Future of Thailand Trade and Investment under Tariff War

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1 Future of Thailand Trade and Investment under Tariff War A Journey to Thailand through Trade and Investment Dr. Rak Vorrakitpokatorn Export-Import Bank of Thailand Thailand Roadshow in London, England September 19, 2018

2 GDP : $460bn As is (2017) Strong economic fundamental (2 nd largest economy in ASEAN) International reserve : over $200bn (12 nd highest in the world) External debt : 35% (of GDP) Trade Export : $320bn (70% of GDP) (Goods and services) Current account surplus : 11% of GDP Investment TDI Outflow*: $463bn (Total TDI b/w ) FDI Inflow : $329bn (Total FDI b/w ) * Remark : TDI = Thai Direct Investment Thailand at a Glance Middle income trap (Per capita income $6,600) Lift up supply chain and expand distribution channels EEC + Attract innovative FDI Service-led goods exports New-frontier markets Online platforms Investment-induced trade Tariff war amongst major economies as catalyst Future Advanced economy (> $12,000) High value-added products and services Regional hub for trade and investment 2

3 The degree of trade war is on the rise, especially USA and China The USA has imposed import tariff on steel & aluminum as a deadly weapon to attack major trading partners Technological Products $50 Billion $200 Billion $50 Billion $60 Billion Agricultural Products Change the way of trade negotiation Low NAFTA Tension Meter Multilateralism WTO TPP High Bilateralism FTAs 3

4 Thai export is resilient to withstand tariff war due to well-diversified markets & products Market Diversification Markets Export Share (%) (Jan. Jul. 2018) ASEAN (5) China CLMV USA EU Japan South Asia Australia Middle East Latin America Africa Product Diversification Products Export Share (%) (Jan. Jul. 2018) Automobiles, parts and accessories Agricultural products (Rice, Rubber, Tapioca products, etc.) Computers and parts Agro-industrial products (Canned seafood, Sugar, Wheat products, etc.) Precious stones and Jewelleries Rubber products Plastics and Resin Chemical products Refine fuels Electronic integrated circuits Machines and parts

5 Export Structure Investment Thailand has struggled to escape Middle-income trap for decades Thailand s economic revolution Thailand 1.0 Thailand 2.0 Thailand 3.0 Agriculture Light industries Heavy industries Farmer mechanization Most for their own living and the rest for trading Early 1960s Others 33% 16% Manufacturing Agricultural products 51% Natural resources Cheap labor with low wages Agriculture Others 12% Agriculture 50% Manufacturing Labor-intensive Products 38% Textiles and clothing (28%) Jewellery (10%) Eastern Seaboard Promoted FDI Others 80% now 10% 10% High-tech OEM Products Manufacturing Agriculture Electronics (18%) Auto and parts (14%) Electrical appliances (13%) Middle Income Trap The major obstacles of Thailand not able to cross the middle income trap We need more New mega infrastructure project New potential investment area Research and development (R&D) High value-added and innovative FDI. ODM (Original design manufacture), OBM (Original brand manufacture) and high value- added OEM (Original equipment manufacture) What is the solution for the future? 5

6 EEC is the key solution under Thailand 4.0 era Eastern Economic Corridor (EEC) is expected to be the new engine of growth to shift Thailand from labor and low value-added based to high value-added and innovative manufacturing. Agriculture and Biotechnology Food for the Future Next-Generation Automotive Smart Electronics 10 S-Curve Industries Affluent Medical & Wellness Tourism - Medical tourism - Advanced sensors and data analytics - Functional foods - Innovation health foods - Electrical vehicle production (EV) - Smart appliances, Internet of Things - Microelectronics 5 First S-Curve Transformative Shifting Traditional farming, SMEs, Services Unskilled labors Import technologies 5 New S-Curve Aviation and Logistics - International distribution center - Maintenances Automation and Robotics Biofuels and Biochemicals - Bio-plastic, specialty polymers Medical Hub - Online Diagnose and Treatment - Remote health monitoring devices Digital - E-Commerce, cloud computing Smart farming Start ups Smart devices Knowledge workers High value services Develop own technologies Robotics & Mechatronics digital 6

