COR­RI­DOR OF POWER

Ro­bots, rail­ways and re­form are all part of the eco­nomic revo­lu­tion set to turn Thai­land into a high-value econ­omy

Business Traveller (Asia-Pacific) - - CONTENTS - WORDS TAMSIN COCKS

Thai­land’s 4.0 ini­tia­tive will be built on the foun­da­tions of the Eastern Eco­nomic Cor­ri­dor (EEC)

De­spite be­ing one of the strong­est ASEAN mem­bers – it boasts the sec­ond-high­est GDP af­ter In­done­sia ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund – Thai­land has found it­self stuck in the “mid­dle-in­come trap”. The king­dom has watched its eco­nomic growth rates slow in com­par­i­son to emerg­ing ri­vals, es­pe­cially the CLMV coun­tries (Cam­bo­dia, Laos, Myan­mar and Viet­nam), who’ve stepped up com­pe­ti­tion for tra­di­tional in­dus­trial and man­u­fac­tur­ing ar­eas.

Ac­cord­ing to the Nikkei Asian Re­view, Thai­land has grown just 2.7 per cent over the past five years, plac­ing it an un­com­fort­able ninth out of the ten ASEAN mem­bers. In 2016, the gov­ern­ment re­sponded with “Thai­land 4.0” – the tagline for a wave of in­vest­ment and ini­tia­tives set to dom­i­nate the eco­nomic land­scape for the next 20 years and drive the coun­try into a high-value and in­no­va­tion-driven econ­omy.

Un­der­pin­ning this plan, the coun­try has pin­pointed ten “S-curve” in­dus­tries on which to fo­cus that in­clude new and emerg­ing sec­tors as well as up­graded ver­sions of Thai­land’s strong­est per­form­ers. Nat­u­rally, tourism, food and health fea­ture high on the list of golden in­dus­tries, while in­vest­ment is planned in cut­ting-edge fields from bioen­ergy to ro­bot­ics and avi­a­tion.

Ma­jor in­fra­struc­ture projects are also in the works, en­com­pass­ing air, land and sea, along with fi­nan­cial re­forms that will de­liver tax breaks, smart visas and a for­eigner-friendly busi­ness en­vi­ron­ment. Nichapa Yoswee, se­nior vice pres­i­dent of busi­ness at Thai­land’s Con­ven­tion and Ex­hi­bi­tion Bureau (TCEB) wel­comes the plan, say­ing, “[Thai­land 4.0] clearly de­fines the di­rec­tion of growth and fo­cuses all rel­e­vant gov­ern­men­tal ef­fort to­wards an un­com­pro­mis­ing goal to drive the na­tion in one stream­lined di­rec­tion. Such clar­ity ul­ti­mately pro­vides con­fi­dence in for­eign di­rect in­vest­ment.”

AIR LAND AND SEA

The heart of the ini­tia­tive lies in the Eastern Se­aboard prov­inces of Chon­buri, Cha­cho­engsao and Ray­ong, which will re­ceive the lion’s share of in­vest­ment and eco­nomic in­cen­tives, and form the new Eastern Eco­nomic Cor­ri­dor (EEC).

This strate­gic re­gion lies on the Gulf of Thai­land, in close prox­im­ity to Bangkok, and has been a pow­er­house for in­dus­trial pro­duc­tion in Thai­land for the past 30 years. Home to 3,788 fac­to­ries with in­te­grated deep-sea ports and rich in en­ergy sources and raw ma­te­ri­als, it has been a ma­jor back­bone in shift­ing the coun­try from an agri­cul­tural econ­omy to an in­dus­trial-fo­cused one. Now it’s once again be­ing looked upon as the gate­way to the next fu­ture econ­omy – Thai­land 4.0 – and is ex­pected to cre­ate 100,000 jobs, garner an an­nual in­come of THB450 bil­lion (US$13.5 mil­lion) and boost the coun­try’s an­nual GDP growth to 5 per cent.

