As AEC revs up, Thai trucking companies are in pole position

ผู้เขียน: EIC | Economic Intelligence Center

Published in Bangkok Post/Asia In Depth: Asia Focus section, 2 March 2015

One Thai industry that stands to benefit from Southeast Asia's economic integration is trucking. Unlike its neighbours in the Mekong sub-region, Thailand has a robust and sophisticated trucking industry, which is destined to expand as intra-regional trade speeds up after the Asean Economic Community begins at the end of this year.

Trucking is by far the dominant mode of cargo transport in Asean's developing countries, partly because the advancement of rail transport has long been stunted. In Thailand, 80 percent of cargo travels by truck. Conveniently enough, many of those trucks are locally made, because Thailand hosts factories for many of the top pickup truck nameplates, as well as for some makers of heavy trucks. All told, some 1 million trucks of all types ply the road in Thailand, a vastly larger fleet than in Myanmar, Cambodia or Laos.

This positions Thai trucking companies to benefit as demand booms. Cross-border imports and exports are growing rapidly due to rising consumption in Thailand's fast-growing neighbours and because production supply chains are spreading out on a regional basis, as companies establish more factories and warehouses in industrial estates and special economic zones at sites along both sides of Thailand's borders. To meet their logistics needs, Thai trucking firms offer a variety of different services, including multi-modal transport, storage management and customs handling.

Myanmar will drive the biggest growth in trucking demand among Thailand's next-door neighbours, thanks to its large population of more than 50 million and GDP growth that is forecasted at 8.5 percent in 2015. The economy's opening is fuelling brisk demand for imports, and the government and private sector are gearing up to develop industrial estates and SEZs. For instance, Myawaddy Border Trade Zone, adjacent to Thailand's northern province of Tak, will host textile and apparel producers as well as food-processing factories.

Trucking services will be needed transport goods from this and other SEZs to Yangon, the country's largest city, and other population centres. Exports to Thailand will also travel by truck. But the total number of trucks in Myanmar is just 70,000, including 30,000 light trucks and 40,000 large ones.

Myanmar will clearly need a drastic increase in its truck fleet. But for now, only local companies can operate trucks there. Until the government issues quotas for foreign-owned companies, Thai operators can only study the market and try to arrange partnerships with local firms.

Laos has a small population of just 6.8 million, but its GDP is expected to grow 7.2 percent in 2015, driven by exports of electricity, copper, timber and various natural resources. Manufacturing will expand as the government develops new SEZs to host production of exports like camera parts, aerospace parts and processed agricultural products like sugar. Road transport is especially important in Laos because it is a landlocked country.

Laos has 6,500 trucks and 50 trucking companies, most of them small, family-owned operations that are short on funds for expansion. Most trucks in Vientiane are in good condition, but those outside the capital are old and decrepit. Because Laos already has reasonably many trucking firms and vehicles relative to its level of economic activity, EIC recommends Thai companies invest there by finding local business partners. The Laotian government has already issued quota for 400 Thai trucks to operate.

Cambodia, with its population of 13 million and GDP growth forecast at 7.3 percent for this year, is a promising market. The government has established 25 SEZs in nine main provinces, such as Poipet O'Neang Special Economic Zone in Banteay Meanchey Province, across the border from the Thai town of Aranyaprathet in Sa Kaeo Province. Cambodia's SEZs host makers of textiles, garments, jewellery and plastic parts.

Cambodian exports are mostly transported by truck to the seaport in Sihanoukville or Thailand's Laem Chabang port. Some 3,500 trucks are in service. Two or three big operators own more than 200 trucks each, while 20 medium-size firms have about 30 trucks each. The rest are small operators. Thai firms will need to find local business partners in order to expand into Cambodia because the government has so far allowed only a very small number of foreign trucking companies to operate. For now, Thai firms have quota for just 40 trucks.

To operate trucks in Myanmar, Laos and Cambodia, Thai companies will need to obtain international driving licenses for employees and train them up to drive safely there, because vehicles travel on the right side of the road instead of left as in Thailand. Thai companies that lack quota to enter these countries can serve rising demand within Thailand for transport of goods to transfer points on the border.

The AEC will help the region's trucking industry grow not only because of rising consumption and manufacturing but also because governments are improving logistics infrastructure, regulations and processes. It's getting easier to transport goods and cross national borders thanks to streamlined new procedures like the GMS Road Transport Permit, the Single Stop Inspection (SSI) and Single Window Inspection (SWI). Government agencies are improving regulations on the types and weights of trucks allowed to cross borders. Until now, highways and border crossings have varied widely in terms of features and standards, but new and future improvements are establishing a more seamless path for logistics operators.

Scepticism is due when any government official or academic declares that Thailand is on the verge of becoming a new "hub" for some product or industry. But in the case of cargo transport in the Mekong sub-region, Thai trucking companies are ready to roll.