As Thailand and the nine other Asean countries prepare for closer integration under the Asean Economic Community (AEC) in 2015, investment laws and regulations have been changing, and the pace of infrastructure development has picked up. The implications for property investors could be significant.
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Many countries have created special economic zones (SEZs), especially in border areas, to attract foreign investors. These countries are seeking foreign investment for development and to increase revenue per capita. Some of this activity will affect neighbouring countries. For example, SEZs in Laos and Myanmar and related infrastructure developments that are connected to all countries in the region will affect Thailand, especially its border provinces.
Bangkok and its surrounding provinces will continue to grow in the future, with a focus on residential projects along the new extensions of mass-transit lines and commercial projects in the urban area. Foreign investors are mostly focused on Bangkok as a location for operational centres for their businesses in the Asean region. However, all border provinces and business cities in Thailand have become new investment locations during the past few years.
Large provinces throughout Thailand have shown growth during the past few years. The gross provincial product of each province is significantly higher than it was a few years ago. Revenues of local government offices and the number of people in each province have also increased, especially in some business provinces. In addition, the central government has introduced many new infrastructure development projects to improve the country's competitiveness. These projects, many of which are scheduled to start in earnest next year, have become the main engine for diversifying the revenue of other provinces.
Many retail and residential developers have started to launch or new projects in some of the provinces that are expected to see above-average growth in the future. Apart from some resort destinations and coastal cities, Chiang Mai, Khon Kaen and Udon Thani have become new destinations for condominium development. In addition, in many provinces and especially business cities, many retail projects are under construction and scheduled to be completed between this year and 2015. Shopping malls, superstores and specialty store malls are expanding into many provinces, while community malls continue to be located only in business cities.
Many provinces along the border are becoming new destinations for both Thai and foreign investors. These areas are not too far from the SEZs of other border countries. This is because the supporting facilities in other countries still do not meet international standards. As such, many foreigners who work in locations that border Thailand will live in Thailand and cross the border to reach their businesses.
The total value of border trade of some provinces has increased significantly from just a few years ago, particularly in the provinces that are directly connected to neighbouring countries through bridges. In addition, the central government has approved the opening of SEZs in some provinces along the border. While Mae Sot in Tak province was the first SEZ in Thailand, the incentives for investors are still being decided.
Central government is planning to develop more border provinces into SEZs, among them Chiang Khong in Chiang Rai, the border areas in Kanchanaburi, Nong Khai, Nakhon Phanom, Mukdahan, Sa Kaeo, and parts of Songkhla.
After the policy is confirmed and incentives are clearly understood, these provinces may become new investment destinations. Although a lot of investors are active in these locations already, superstores and many specialty-store malls will expand to some of these areas.
Infrastructure development, especially high-speed train projects, will affect and change the landscape of all provinces along the development routes and increase the attractiveness of some areas. Some business cities will become business centres or first-tier logistics hubs and lead the surrounding provinces to more development. These locations will probably become new business cities after the first-tier provinces are fully developed.
SEZs and infrastructure development projects from the 2-trillion-baht investment programme by the central government will improve the attractiveness of many provinces. Chiang Mai, Khon Kaen, Udon Thani, Nakhon Ratchasima, Ubon Ratchathani, Chon Buri, Rayong, Phetchaburi, Prachuap Khiri Khan, Nakhon Si Thammarat and Songkhla are first-tier provinces that will keep growing in the future. However, some smaller provinces around the first-tier locations and some bordering provinces, such as Chiang Rai, Tak, Lamphun, Ratchaburi, Kanchanaburi and Nong Khai, are also growing and expanding.
In addition, some provinces, such as Phitsanulok, are becoming more important because they are located in the best locations along the development routes.
The border provinces and some existing business cities have shown the most interesting activity during the past one or two years and will continue to do so in the future, even though some of the infrastructure development projects may be delayed or may never start. This is because of numerous external factors, such as SEZs in Laos, Myanmar and Cambodia, and the opening of their economies.
Surachet Kongcheep is senior manager of research at Colliers International Thailand. He can be reached at surachet.kongcheep@colliers.com.