Past Success Ahead of the Curve
The phenomenon known as digitalisation has grown rampant globally. Thailand has ridden this digital transformation wave and has attracted many foreign multinational companies. One example is Samsung, a South Korean-based company that specialises in electronics and IT that has found great success with its electronic products globally.
With manufacturing bases in Thailand, the company considers the country a firm hub for production that allows wide access to Asian markets. Forward to 2022, the pandemic has accelerated the demand for food deliveries, e-commerce, and other services as preferences for contactless dealings escalates. A recent article in the Bangkok Post revealed that almost a quarter of Thailand’s enterprises have integrated digital systems into their operations. Almost 60% of Thai enterprises are referred to as ‘digital evaluators’, a phase where embracing digitalisation is gradually becoming apparent.
Embracing the Digital Transformation
Although Thailand is a developing country, it is estimated that the digital economy will generate $74 billion worth of value by 2030, with soaring usage of the internet for social media, accessing information, news, e-commerce, and other applications.
Grab, a Malaysian-founded company, that entered the Thai market in 2013 originally as a platform for taxis, further expanded into food delivery in 2018. The company became the market leader for food delivery in October 2018, only eight months after its official launch, covering over 80,000 restaurants paired with 100,000 drivers, it reported $16.1 billion in gross merchandise value in the fourth quarter of 2021. Aside from food deliveries, e-commerce is a segment in the digital economy which experiences sharp growth due to the pandemic.
Shopee, a Singaporean multinational company that focuses on e-commerce launched in Thailand back in 2015. It accumulated over 36 million people spending $19 billion in 2021, up 8.7% from the previous year. The digital industry in Thailand is no different from what other nations are experiencing – the exponential growth in the industry under the new normal with increased access to all aspects of the digital economy – internet and mobile phones for instance. The strategic location in which Thailand is located allows for effective placements of data centres and cloud facilities ranking fourth in ASEAN and is forecast to grow 26% between 2019 and 2025.
Infrastructure is the supporting pillar essential for the digital industry to blossom. In this connection, the government has acknowledged that advanced systems involving 5G, cloud computing, and Artificial Intelligence (AIs) will be provided to support the digital economy as a whole in order to enhance accessibility for the population and foreign investors.
For instance, the launch of PromptPay, a system that enables users to transfer and receive funds through an ID or phone number instead of a bank account, shortens and eases how money is transferred between individuals. Providing such infrastructure is essential to the growth of the economy which the government calls ‘Thailand 4.0’, a framework planned to align the private sector’s interest with the economy as a whole to drive economic growth through digital means and innovations. As such, the government is driven to provide infrastructure that will promote the digital economy. Various new laws and regulations, such as the Electronic Transaction Acts and Data Privacy Act, are vital instruments needed to accommodate effectiveness and efficiency in the digital world.
Investment Drivers & Implications for Supply Chains
Research conducted by Citi and the EIU finds that the attractiveness of a country is determined by nine key factors; labour costs, geographical location, access to key markets, regulatory environment, skilled workforce, government incentives, currency convertibility, tax rates, and political stability. There is an abundance of relatively cheap and skilled digital labour in the Thailand, primarily due to specialised training and government incentives for skilled personnel. Thailand is also located in a strategic position that allows effective exports to neighbouring countries through all channels – sea, sky and land – as well as being optimal for data centres and cloud facilities. Moreover, the nations surrounding Thailand are some of the world’s fastest-growing markets. CLMV and ASEAN nations open up a lot of opportunities for common exports. Additionally, the business environment is one of the most favourable globally, with low tax rates compared to neighbouring countries as well as numerous government incentives. All of these supportive factors that Thailand is able to provide contribute to the country’s resilient supply chain, powering ahead from manufacturing to the customer
BOI as a Supporting Pillar
The Board of Investment of Thailand (BOI) is an agency under the government of Thailand which aims to promote foreign direct investments by providing essential information and services as well as monetary and non-monetary incentives. Tax incentives and import duty exemptions are the main benefits the BOI provides by which certain activities under certain criteria are qualified for such benefits.
Training grants and relevant institutions are provided to develop skilled personnel for digital industries. The government has recognised the significance of digital industries to the economic growth of Thailand and has provided industry-specific incentives to advance the industry more effectively. The building of sophisticated software, digital and cloud services as well as digital parks can educate society about the rapidly-growing digitalised world and stimulate investments. As technologies are evolving and becoming increasingly involved in daily life, digital industries form the backbone of the economy including all the other sectors supported by digital systems.