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Published on April 26, 2008

nophakhun limsamarnphun

nop1122@yahoo.com

For the past 18 years, Sombat, who speaks Mandarin and Japanese fluently, has helped King Power become a strong conglomerate. Last year's sales totalled Bt15.1 billion.

"I joined King Power [founded by Khun Vichai Raksi-arksorn] in 1989 after a stint at a Japanese steel firm in Thailand," Sombat, who holds an economics degree from Japan's Meijo University in Nagoya, said.

At the time that he joined the company, King Power was still a partner of the Tourism Authority of Thailand in a city duty-free shopping operation at the former Mahatun Plaza in Bangkok.

In 1993, the company won a contract to open a souvenir shop at Don Mueang international airport and in 1997 was granted a licence to run a duty-free shop covering an area of 2,000 square metres.

"In the early 1990s, foreign-tourist arrivals in Thailand were only 6 million to 7 million per year. Thus, duty-free sales amounted to some Bt6-7 billion a year, with liquor, cigarettes, perfumes and cosmetics among the leading items.

"Later on, we turned our focus to branded fashion products such as watches and leather goods, which have relatively higher profit margins, ranging from 30 to more than 50 per cent.

"These kind of margins are necessary since we're required to pay Airports of Thailand a share of the sales revenues. For example, we pay 15 per cent at Suvarnabhumi Airport.

"In fact, we got the duty-free licence extended when Suvarnabhumi Airport was opened in late 2006 to replace Don Mueang as the country's international gateway.

"Then we also won the bid to manage the commercial-retail space at the new airport," Sombat said.

"However, both duty-free and commercial-retail contracts at Suvarnabhumi were terminated by AOT's previous board of directors after the coup. We're contesting the cases in court," he said.

During the 1990s, Sombat said, Japanese tourists were among the major buyers of duty-free goods. However, the Japanese, who used to spend between Bt3,000 and Bt4,000 per head on duty-free shopping, are now a saturated market segment. As import duties in Japan have fallen, it has become less attractive for Japanese to shop abroad.

"Now the Chinese have become the major shoppers, with an average purchase of Bt2,000 per head, up many times from just about Bt500 per head a few years ago.

"The number of Chinese visiting Thailand has also increased sharply, from an annual 300,000 visitors three to four years ago to about one million as the Chinese government encourages more of them to travel overseas.

"More Chinese have also become affluent due to the economic liberalisation and high growth rates of the past two decades. Many are now wealthy due to the property and stock market booms.

"We expect Chinese arrivals to double to two million annually in the near future due to favourable factors, such as cultural proximity between Thailand and China in terms of food and language [as there are a significant number of Chinese descendents here].

"In addition, Thailand is not far from China, while prices here are quite low for Chinese tourists.

"In my opinion, the Thai government needs to ensure that the country is competitive regionally in terms of attracting foreign tourists over Singapore, which is a major rival.

"If we could keep landing fees low, we could attract more airlines to Bangkok and turn it into a regional aviation hub.

"At present, Singapore has about 33 million air travellers and 11 million foreign tourists compared to Thailand's 38 million and 12 million tourists annually," he said.