THAILAND’S VIBRANT POST-PANDEMIC LOGISTICS OUTLOOK
published : 21 Oct 2021 at 15:55
While Thailand’s robust logistics facilities and business ecosystem contribute to the reliability and competitiveness of its supply chains across industries and markets, the country has a strong commitment and a concrete plan to further improve this competitiveness and leverage its advantageous location in ASEAN.
With the largest online population and the second largest economy in the ASEAN region, Thailand has seen its consumers increasingly shift to e-commerce as part of the adjustment process to the COVID-19 pandemic, creating a boon to delivery services. Meanwhile the country’s air, maritime and road transportation services are all poised to rebound strongly in line with the pickup in world demand, as Thailand is one of the region’s largest export bases for industries from automotive to agribusiness and biochemicals.
Represented by both local and global companies, Thailand’s well-established logistics sector is a major facilitating factor for trade and investment while also generating massive jobs for the country’s workforce. The database of the Trade Policy and Strategy Office (TPSO), under Thailand’s Ministry of Commerce, showed that around 20,200 companies were registered in the Thai logistics sector as of August 2020. More than half of these (10,500) were active in road and rail transportation, with 7,900 in warehouses and related activities and approximately 800 each in maritime shipping and delivery services. Approximately 200 companies were operating air transportation services.
The TPSO estimated that Thailand’s logistics industry was the fourth largest industry in the country’s service sector, generating economic outputs during the first half of 2021 of approximately US$ 12.2 billion, accounting for 5% of gross domestic product. Although the TPSO reported that Thailand’s logistic industry declined by 22% in the first half of 2021 compared to the same period of 2020, such a decrease was observed in almost all of the country’s logistics sectors during the pandemic, except for last-mile delivery and postal services, which posted 35% growth in 2019 from 2018 to reach a value of US$ 860 million.
Thriving Delivery and Goods Transportation
Reflecting the surge in e-commerce during the pandemic, for both business-to-consumer (B2C) and business-to-business (B2B) transactions, a survey by the Electronic Transactions Development Agency (ETDA)1 estimated that Thailand’s revenue from e-commerce rose to approximately $50 billion in 2020, up from $35 billion in 2017. The survey also showed that Thailand had the largest B2C e-commerce sector in the ten- membered ASEAN region in 2019 with solid growth prospects.
A study by JP Morgan2 showed that one-third of all e-commerce activities in Thailand involve cross- border transactions, with half of the country’s online shoppers having already made a purchase from abroad. The top three overseas destinations for Thai products are China, Japan, and the United States. Thailand’s growing e-commerce market is driven by mobile applications and e-payment systems, with an estimated compound annual growth rate of 12% to $25 billion by 2023 reflecting the growing popularity of online shopping through mobile phones.
Looking at ASEAN overall, an e-Conomy SEA 2020 report, jointly commissioned by Google, Temasek and Bain & Company, predicted e-commerce in the bloc to hit $62 billion in value in 2020. Global e-commerce firm, Lazada, expects online shopping in ASEAN to reach US$172 billion by 2025, an increase by nearly three times from 2020.
The robust demand for e-commerce in Thailand and across ASEAN has attracted global e-commerce portals to invest in warehouse and logistics facilities in the country, helping shorten transportation times and provide more sophisticated supply chain and logistics management in the medium-term.
Promising Hub for Maritime, Air and Road Logistics
After a decline during the pandemic, Thailand’s logistics industry is poised to recover gradually along with world demand for Thai exports and tourism. Over the long-term, the country’s ongoing investment in upgrading the country’s deep seaports and dry ports as well as international airports across the country will underpin the robustness of the traffic and growth of the logistics industry and further cement Thailand as a logistics hub of Asia and the Pacific.
The database3 of the United Nations Conference for Trade and Development (UNCTAD) showed that Thailand reported a fleet growth rate of 15.5% to 6.7 million dead weight tons of national flag fleet in 2020, compared with 5.4 million tons in 2015. A 2019 UNCTAD analysis of the volume of goods transported by shipping in the next 20 years, meanwhile, has forecast a significant expansion of the shipping volume to as much as 536 million tons in 2039.
