%. Arrivals should reach 37 million next year. In addition to direct income from tourist spending, the sector contributes to the economy via job creation and investment. The three tourism-related sector– hotel and restaurant, wholesale and retail trade, transportation and communication – together employ more than 10 million workers, adding 1.4% each year and comprising 26% of total employment in Thailand.

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Contents

Executive Summary
Chapter 1: Tourism becomes Thailand’s most vital growth driver
Chapter 2: Tapping new tourist sources and market segments
Chapter 3: Developing new drivers of tourism
Chapter 4: Long-Term Challenges
Epilogue

Infographic

Bioenergy and the Road to Sustainable Growth

Wed, 07 Sep 2016 10:15:00 +0700

Bioenergy and the Road to Sustainable Growth

Bioenergy is expected to grow rapidly around the world including in Thailand. Key supporting factors are government policies on national energy security, rising consumer awareness in environmental issues and climate change, effort to increase value-added for agricultural raw materials as bioenergy feedstock and new technologies to increase product value. This issue of Insight presents new perspectives and identifies business opportunities and challenges for the bioenergy industry in Thailand. In particular, we focus on 3 areas: 1) biofuel, 2) biomass power plants, and 3) bioplastics. EIC estimates that investment in the Thai bioenergy industry will reach THB 180-200 billion between 2016 and 2020.

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Contents

Executive Summary
Chapter 1: Prologue: The Global Bioenergy Industry
Chapter 2: The Biofuel Industry in the Age of Cheap Oil
Chapter 3: Biomass Power Plants in Thailand Power Industry
Chapter 4: Riding the Green Consumer Wave with Bioplastics
Epilogue
List of Abbreviations

Infographic

Eyes on reshaping China: illuminating opportunities for Thai businesses

Tue, 01 Mar 2016 00:00:00 +0700

Eyes on reshaping China: illuminating opportunities for Thai businesses

China is undergoing a major restructuring of its economic strategy that will create a "new normal" of somewhat slower but more sustainable GDP growth. Under the new approach, consumption and the service sector will become the economy’s key engine, displacing the leading role of investment, which helped generate a growth rate of more than 9% per year during the past decade. Because China has the world's second largest economy, with the most trade and largest population, the ongoing change will have ramifications throughout the world. This includes implications for the Thai economy, which depends heavily on trade and investment with China. Thai businesses should stay well informed about the new developments in China and adapt their strategies and tactics according to the emerging dynamics.

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Contents

Executive Summary
Chapter 1: How will the 5th Plenum plan change China?
Chapter 2: China's emergence as a world source of capital
Chapter 3: China aims to become technological innovation hub
Chapter 4: With smart strategy, Thai businesses can win big in China’s huge consumer markets

Infographic

Thai transport mega-projects pave way for countless business opportunities

Wed, 11 Nov 2015 00:00:00 +0700

Thai transport mega-projects pave way for countless business opportunities

A wide variety of businesses are likely to gain new and improved business opportunities as Thailand revamps its transport infrastructure to reach top international standards, according to a new report by SCB Economic Intelligence Center (EIC). In the latest edition of Insight, an in-depth quarterly analysis of business and economic topics, EIC forecasts the impact of the Thai government’s 2.2 trillion baht ($61 billion) plan to upgrade rail, air and water transport. EIC expects that the plan will boost GPD growth by 0.3 to 1 percent each year, stimulate higher private-sector investment, remain fiscally sustainable and increase the likelihood that Thailand will become the region’s logistics hub. The mega-projects will generate growth in industries ranging from construction and property development to commercial aviation, retail and logistics, among others.

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Contents

Executive Summary
Chapter 1: Infrastructure gap has dragged on Thailand’s development
Chapter 2: Off the roads, onto rails: putting Thai transport on track to efficiency
Chapter 3: Airport upgrades likely to lift economy
Chapter 4: Port expansion: harnessing the power of water transport
Chapter 5: Moving on: transport investment push will create both pressures and gains

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Trade Trends: New Forces Reshape Thailand’s International Prospects

Wed, 02 Sep 2015 00:00:00 +0700

Trade Trends: New Forces Reshape Thailand’s International Prospects

Thailand’s slumping export performance has focused attention on how to remedy it. Looking beyond specific products and industries, it is important to consider certain broad trends and opportunities in today’s global environment that will affect most Thai companies going abroad.

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Contents

Executive Summary
Exploring new frontiers and trends in global trade
Refocusing export towards sustainable growth through value-added and innovation
Raising the game: Capitalizing on Thailand’s strategic location as an entrepot
Digitalization transforms international trade

Staying ahead of Thailand’s graying society

Mon, 15 Jun 2015 00:00:00 +0700

Staying ahead of Thailand’s graying society
The rapid aging of Thailand’s population will pose a challenge for the economy, forcing government, businesses and individuals to adapt. The nation is among the first of today’s developing countries to become an aging society. Within 20 years, the elderly are expected to comprise 20% of Thailand’s total population. This issue of EIC Insight paints the big picture of this coming transformation, highlighting related economic and social changes that the public and private sectors need to prepare for.

