EIC Research Series: Get to know the gig worker
By: Kunyaruk Naiyaraksaree

Author: PULLAWAT PITIGRAISORN

Published in Bangkok Post/Asia In Depth: Asia Focus section, 17 July 2018

Spa is one of the rising stars of global wellness industry due to its fast-growing record, outpacing the overall growth of the wellness industry. The Global Wellness Institute (GWI) expects the overall market value of the spa industry worldwide to grow 6% per annum, or from USD 1.29 trillion to USD 1.69 trillion during 2015-2020. The rate is faster than the overall growth rate of the worldwide wellness industry which is expected to grow by 5% per annum from USD 3.8 trillion to USD 4.9 trillion in the same period. The reason behind the fast-growing rate of the spa industry is attributed to 1) the rise in aging population in which an analysis of GWI report and the CIA World Factbook shows that 20 countries with highest market value for spa industry have a population median age of over 40 years old, highlighting the need of spa usage that grows alongside the trend of aging society. 2) The rising income of middle-class consumers worldwide that leads to an increase in spending on personal well-being in addition to the daily spending and 3) The fast-paced life of the millennials that create stress.

The information provided by GWI also shows that the overall market value of the spa industry in Thailand is growing as high as 8% per annum, from THB 30 billion in 2013 to THB 35 billion in 2015. This figure puts Thailand at 16th place in the world and the 5th in Asia behind China, Japan, South Korea, and India. The main consumer group for Thailand’s spa industry are international tourists especially those from East Asia, such as China, Taiwan, Hong Kong, South Korea, and Japan, as well as tourists from the western countries. The international consumers also make important contributions to growth in income for Thailand’s wellness tourism sector. From the analysis by GWI, the market value of global wellness tourism is projected to grow by 7% per annum between 2015-2020. It is expected that Thai spa industry will likely benefit from this growing trend of global wellness tourism also.

In Thailand, there are 3 popular types of spa. These are 1) Day spa which is the most common type of spa located in residential areas, offices, and shopping centres. Day spa focuses on providing treatments that last from 30 to 210 minutes without an overnight stay. 2) Destination spa which provides all-inclusive package that includes accommodation, healthy diets and wellness programs. Customers of destination spa can customize their length of stay and the services that fit their wellness goals, with options ranging from 3 to 28 days. Most of these spas are located in a tourism destination with beautiful natural surroundings. 3) Hotel spa located in a hotel/resort property. Hotel spa operates in a similar manner to a day spa. From the mentioned types of spa, hotel spa represents the worth-watching business opportunity because it provides more activity options for tourists while contributing to the hotel bottom-line. The rise of hotel spa helps Thailand to become an inclusive destination for international tourism.

 Hotel spa reinforces hotel’s core competency that is reflected in a higher revenue per available room (RevPAR) while providing a business opportunity for spa operators and cosmeceutical business. According to the information from CBRE Hotels, hotels with spa in the US tend to receive a higher RevPAR than those without a spa by 27% for urban hotel and 10% for resort. This is attributed to the ability of the hotel to increase a higher rate per room. At the same time, hotel with a spa can create additional and recurring revenues from guests who signed up for a spa membership. In addition, a popular and well-known spa can help by adding value to the hotel through a positive brand image.

Furthermore, a hotel spa with a different selling point can create a unique experience for guests of the hotel. For example, Zen Zone Spa, located in a 5-star hotel Gran Hotel La Florida in Barcelona, offers a unique experience by providing a relaxing bubble pods containing 99.5% oxygen to relieve stress under blue light and detox the body, or the K-Spa of K-West Hotel & Spa in London which provides a sub-zero spa experience alongside sauna, known as the “Hot and Cold Therapy” that originated from Finland, that induces blood flow, reduce cellulite, and build the immune system.

From these angles, Thai’s spa operator should leverage an opportunity from hotel spa to build a customer base by providing services to guests staying in a hotel. This is a significant business opportunity because 4 to 5 stars hotels are mostly situated in prime areas while their customers also possess high purchasing power. For Thai’s spa operators specialized in cosmeceutical and aromatherapy products, they can use this business opportunity to advertise and sell their products while creating brand awareness through actual product usage among spa users, potentially leading to a wider consumer base that subsequently lead to higher sales.

Author: Panjarat Kitticharoonwit

Published in Bangkok Post/Asia In Depth: Asia Focus section, 18 June 2018

Health craze and what it means for fruit juice manufacturers

For several decades, fruit juice has been regarded as a healthy option, especially when compared to the always popular carbonated soft drink. But many credible scientific researches have found that drinking fruit juice is not the same as consuming fruit as fruit juice contains as much sugar as soft drinks or sometimes even more. This new perception of adverse health impact from fruit juice’s consumption among many consumers has been slowly forcing “fruit juice” to lose its crown to healthier alternatives.

According to Business Insider, the orange juice market in the U.S. is down 50% since 2001, and its sales had not seen any annual increase since 2013. Popular brands such as Tropicana and Minute Maid suffered double-digit sales drop between 2010-15. The similar direction has also observed in western Europe, where consumption of orange juice, as reported by GlobalData, saw a drop of around 25% between 2007-15.     

With no exception, this change of consumer behavior has already been felt in Thailand. According to Nielsen, in 2017, the total value of the ready-to-drink (RTD) fruit juice market in the country was at 12,000 million baht, a 6% drop from the previous year. The data indicate that growth in the industry has been stagnant for many years, signaling the fruit juice sales may have reached saturation point. Many of the top domestic juice manufacturers have also recorded revenue drop in the last few quarters.

Customer is more educated on healthy consumption

EIC has identified two major underlying factors behind this changing customer behavior. First, consumers can access to information anywhere at any time due to the rise in smartphone penetration and internet access which allow the access to relevant information at a fingertip. And health-related issue is one of the categories that continue to gain traction online. Over the years, we have witnessed bloggers gain their popularity from writing, sharing and reviewing healthy lifestyles and products. It is evident that discussion about the misconception of health benefits from fruit juices have been flooded.

The second factor is the negative impact of the 2017 sugar tax hike, which consisted of an ad valorem tax and a tariff for soft drinks with a sugar content of 6 grams and above per 100ml. This amendment has an impact on fruit juice market quite significantly, especially for the non- 100% fruit juice, given it often contains substantial amounts of sugar. This government policy more or less has sparked a spillover effect of concerns on the actual benefits attached from fruit juice consumption. Consequently, juice manufacturers thus start to focus on reducing the sugar level in their products with hope to avoid having to pass on the tax burden to consumers through unit price increase. Nevertheless, many customers have already shifted away to alternatives deemed healthier such as drinking water or specific new segments like coconut water and tomato juice. Reflected by this change, these three segments continue to experience positive sales. Scientific researches have proven that these group of products provides specific health benefits for consumers.  

Right balance between export-led growth and potential domestic subsegment

Noting that customers have already begun to change their perception toward fruit juice, this does not necessarily mean juice manufacturers will be running out of business. Amid of this challenge, there are some bright spots waiting to be captured. EIC has broken down three key strategies that fruit juice manufacturers could adopt to withstand the storm. These will not only help to keep their businesses afloat but also will eventually convert to a bigger win in a long run. These approaches include capturing new growth from the increasing demands in neighboring markets, focusing on specific segment in domestic market and lastly consistently investing in R&D for future product trends.

The export-led growth strategy for Thai fruit juice companies has already been validated by the move of Malee Group, one of the leading food-and-beverage firms, as it has undertaken its first foreign acquisition with Long Quan Safe Food Joint Stock Company (LQSF), a major beverage producer in Vietnam earlier this year. According to the news report, Malee is expecting to increase its oversea revenue share from 40% to 60% within the next 3 years. Import statistics of CLMV on fruit juice category in 2017 have shown a noteworthy growth of 170% from the previous year. Fruit juice manufacturers should take the advantage when the juice’s perception in these neighboring markets still be in an initial stage, which products from nature are considered healthy. 

Whereas in the domestic market, juice manufacturers should focus their attention not only on to reduce the added-sugar level on their juices but also to find new segments that savvy customers would embrace. The recent popularity of tomato juice and coconut water presents a good example of how fruit juice market has evolved. With the notable scientific proven record of nutrients that come with tomato juice namely lycopene, antioxidants and vitamin A, the product has become one of the rising stars among fruit juices. EIC has estimated the value of tomato juice market in Thailand in 2017 to be at around 880 million baht and predicted that it could reach over 1,000 million baht within the next 3 years. The story of coconut water is also worth-noting as we can see that many new brands of RTD coconut water are added onto the shelves. The benefit of this fruit juice to the body especially the low level of fat content and its advantages to skincare are the factors that make coconut water become a trendy beverage.

Keep researching for the future

With consumers continue to actively monitor their intake of sugar and nutritional label, juice manufacturers need to emphasize on research and development in order to understand the market trends. Rising number of middle class and the coming of ageing society are the two important factors that will create even more number of health-conscious consumers in the future. These group of customers are more sophisticated and have begun to favor premiumized products that could deliver what their bodies ask for. It is clear that consumer behaviors in fruit juice consumption have already started to change and those companies who can evolve quickly and respond to the change with the right mixture of balanced approaches will manage to stay. Juice companies are going to have to get creative.

Author: ­LERDSAK SANGASILPA

The impacts to Thailand from the impending US-China trade war

Trade remains a key focus for 2018 as President Trump continues to deliver his promise of the “America First” Policies.  Aiming to attain fair trade for American companies globally to reduce trade deficit, implementation of the policies began in January with imposition of safeguard tariffs on imported washing machines and solar panels, followed by the steel and aluminum tariffs in March.