As about 90% of all goods transported from one country to another are sent by sea, due to the low cost and greater capacity of this mode compared to air freight, the Thai government has placed a priority on expanding the capacity of seaports across the country. Flagship projects include the expansion of Laem Chabang Deep Seaport to reach a capacity of at least 18 million twenty-foot equivalent units (TEUs) per year upon completion targeted in 2023, compared to 11 million TEUs at present, and the expansion of Map Ta Phut Industrial Seaport to increase the capacity of natural gas and fluid material shipments for the petrochemical industry upon completion in 2025. Aside from these two seaports, which are located in the Eastern Economic Corridor (EEC), the Thai government is also conducting a feasibility study for the Southern Land Bridge which will feature upgraded commercial seaports in Ranong and Chumphon provinces, connecting the Andaman Sea and the Gulf of Thailand, which will connect to other seaports along coastal areas in Bangkok and the EEC.
The Thai aviation industry has grown continually since it underwent liberalization in 2008, which led to the rise of low-cost carriers and vigorous air freight businesses. Thailand’s air freight sector, which is well-represented by multinational companies, contracted in 2020- 2021 in line with the pandemic- driven slowdown in Thai exports and tourism. The International Air Transport Association (IATA) predicts that the number of air passengers worldwide will recover to the pre-COVID level by 2024, depending on the progress of the global vaccination program, and that air freight will grow back to the pre-COVID level of 61.2 million tons in 2021, compared with 54.2 million tons in 2020.
In line with the IATA predictions, Krungsri Research Center estimated that Thailand’s air freight will begin to recover gradually in 2021-2023, from contractions of 68% for local and 38% for international transportation in 2020 compared to 2019. In the short-term, the recovery of the sector will be weighed down by negative factors such as uncertainty of commercial flights, weak global economic recovery, and high competition in the airline industry. Over the long-term, however, the Thai government’s ongoing investment in upgrading aviation capacity at Suvarnabhumi, Don Mueang and U-Tapao international airports and major provincial airports as well as in developing the Eastern Aviation City, which includes maintenance repair and operation facilities, will support Thailand’s position as an important investment and logistics hub.
Road transportation is currently the major platform for Thailand’s domestic logistics industry, accounting for 80% of all goods transported for industrial, farm, construction materials and delivery sectors. Thailand’s plans for upgrading its transportation infrastructure focuses more on dual tracked railways connecting with motorways, airports and seaports. The PPP contract signed in October 2019 for the 220-kilometer high-speed train linking three international airports scheduled for completion in 2025 has set a new milestone for the country’s railway network development. This high-speed train service will bring about new investment in support systems, such as feeder systems and trams. Under the Motorway-Rail Map, the Thai government will invest in the construction of dual- tracked railways linking Bangkok to major provincial cities and regional economic corridors such as the China-Laos Railway.
According to Krungsri Research Center, there are more than 20 cold storage container operators in Thailand at present able to handle perishable goods such as food, fruit and vegetable, and fishery products. Growth of the sector will drive Thailand’s industrial economic growth and its robust export markets.
Smart Warehouses as the Heart of the Supply Chain
Having the largest e-commerce market in ASEAN, Thailand has seen a rapid growth in warehouse properties, which continue to attract more investors to the EEC and other special economic zones. Knight Frank Thailand Research predicted that the total supply of ready-built warehouses in Thailand would increase by 0.7% in the second half of 2020, to reach 4.6 million square meters, compared with the same period in 2019. Despite the slowdown in the global economy during the pandemic, the total warehouse supply in Thailand increased by 2.5%, with occupancy standing at approximately 85% at the end of 2020.
To address the challenges in supply chain management, many warehouses in Thailand have installed upgraded systems, such as enterprise resource planning, cloud- based warehouse management systems, and automation and robotics, to enhance their competitiveness and support Thailand’s vibrant trade and logistics ecosystem.