FOREIGNERS’ MIXED RECORD:
History of foreign investment in Thailand shows many high-profile ventures that failed to work out for various reasons.
Doing business in Thailand often turns out to be a frustrating experience for multinational companies, many of which have stepped in and then decided later to take a back seat or walk away.
In the region, only Indonesia is considered more dangerous for foreign companies, mainly due to inconsistent regulations, although the sheer market size of the country compels many investors to remain put.
Thailand has seen many multinationals walk in with high aspirations but years later walk out without much success. Sometimes they are compelled to leave because of financial problems or strategic changes elsewhere, as True Corp, then known as TelecomAsia (TA), experienced with its foreign partners.
“Back then, we were looking for foreign partners who could transfer knowledge in the technology business to work with us as we knew how to operate in Thailand,” recalled Suphachai Chearavanont, the current president and CEO of True, referring to the former foreign partners Verizon of the United States and Orange of France in the mobile phone business.
Things went well until the two global partners went through changes in shareholders and their business direction changed. Unfortunately, the telecom business normally takes a minimum of 10 years to break even but the partners could no longer wait that long for a return, he said.
“When they were reluctant to go ahead with the joint venture, the business stood still, even though the Thai side really wanted to go ahead with expansion. As a result, the expansion was stalled because they had more than a 25% share in the venture, they had the right to veto,” Mr Suphachai told Asia Focus.
After the lessons learned from previous ventures, Mr Suphachai said True has continued its search for strategic foreign partners, especially to get better access to overseas markets by using its partners’ networks.
“For those looking for foreign partners, I would say culture of the country where they are from, as well as corporate culture is one thing they should take into account. It matters when the cultures are different,” he said.
“We as business partners should have synergistic values and networks with confidence that we can pursue business together in both the short and long term. A partner should not be the one that causes disruption or stalls the business operation.”
The list goes on but many companies that have exited have cited the lack of coherent policies and sudden change in the policies of the governments.
In the banking field, Singapore’s DBS Group was surprised when it was forced into a threeway merger involving DBS Thai Danu Bank, IFC Plc and TMB Bank Plc. Asean’s largest bank realised it would end up as a minor shareholder with little influence despite the big commitment it had made to rescuing failing Thai Danu. As a result, it has gradually sold down its shares in TMB to the current level of just 1.79%.
Not all foreign ventures in Thailand end badly. A case in point is Tesco Lotus in Thailand. The UK retail group Tesco may be struggling at home but its Thai operation has been highly successful and is potentially worth more than $10 billion. Several prospective buyers are expected to join the fray as Tesco looks to raise cash to repair its balance sheet.
Potential buyers in Thailand include Charoen Pokphand (CP), Central Group and Thai Beverage Plc. CP boss Dhanin Chearavanont originally sold the Lotus supermarket chain to Tesco more than 15 years ago to raise funds during the Asian financial crisis, and is said to be keen to have it back.
Many other foreign-Thai ventures have been hit-and-miss affairs. Asia Focus has compiled a selection of notable examples below.
RETAIL
The Dutch supermarket operator Royal Ahold Co Ltd entered a joint venture with Central Retail Corporation in 1995 to operate Tops supermarkets in Thailand. In 2004, CRC bought back all its shares from Royal Ahold, which was facing its own financial problems at the time, making Tops its wholly owned subsidiary.
Netherlands-based SHV Holding NV joined with CP to set up Siam Makro in 1988 but CP sold the majority of his interest during the 1997 financial crisis. In 2013, SHV, a privately held trading group, had a global policy to pull out of the retail business, so it decided to sell its stake in Siam Makro to the 7-Eleven operator CP All.
The French hypermarket chain Carrefour SA in 1996 formed a joint venture with Central Retail Corp (CRC) to open its first hypermarket in Thailand through CenCar. CRC divested its holdings in CenCar in 1999 and one year later it allowed the French chain to take up a joint venture to operate its grocery chain Big C. In late 2010, Carrefour divested its business in Thailand and sold over 40 outlets here to Casino, which then operated 111 Big C outlets.