The initial trade actions by the US did not target specific countries, however, recent actions seem to focus on China – a country having the largest trade surplus of $396 billion in 2017 with the US, according to the International Trade Center.

On March 22nd, US formalized plans to impose 25% tariffs on 1,333 Chinese products as US deems that China does not adequately observe intellectual property rights. This action prompted the initiation of China’s retaliation, first with tariffs of 15% to 25% on 128 American products such as fruits and pork followed by Chinese’s threat to impose 25% further tariff on 106 additional products such as oilseeds and plastics from the US.

US and China’s objectives

A detailed examination on the products targeted by the US and China reflects the varied objectives of both countries. Chinese products that are high in technological content i.e. automotive and electronics are primary targets of the US and agricultural products from the US i.e. fruits and pork are penalized by China.

Apart from aiming to reduce trade deficit, US is making clear efforts to deter China from moving up the value chain into becoming a high technology powerhouse with a targeted tariff list on tech products. This is to combat the “Made in China 2025” initiative which has been adopted by China to shift away from labor intensive industries such as footwear and toys to high-tech industries.

On the other hand, China’s penalization on US agriculture products could be deemed as an effort to target American farmers, especially in the Midwest, who are strong supporters for President Trump.

What does this mean for Thailand in the short term?

Tension abounds amid the trade war between two global super-powers. In the short term, Thailand could face direct and indirect impact. The most immediate direct effect which can arise in times of loggerheads is for the mutual tariff-imposition to cause products of both trade giants to be dumped into Thailand, resulting in stiffer competition with Thai domestic products.

However, the imposition of tariffs between the US and China may lead to an increase in the demand for Thai products that are substitutable in these two markets.

Riding the storm with Thai agriculture and petrochemicals

Our analysis shows that, in the short term, there seems to be some Thai sectors such as the agriculture sector that may benefit from the trade war. 

For example, Thai cassava chips may stand to gain as a result of Chinese tariff on US ethanol. In 2017, China ethanol import from US declined 99% YoY from 2016 after China increased ethanol import tariff to 30%. The further increase in China’s ethanol tariff of 15%, to 45% from 30%, will further limit US ethanol export to China. This action, together with China’s plan to expand the mandatory use of ethanol in gasoline (E10) nationwide by 2020, encourage Chinese ethanol manufacturers to increase their domestic production of ethanol. Since 25% of the ethanol are produced using cassava chips, the demand of Thai cassava chips export is likely to increase.

Another noteworthy product on the list is soybean. China relies heavily on soybean imports for its domestic requirements of soymeal to produce animal feed. China now imports 90% of its soybean consumption of which 32 million tons was imported from the US in 2017. This accounted for 57% of the soybean exports of the US at $12.4 billion. China is likely to shift its domestic import requirements from the US to Brazil. Together the US and Brazil accounted for 83% of global soybean exports (40% from US, 43% from Brazil) in 2017.

Since China still has the soybean stocks of 21 million tons, it can turn away from purchasing US soybean in the short term. This may cause a fall in US soybean price due to declining demand from China. As Thailand is an importer of soybeans, of which 26% comes from the US, this will benefit the industries that use soybean as raw materials to produce animal feed and cooking oil. 

China’s tariff on US products may also create further opportunity for Thai petrochemical players to export more plastic resins to China - currently 30% of Thailand’s plastic resins are exported to China.

Thailand’s technology sector – cause for concern?

With the possible US tariffs on China high-tech goods, Thailand is likely to be affected, although the impact should be limited for now.  This is because the linkage of Thailand’s supply chain to high-tech China exports is relatively small.  Also, Thai exports to China of automobile and electronic products like digital cameras are mainly for final consumption within China. 

As a developing country that relies on export, Thailand grows best in times when the world trade is expanding. Thus, Thailand cannot be complacent on riding the storm peacefully as a bystander because there is no signal that President Trump will be halting threats to impose further tariffs.  We should look for opportunities to attract strategic FDI, partly benefiting from the relocation of investment from China. Going forward, Thailand can also enhance our resilience to potential escalating trade wars by accelerating Regional Comprehensive Economic Partnership (RCEP) negotiations and strengthening other FTAs to gain more market access for Thai products. 

Author: Nithi Kaveevivitchai

Getting your favorite food delivered right at your doorstep

Its size maybe dwarfed by those of North America and Western Europe, but the online food delivery business in Asia has been witnessing steady growth of about 15% a year. Food delivery service in Asia now appears poised for a breakthrough to the next level, as more players both domestic and international enter the industry.

Restaurants were once thought to be immune to the threat of eCommerce, but the arrival of online food delivery platforms have transformed the industry into a new battle ground. Competition among online restaurant aggregators as well as logistic networks are intense as several partnerships are formed in an attempt to create a business model that would best appealed to each distinct market segments.

While food delivery in China is dominated by domestic players, smaller markets in Southeast Asia have been more promising for international and regional players like Deliveroo, Foodpanda, Ubereats and LINEMAN, which has been especially popular in the Thai market. The high growth potential and fast changing consumer behavior in Southeast Asian markets have offset their small market size and continued to attract new businesses.

Customer is more powerful than ever before

EIC has identified two major underlying factors behind changing customers behavior during this rise. First, smartphone penetration and internet access which allow everything to be connected at a fingertip. With the technological advancement, consumers are discovering their interests virtually through their smartphone’s screen and the need to physically be outside of the house to learn about new places is diminishing. The second factor is that digital consumers in this generation are much more savvy and particular. Moreover, they are ensuring that their voices are also being heard much louder through online comments and reviews.

As a result, online food delivery services serve right at the heart of these digital savvy consumers by allowing them to be able to have their favorite dishes from the restaurants of their choices at anytime and anywhere. The service works as a substitution of the effort to go out and fight the traffic or to wait in line for hours to be seated in a busy restaurant. In a similar manner, it is also a replacement for meals that were prepared and consumed at home. With the rising urbanization and the Asian hectic working culture, consumers are looking for an easy treat and nothing could beat a beloved menu delivered right to the living room and having it while watching your favorite TV show. Along with many other new digital services, these online food delivery platforms are invented to please the demanding customers.      

Localization to stand up against fierce competition

Noting that the demand is here to stay, this does not necessary mean any players have a permanent advantage in capturing this opportunity. There are five key competing factors that those platform aggregators who wish to win in online food delivery must possess. These factors are the delivery time and coverage area, variety of restaurant choices, delivery cost, payment methods and user experiences.

Nevertheless, with this highly competitive market environment, challenges are inevitable. EIC has broken down majors challenges that online food delivery platforms are expected to encounter into external and internal factors.

External challenges or those factors that the platform aggregators are unable to control are: the food standard from the restaurant, technology acceptance or the level of adoption rate among users and the strong pricing due to competition in the market. Whereas the internal challenges are logistic management, business model for drivers and the high marketing cost. Those platform aggregators that could come up with the right business model to optimize their logistic service as well as create the right incentive model to keep the drivers working for them would be able to create satisfaction for the users.

It is also very important to keep in mind that each market has its own uniqueness and success story elsewhere cannot be directly transferred to another market. The business shutdown of Foodpanda in Vietnam and Indonesia presents a very good example. The German-based Foodpanda had sold off its Vietnam unit in 2015 to local rival and in the following year terminated its operation in Indonesia, admitting losing the competition with the new generation of app-based taxi services that also offers food delivery.

Key factors behind the failure of Foodpanda in these markets are its unsuitable business model for the local environment. In Vietnam, Foodpanda’s rival, Vietnammm, a subsidiary of one of the world’s largest online food delivery websites Takeaway, could operate the deliver services in a much cheaper cost as compared to those of Foodpanda. During its operation time in Vietnam, Foodpanda hired around 100 full-time employees which was deemed to be too large of a group for the service they provided.  In Indonesia, meanwhile, the close-range delivery service is believed to be a weakness that made it hard for Foodpanda to compete. This strategy limited the options available to users and at the end have turned customers away.

Local market’s knowledge and understanding are therefore at the forefront of winning strategies. It is vital that the food service operators and aggregators realize customer’s list of priorities in each market and make sure that those are being delivered at all time.

The right combination of all to become a clear winner

Asked what we would expect to see in the near future of online food delivery sector, EIC has analyzed that we would witness blurring of segments between food and non-food delivery as players attempt to offer both services. However, we expect to see more non-food delivery platforms expand their business into food-delivery than the other way around.

Acquiring or partnering in order to cover both segments will be norm to gain larger user base. This also includes collaboration with logistic experts and food review platforms to create a more complete and interactive user experience.

We also expect that only a handful of players will remain as clear winners overtime. Given in the first phase of marketing spending, platforms are forced to spend great amount of money to capture users. But only those players with strong financial backups can survive and thrive in the long run. Lastly, product differentiation will be the ultimate key success factor. Platforms will be competing on their abilities to meet sophisticated customer’s demands such as number of restaurants, type of restaurants, recommendation services, coverage location and unique customer services. It is clear that digital food delivery service in Asia is here to stay and those who can find the right touch of each market by utilizing the perfect mixture of glocalization (globalization + localization) will triumph.   

