Exports to new markets set for growth: survey

Most businesses believe that Thai exports and imports will continue to grow, especially in new markets, although the global economy has slowed down, according to a survey by express logistics company DHL.

New markets include Indochina, the Middle East, Africa, Latin America, Eastern Europe, India and China.

More than 80 per cent of respondents to DHL's survey, ranging from import and export managers to government agencies and other related industries, have confidence in the economy over the next two years and expect it to match its 2007 performance.

The survey was conducted for the third consecutive year. As a facilitator of trade, with customers across key businesses in the automotive, technology, industrial, consumer products, services and healthcare industries, DHL's survey is designed to share information with customers and partners to provide a perspective on their business outlook.

Based on the survey, most businesses expect a soft decline in Thai exports this year, but are confident the situation will improve in 2009 and expect overall export growth to match or be higher than that in 2007.

Exporters believe agricultural exports will continue to have a promising future over the next two years, despite an increase in production costs. The key products here are rice and energy crops, used for biofuel.

The electronics and automotive industries are also expected to enjoy healthy growth, since many of them are subsidiaries of multinational corporations that have secured places in multiple foreign markets.

For imports, half of all respondents expect import growth to improve this year and next, with surging domestic demand across all industries expected to give the slow pace of Thailand's economy a much needed boost. Furthermore, the government's "Thailand Investment Years 2008-2009" campaign is expected to stimulate local and foreign investments here and secure a more solid economic growth for the country.

The Department of Export Promotion (DEP) predicts that exports to new markets this year will rise by 15.3 per cent to 18.7 per cent - about 49 per cent of total exports - compared to last year.

Nonetheless, much of the export growth will rely on greater export expansion into new markets and the forecast suggests that exporters should explore primary markets such as the United States, Europe and Japan, where steady demand is likely to continue over the next couple of years. A sharp increase in exports is expected to China, India and the Middle East.

The DEP expects India in particular to be a most lucrative export market and has predicted significant export growth there of 40 per cent, mostly from the Thailand-India Free Trade Agreement.

However, 15 per cent of respondents consider China to offer the greatest potential for export growth and view it as a new market. Yet interestingly, 40 per cent of respondents in the automotive, electronics, gems, machinery and textiles industries also regard China as a major export competitor.

Consequently, exporters need to diversify their markets, continuously improve their production and hedge against currency risks in order to remain competitive.

While the Kingdom has seven free-trade agreements, most respondents highlighted four main FTAs which they felt delivered the most benefit to their businesses. Top of the list is the FTA with China, which enables cheap imported parts and raw materials from China to lower production costs. Nonetheless, the survey also revealed that the FTA posed a challenge to local manufacturers of similar items.

The Japan-Thailand Economic Partnership Agreement (Jtepa) came in second, with the top exports to Japan in 2007 including integrated circuits, computer accessories and parts. The Jtepa is also allowing for lower prices of imported high-quality Japanese products, such as machinery and parts, iron, steel and integrated circuits.

The survey also highlighted the growing importance of the Australian market, with the Thai-Australian Free Trade Agreement coming in third as having the most effect on Thai exports, closely followed by the India-Thailand Free Trade Area.

Yet despite this, only about 25 per cent of general Thai exporters have gained benefits from the FTAs, which indicates that more can be done.

The survey revealed that Vietnam was perceived as the country with the highest investment potential for Thai investors (27 per cent), followed by China (22 per cent).

In the last year, small and medium-sized enterprises and micro-enterprises accounted for 31 per cent and 36 per cent of total exports and imports, respectively.

High oil prices, a strong baht and insufficient infrastructure and logistics were the other main factors negatively impacting respondents' businesses.