Logistics set to see B200bn income loss
First contraction in industry's history
Despite thriving online shopping and express delivery services, Thailand's overall logistics business is projected to see the first contraction in the history of the industry this year, with about 200 billion baht worth of revenue loss.
Chumpol Saichuer, president of the Thai Transportation and Logistics Association, said Thailand's logistics business has been hit hard by the slowing global economy, wrecked by the Covid-19 pandemic.
"In previous years, the country's logistics business, be it via land, water or air, registered growth every year," said Mr Chumpol.
"But this year the business is highly likely to shrink by as much as 10%, the same rate as the country's GDP."
He said the logistics business contributes 14% of GDP, or about 2 trillion baht. That means Thailand could lose about 200 billion baht if the business contracts 10% this year as he expects.
Road transport makes up 79% of Thailand's logistics business, with water transport representing 18%, rail 2% and air 1%.
According to Mr Chumpol, the Covid-19 crisis caused Thailand's e-commerce business to flourish as consumers have shifted increasingly to shopping online.
Thailand's logistics structure has changed to more express delivery, with a market value estimated at 100 billion baht.
He said what worries him most is express delivery services belong to foreign providers, with few Thai players in the industry.
Up to 90% of the Thai logistics providers offer land transport, while water and air transport services are controlled by foreigners.
Thai-owned logistics providers have developed from companies that transported consumer goods from industrial factories to traders and retail outlets in provinces nationwide, which amount to 200,000 outlets.
Such providers account for 50% of the country's land transport, with those in modern trade making up 40% and express delivery providers 10%.
However, Mr Chumpol said express delivery services have rapidly grown and now account for 35% of land transport services.
"With flourishing online shopping, goods transport has switched focus to express delivery," he said.
"This business is likely to record a growth rate of more than 100%, be it through pickups or motorcycles. This trend is quite worrisome and the existing 1,000 to 2,000 Thai providers are at risk of being wiped out."
Mr Chumpol called on the government to intervene and offer more soft loans to Thai logistics providers, allowing them to use their trucks as loan collateral.
State authorities are urged to closely supervise trade competition rules to ensure fair trade and prevent dumping, where the prices of goods or services are cut by giant players in order to dominate the market.
"Express delivery services are owned by foreigners. Foreign players that are well-equipped with cash and technology, such as Kerry, Flash Express and ZTO Express, control most of the express delivery market," he said.
Mr Chumpol said state agencies should use more services of Thai providers by cooperating with the Thai Federation on Logistics and the Thai Transportation and Logistics Association.
Somsak Kiatchailak, secretary-general of the Office of Trade Competition Commission (OTCC), said his office is overseeing express delivery services, particularly unfair practices in e-commerce, logistics and food delivery, after consumers' behaviour shifted more to shopping online.
He insisted the OTCC has not received any complaints about unfair trade practices in the logistics business, though the office is expediting setting up guidelines for online food delivery services to prevent unfair trade practices and keep such platforms from taking advantage of restaurants.
Santichai Santawanpas, the OTCC commissioner, said commissioners have already finished the draft guidelines to regulate online food delivery services after the business mushroomed during the lockdown starting in April.
The guidelines will include preliminary prohibition requirements on calls for unfair economic benefits such as unreasonable income-sharing charges and advertising and special sales promotion fees without proper rationale and clarity.
Food delivery platforms are also required to notify restaurant operators in advance of the reason and the need for changes to their service charges.
The guidelines also stipulate trade conditions that restrict or hinder the operations of other businesses, such as determining conditions that restrict restaurant operators' rights by prohibiting food distribution to other food delivery operators unfairly, said Mr Santichai.
The OTCC is holding public hearings for stakeholders and will be open for comments on improving the draft guidelines, he said.
Once the public hearings finish, the working panel on the draft guidelines will edit and send the draft to the OTCC for approval.