Author: Veerawan Chayanon

Payment is an integral part of our daily lives but the way we are making payment is changing. The society is gradually moving from a fiat currency to a virtual one. As an example, our favourite cup of coffee was once paid by using bank notes or coins. When card system became more widely accepted, we swiped our debit or credit cards instead. Nowadays, we are increasingly neglecting these physical objects in favour of smartphone-based applications. A barcode in e-wallet is tapped, and the transaction is completed usually within few seconds.

As one of the fastest-growing regions in the world, Asia is witnessing the growing trend of cashless payment with an increasing array of services. Countries like China and South Korea are heading towards cashless society at a faster pace than others due to high internet speed and penetration rates, as well as a large share of smartphone ownership. A survey by Pew Research Centre in 2015 reveals that 65% and 94% of adults in China and South Korea has access to the internet, while smartphone ownership is 58% and 88% of the population, respectively.

In China, consumers are becoming increasingly adapted to mobile payment and are become more addicted to it. KPMG’s global survey shows that 85% of Chinese respondents are willing to use mobile wallets, comparing to 66% of those polled worldwide. Beijing-based consultancy firm iResearch also reveals that China’s mobile payments are around 40% of retail payments or USD 5.5 trillion in 2016, dominated by Alibaba Group Holding's Alipay and Tencent Holdings' WeChat Pay. Additionally, a research investment company CLSA predicts that China’s e-payments will surge to USD 45 trillion by 2021.

To match their enthusiasm for mobile payment and e-wallet, firms in China are offering consumers increasing convenience, accessibility, and attractive incentives. In Mainland China, from convenient stores to fine dining restaurants, accept e-payments while others, such as bike sharing, do not accept cash payment at all. Several businesses even offer superior benefits to encourage consumers to use mobile payments. Alibaba’s online money market fund Yu’e Bao provides attractive interest rates to clients who invest and spend with Alipay. This strategy turned Yu’e Bao into the world’s largest money market fund with assets of USD 233 billion as of November 2017.

In South Korea, debit and credit cards, e-wallets, and mobile payments have become the preferred choices when making transactions. The Bank of Korea (BOK) reveals that only 20% of all payments are made with cash. E-payments gained popularity in South Korea after the launch of T-money in 2004 in which public transport fares are paid by a stored-value card. T-money offers users many incentives and convenience such as fare deduction, discounts at participating stores and restaurants, and a modified chip that fits mobile phone SIM cards as well as the more traditional debit and credit cards.

The success of T-money, the popularity of smartphones, and easing of financial regulations in 2015 prompted a new wave of Fintech developments in South Korea. Tech giants like Naver, Kakao, and Samsung are investing to develop their mobile payment platforms with the aim of capturing behaviours of modern consumers. Moreover, BOK is now pursuing an aspiration of having a cashless society by 2020, beginning with the phasing out of largely worthless coins from the economy. It is important to note that it is not only because the minting cost is increasing and exceeding the face value, but people also do not want to carry coins anymore.

However, while China and South Korea represent success cases for mobile and e-payment, other Asian countries with well-established payment infrastructure, have a surprisingly low adoption rates of non-cash payments. Although there are plenty of choices of e-wallet in Japan, such as Suica, Pasmo, and ICOCA, Bank of Japan reveals that value of e-money transactions in 2016 is around JPY 5.1 trillion, accounting for only 4% of total retail sales. In addition, a study by insurer Meiji Yasuda reveals that 70% of Japanese consumers of all ages still prefer cash. This may be the consequence of an economic stagnation since the early 1990s in which Japanese consumers became more careful in their spending habits. In this sense, cash is a physical object that can be seen and controlled. Moreover, the low crime rate in Japan makes people feel safe in carrying cash while, at the same time, there are concerns over data security and privacy when money becomes virtual.

In Singapore, an auditing firm KPMG reveals that 60% of Singaporean respondents prefer cash to non-cash payment. An explanation given for this preference is that cash is more readily accessible via a large network of ATMs. According to the government’s report, the number of ATMs in Singapore has increased by 65% within the past decade, and 90% of residents can reach ATMs within 500 meters from their homes. Moreover, cashback services are available in convenience stores throughout the country. These are possible reasons as to why consumers in Singapore are more reliant on fiat money.

Furthermore, cash is also a preferred payment method for merchants in Singapore, especially SMEs, because they do not wish to bear the costs of e-payment adoption. In reality, transaction fees are normally charged by e-wallet developers, as well as the credit card issuers. Meanwhile, a point-of-sale terminal is not always free lunch. Moreover, each e-payment system is incompatible with another. Thus, consumers have to sign-up with different mobile applications, while merchants have to install additional devices to settle payment with different parties.

In learning from the above cases, it is evident that while new technologies for payment are available, they are not always by consumers and merchants alike. Thus, the key challenge lies in how to attract consumers and merchants to accept new forms of payment, whether through accessibility, convenience, incentive, or a combination of factors. This is an important consideration, as payment technology is evolving continuously with buzzwords such as blockchain and hashgraph as the next generation of payment. 

Author: EIC | Economic Intelligence Center
Published in Bangkok Post/Asia In Depth: Asia Focus section, 4 December 2017

Biomass pellets have been fueling the world’s energy needs significantly in recent years. According to IEA Bioenergy, global wood pellet production observed phenomenal growth, from 6-7 million tons in 2006 to 26 million tons in 2015, with an annual growth rate of 14%. Over 60% of the pellets are designated for export markets, which has propelled the annual growth rate of global wood pellet exports to 11% for the past five years, reaching USD 2.5 billion in 2016.

What has sparked the increase in demand for wood pellets? The continuing trend to optimize value from wood by-products as biomass pellets is deemed by some as an efficient way to turn waste into a lucrative business. Industrial agricultural residues such as sawdust from the milling of lumber, eucalyptus bark, rice husk, and tapioca trunk are amongst some of the valuable waste in the pellet business. Among the various types of biomass pellets, wood pellets are the most popular due to the high availability of raw materials and higher fuel efficiency in comparison to other biomass feedstocks. In addition, wind, solar and biomass energy are in strong demand in countries such as China, Japan, South Korea, and the United Kingdom due to the enactment of the Renewable Portfolio Standards (RPS) policies, which aims to increase the production of electricity from renewable energy resources.

According to the International Trade Center (ITC), the top three exporters of wood pellets are the United States, Canada, and Latvia. Vietnam is the sixth largest exporter in the world as well as the largest exporter in Asia.  It is also the fastest growing exporter, contributing to 5% of global wood pellet exports. Vietnam benefits from its furniture industry, the second largest in Asia, behind China. This provides Vietnamese producers, who are mostly small, pellet producers, with a large pool of wood scrap to be used as cheap feedstock for the production of pellets that can be sold cheaply.

South Korea and Japan are the two leading Asian importers primarily due to the implementation of RPS policies. In 2012, South Korea set a target for large power utilities to increase the use of renewable sources in their energy production from 2% to 10% by 2024. As a result, power utilities in South Korea turned to wood pellet to fulfill the regulatory obligation. This prompted a surge in imports from 0.1 million tons in 2012 to 1.7 million tons in 2016, with Vietnam benefiting as the top export partner for South Korea.

In Japan, an RPS-equivalent policy was also introduced in 2012, following the aftermath of the Fukushima disaster in 2011. Under this Feed-in Tariff (FiT) scheme, power utilities are obliged to purchase electricity generated from renewable sources such as wood pellets. As a result, Japanese wood pellet imports have spiraled towards a 48% annual growth rate since 2012, from 0.02 to 0.35 million tons.

Is Thailand hopping on the global wood pellet bandwagon? Currently, there are 77 pellet factories in Thailand, with half of the factories located in southern Thailand due to an abundant supply of rubber wood, which enables pellet factories to utilize residue generated from the lumber industries as feedstock. Thai wood pellet export declined significantly in 2014 due to a short-term halt in South Korea’s import strategies due to changes in import regulations. Despite being in a nascent stage, with most of Thailand’s pellets only produced for industrial use, the growth rate of Thailand’s wood pellets has seen a healthy increase from almost none in 2011 to USD 2 million in 2016. This is attributed to a growth rate of 112% for the past five years, thanks to South Korea as the major importer in view of the proximity advantages enjoyed by Thailand. 

Despite a rosy outlook, the Thai wood pellet industry can be a double-edged sword. First, Thai pellet producers have to compete for a constant supply of feedstock from biomass power plants that also use wood residue such as wood chips and sawdust to generate power. Wood pellets are not typically used by Thai biomass power plants due to their high cost. According to the Energy Regulatory Commission, Thailand’s installed biomass power plant capacity is 242 Megawatts, consuming some 3 million tons of wood chips and sawdust per year.

Second, procurement of suitable equipment for the production of wood pellets is an uphill task. Many Thai pellet producers encounter problems in importing expensive pellet machines which are incompatible with the production of local rubber wood pellets, and at a prohibitive cost. This is due to the differences in the types of wood used in Thailand and other pellet producing countries where the machines originate.

Third, export opportunities are being hindered by sustainability certification requirements by prospective customers such as Japan. Forest Stewardship Council (FSC) certificates are issued to ensure the traceability of wood pellets that come from responsibly managed forests. As most Thai rubber plantations are small holdings, they lack the expertise and resources required to obtain proper FSC certification. Some cooperative groups have introduced initiatives to encourage Thai small rubber plantation owners to apply for this type of certification.