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Contents

Executive Summary
Thai economy needs to prepare for next big structural challenge: rapid aging
Aging society drives new consumption trends, new business opportunities
Below the radar: hidden opportunities and risks of the aging society

Bridging Thailand’s Labor Gap

Mon, 30 Mar 2015 00:00:00 +0700

Bridging Thailand’s Labor Gap
A growing shortage of workers is one of the main challenges facing Thai companies today, as business owners and executive will tell you. The problem will only worsen in the years ahead, which is bad news for Thailand’s stumbling economy. GDP growth has been slowed by this hurdle for several years already. In this issue of Insight, SCB Economic Intelligence Center looks at three aspects of the labor gap. We assess the current state and future growth of the problem, examine its causes, and propose some ways companies can cope.

Contents

Executive Summary
What causes labor shortage in Thailand?
Impact on the economy and major industries
Business strategies to cope with labor shortage

Capturing Thai Gen Y consumers

Thu, 13 Nov 2014 00:00:00 +0700

Capturing Thai Gen Y consumers
Published in November 2014

The Information Age that has transformed daily life around the world since the early 1990s has likewise shaped the thinking and behavior of the global generation of consumers that grew up in its wake, called "Generation Y" or "Gen Y," who were born between 1981 and 2000 and who are now aged 15-34. Rising affluence and the power of digital technologies have given this group higher expectations than those of any generation seen before. Around the world, a new generation of start-up businesses has likewise emerged, catering to the particular needs of these young people, who are well aware of the power of choice in their hands.

Contents

Executive Summary
Introduction: The rise of Gen Y
Chapter 1: 5 key characteristics of Gen Y in Thailand
Chapter 2: How to leverage the 5 key characteristics to target Gen Y
Chapter 3: Successful Gen Y business models
Parting thoughts

Mastering the game in the connectivity era

Tue, 11 Feb 2014 00:00:00 +0700

Mastering the game in the connectivity era
Published in February 2014

Connectivity is the new game of doing businesses in a more connected world. It is a true megatrend that governs major developments throughout Thailand and Southeast Asia. Chief among the emerging changes is creation of the ASEAN Economic Community (AEC) that will demolish trade barriers and protectionism, creating a marketplace of more than 600 million consumers in 10 countries.

Many forms of connectivity are a result of changes in government policies or a natural progression of key trends and technology. These changes allow new breakthroughs to take place. Six connectivity megatrends will profoundly impact the private sector in Thailand and ASEAN:

Contents

Introduction: Connectivity and the changing business landscape
Target high-growth markets in the provinces and ASEAN
Use online channels to sell to more consumers at lower costs
Enhance human resource management to attract and retain talent
Build flexibility into supply chains to expand regionally
Jumpstart overseas expansion via regional capital markets
Parting thoughts

Mastering the game in the connectivity era

Tue, 11 Feb 2014 00:00:00 +0700

Mastering the game in the connectivity era
Published in February 2014

Contents

Introduction: Connectivity and the changing business landscape
Target high-growth markets in the provinces and ASEAN
Use online channels to sell to more consumers at lower costs
Enhance human resource management to attract and retain talent
Build flexibility into supply chains to expand regionally
Jumpstart overseas expansion via regional capital markets
Parting thoughts

Connectivity: shaping the game,breaking new grounds

Mon, 05 Aug 2013 00:00:00 +0700

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.

Therefore, it is necessary and advantageous for the private sector to be aware of the changes taking place in order to capitalize on these changes to benefit their own businesses under changing economic conditions.

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.

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.

Connectivity: shaping the game,breaking new grounds

Mon, 05 Aug 2013 00:00:00 +0700

Connectivity: shaping the game,breaking new grounds

On the road to the AEC...how can SMEs adapt and thrive?

Fri, 30 Nov 2012 00:00:00 +0700

On the road to the AEC...how can SMEs adapt and thrive?

The road to the AEC: How should Thai SMEs plan?

Thailand ' s small and medium-size enterprises (SMEs) today face domestic and international conditions that are changing rapidly. Now more than ever, it is worth considering whether these SMEs are prepared to handle the challenges, and just how they might seek benefits from any opportunities that would arise.

SMEs face increasing challenges. The rise of the minimum wage to 300 baht per day is a domestic factor that will directly affect operating costs, especially for SMEs in the services sector and in labor-intensive industries. Another challenge is rising shortages of labor, as more and more workers turn to self-employed jobs, and as high turnover rates result from skilled workers moving into larger production industries. Thailand's integration into the ASEAN Economic Community (AEC) will also have both positive and negative impacts on SMEs. There will be more opportunities for trade and investment, but at the same time, pressures will increase.

An analysis of the effects of the rise in the minimum wage shows that there will be both direct effects from increased labor costs and indirect effects from costs passed through via other businesses in the supply chain. Direct effects will inevitably hurt companies that rely heavily on unskilled labor and those that have labor costs as their main cost, such as these in the agricultural services, and construction sectors. Businesses with long, complicated supply chains will be affected more from indirect costs. These businesses, such as food and beverage and vehicles and vehicle parts, will see higher costs for goods and services on the form of rising price of raw materials and logistics pushing through the supply chain. As a result, profits of these businesses will be affected by both direct and indirect effects of the raise in the minimum wage to 300 Baht. We expect that overall costs may increase up to 8% if companies are able to pass through 100% of costs. However, If the ability to pass through costs is less than 100%, the effect on costs may be reduced to 3%, but companies will still see a 4% reduction in their profits due to the burden of costs that cannot be passed through.