The gov­ern­ment has pledged THB1.5 tril­lion (US$43 bil­lion) to be al­lo­cated to EEC de­vel­op­ment schemes over the next five years. A hefty por­tion of this will be poured into vast in­fra­struc­ture projects to cre­ate a fully in­te­grated trans­port net­work. This will fos­ter con­nec­tiv­ity in the EEC, but also give the coun­try greater links with Cam­bo­dia, and ul­ti­mately help to sync with China’s mas­sive One Belt One Road con­nec­tiv­ity project.

A key in­vest­ment is the US$5.7 bil­lion al­lo­cated to ex­pand and im­prove U-Ta­pao In­ter­na­tional Air­port – some­times re­ferred to as Pat­taya air­port – with a sec­ond run­way, a third pas­sen­ger and cargo ter­mi­nal and the cre­ation of the MRO Cam­pus ded­i­cated to air­craft main­te­nance. Pas­sen­ger ca­pac­ity is ex­pected to soar from a cur­rent max­i­mum of 20 mil­lion to 60 mil­lion when com­plete, with a num­ber of new routes al­ready hav­ing launched. In Jan­uary, for ex­am­ple, Qatar Air­ways be­came the first Mid­dle Eastern car­rier to launch di­rect f lights to U-Ta­pao, with a three-times-weekly ser­vice. But pre­dom­i­nantly, the air slots are be­ing snapped up by main­land Chi­nese car­ri­ers: new ser­vices launched in the last 12 months in­clude Hainan Air­lines, Dong­hai Air­lines, Shen­zhen Air­lines and Kun­ming Air­lines.

Ma­jor in­vest­ment in the re­gion’s busy deep-sea ports will also see dra­matic ex­pan­sions. Laem Cha­bang in par­tic­u­lar will see THB150 bil­lion (US$4.5 bil­lion) spent to in­crease from 11 mil­lion teus (a mea­sure­ment of cargo ca­pac­ity) to 18 mil­lion teus per year, mak­ing it the world’s 15th busiest cargo port. Smaller but sig­nif­i­cant in­vest­ments in Map Ta Phut and Sat­tahip will see the cre­ation of ship­build­ing fa­cil­i­ties and off­shore oil rig as­sem­bly plants, as well as up­graded dock­ing fa­cil­i­ties for fer­ries, lux­ury yachts and in­ter­na­tional cruise lin­ers.

In­vest­ments in land trans­port in­fra­struc­ture are also huge, with about THB200 bil­lion (US$6 bil­lion) al­lo­cated to the de­vel­op­ment of a new high-speed rail­way from Bangkok to Ray­ong, which will con­nect three in­ter­na­tional air­ports (Don Mueang, Su­varn­ab­humi and U-Ta­pao) within one hour. Ad­di­tional dual-track rail­ways and mod­ern mo­tor­way ex­pan­sions will fur­ther com­ple­ment the new highly con­nected trans­port sys­tem.

ZONES OF IN­FLU­ENCE

In tan­dem with these heavy­weight in­fras­truc­tural up­grades, a slew of re­forms are help­ing to shape the 13,000sq km EEC re­gion into a vi­brant fu­ture-fac­ing busi­ness hub. Cur­rently 21 “in­dus­trial pro­mo­tional zones” have been des­ig­nated, cre­at­ing spe­cialised in­dus­try clus­ters with a range of eco­nomic in­cen­tives.

Among these are the EECi (Eastern Eco­nomic Cor­ri­dor in­no­va­tion zone) – a col­lab­o­ra­tive net­work span­ning univer­sity, pub­lic and pri­vate sec­tors for sci­en­tific re­search into ar­eas like ro­bot­ics and bio­chem­i­cals. An­other is Dig­i­tal Park Thai­land, flagged as an eco­nomic and com­mer­cial cen­tre with a fo­cus on dig­i­tal in­no­va­tion – think Iot, AI, big data, vir­tual re­al­ity and smart de­vices, to name a few.

The grand am­bi­tions have al­ready caught the at­ten­tion of the in­ter­na­tional busi­ness com­mu­nity. “Since the in­tro­duc­tion of this trans­for­ma­tive pol­icy, Thai­land has wel­comed large busi­ness mis­sions from Ja­pan, Korea, China and Hong Kong ex­plor­ing in­vest­ment op­por­tu­ni­ties,” re­veals TCEB’s Yoswee.