Although Thailand’s export of wood pellets is conservative at this stage, domestic demand for wood pellets is gaining a stronger foothold, as more and more industrial boilers are switching from other fuels such as fuel oil and firewood to wood pellets. According to the Department of Alternative Energy Development and Efficiency, wood pellets are 60% cheaper than fuel oil in generating the same energy output. Even though wood pellets are a costlier resource compared to firewood, pellets are preferred due to their many advantages over counterparts, including their possessing a higher density, which makes pellets easier and cheaper to transport and store. The homogenous quality pellets make it easier for boilers to operate at a constant burning rate.

Despite challenges, the outlook for wood pellet exports in the medium term looks promising, as global demand is gradually shifting from Europe to Asia. Japan and South Korea are projected to demand 4.4 million more tons of wood pellets by 2020 for power generation, according to IEA Bioenergy. In addition, China is striving to replace the use of coal with 30 million tons of biomass pellets by 2020. Although the Thai wood pellet industry remains at an infant stage, given the marginal export quantity of 22 thousand tons of wood pellets in 2016, there is room for Thai producers to dream of bigger export markets in the long run while continuing to concentrate their efforts on the domestic market in the short term.

EIC Research Series: Alibaba Kingdom

Author: Pimnipa Booasang

In recent times, both government and private sector have been promoting the move away from cash towards e-Payment among stores and consumers. The Chairman of the Thailand e-Payment Trade Association estimates the amount of cash transactions will rapidly fall from its current level of 90% down to 50% within just 2 years. Given the above, this article aims to provide answers to questions on the minds of all store owners regarding the benefits of e-Payment, the form of e-Payment that will be most widespread and whether the usage of e-Payment will rise as anticipated.

Government and private sector push for a cashless society.

The Ministry of Finance and commercial banks had a joint initiative under the National e-Payment agenda leading the installation of a total of 550 thousand electronic data capture (EDC) terminals nationwide to support credit/debit card payment. Afterwards, the Bank of Thailand announced its Standard QR code or QR code scheme enabling compatibility of a single QR code with payments from any credit/debit card, bank saving accounts or e-Wallets from domestic or foreign Non-Bank service providers. Meanwhile among private enterprises, large banks renewed their mobile application to enable QR code payment, whilst non-banks such as TrueMoney, m-Pay, AirPay heavily promoted their services in order to draw in more e-Wallet users.

It can be seen that the government and private sector have been encouraging more use of e-Payment between merchants and consumers via credit/debit cards, mobile banking and e-Wallet as the advantages of the move towards a cashless society are enormous. Such transition will lower cost of transactions and cash management as well pave way to other financial innovations. In fact, an analysis by VISA estimates the cumulative benefits of Bangkok becoming a cashless society will amount to THB 125 billion per year, with businesses stand to reap the most gains.  

Mobile banking is a service provided by a bank that allows its customers to conduct financial transactions remotely using a mobile device such as a smartphone or tablet.

Non-bank’s e-Wallet, such as TrueMoney, m-Pay, AirPay, is an electronic wallet which is used for transactions made online through a computer or a smartphone.

Estimated annual net benefits experienced by Bangkok if it moves to cashless society*

Remark: Estimated net benefits experienced by Bangkok’s economy if the entire population can move to digital payment usage equal to top 10% of users today.

Source: Cashless Cities Report by VISA

How to pay for goods or services by QR Code via SCB EASY

Bank and service providers heavily promoted their services in order to draw in more users.

e-Payment will raise sales and lower cost for businesses

Research by Roubini ThoughLab found that receiving cash via e-Payment can help boost sales for businesses. On average, a small business can increase sales by up to 17% after adding e-Payment option as it reduces lost sales from consumers that do not have enough cash on hand and also allows them to expand market reach towards online consumers. As for large businesses, adding e-Payment can increase sales by up to 22% because they can take advantage of e-Payment data to gain better understanding of their customers’ preferences. Such analysis can then support appropriate setting of prices and promotions to each customer group as well as loyalty programs that will increase returning customers. Nevertheless, such added benefits of e-Payment are not restricted to larger businesses, for instance stores in China used payment services via mobile phones to engage with customers by encouraging them to follow store’s page so that they can send out discounts coupons and promotions to customers directly.

How e-Payment help raise sales for businesses

Moreover, the replacement of cash with e-Payment will help businesses save time in doing cash transactions and cut cash management cost like cost in hiring staff to cash checks, cost in cash handling in stores as well as cost of monitoring or guarding cash from robbery. The study by VISA found that medium to large firms within Bangkok are more like to use e-Payment than their smaller counterparts as more than half of these small firms still rely of cash because they have few employees that are mostly daily hired and are more familiar with using cash. Regardless, small businesses can still save time and lower cost in handling cash with use of e-Payment.

Proportion of incoming payments (value) received digitally

Proportion of incoming and outgoing payments (value) received digitally

Remark: business sizes are based on number of employees. Small businesses: less than 20 employees, Medium businesses: 20-50 employees, Large businesses: 50-200 employees.

Source: Cashless Cities Report by VISA

QR code payment is inexpensive for merchants and will be more popular among consumers.

Stores adopting QR code system face lower cost than EDC terminals that are used to support credit/debit card payments because EDC machines and systems need proper installations and charges a fee of 1.5-3.5% to the seller. On the hand, payments using QR code requires only a mobile phone and a PromptPay account, which does not charge any fees for transfers below THB 5,000. Furthermore, as banks and service providers compete to become stores’ main receipt accounts, most of them have waived fee charges and thus stores do not have to set a minimum amount for users wanting to pay by credit card. Services such as transfers alerts are also being offered free of charge, which further enhances the convenience of QR code payment system. As for consumers, use of QR code is expected to become more prevalent in tandem with rising PromptPay accounts and greater use of mobile phones. To attract more customers, banks and non-banks are also set promotions and benefits such as cash backs or discounts for QR code payments.

Growth of e-commerce will drive use of e-Payment among consumers.

Growth of e-Commerce can boost use of e-Payment because it can make purchases of goods faster and more convenient. A case in point is China that transitioned into a cashless society within merely 2 years. Its transformation kick started from the use of e-Wallets like Alipay and Wechatpay that are used for online purchases and as it became more popular, a number of offline stores later had to adopt QR code payment system in order to compete and boost sales. As for Thailand, e-Commerce market value is estimated to grow at 13% per annum during the next 4 year, from THB 60 billion in 2017 to reach THB 100 billion by 2021, providing an important opportunity for consumers to become more accustomed to the use of e-Payment.  

However, as up to 39% of Thai online consumers preferring cash on delivery (COD) compared a share of only 8% in China, such may pose as a challenge to the growth of e-Payment among e-Commerce in Thailand going forward. Nevertheless, in future when COD adopts use of QR codes, e-Commerce businesses will be able to reduce their cost as payments are more secure and allows cash payment limits to be removed. 

Majority of online purchases in Thailand are paid using credit/debit card and COD

Unit: % of total respondents who bought products via online channel

Source: Survey conducted by EIC as of February 2017 and Worldpay

Cash on Delivery (COD) payments via QR code

Cashless society to spark development of fintech

The example of China and India shows that increased use of e-Payment will enable creation of financial database of SMEs and consumers. Information such as amount of money circulating within bank accounts, the type of transactions, and timing of flows in and out of bank account can be used to develop credit scoring or data that provides basis for financial institutions that want to provide nano-financing or other additional financial services such as private wealth management and insurance. In sum, with improved access to various financial services among consumers and businesses, this can support growth of SMEs, enhance people’s personal financial planning and streamline relevant data to government that can be used to design appropriate and effective policies. 

Development of e-Payment will enable other types of fintech

Unit: % of banking/financial services customers using fintech services

Source: DBS Bank, 2016

EIC Research Series: About gigs EP2

By: Kunyaruk Naiyaraksaree

           You may find the title of this episode a little off.

           “Earlier didn’t you say everybody wants to get a gig? Then how can it be painful?” you might ask.

           Indeed, even though the gig crowd seems to be living perfect lives (for more about the perks of being gig workers, please see our previous episode), their freedom actually come at an expensive cost.

           Our EIC survey shows that not all gig workers are happy with their freedom. In fact, some of them want to switch to full-time work, especially those who are not making that much money and those who used to work full-time before.

           Ask someone with a gig, and he or she will say there’s no such thing as a free lunch. Gig worker’s freedom is anything but free.

           But why? How can a gig worker’s life be so painful?

There’s no free lunch for freelance workers

            Pain point number one: Uncertain income. This is the most popular answer we received in our survey (80% of the gig workers picked this). Freelancers don’t enjoy the luxury of knowing when their next job will come. And since the job itself is unpredictable, so is the income. This is a stark difference from full-timers who never have any doubt if they will have enough money in their pocket come next month.

            Also, it may sound great to get to choose whatever jobs you want, but in reality it’s not always you who get to choose. Don’t forget that you’re not the only one who can and is willing to work. And if the task requires only basic skills, your competition is plenty, someone else can replace you in no time.   

Just imagine that you are a freelancer, perhaps a wedding photographer. Wedding couples, your potential clients, will search for the right photographer for their big day. So unless you have the style they want or get along well with them they will choose someone else. It is no wonder that gig workers feel a constant fear that someone with similar skills can snatch their jobs away anytime.

            Pain point number two: No job benefits, no holidays. The gig crowd doesn’t enjoy the usual job benefits that full-timers do, such as health insurance, work uniforms, holidays, transportation subsidies, bonuses, or pension funds. Indeed, it is these benefits that make gig workers green with envy.

            Granted, holidays and bonuses might not be too big of a deal if gig workers carefully plan out their schedules. But health insurance really makes the difference. When they get sick, gig workers have to choose between going to a public hospital super early in the morning and still face long lines, or going to a private one for more convenience just to get even more ill once they see the bills. No one wants to get sick, but our bodies probably won't listen.