Aside from the rise in the minimum wage, labor shortages also present a challenge to SMEs. As the Thai labor force begin decreasing after 10 to 15 years from now, a scarcity of workers will become a large problem, especially in the manufacturing sector, where the effects can already be seen. Many Thai workers have turned to self-employed jobs. And there is a significant skill mismatch issue, involving an insufficient supply of the skills and experience that businesses need from workers. This means that workers will be harder to find and SMEs will have to pay more attention to increasing labor productivity

SMEs that suffer direct and indirect effects from the minimum wage hike should act promptly to increase labor productivity. They can do go by such methods as using technology to reduce reliance on labor. These companies should also value-added to their products and services, while training workers and upgrading skills to enhance labor efficiency.

SCB EIC has surveyed the opinions of SMEs regarding business prospects and their readiness to handle both domestic and external factors. Overall, SMEs are optimistic about the next one to two years, despite the challenges, especially the rise in the minimum wage. SMEs assess that the higher minimum wage will raise manufacturing costs by an average of 12%, which is higher than overall industries impact estimated by EIC. The service sector expects to be affected the most, because it relies on high levels of labor and is less able to pass through costs to consumers. SMEs also face the issue of labor shortages, especially among companies that require skilled labor, because they are unable to meet this need with foreign unskilled workers. However, most SMEs have started to implement new technologies to reduce long-term costs.

Regarding the AEC, most SMEs have little understanding or knowledge about it, and believe that liberalizations will have either a positive impact or none on their business. Businesses in the agricultural and manufacturing sectors foresee opportunities for exporting into ASEAN, while retail and services businesses see prospects to build new business alliances. On the other hand, Thai SMEs are also concerned about an increase in competition from within ASEAN. Most SMEs have prepared for this pressure by finding cheaper raw materials in ASEAN and improving their internal structures.

Beyond getting ready for new challenges, Thai SMEs need to look into opportunities to expand trade and investment in many different forms, such as through border trade, by operating businesses in response to global trends, and expanding investment into neighboring countries.

Border trade is an opportunity that SMEs should not overlook. Trade routes with neighboring countries still offer plenty of potential for growth, especially for various consumer products and construction goods. Demand in both categories has been growing a lot recently. Cross-border trade is another interesting channel for SMEs, especially the opportunity to trade with an economic superpower like China, which has a large consumer market with ever higher purchasing power. If overland transportation to China improves and becomes more convenient in the future, opportunities for trade will increase. Moreover, the establishment of Special Economic Zones over the border in neighboring countries will also add additional channel for trade and investment for SMEs that can supply raw materials, products and services to accommodate growth in these zones or construct amenities in them.

Global trends generate a variety of opportunities for Thailand ' s SMEs. For example, innovations in communications technology, such as social networks, are marketing tools that can empower SMEs to become more competitive. For example, these innovations present new opportunities to respond to fast-growing demand in emerging markets. There is also rising demand in niche markets, such as among environmentally conscious consumers, which generates growth potential for "green" businesses. Opportunities even result from the changing demographics of aging societies. These are all quite major opportunities for SMEs.

Thai SMEs should also utilize opportunities from liberalizations under the AEC to expand trade and investment into neighboring countries with lower manufacturing costs, which can help competitiveness. The best trade and investment opportunities for Thai SMEs are in Cambodia, Laos, Myanmar and Vietnam, known as the CLMV countries. Industries that present opportunities for market penetration include trading, especially consumer goods and goods related to housing and construction materials, as well as construction services, vehicle repairs, travel services and businesses which create linkages with export manufacturers. In considering investment destinations, companies should study which competitive advantages they can best build upon, in order to choose the appropriate country and find the right business alliances. SMEs should target business investments to best suit the business sectors that the destination country is officially supporting. If companies invest in businesses that enjoy the support of the target country's government, barriers will be reduced and investment returns will be higher.

It is now time for Thai SMEs to transform negative impacts from such factors as rising labor costs into motivators to develop to the next level. In reality, Thai SMEs have many channels through which to expand, such as via border trade, capturing new markets and adapting to changes in consumer behaviors, as well as seeking opportunities from AEC liberalizations. Because of increasing competition in regional and global markets, consumers can more easily purchase goods from many different suppliers. Prices of goods will therefore likely decrease, unless entrepreneurs increase the value of their products to support higher prices. So now is the time for SMEs to leave their comfort zone in traditional domestic markets to find new channels to increase earnings and counter profit erosion from rising domestic costs.

On the road to the AEC...how can SMEs adapt and thrive?

Fri, 30 Nov 2012 00:00:00 +0700

On the road to the AEC...how can SMEs adapt and thrive?

The road to the AEC: How should Thai SMEs plan?