The Asean Economic Community (AEC) officially came into effect on Dec 31, 2015. A year on, how much has the pact achieved?
The AEC is not just about setting up free trade zones within Asean. It also aims to create a single market and production base in order to boost the competitiveness of Asean countries. It is expected to create free mobility of goods, services, investment, capitalisation and skilled labour.
Freer mobility of labour is a significant element as all businesses and economies rely on manpower.
Aat Pisanwanich, director of the Center for International Trade Studies at the University of the Thai Chamber of Commerce (UTCC), helps evaluate the impact of AEC in its first-year of operations.
How has the AEC's performance been so far?
Given Thai exports in the Asean market in the first four months of 2016, statistics show that shipments shrunk 2.9% year-on-year to US$26.6 billion (956 billion baht). Thai shipments to Malaysia were the highest contributor, accounting for 18.1% of total exports to the region followed by those to Vietnam (15.7%), Singapore (15.5%), Indonesia (15.4%), the Philippines (11.8%), Myanmar (8%), Cambodia (7.8%), Laos (7.6%) and Brunei (0.1%).
Based on the latest figures that are available, in the first four months of 2016, Malaysia and Singapore still dominate the Asean market, controlling 26.4% and 22.2% of market share, respectively.
Thailand comes third, accounting for 17.3% of the market followed by Indonesia at 16%, Vietnam (8.7%), and the Philippines (5%).
Countries boasting increased market share for the period include Cambodia, Indonesia, Laos, the Philippines, Thailand and Vietnam, while Malaysia, Myanmar and Singapore saw their market share drop.
In 2016, countries that envisaged outstanding export growth were Vietnam from rice and garments, Indonesia from auto parts and auto tyres, and Malaysia from electrical appliances.
Vietnam also boasted outstanding outbound investment in Asean, mainly from the agricultural sectors in Laos and Cambodia and construction in Myanmar. Thai investment, meanwhile, is still dominated by existing investors.
In the service sector, Thai investment was found only in hospitals, beauty care and cosmetic surgery.
What is Thailand's weakness?
Knowledge of English and the languages of neighbouring countries. Thai people are still quite poor in English literacy and most Thais are still reluctant to learn the languages of neighbouring nations. This is due to a lack of inspiration and incentive.
What are the key problems and obstacles for Thailand to tap into the AEC?
Thailand still has a problem regarding connectivity of the Asean supply chain. For instance, Thailand, which is now facing a short supply of coconuts, still fails to import rich raw materials available in neighbouring countries to fill the gap.
On the investment-side, Thai medium-sized enterprises have yet to have the guts to invest in the Asean market, largely due to insufficient investment capital, good and trustworthy local partners, and fears of copycats.
Thai businesses are still short on finance and funding support for expansion abroad from the government, while most of them are still lacking in information support before making investment decisions.
What are your suggestions for Thai investment in Asean?
Thai investors, particularly for small-and-medium-sized enterprises, should first find good and trustworthy local partners. Solo investments are not recommended.
Those who want to sell goods in Asean are also urged to first find in-depth information about market demand and consumer lifestyles.
The government should set up an SME fund for Asean to financially support Thai SME investment in the region and proactively support and develop distribution outlets and public relations campaigns for Thai products.
For One Tambon One Products and community products to be sold in regional distribution outlets, the government should also help subsidise their shelf fees.