Firms look to set up abroad as growth slows

As many parts of the world are falling into recession, Asean and the Middle East are seen as new promising markets thanks to their uncomplicated regulations and high purchasing power.

Businesses with overseas potential include those in the service sector and labour-intensive manufacturing as well as firms seeking larger markets, needing a high volume of raw materials and top technology related to textiles, garments, lifestyle goods, processed food, auto garages and tailoring.

About 800 out of the more than 500,000 registered Thai firms have already gone international by setting up factories or opening outlets abroad.

"We expect the number to increase by about 300 in the year to come," said an official at the Commerce Ministry.

In spite of the bright opportunity to invest overseas, Dusit Nontanakorn, adviser to the management of Siam Cement, warned that new investors must carefully consider whether they would have enough cash flow to run the business during the world economic downturn.

"Thai enterprises may face cash-flow difficulties as a result of the financial crisis, with commercial banks being more careful about approving loans for new operations," said Dusit.

He said the markets with high potential to serve as manufacturing bases for Thai firms were in Asean, in view of their proximity to the Kingdom and their investment regulations not being complicated.

Restaurants

Sakon Kubpiyajanya, managing director of Neo Suki Thai Restaurants, believes there are good opportunities for Thai food and restaurant firms to expand overseas, in particular within Asean.

Asean will become a single market in 2015, which will allow the free flow of capital investment and labour. Investing in an Asean member state would therefore be establishing a base for business growth in the long run.

"Despite the global slowdown in consumption following the financial crisis, people still have demand for food and restaurants. Thai enterprises have a high ability to manage this kind of business, with their good service mindset and famous cuisine," said Sakon.

He added that Neo Suki would concentrate on expanding its business overseas - particularly in Asean - to compensate for losses from sluggish domestic growth and a slowdown in tourism.

Neo Suki has seven outlets in Thailand, Japan, China, Vietnam, Cambodia and Indonesia. The firm is planning to open two more outlets in Vietnam next year, as it foresees robust economic growth in that market.

More than 30 per cent of the company's income is generated from its overseas outlets. Neo Suki expects its income from restaurant operations and selling its sauces to grow by 10 per cent next year, from this year's estimated Bt50 million.

Sakon suggested that those venturing overseas for the first time should find reliable partners in their target countries. This would enable them to understand the regulations specific to each market and pave the way for future business expansion.

Spas

Naparat Srilapan, vice president of the Thai Spa Association, said that despite the slowdown in economic growth, Thai spa business still have room to grow abroad because of their renowned high-quality service and unique Thai style.

However, business expansion next year may not be strong as in the past few years due to the global economic woes. The association expects the industry will grow by 10-20 per cent in 2009, against the 50 per cent experienced in previous years.

About 50 Thai spa businesses are already established overseas under one of three formats: those owned by Thai investors; joint ventures; and those under the management of Thai operators.

Naparat warned that some countries have regulations limiting the number of Thai therapists and other workers. She advised new investors to seek local partners as way of getting round such legal barriers.

The Middle East is the most interesting market for Thai spa operations, she said, as clients there have high purchasing power and their governments have a policy to promote tourism industries.

Naparat, who is also managing director of Spa Plus, said her firm is planning to expand into Italy next year under the Lanna Gaya brand. Spa Plus has opted to manage the operation for its local partners, given its expertise in this area.

The firm currently has two overseas branches - in Chingdao, China, and Fiji.

Spa Plus expects income from its domestic and overseas operations to hit Bt60 million this year, and anticipates 10-per-cent growth next year.