The AEC does not actually begin in 2015. Every business will, sooner or later, need to face with substantial changes and impacts from AEC. The Thai service businesses should use their competitive advantages and find the right timing to adjust their businesses conduct to ensure successful implementation upon entering ASEAN market. From now on, business opportunities will not only range from rising demand of some key agricultural outputs, but also from new forms of agricultural businesses such as contract farming in the neighboring countries. In addition, some services sectors are continuing to be liberalized which will also add more opportunities for businesses. The strategy for the services sector will be different, according to the type and situation of the service. Some may benefit from expansion into neighboring countries with marketing potentials while others may do well domestically due to growth prospects. Yet for some others, they will have to be prepared for both opportunities and challenges that will intensify.

Although the number of social media users is more limited than the audience for television and radio, social media is more advantageous in terms of immediate and constant access to consumers, with less cost. Despite its popularity, social media is still somewhat constrained by internet accessibility. In Thailand, the share of people with access to the internet is only 27 percent, compared with 92 percent of households who own a television. Nevertheless, social media is advantageous in comparison with other media due to its high-speed, constant direct access to consumers-especially through mobile phones, and low costs for basic services.

In line with global trends, Thailand’s retail business is changing rapidly. Notable growth is observed in the internet channel, which is expected to expand at a Compound Annual Growth Rate (CAGR) of 8% per year over the next 5 years, consistent with the growing number of internet users. Large retailers are therefore placing emphasis on online sales. At the same time, the quantum leap in the growth of social network membership has boosted marketing and customer communication through the internet.

The advantage of Thai economy in low labor cost is disappearing. Thai businesses have been heavily relied on low-cost labor. But, the Thai workforce is changing. How business will need to adapt to the changing workforce?

Before coming up with strategies, businesses need to understand the characteristics of Thai workforce.  We find 5 salient characteristics:

How will businesses in Thailand need to adapt?

Believe it or not, Thailand is categorized as one of the countries in an “extreme risk” category of being affected by the impacts of climate change, and also the main cause of the problem as well. Not only is Thailand ranked among the 16 countries with an extreme risk of being affected by climate change over the next 30 years, but it is also ranked the world’s 25th in terms of greenhouse gas emissions. Even more surprisingly, Bangkok releases almost the same level of carbon dioxide (CO2) as London, which is 10 times larger than Bangkok with respect to the size of the economy.

What the ASEAN Economic Community (AEC)
really means for businesses in Thailand

The ASEAN Economic Community or AEC will make ASEAN a more interesting place to do business. The AEC will have an aggregate population of 580 million, more than that in the European Union itself. Given the low levels of income in many of the ASEAN countries, however, the aggregate size of the economy in the AEC is not that large, roughly that of just South Korea. This makes it incumbent on businesses to identify those salient characteristics of ASEAN which should make it of particular interest. For example, aggregate FDI in ASEAN is quite substantial, and it is a top tourist destination, second only to France.

Urbanization really matters. Cities facilitate development and domestic demand. Urban residents in Thailand have about twice as much income as non-urban residents on average, and they spend significantly more than their rural counterparts who earn the same income.

While often used, GDP growth alone is inadequate in forecasting energy demand. Energy consumption, especially in the consumer-driven sector (comprising the residential, commercial, and transportation subsectors), does not track very well with GDP growth.

While growth has done a pretty good job of reducing poverty in Thailand, many people are still “almost poor.” At a threshold of 2 USD per day (measured in purchasing power parity terms), the poverty headcount in Thailand dropped from over 26% in 1992 to around 12% in 2004. But shifting the threshold up just slightly picks up a lot more people: over 29% still earn below 3 USD per day. Inequality remains stubbornly high. The richest 20% of the population account for nearly 55% of income, while the poorest 20% account for only around 4%.

While it remains important, the property sector has underperformed relative to its potential and the region. The property sector represents about 5% of GDP, significantly below its 10% share of GDP during its heyday prior to the 1997 Asian crisis. Prices remain at or below regional trends, especially in commercial real estate.

Liquidity facilitates economic growth. It acts like the gears on a car. If there isn’t enough liquidity and the car is stuck in first gear, it doesn’t matter how much one steps on the accelerator. The car is just not likely to move that fast.

The progressive implementation of the ASEAN Free Trade Area (AFTA) and the ASEAN Economic Community (AEC) creates—in principle—the opportunity for businesses to locate and produce in any ASEAN country and export relatively freely to any other. As a result, we are increasingly being asked about opportunities outside Thailand, especially among our neighbours in the Mekong region: Cambodia, Lao PDR, Myanmar, and Vietnam, also known collectively as the CLMV countries.