            The gig crowd also complains of a few other difficulties. For example, it is hard for them to apply for bank loans because they don’t have good collateral. Applying for visas is also a challenge as they don’t have an authorized work certificate.  Working alone can also feel like being cut off from society. And what can be worse than an overly demanding client who does not honor a contract and delays payment. All these headaches make gig workers want to scream “I didn’t sign up for this!

 Source: EIC analysis based on EIC survey as of August 2017

A survival guide for gig workers

           Being a gig worker sounds painful, but 80% of gig workers (who don’t also have full-time jobs) are still happy with the situation, and more than half do not wish to switch to full-time jobs. Even as their freedom comes at a high cost, they’re willing to stick with it.

           Are there any secrets to survival?

           Look no further, we’ve got them all here for you. 

            1. Master time management. For gig workers, the one key to success is effective time management. This includes prioritizing tasks to see what should be done first. This is especially true for those who work on many jobs at the same time. Also, they have to learn to carve out some personal time for relaxing, spending on their own, or enjoying friends and family. With good time management, the work-life balance that everyone is chasing will be well within reach

            2. Make connections. Who said connections don’t matter? Our survey shows that most gig workers find their jobs through social connections, including direct personal contacts, mutual friends, and social media. Therefore, the ability to connect with people is among the most important skills gig workers need. The more people they know, the more jobs they can get their hands on. Useful connections are not limited to ones with clients, but also others in the same profession. For example, if you are an independent lawyer, then you should get to know other lawyers too so that a friend can replace you if for some reason you can’t finish a job you have accepted, and vice versa.

Source: EIC analysis based on EIC survey as of August 2017

            3. Acquire a variety of skills or unique skills. Skills are what sets one apart from others. Similar to regular jobs, whoever performs better will get the next project. Our friend who is a freelance Japanese interpreter told us that although there are plenty of people who can speak Japanese, only a handful have enough vocabulary bank to work as an interpreter. That’s why the jobs keep coming her way.

            4. Passion and happiness. These are often the reasons why people decide to become a gig worker. More importantly, they are the reasons why some stay for the long haul. An independent artist we talked to nicely summarized this point. He said he would stick with being a freelance artist because it makes him happy. And he’s happy not because of the freedom or the money, but because he enjoys the luxury of doing what he really loves.

            5. Get ready for changes. As we said earlier, gig workers face higher uncertainty in life than the rest of us. They don’t know how much money they will make or when the next job will come. Plus, big expenses for things like healthcare may suddenly catch them off guard. Therefore, the last and arguably most important survival tip is to always be ready for change. We had a chance to speak to a freelance graphic artist, whose work is so unique that anyone can recognize it. When asked about his secrets for success, he said that he constantly worked on improving his skills, updating his styles, and looking for new perspectives. He realized that whatever he makes today could be copied as soon as tomorrow, so the only way to avoid being replaced is to always offer fresh and innovative work.

            In fact, this last tip can be applied to anyone, whether you’re a gig worker, a full-timer, or whatever else. If you’re adaptable, open to change, and never stop improving, then you can keep your chin up through any changes that may come your way, be it a new job or even a lay off.

            And that’s what we call a boss!

Q&A with the gig workers

To gig or not to gig?

            Up to here, many of you may be asking yourselves

            “To gig or not to gig? What is really the right job for me?”

            For the first question, it depends on each person’s preferences. Let’s say that you ask your grandparents what they would think if you quit your job to become a freelancer. We don’t need to know your grandparents to guarantee that you will be scolded for throwing out the window oh-so-dear job security. But instead, if you ask fresh graduates they will say go ahead and follow your heart! Can you see? Different generations already disagree on this.

            As for the second question, look for jobs that suit you.

            On the one hand, gigs can be perfect for you if you love freedom. But on the other hand, full-time jobs would serve you better if you value certainty. Put another way, if you have a “I need cash in my pocket every month and health insurance to pay all my hospital bills” kind of mindset a full-time job is probably best for you.

            Remember too that you can’t always just do whatever you want. Life always comes with constraints. For instance, if you have to pay for a house or car, then you need a rather certain income stream. In this case, a full-time job would be a better bet. At the same time, many choose to gig out of necessity as it is the only way they can make time for their families.

            So to sum up, in order to decide if a gig lifestyle is right for you think about your preferences and constraints. Carefully weigh the pros and cons of each type of job and decide for yourself. Just remember that there’s no right or wrong answer when it comes to this.

            Or better yet, try both if you have a chance. There is a Thai saying that goes, “one look is better than ten hearsays.” Just one chance of trying it out is better than a hundred looks, too.

            Now back to our first question.

            To gig or not to gig?

            Do you know your answer now?

            .

            .

            .

            P.S. For those out there who are still unsure, we will not leave you stranded. Try out this quiz to see if a gig is right for you.

         Not satisfied with the answer? Still undecided? Keep calm, here are more quizzes for you!

         https://www.fieldnation.com/technician-blog/freelance-quiz

         https://www.policybee.co.uk/freelancing/should-i-go-freelance.aspx

Author: EIC | Economic Intelligence Center
Published in Bangkok Post/Asia In Depth: Asia Focus section, 20 November 2017

By 2050, the world will have 2 billion more people than today. How to feed them without overwhelming the environment is going to be one of the toughest challenge in the coming decades.

One solution that have emerged is what’s called indoor farming. Indoor farming is a practice of growing crops in an enclosed environment where grower have control of parameters such as light, water, nutrients, temperature, and carbon dioxide. Food production would take advantage of techniques such as hydroponics and aeroponics. Hydroponics is a method of growing plants in sterile medium using nutrient rich water. While aeroponics system does away with growing medium altogether by feeding plants with nutrient-laden mist. These methods can use up to 90 percent less water than traditional farming, avoid chemical runoffs, and prevent over fertilization. What’s more, proponents say that indoor farming can produce reliable food supply at a much lower footprint as traditional farming is restricted by arable land, soil quality, water availability, and weather conditions.

Indoor farming is gaining popularity worldwide. This is due in part to technological advances that have considerably bring down the cost of an indoor farm as well as the use of sensors, data, and artificial intelligence to control and improve how plants are grown and scale up operations. Studies conducted by the German Space Agency found that in 2016 the economic gap between crops grown using hydroponics with LED lighting and crops grown in German country side was around 3 USD per kilo a 75% drop from over 12 USD per kilo five years ago. The economic gap is expected to continue to drop as technology costs decline. For example, the price of LED light, a critical component of many indoor farms, have come down almost 80% since 2012.

In Japan the number of indoor farms (also known as plant factory) have increased threefold between 2011 and 2016 to roughly 200 factories where most common plants are primarily green leaf lettuce, romaine lettuce, frill lettuce, spinach, basil and arugula. Further drop in price is also expected as growers gain more experience and fine tune their production methods. More indoor farms in Japan are reporting profits or breakeven operation than previous years, according to a 2016 survey conducted by the Japan Greenhouse Horticulture Association. In addition, older farms are more likely to be profitable than newer ones; although this may partly be because their assets have been fully depreciated.

Three consumer driven trends are also helping to drive the growth of indoors agriculture.

First, food safety is a primary concern for many consumers who are wearied of contaminations and chemical residues from pesticide. A testing conducted by Thailand Pesticide Alert Network in 2016 found pesticide over the Maximum Residue Limit in 25% of products with “Organic Thailand” label. As crops are grown indoors, pesticide use is unnecessary for indoor farming. In China, where almost 20% of arable farmland is contaminated and air pollution levels can be as high as 5 times the level the World Health Organization considers safe, many indoor farms have sprung up to serve the affluence urban population who are demanding safe and clean food.

Second, demand for healthier and more nutritious food is also driving demand as indoors grown plants can be altered to specific dietary needs. For example, Fujitsu has converted a semiconductor plant to produce low-potassium lettuce for Japanese consumers with kidney diseases. Manipulating plant growth using indoor farming techniques can potentially produce more nutritious plant. Few researchers have found that tomatoes grown using LED light have been found to have higher vitamin C level than their conventionally grown counterpart.

Lastly, many consumers are becoming more interested in locally grown food as a way to connect with the local community, reduce environmental impacts from transportation, and get fresher food. Several forms of indoor farming such as vertical farm and container farm are designed to be located in urban area so consumers can get access to much fresher produce that can be grown year round. This present a business opportunity for producers in urban low food security markets. For example, Panasonic is currently offering 40 varieties of greens grown from its indoor plant factory in Singapore. For a country that imports more than 90 percent of its food, indoor farming offers a way to increase food security and build local food supply chain.

To be sure, indoor farming is still an emerging industry. Setting up an indoor farm is an expensive undertaking with high capital cost and specific technical know-hows. Construction cost for the structure can vary greatly from a simple greenhouse that relies on sunlight to a multi-story farm with densely stacked rows of crops and artificial lighting. Then there’s system cost such as trays, pumps, and lighting as well as sensors and controls. Moreover, indoor farming requires precise application of nutrient and control of parameters such as lighting, water, and temperature. This means that in additional to plants nutrients and growth requirements, growers need to possess knowledge about indoor growing system and equipment.

