Buffeted by the pandemic and other headwinds, the majority of companies in Thailand are focusing on intra-regional trade to grow in the post-Covid world, according to HSBC.
Of the Thai businesses that participated in the latest HSBC Navigator survey, 65% are currently trading within Asia Pacific, the bank said.
Meanwhile, mainland China continues to hold importance as an investment destination for Thai companies: 28% are targeting future expansion in China, while 18% are targeting Japan and 14% the United States for growth opportunities.
"Intra-regional trade already accounts for some 60% of Asia's overall trade, and it's a figure that will only grow when the RCEP comes into effect," said Krisda Phatcharoen, country head of commercial banking for HSBC in Thailand.
"Intra-Asian integration will not only strengthen the region's role in the global trading system but also position Thailand to take part in the next round of global economic growth."
The Regional Comprehensive Economic Partnership (RCEP) was signed last month by the 10 Asean member states plus China, Japan, South Korea, Australia and New Zealand. It will create the world's largest trade bloc, covering around 30% of world gross domestic product (GDP) and population. Thailand is expected to be one of main beneficiaries of the pact.
Buffeted but not blown off course: 4,131 companies from 16 Asia Pacific markets -- the largest sample size yet -- participated in the latest HSBC Navigator survey. Among the 200 participating firms in Thailand, it was not surprising to find that business confidence has weakened slightly over the last 12 months, in line with the regional trend. It found that 76% of Thai companies expect revenue to grow in the coming year, down from 87% in 2019.
The resurgence of Covid-19 and its knock-on effects -- among them a decrease in customer demand, supply-chain disruptions and workforce morale -- are seen as the main threats to economic recovery.
In order to reduce the impact of such threats and to target future growth, Thai companies are predominantly focusing on improving the quality of their products and services (47%), reducing costs (43%) and expanding into new markets (43%).
Cutting costs, however, does not equate to cutting investment. In fact, more than three quarters (76%) of Thai businesses say they will increase investment in the coming year, primarily in product innovation (65%), digital platforms and tools (65%) and into new sales channels (63%).
"You can't cost-cut your way to growth, so it's encouraging to see that businesses in Thailand are increasing their investment," said Mr Krisda. "In the current operating environment, businesses need to be extra judicious with how and where they can create value so that they can sharpen their competitive edge."
Only as strong as the weakest link: The pandemic has also driven businesses everywhere to rethink their supply chains. In particular, Thai businesses are most concerned by elements relating to stability of their suppliers and whether they are at risk of tariffs (cited by 56% of Thai businesses), as well as the physical distance between suppliers and customers (49%). Meanwhile, the concern that was mentioned the most among respondents was rising costs (46%).
In response, 63% of Thai businesses will make it their immediate priority in 2021 to ramp up the use of digital solutions and technology. Meanwhile, 59% will both aim to diversify their supply chain and select suppliers based on their operational resilience.
These changes are expected to deliver the following benefits: greater access to international customers (46%), improved environmental and sustainability outcomes (46%) and increased speed to market (45%).
To read more, visit www.business.hsbc.com/navigator