THB1.5 tril­lion has been al­lo­cated for EEC de­vel­op­ment schemes in the next five years

In June, The Bangkok Post re­ported Min­is­ter of In­dus­try Ut­tama Sa­vanyana dis­cussing talks with Euro­pean com­pa­nies: “In­vestors from Bri­tain are in­ter­ested in biotech­nol­ogy and elec­tric cars, and we will meet with France’s Air­bus to talk about in­vest­ment for main­te­nance re­pair and over­haul cen­tres in the EEC prov­inces as Air­bus signed a mem­o­ran­dum of un­der­stand­ing last year,” he said.

New busi­ness ven­tures, heavy in­vest­ment and en­tre­pre­neur­ial spirit cre­ate a fer­tile breed­ing ground for meet­ings, ex­hi­bi­tions and events (the MICE in­dus­try), which is ex­pected to re­ceive a ma­jor boost from the EEC de­vel­op­ment.

For TCEB the fo­cus is par­tic­u­larly on at­tract­ing con­fer­ence and trade shows re­lat­ing to the ten S-curve in­dus­tries. “So far we have been able to at­tract CEBIT ASEAN 2018 from Ger­many, to show­case dig­i­tal in­no­va­tion, Fu­ture En­ergy Asia 2018 from the UK, and Med­i­cal De­vices ASEAN 2018,” says Yoswee.

Beach­side city Pat­taya, half an hour from U-Ta­pao, is al­ready a strong player in the EEC MICE mar­ket, with two in­ter­na­tional con­ven­tion cen­tres (in­clud­ing the Pat­taya Ex­hi­bi­tion and Con­ven­tion Hall (PEACH) and the Nong­nooch In­ter­na­tional Con­ven­tion and Ex­hi­bi­tion Cen­tre), 30,000 busi­ness-friendly ho­tel rooms, plus a raft of en­ter­tain­ment and in­cen­tive op­tions. “Pat­taya’s strength lies in the fact that it can be an al­ter­na­tive to Bangkok. It has a vi­brant mood of busi­ness like Bangkok, but at the same time it has a sea­side set­ting, in­ter­na­tional restau­rants and var­i­ous at­trac­tions. The fact that in the fu­ture it will be linked with Bangkok via high-speed train will also make it a strong choice,” says Yoswee.

Thai­land is ranked 26th out of 190 economies for ease of do­ing busi­ness by the World Bank

CUT­TING THE RED TAPE

So if you’re not al­ready do­ing busi­ness in Thai­land, should you be? Thai­land is cur­rently ranked 26th out of 190 economies in terms of ease of do­ing busi­ness by the 2017 World Bank rat­ings, and ac­cord­ing to Ul­rich Eder, manag­ing direc­tor of Bangkok-based law firm Pug­na­to­rius, there are lots of pre-ex­ist­ing in­cen­tives for for­eign busi­nesses.

“Tra­di­tion­ally, Thai­land’s in­vest­ment pro­mo­tion agency, the Board of In­vest­ment (BOI), grants tax hol­i­days for for­eign in­vest­ments, al­lows for­eign land own­er­ship and up to 100 per cent for­eign share­hold­ing in Thai com­pa­nies,” he says. “Within the Eastern Eco­nomic Cor­ri­dor, these ben­e­fits have now been taken to the next level, by ex­tended tax hol­i­days, tax re­duc­tions, smart visa schemes, ad­di­tional op­por­tu­ni­ties to ac­quire prop­erty and a bundle of other ben­e­fits.

“The huge in­vest­ment in Thai­land’s in­fra­struc­ture also opens the door for pub­lic-pri­vate part­ner­ships with the gov­ern­ment and hand­some prof­its for for­eign cor­po­ra­tions.”

At the same time, Eder high­lights the need to be cau­tious in a coun­try known for “U-turns” on le­gal frame­work. “Thai­land’s clus­ter de­vel­op­ment some­times seems like a mov­ing tar­get,” he adds, sug­gest­ing dis­pro­por­tion­ate favouritism is also some­times shown to multi­na­tion­als like Alibaba over for­eign SMEs, but he ad­mits the scheme shows huge prom­ise. “The EEC is a rough un­cut di­a­mond – the next five years will show if ev­ery­thing falls into place.”