For would be producers, should consider the economic viability of potential crops including market demand, cost to produce, and market price. In Thailand, demand for hydroponics plants has grown over the years as lettuces such as red oak and green oak become popular with consumers. However, a typical commercial-scale hydroponic system cost well over a million bath for one rai of land not including greenhouse construction. Even assuming an optimistic production yield and healthy market demand the payback period is longer than two years. This means that without a big breakthrough in technology and cost for more high tech indoor farming the high upfront cost and small margin for indoor grown crops will still limit future growth of indoor farming in Thailand.

To be clear, indoors farming should be viewed as a supplement to traditional farming rather than as a replacement. Its role is to augment the food supply chain to create a localized system that is more resilient to adverse weather conditions and better prepared us to meet the demands of a growing urban population. 

Read more in EIC Research Series : About gigs

EP1 - The perks of being a gig worker

EP2 - Why is gig so painful?

EP3 - Get to know the gig worker

EIC Research Series: About gigs EP1 

By: Kunyaruk Naiyaraksaree

First things first, we should start by clarifying that the word “gig” here has nothing to do with either “more than a friend but less than a lover” relationships or the act of cheating, as many would presume. The two words may sound the same (in Thai) but their meanings are totally different.

The word “gig” that we are talking about here refers to short-term jobs without a contract tied to a certain place, such as part-time or freelance work. Gigs offer a lot of freedom in the types of jobs and work hours available. Compensation depends on how many jobs are completed and how difficult they are. An economy made up of these gigs is called a "Gig Economy.”

For Thai people, this new buzzword may not sound familiar, but the truth is that the gig economy has been a part of Thai society for a long time. As a farming country, there is a high demand for labor jobs during planting or harvesting seasons, so during those seasons there are always temporary jobs in the fields.  Another example; imagine our grannies in their 20s who just landed at Chinatown and started to settle down. The first jobs the grandpas took back then would be random delivery boys who were paid based on the number of trips they made. If a shop had no work available, they went to work for others. There was no commitment or contracts made. This kind of job was indeed a gig work and our grandpas back then could be called the gig workers.

Today gig economy is booming thanks to the Internet and a sharing economy. There are more types of gigs to choose from than ever. Riding the trend, young generations looking for freedom are flocking to gigs, so much so that they will perhaps replace some conventional office jobs soon.

But what exactly is so good about being a gig worker?

Let’s get to know the gig crowd

Before stepping into a gig world, let’s first look at how big the gig crowd is.

Although official numbers have not been published by any countries, leading consulting institution McKinsey Global has estimated that in the United States and Europe the gig population numbers around 162 million people, or about one-fourth of the working population. This is indeed a staggering figure. If the trend

continues, the gig population may take over the world in no time.

In Thailand, no official data has been collected either, but a survey by the EIC (based on 9,387 responses) found that the gig population makes up as much as 30% of the total workforce in Thailand. This means that for every 10 people you meet, three of them will be working a gig. And within those three, two will likely have full-time jobs and take gigs on the side, while the other one is a 100% gig worker (a freelancer, for example).

Some popular gig work in Thailand include freelancers, business owners, online merchants, and stock investors. Who are the freelancers? They can range from gardeners and coffee baristas to specialized professionals like doctors, graphic designers, lawyers, and financial advisors. As you can already see, the variety of gigs is huge, and it doesn’t even end there. For example, in Japan, middle-aged men take part in creative gig work called Ossan Rental (ossan means uncle in Japanese). The “ossans” can be hired to help clients do chores or to provide some good life advice – as they are all adults full of life experience. This business has proved very popular even though it has only been around for four years. The ossans also pull a nice pay, earning around 1,000 yen (around 300 baht) per hour.

Anyone can have a gig

To all the non-middle-age-male readers out there, don’t fret! You don’t have to be ossans to have a gig. And of course, the pay can be even better than 300 baht per hour.

The EIC survey showed that gig workers in Thailand come in all shapes and sizes, or more accurately, ages, income levels, and educational backgrounds. The largest group of gig workers is the baby boomers, most of whom already have a stable income that allows them to spend time as freelancers. As for how much money they make, gig workers earn between 9,000 baht to over 100,000 a month, with the majority of them making around 15,000-50,000 baht, depending on the types and quality of jobs, as well as how hard they work. Just like any other jobs in the world, the harder they work, the more they earn.

What we also find interesting is the diversity in the educational backgrounds of gig workers. As we have seen earlier, gig workers have been around in Thailand for a long time, taking up jobs like goods delivery or helping out on the farm. In the past these workers tended to be less educated, while the highly educated ones flocked to civil service jobs, considered highly prestigious decades back. But now a lot has changed, and gig workers include those without high school degrees as well as those with Ph.D. degrees.

The gig economy trend has changed the way we think about jobs. It has also thrown out some barriers that prevented some people from getting a job due to such things as age, educational background, race, or language. In the world of gigs, everybody can get a job as long as he or she has the skills, the energy,

and the time it takes.

Everybody wants to have a gig

So, up to here, anyone want to get a gig yet?

No need to be shy, you are not alone.

EIC survey showed that as many as 86% of Thai full-timer want to quit their jobs and take up gigs. This is such a huge number that it would make major employers in the country fall off their chairs. But more surprisingly, the portion of people who want to switch to gigs makes up of more than two-thirds of all types of groups, no matter how the group is defined, whether by age, occupation, income level, or financial needs. Yes, the results are the same, though the exact numbers for each group may differ somewhat. For example, interest in gigs is higher among private sector employees compared to those in the public sector and higher among Gen-Y people compared to baby boomers. But in general, the shares are all roughly in the same ballpark.

The number one appeal of gigs is freedom. Freedom defines a gig lifestyle. This is what the general public believes, for it is what famous gig economy platforms like Uber and Task Rabbit emphasize when recruiting partners, which in their cases mean drivers or contractors.

“Be your own boss and make money whenever you want” is what Uber tells us.

But even so, not everybody is willing or able to declare their freedom by quitting their jobs and taking up gigs. Given social values, responsibilities, and various other limitations, we are unfortunately not always free to do whatever we want.

Now, let’s hear what gig workers say about why they have chosen this path.

The perks of being a gig worker

Based on conversations with many gig workers and the EIC survey results, we discovered three main reasons why people choose to become gig workers.

Perk # 1 : Take your own time

This is the leading reason among both the people we interviewed and survey results. The ability to manage their own time is a major perk of gig workers. Let’s imagine that you are a freelancer. You can work whenever you want, either be an early bird, or sleep in and be a night owl. If you want to spend time with family, meet up with friends, study for exams, or run other chores, it’s all up to you. This may sound almost too good to be true, but remember that it can also turn out badly if you don’t have good time management skills. Some gig workers do have trouble separating their personal life from their working life.

Perk # 2 :  Go where passion takes you.

With everybody nowadays talking about the importance of happiness, it is no wonder that some choose to leave high-paying full-time jobs to follow their passions. One of our friends who is a gig worker has always loved to do arts and crafts. After university she landed a stable well-paying full-time job. But she also started her own business on the side selling dried flower bouquets on social media. Even though she has to work on it after long days at the office and spend her weekends at the flower market instead of lounging at home, she insists that she will continue this small business because it makes her happy. 

Perk # 3 : Choose any jobs you want.

Not only can gig workers choose to work whenever they want, but they can also choose the kind of jobs they want. Some may prefer variety to developing a broad experience. Others may choose something new to keep them from getting bored. Some may look for challenging tasks to improve their skills. And others may simply choose what they’re happy doing. If they are in full-time jobs, they will hardly ever enjoy such privilege of choice. Gig workers are without obligations and have no one telling them what to do. If they have to work with someone they don’t like, they can just say no and walk away. But that being said, the degree of choosiness dictates how many jobs they can take. We asked a friend who is a freelance interpreter how many jobs she gets, and she said there are always some as long as you are not too choosy.

A Thai saying says, “The greedy ones miss the fortune”. Likewise in this case, the choosy ones miss out on job opportunities, too.

There are a few other perks worth mentioning, although they were not among the top answers. First, when it comes to making money from gigs, the sky is the limit. Indeed, the more hardworking or talented you are, the more money you can make. This should be attractive for those who dream to become millionaires in no time. Second, there is no retirement age for gig workers. The EIC survey reveals that many gig workers are retired or approaching their sixties. As such, they don’t have to worry about what to do after they retire, as long as they have the right skills for their gigs. Another reason people mentioned is the absence of people problems. For gig workers, if they find good partners that’s great, but if not it doesn’t matter, because they’re only working together for a short period of time. Once the job is done, gone the annoying partners. No drama necessary.

Looking closely, we can see that all the perks of being a gig worker can be traced back to freedom of choice, whether it is choosing work hours, work types, income, or colleagues. Thus, it can be said that in today’s world full of customization, people do not only want customized products or experiences, but also the kind of work they wake up for every morning.

So this is probably the ultimate reason why everybody wants to have a gig. It allows them to choose

the kind of work that they want.

Now as we finish up, anyone want to get a gig yet?

Author: EIC | Economic Intelligence Center
Published in Bangkok Post/Asia In Depth: Asia Focus section, 6 November 2017

The construction sector is one of the cornerstones for a country's development. Thanks to this sector, we have homes and infrastructure that improve our quality of life, and transportation systems that are ever more convenient. Nonetheless, the performance of the global construction sector over the past two decades has seen labor productivity growing a mere 1% per year. This is markedly lower than that of the manufacturing sector, which boasts growth as high as 3.6% per year. A study by McKinsey revealed that technology is the most important factor in boosting labor productivity, and when applied correctly can pump labor productivity up as much as 15% as well as cut costs by 4-6%.

