Thailand as Asean logistics hub
Thailand's central location in mainland Southeast Asia, bordering Malaysia, Cambodia, Myanmar and Laos, as well as access to the Mekong River and a coastline along the Gulf of Thailand and the Andaman Sea, offers logistics opportunities that few other Asean countries can compete with.
As well, the rapid development of neighbouring states, whose growing economies are catching the eyes of investors worldwide, will ensure that Thailand's share of regional logistics is bound to grow.
Thailand is also one of Southeast Asia's top performers in the logistics field. It is ranked 35th out of 160 countries in the World Bank's Logistics Performance Index (LPI) and third among Asean countries -- clear evidence that the country is competitive at a global level.
Hub for logistics: Although significant developments still lie ahead, Thailand has been actively carrying out policies that are transforming all aspects of its national transport infrastructure to make it more competitive globally. As part of this effort, the government recently passed a new infrastructure development plan (2015-22) that calls for investments of at least US$75 billion (2.4 trillion baht) to revamp national infrastructure, including the following projects.
- Rail: Upgrade rail infrastructure and the overall national freight system; build double-track lines along six main routes extending to the country's land borders.
- Road network: Develop four-lane road networks linking key economic regions and border areas; construct new motorways to minimise transit times; develop facilities along main roads such as container yards and multimodal handling systems.
- Mass transit in Bangkok and vicinity: Extend mass-transit railway and light-rail systems; improve the quality of service and safety of mass-transit bus systems and enhance environmental standards
- Maritime transport capacity enhancement: Improve seaports on both the Gulf and Andaman to allow for handling of even greater volumes of cargo.
- Air transport expansion: Enhanced airports across the country will increase capacity while upgraded air traffic systems will improve efficiency. The establishment of an aviation industrial estate is also called for.
Asean logistics maturity: Logistics services in most Asean countries are still in their infancy and in some cases highly fragmented and not as internationally competitive as they need to be. A recent high-profile rail infrastructure project into Cambodia was curtailed because governance and track construction problems prevented viable turnaround times for new rolling stock. This is an example of the gap between the vision of connectivity expressed by the promoters of the Asean Economic Community (AEC) and the actual implementation of commitments by member states.
Growth of cross-border trade: According to a recent study by Siam Commercial Bank, the reduction in tariffs on goods traded among Asean members has increased border trade and transit trade by an average of 7% annually over the past five years. This has been accompanied by a corresponding rise in investment to maintain advantages in terms of cost, raw materials and labour.
For example, business operators who rely heavily on labour, such as clothing and shoe manufacturers, are expected to set up new factories in countries with cheaper labour costs, such as Myanmar, Laos and Cambodia.
Now that the AEC has been formed officially, movements of raw materials, goods and labour are expected to start increasing significantly, which will give rise to the demand for logistics services to manage goods and services throughout the supply chain. Under the AEC, restrictions on labour, raw materials, market access and regulations are to be reduced considerably or totally eliminated. As a result, border provinces in the North, Northeast and East of Thailand are projected to experience robust growth in cross-border trade in the coming years.
The future: Road transport has been the major logistics mode for many decades, not only for domestic but also for cross-border transport. It is expected that this trend will continue in the coming years because of continuing investments in road infrastructure and the trade-off between cost and delivery time. As a result, demand for heavy trucks and other commercial vehicles will continue to grow.
But what will happen to the numerous local logistics firms with smaller fleets? To survive in the marketplace, they will need to align their strategies with regional or global businesses. One example would be to become outsourced business units of a global logistic company, which would allow consolidation among larger networks offering full utilisation of capacity on outward and return journeys.
The do-nothing option, meanwhile, is to be driven out of the market or to be acquired amid intensifying competition as the AEC gathers momentum.
(References: "Thailand: Asean's Logistics Hub", Thailand Board of Investment; "Thailand's Logistic Opportunities", Solidiance.com; "Business Opportunities for the Services Sector under the AEC", SCB Insight.)
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