While Thai­land 4.0 is still very much in the con­cep­tual stages, things are start­ing to shift into gear. All of the bil­lion-dol­lar con­tracts for the vast in­fras­truc­tural up­grades will be fi­nalised by the end of this year, with projects sched­uled to come to fruition as early as 2021. Le­gal re­forms are also un­der way: the EEC Act was passed in March 2018 to for­malise a num­ber of re­laxed tax and visa leg­is­la­tions, as well as fi­nan­cial in­cen­tives.

TRAV­ELLER HIGH­LIGHTS

Of course, one of Thai­land’s key strengths as a busi­ness des­ti­na­tion is that it’s not all about busi­ness. Trav­ellers to Thai­land will come across qual­i­ties such as high stan­dards of ser­vice, an in­her­ent friend­li­ness, won­der­ful food, al­lur­ing beaches and gala venues full of char­ac­ter. Tourism is nat­u­rally one of the key in­dus­tries for de­vel­op­ment un­der the Thai­land 4.0 drive, en­com­pass­ing ev­ery­thing from well­ness retreats and spa re­sorts to eco­tourism ini­tia­tives and med­i­cal fa­cil­i­ties.

Neigh­bour­ing Gulf hotspots Pat­taya and Hua Hin are prime can­di­dates for de­vel­op­ment, tar­get­ing leisure tourists, busi­ness trav­ellers and MICE del­e­gates, and a raft of new ho­tels have opened in the past year.

In June 2017, Onyx an­nounced US$100 mil­lion in­vest­ment in a new Ozo ho­tel, plus im­prove­ments to its ex­ist­ing Amari Pat­taya prop­erty next door. Other new en­trants to the mar­ket in­clude Re­nais­sance Pat­taya Re­sort & Spa (opened Septem­ber 2017), Golden Tulip Pat­taya Beach Re­sort (opened July 2018) and X2 Pat­taya Ocean­phere lux­ury vil­las, ex­pected to be open by the end of the year.

While Hua Hin is a qui­eter sea­side des­ti­na­tion, it boasts a num­ber of five-star ho­tels in­clud­ing Hil­ton, Mar­riott and In­ter­con­ti­nen­tal, with more de­vel­op­ments on the way. “Plans in­clude a new con­ven­tion cen­tre and on­go­ing de­vel­op­ment of themed at­trac­tions and new ac­com­mo­da­tion, so it can eas­ily at­tract more in­vest­ment and MICE trav­ellers in the near fu­ture,” says Yoswee.

How­ever, the EEC will also be po­si­tioned as a new tourist-friendly des­ti­na­tion in its own right, with eco-ini­tia­tives rang­ing from man­grove re­for­esta­tion to fruit gas­tron­omy. Other high­lights range from the high-oc­tane and fam­ily-friendly Car­toon Net­work Ama­zone water park to a cul­tural show­case of Bud­dhist and Hindu art at the Sanc­tu­ary of Truth.

“Thai­land’s Eastern Eco­nomic Cor­ri­dor is a di­verse re­gion and of­fers a huge range of at­trac­tions to tourists and visi­tors,” said Yuthasak Su­pa­sorn, gov­er­nor of Tourism Author­ity Thai­land (TAT). “We want peo­ple com­ing here for work or travel to have the chance to ex­plore the cul­ture of the area. They’ll find com­mu­ni­ties of­fer­ing unique lo­cal ex­pe­ri­ences from ex­plor­ing 100-year-old water mar­kets to mak­ing con­nec­tions with peo­ple via home­s­tay and fish­ing ex­cur­sions.”

“The EEC is a rough un­cut di­a­mond – the next five years will show if ev­ery­thing falls into place ”

ABOVE: Deep-sea ports are a fo­cus for de­vel­op­ment

CLOCK­WISE FROM TOP LEFT: U-Ta­pao In­ter­na­tional Air­port; a map show­ing the EEC’s de­vel­op­ment plans; and lush fruit in a lo­cal mar­ket

CLOCK­WISE FROM TOP LEFT: Hua Hin Mar­riott Re­sort & Spa; Mövenpick Asara Re­sort & Spa Hua Hin; and Car­toon Net­work Ama­zone water park

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