In addition to investment in research and development (R&D) by large companies in the construction value chain, for the past five years the sector has seen a growing role for small startups, offering innovations to fill the gap left by large companies. The rise of construction startups can be seen from the surge in funding pouring into them, amounting to 207 deals worth over 36,000 million baht and with a continuous rising trend. New areas that construction startups are working on can be categorized into eight groups: 1. Collaboration software used for the overall management of a project, from bidding, to construction, to delivery, 2.Marketplace platforms that serve as central sites for companies to share tools and machinery, or for contractors to connect with construction material suppliers, 3. Frontier technology and robotics that enable robots and drones to work in construction, with drones performing tasks such as land surveying or counting building material amounts, 4. Design technologies, such as Computer-Aided Design (CAD) and Building Information Modeling (BIM), 5. Inventory and supply chain management technology for managing and transporting construction material, 6. Risk management technology to enhance the safety and security of construction projects, 7. Data analytics, and 8. Financial management. Among them, investors are particularly paying attention to collaboration software/platforms and marketplace platforms, as well as frontier technology and robots.

In Asia, Singapore stands out as a country with a definite plan for applying technology to improve construction productivity. The goal is to raise productivity growth from the current 1.5-2% per year to 2.5-4% per year until 2020. Singapore’s Building and Construction Authority (BCA) has specified three focus areas in its productivity road map. They include: 1. A higher quality workforce 2. Better integration of the value chain and 3. Greater adoption of productive technologies.

The third area calls for the adoption of 35 technologies across seven R&D sectors, which are close to the eight aforementioned start-up groups. Construction startups have flourished in Singapore under this  vision. For example, marketplace platforms Handmade and Hometrust connect real estate owners, interior designers, and contractors. SgBuildersHub is a central platform for buying, selling, and renting construction machinery. Another example is Garuda Robotics, which develops specialized drones for construction. Furthermore, the Singaporean government has also set up a Construction Productivity and Capability Fund (CPCF) that has granted over 27,000 million baht in funding for around 9,000 construction companies, 90% of which are SMEs. Ultimately, a solid roadmap and supplemental funding are the keys to creating an ecosystem that boosts productivity among construction start ups.

Back in Thailand, a number of construction startups have also emerged in the market. For example, Builk is an online application for construction project management and cost control, a marketplace for property owners and contractors to connect with construction material providers, and a tool for analyzing material usage. Fixzy is a marketplace where real estate owners can find repair technicians for different issues, such as plumbing systems, electrical systems, interior design, or electrical appliances. Another example is OneStockHome, an online store for construction materials with delivery service. Inevitably, the rise of these startups will have an impact on other players in the construction value chain. Incumbents should therefore get ready for competition. Some possible strategies include forming partnerships, investing in startups, and boosting efficiency via mergers and acquisitions. 

Not only do construction businesses have to rethink their strategies, the government also has to prepare for the new technologies that startups introduce. Indeed, the government should encourage innovators by offering funding, investment privileges, and support for software or application testing. Moreover, it should facilitate the adoption of these technologies by amending relevant regulations, e.g. allowing for online submission and approval of construction plans and establishing standards for contractors. These efforts will lead to an ecosystem that fosters innovation, and put the government right on track towards a digital government goal. 

Published in EIC Outlook Q4/2017 Click here for more detail

The global economic context is about to change significantly. Developing nations with high growth potential, especially India, China and the ASEAN countries, will soon become more important. Companies will need to adapt as wireless connectivity among players in the market changes business processes, production processes and consumer behavior. Looking at Thailand in 2018, transformation of the consumer market will be led by global e-commerce businesses. This will give businesses both new opportunities and challenges. Companies need to prepare for the coming changes in order to take advantage of opportunities and manage risks.

Source: EIC analysis based on data from leading international sources (as of August 22, 2017)

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Published in EIC Outlook Q4/2017 Click here for more detail

Malaysia’s growth in the first half of the year exceeded expectations due to strong domestic demand. In the first and second quarters of 2017, growth registered 5.6%YOY and 5.8%YOY, respectively. Private consumption growth gained traction, up 7%YOY, driven by higher wages and government measures to bolster household incomes. Public expenditure also showed a large expansion of 5.4%YOY. Private investment rose 12.9%YOY in the first quarter before easing to 7.4%YOY growth in the second quarter. Gross fixed capital formation increased by 7%YOY on average, particularly from imported capital goods and intermediate goods, making imports grow 23%YOY. As a result, the current account surplus fell slightly despite the high 20%YOYgrowth of exports during the year’s first half.

EIC expects Malaysia’s GDP to grow 5.3%YOY in 2017 and 5.1%YOY in 2018. Domestic demand remains a key driver of the economy, led by steady growth in private consumption and private investment. Public spending and infrastructure projects are also lending support to economic activity in the second half. At the same time, manufacturing output, construction, the agricultural sector and services sector are improving in line with better economic conditions at home and abroad. On the other hand, Malaysia faces risks from volatility of prices for oil and commodities, uncertainty surrounding trade partners’ economies, and high household debt of 88% of GDP.

Malaysia expects to become a high-income country by 2020 and one of the world’s top 20 economies in line with the government’s National Transformation 2050 Vision. By 2020, Malaysia aims to reach developed status, in terms of both economic and social. Among the government’s successes are economic reform, which has enabled the private sector to play a key role in driving the economy forward, and reducing poverty to just 0.6% of the population as of 2014. This was a result of the 1Malaysian People’s Aid (BR1M) program that provided monetary support to 7 million low-income households, or around 40% of Malaysia’s total population. However, a major challenge remains for Malaysia to raise annual income per capita to USD 15,000 over the next three years, from USD 10,010 today. Beyond this target, the government’s Vision 2050 aims to continue developing the country to become one of the world’s top 20 economies by 2050. The plan is to put greater emphasis people’s voice and to deliver clearer government’s policy targets. The ongoing process of drafting the Vision 2050 should be completed by 2018.

Implications for Thai Economy

• As of September 21st, the ringgit rose by 6.6% against the U.S. dollar and will likely stabilize to 4.3 per dollar in the second half of the year. But it slightly depreciated against Thai baht, affecting Malaysian tourist arrival in Thailand and Thai export to Malaysia only little. Slowdown in 2 sectors are expected to continue in 2017.
  
  

• Thai export to Malaysia rose 4.1%YOY in the first 8 months of 2017, while import grew at faster pace of 10.1%YOY. Thailand-Malaysia trade is expected to continue expanding in the latter half of the year. Key Thai exports to Malaysia include rubber products and computers & parts.
  
  

• Malaysia’s incoming foreign direct investment (FDI) rose by 6.3%YOY during the first half of 2017, while its outbound FDI climbed 10.2%YOY. Nonetheless, Malaysia’s FDI flows into Thailand contracted 64%YOY during the same period, particularly in the agricultural sector and service sector.

   

Published in EIC Outlook Q4/2017 Click here for more detail

Cambodia’s economy showed strong growth last year and so far in 2017. GDP grew 7% in 2016, boosted by domestic demand. Manufacturing rose 10% and the service sector climbed 6.8%. Incoming foreign direct investment jumped 34%, driven by China. A smaller trade deficit lifted foreign reserves to a level covering 7.7 months of imports. In 2016, the World Bank upgraded Cambodia’s development status to the lower middle-income level in 2016. The government aims to raise the economy to the upper middle-income threshold within 2026-2027.

EIC expects Cambodia’s economy to grow by an average of 6.8% per year during 2017 and 2018. Domestic factors would remain the key growth drivers particularly investment in such infrastructure as roads, railways, power plants and tourism facilities. Cambodia is currently working with the Asian Development Bank to improve rail lines. The country also plans to build a USD-800-million train system linking Phnom Penh and the capital’s international airport in cooperation with Japanese investors.

Tourism will be a key to Cambodia’s growth. Tourism receipts accounted for 16% of GDP in 2016 and have grown by an average of 9% per year during the past decade. In July 2017, UNESCO officially registered Sambor Prei Kuk as Cambodia’s third World Heritage Site. To seize the opportunity, Tourism Ministry plans to boost the number of tourists via this new archaeological site. Foreign tourist arrivals are expected to reach 7 million per year by 2020, up from 5 million per year in 2016.

Major risks to Cambodia’s economy are its exposure to external conditions and rapid credit growth that could affect domestic financial institutions. Rapid changes in the U.S. dollar could greatly affect consumption and business operations due to dollarization of the economy. Export revenue could receive negative impact as well since Cambodia relies heavily on just a few major exports, mainly apparel, which accounted for 74% of total exports in 2016. Moreover, Cambodia’s financial sector has surged during the past few years. Numerous micro-finance institutions (MFIs) have emerged, giving low-income people access to banking services. In March 2017, the National Bank of Cambodia issued measures to curb credit growth by capping MFI lending rates at 18%, down from previous 20-30%. This will induce MFIs to become more cautious about lending because risk compensation, as reflected by lending rates, is now lower.

Implications for Thai Economy

• The Khmer riel weakened by 1% against the U.S. dollar, under the central bank’s managed float regime. The National Bank of Cambodia intervenes in the market by purchasing U.S. dollars and supplying riel. However, riel fluctuation has only a limited impact on the economy due to persistent dollarization of Cambodia’s economy.
  
  

• In the first 8 months of 2017, Thai exports to Cambodia grew 19%YOY, with refined petroleum, jewelry, sugar and beverages as the main products. The rise of the middle class in Cambodia is the main factor driving imports from Thailand, since most Cambodians view Thai products as having good quality with affordable price.
  