7 Besides EEC, 4 strategic directions for future of Thai Trade and Investment Thai export diversifies to new markets Export share by markets (%) (Jan.-Jul.) USA EU Japan China CLMV New Frontiers Source : Ministry of Commerce, Thailand Thailand has proactively developed its own online platform and also coordinate with international players to facilitate Thai exporters Major E-Commerce platforms in Thailand 120, ,000 80,000 60,000 40,000 20,000 USD million 0 Thailand initiates investment-induced trade strategy to strengthen supply chain TDI Outflow FDI Inflow Utilize service as spearhead or front-liner to accelerate export of goods % Services export growth Goods export growth Source : NESDB, Thailand Thailand s high potential services : Hospitality, Medical care, Logistics, Construction and Entertainment Food& Beverage Textiles Mining Low grade auto-part

8 4 Beauties of Thailand to be the safe haven for investors Beauty of Economic Fundamental Beauty of Strong Supply Chain 2 nd largest economy in SE Asia World s 7th highest current account surplus to GDP (11%) World s 12 nd highest FX reserves Strong banking sector: BIS ratio 17% Low external debt to GDP: 35% Ranked 26th amongst 190 economies in the ease of doing business, standing the 3rd in ASEAN. Beauty of tax-free economic pacts 7 Multilateral Pacts China Hong Kong New Zealand Korea ASEAN India Japan Australia Peru New Zealand 6 Bilateral FTAs Chile Japan India Australia As trade war spurred across the globe, the Regional Comprehensive Economic Partnership (RCEP) is expected to strike in the near future to promote trade and investment in Asia. It will be the world s biggest economic pact in the era World s biggest canned tuna exporter World s biggest natural rubber exporter World s 2 nd rice exporter World s 2 nd air-conditioner exporter World s 9 th Tourism destination with 4 th highest income from tourist World s 12 th biggest car producer One of the best privileges (under EEC project) in ASEAN Lowest personal income tax in ASEAN (17%) 15 years corporate income tax exemption World s 2 nd hard disk drive exporter Beauty of investment incentives 2 nd Lowest corporate income tax in ASEAN (20%) Rights to lease state s land 50 years (+49 extendable) Permission to own land for BOI promoted projects 5 Years work permit for investors, specialists and scientists. 8

9 Thai ranking Thai ranking Beyond investing in Thailand, using 4 seamless Linkages of Thailand to be a hub of CLMV Linkage of Location Linkage of Regional Logistics M T L C V Cambodia Laos Myanmar Vietnam World s highest GDP Growth (7% annually) Abundant national resources and labor force (World s 2 nd youngest workers after Africa) GSP from developed countries/ Low wages <$140 monthly Less impact from global crisis and less FX volatility Linkage of Economic Activities Trade : CLMV overcomes USA, EU, Japan to becomes Trade Thailand s 2 nd largest export market C Investment : CLMV is Thailand s 2 nd largest investing destination, after ASEAN-5 C L L M M V V - East-West Economic Corridor - North-South Economic Corridor - Southern Economic Corridor China-Indochina Economic Corridor Linkage of Culture & Relationship Popularity of Thai medias create demand on Thai products in CLMV. Traditional similarity benefits for Thai products an opportunity to reach a wider range of customers. Reputation of Thai product s quality in the region. Thai entrepreneurs are familiar to deal with CLMV government, businesses and consumers. 9

10 EXIM as one of Thai government arms has financial solutions to support trade and investment along the region We are ready to support financial solutions in every process of supply chain for investors who have business stance in Thailand Supplier Exporter Importer Working Capital Loan Working Capital Loan Buyer s Credit/ Buyer s Bank Credit Supplier Credit Insurance Export Insurance Expand and move production base abroad Project Finance Investment Insurance 10