TELECOMS/MEDIA
France’s Orange SA founded a joint venture with Thailand’s TelecomAsia, now True Corp, in 2001 to enter the Thai mobile phone market. Orange sold off its 39% stake in TA Orange, later renamed True Move, in 2003 to focus on the European market.
US-based Verizon in 1990 established a joint venture with the CP Group under the name TelecomAsia to develop and operate fixed-line services in the Bangkok area. Verizon sold its shares to CP Group and the joint venture was renamed True Corp.
Hong Kong-based Hutchison Asia Telecommunications in 2000 entered into a joint venture with state-owned CAT Telecom to establish Hutchison CAT Wireless MultiMedia Ltd to provide exclusive marketing services for CAT’s CDMA mobile service in 25 provinces including Bangkok. In late 2010, True acquired the local CDMA business of Hutchison along with related companies.
South Africa-based MIH Holdings and CP formed the pay-television operator United Broadcasting Corporation (UBC) in the 1990s but in January 2006, True bought out MIH and completed a tender offer for listed UBC shares two months later, allowing True to own 91.8% of UBC which was renamed TrueVisions in early 2007.
OIL AND GAS
The Malaysian national oil company Petronas acquired a retail oil business in Thailand from Kuwait Oil (Thailand) in 2005 but found the competition fierce. In December 2012, the Thai oil retailer Susco Plc bought Petronas’s retail Thailand retail operations including 100 stations for US$46 million as Petronas changed its business direction to concentrate more on upstream.
US-based Hess Corp, formerly known Amerada Hess, agreed to sell its stakes in oil and gas assets in Thailand to PTT Exploration & Production Plc (PTTEP) for US$1 billion in 2013. Hess also entered into two separate agreements with a joint venture of PT Pertamina and PTTEP to sell its interests in offshore assets in Indonesia for $1.3 billion. Both sales are part of a large-scale divestiture Hess undertook last year to repay debt.
MANUFACTURING
The Switzerland-based cement giant Holcim, then known as Holderbank, acquired a large stake in Siam City Cement Plc (SCCC) during the 1997-98 financial crisis. In 2012 it sold 9% back to the Ratanarak family. It is now seeking prospective buyers for its remaining 27.5% as part of its proposed merger with French rival Lafarge
Taiwan-based Tuntex expanded to Thailand in the textile and petrochemical businesses but the Asian financial crisis caused the company to cut back its large overseas investments including a naphtha cracker complex in Thailand. In 2012, SET-listed Indorama Ventures Plc (IVL) took over the financially troubled polyester maker Tuntex and restarted its Rayong plant.
FINANCE AND BANKING
The Dutch financial group ABN Amro sold its 80% stake in Thailand’s Bank of Asia to United Overseas Bank (UOB), Singapore’s largest bank by market value, for US$553.5 million. ABN said it had a strategy “to allocate its resources to those markets generating the highest possible benefits for its clients and shareholders” as the reason of the sale.
DBS Bank, previously known as The Development Bank of Singapore Limited, entered Thailand in 1993 when it obtained a Bangkok International Banking Facility (BIBF) licence. During the 1997-98 crisis, DBS subscribed to a new share issue by ailing Thai Danu Bank and gained a 50.3% stake. In 2004, DBS Thai Danu Bank agreed to a three-way merger with the Industrial Finance Corp of Thailand, and Thai Military Bank, creating the sixth largest bank in the country. TMB undertook a further recapitalisation in 2007 but DBS refused to take part. Its holding was reduced to 7.2% from 16.1%, and is just 1.79% now.
US-based GE Capital acquired a stake in Bank of Ayudhya (BAY) in 2007 but sold 7.6% to institutional investors in 2012 under a global plan to shed non-core assets. Bank of Tokyo-Mitsubishi UFJ (BTMU) bought 72% of BAY, Thailand’s fifth-largest lender, in December 2013.
PROPERTY
Singapore’s CapitaLand formed a 40:60 joint venture TCC CapitaLand in September 2003 to invest, develop and manage residential, office and retail properties in Thailand. In 2011, TCC Land Co, which is owned by beverage tycoon Charoen Sirivadhanabhakdi, paid 2.33 billion baht in cash to buy CapitaLand’s stake.