  

• Thailand and Cambodia are working together on a tourism promotion campaign dubbed “Two Kingdoms, One Destination.” Since Thailand serves as a connecting hub for travellers in the region, stimulating tourist arrivals in Cambodia should benefit the Thai tourism sector as well. Thailand expects to receive revenue from transiting visitors who pass through to Cambodia and other countries in the region.

Published in EIC Outlook Q4/2017 Click here for more detail

Eurozone GDP grew 0.6%QOQ SA² or 2.3%YOY in the secondquarter of 2017, the highest rate in six years.The key drivers were household consumption and the rebound in private investment, in line with solid export growth. The Purchasing Managers’ Index (PMI) for the manufacturing sector continued to increase, reaching 57.4 in August, consistent with falling unemployment, which dipped to an eight-year low of 9.1% in July. But the labor market recovery has not yet clearly boosted wages and prices. According to a survey of economists, headline inflation forecasts average at 1.5% in 2017, 1.4% in 2018 and 1.6% in 2019³, well below the ECB’s target rate of 2%.

The growth outlook for the fourth quarter remains positive, with political risks abating. Germany’s election, won as expected by pro-EU Angela Merkel, helped boost economic sentiment, and Italy’s general election now appears unlikely to take place this year. The sunnier political outlook was reflected in the Eurozone Consumer Confidence Index, which rose to a 16-year high in July. EIC has raised our forecast for Eurozone growth to 1.9% in 2017, up from 1.6%. The key risk factor for the remainder of the year is the euro’s strong appreciation trend, which may affect exports and tarnish growth in export-oriented countries like Italy and France.

As for 2018, EIC forecasts that Eurozone economic growth will be 1.7% with three key events: (1) Italy’s general election, expected by May, which could stir up anti-establishment sentiment if anti-EU parties win; (2) Brexit negotiations, whose implications may emerge by the end of the year and are likely to impact the Eurozone and UK economies, especially the financial sector; (3) the beginning of the ECB’s QE taper, which might drag on credit growth and overall economic growth. EIC expects the ECB to announce in October that it would taper QE from EUR 60 billion per month to EUR 40 billion per month beginning January 2018 over a period of six months and raise its interest rate by the end of 2018.

Implications for Thai Economy

• The Eurozone’s impressive growth, bolstered by subsiding political concerns, combined with sharp U.S. dollar weakness has helped strengthen the euro by 12.3% against the dollar or 5.6% against the baht⁴. However, EIC expects the euro will weaken to 1.17 against the dollar by the end of 2017 due to the Fed’s policy rate increase and a wider differential between U.S. and Eurozone policy rates.
  
  

• Thailand’s exports to the Eurozone expanded 6.9% in the first 8 months of 2017. Recovery of Europe’s household and business sectors may further boost demand for Thai exports, led by computer and parts as well as car and parts.
  
  

• Airbus’s investment plan in the Eastern Economic Corridor, likely to be finalized by the end of 2017, will significantly boost Euro zone direct investment in Thailand.

¹ Quarter-on-quarter, seasonally adjusted and annualized rate

² ECB’s survey of private sector economists

³ Changes in EUR as of September 21, 2017, compared to the end of 2016

 Published in EIC Outlook Q4/2017 Click here for more detail

Japan’s economic growth beat expectations in the second quarter of 2017, supported by domestic demand. GDP grew 2.5%QOQ SAAR5 or 1.4%YOY. Private consumption, which accounted for two-thirds of GDP, grew 0.8%QOQ SA6 on the back of higher spending on durable goods, e.g., cars and household appliances, while private non-residential investment rose 0.5%QOQ SA and public investment climbed 6%QOQ SA. The outlook for the second half of this year is for continued expansion, underlined by infrastructure investments for the 2020 Tokyo Olympics and solid household spending. The Consumer Confidence Index has shown improvements since the beginning of this year. In addition, the tourism sector’s high growth will help support GDP growth, which is expected to reach 1.3% in 2017.

EIC expects Japan’s economy to grow 1% in 2018, driven mainly by domestic demand – household consumption, private investment and public spending. Meanwhile, the successful conclusion of the Japan-EU Free Trade Agreement (JEFTA) in July will boost trade, especially exports of auto parts, sake, green tea and soy sauce, which received immediate duty exemptions. However, growth will soften slightly in 2018 compared to 2017 as momentum from public and private investment abates and export growth decelerates, in line with the maturing technology product cycle, which passed its peak in the middle of 2017.

The key risks to Japan’s economy are low inflation and labor shortages, which will impede overall GDP growth. July’s inflation rate was 0.4%, just marginally higher than in the beginning of the year and much lower than the 2% target. Therefore, BOJ is expected to maintain an accommodative monetary policy stance to encourage inflation. Moreover, the continuing increase of the job-to-applicant ratio, together with the fall of unemployment rate to the 23-year low, signals emerging labor shortages that stem from shrinking working-age population and arrival of an aged society. A tight labor market will pressure Japanese companies to raise wages in the near future. This will be positive for inflation going forward.

PM Abe called for a snap election by October 2017. EIC anticipated the re-election of Liberal Democratic Party (LDP), the current ruling party, as the cabinet approval rating recently rose on the back of tension over the Korean peninsula. If LDP wins a general election, Japan’s economy will be benefited from a continuity of government policies and support for the BOJ’s accommodative monetary policy stance. This will raise business confidence and financial market sentiment as well.

Implications for Thai Economy

• As of September 21th,the yen appreciated 4.6%YTD. EIC expects the U.S. policy rate hike will pressure the yen to drop to 114 against the dollar by the end of 2017. However, the Korean peninsula conflict and uncertainty over U.S. policy could attract fund flows into yen as a safe haven, thus driving yen appreciation.
  

• The recent expansion of Japan’s manufacturing output has boosted its demand for Thai products. In the first 8 months of 2017, Thai exports to Japan increased 8.6%YOY, with high growth in telephones & components.
  
  

• Japanese direct investment to Thailand increased 8%YOY in the first quarter of 2017 and looks set to rise further. A Japanese Chamber of Commerce survey reveals that 44% of Thai-Japanese joint ventures plan to increase investment in Thailand. Moreover, a recent visit of Japan’s government and investors would create greater opportunity for Japanese investment especially in EEC. The official visit was held during 11-13 September, participants are representatives from Ministry of Economics, Trade and Investment of Japan (METI) and around 600 Japanese investors.

Published in EIC Outlook Q4/2017 Click here for more detail

The Chinese economy attained high growth of 6.9%YOY during the first half of 2017, driven by domestic factors and higher exports amid a rebound in global trade. In the first half of 2017, retail sales increased 10.4%YOY, reflecting strong consumer confidence and robust private consumption. Private investment expanded but with slower pace, while public investment grew substantially and will play a larger role in the second half. The manufacturing sector registered robust growth of 6.4%YOY while the service sector expanded 8.3%YOY. Corporate profits rose 18%YOY. Moreover, export growth continued for 2 consecutive quarters, averaging at 14.4%YOY.

EIC has revised up its growth forecast for the Chinese economy to 6.8%YOY in 2017 and 6.5%YOY in 2018, underpinned by strong domestic fundamental factors and the positive impact of economic reforms targeting development of high technology. Low unemployment and the government’s measures to stimulate domestic spending are helping consumption to continue to expand. Overall investment is growing on the back of higher public investment. In the manufacturing sector, government continues its efforts on reducing overcapacity and managing zombie companies. In addition, the efforts to expand high-tech industries and deployment of technology during the first half of the year should continue to benefit the economy during the rest of the year and in 2018. This development is in accordance with the government’s “Made in China 2025” strategy. However, high debt levels still pose a risk to the economy.

One risk to the Chinese economy stems from demand-side stimulus policies that induce more debt. Another is the challenge of managing financial-sector stability. The key economic drivers are private consumption, private investment--especially in the real estate sector--and public investment in utilities infrastructure. Nonetheless, debt has been accumulated and reached 260% of GDP. EIC expects China’s debt to continue rising in the next few years. In September, S&P Global Ratings downgraded China’s long-term sovereign credit rating to A+ “stable”, reflecting concerns on rising loan growth, which pose risks to economic and financial stabilities. However, Moody’s outlook on China’s banking sector changed from “negative” to “stable”, represented the government’s efforts to control credit expansion, curtail shadow banking, and improve banking sector stability, which will potentially slowdown credit growth in medium-term.

Implications for Thai Economy

• The Chinese yuan appreciated against the U.S. dollar by 6.7%YTD, in the first 8 months. But after the capital control measures were relaxed, the yuan promptly depreciated as demand for outward investment remains high. EIC expects to see a rebound in Chinese direct investment in Thailand.
  
  

• In the first 8 month of 2017, trade between Thailand and China rose 13.1%YOY. Thai exports to China surged 30.1%YOY, driven mainly by manufactured products. Thailand’s imports from China grew slightly 4.2%YOY, as capital goods imports have been falling since the beginning of the year.
  
  

• Foreign direct investment into China edged down to grow just 1.2%YOY during the first 7 months of 2017. Nonetheless, investment in high technology manufacturing and services rose 6.8%YOY and 16.8%YOY, respectively. While Outward direct investment (ODI) by Chinese corporates fell 44.3%YOY as well as Chinese investment in Thailand showed a big contraction of 115.3%YOY. However, Chinese ODI under the Belt and Road initiatives increased 5.7%YOY.