Global trade logistics' strategy drawn up

In an attempt to boost flagging exports, the Commerce Ministry is drawing up a "global trade logistics" strategy aimed at creating not only direct transactions, but also establishing Thai distribution centres in high-potential countries.

Under the plan, the ministry will focus on both international and domestic logistics development.

The Business Development Department is in talks with global and local logistics operators, exporters, wholesalers and retailers. They will share ideas and identify strategic areas for distribution centres, both in the Kingdom and abroad.

A combination of poor logistics and a low number of distribution centres has reduced Thailand's competitiveness in terms of accessing more foreign markets. Amid the global financial crisis, exports are one of the country's main economic drivers and a sector on which the government is focusing for survival.

Deputy Commerce Minister Alongkorn Ponlaboot said the "global trade logistics" strategy would primarily focus on major export markets, including the United States and European Union.

Despite the size of the US market, Thailand has only two private distribution centres: one in the East and one in the West. The former has an annual trade volume of Bt1 billion, while the latter achieves Bt10 billion per year.

In addition, other export markets, such as Africa, the Middle East, Russia and Germany, have great potential for the establishment of distribution centres, as trade volume is growing. Munich is seen as a potential base in Germany.

"We are considering with the private sector marking up key areas to set up our distribution centres, to make sure they will boost exports. In addition, they'll reduce exporters' costs," Alongkorn said, adding that he expected the draft plan to be finalised later this week.

He said the ministry had also focused on expanding the strategy to link up with wholesalers and retailers to complete the marketing cycle. With these strategic partners, they can directly order Thai goods via the distribution centres in their countries.

The ministry is also considering two business models - the Guangzhou model and the Boston model - that are designed to fit the consumption culture in each market.

The former is drawn up to focus on B2C (business to customer) trade practice, while the latter is focused on call-to-call practice, which cuts out the importer, middleman or trading firm.

"If Thai products can access the market with fewer of these marketing players, it will allow Thailand to achieve [expansion of] both trade volume and value," Alongkorn.

The ministry is also in talks with retail giant Tesco Lotus and wholesale giant Makro, which have their own distribution management that can facilitate the movement of Thai goods.

UK-based Tesco manages 3,700 stores worldwide, for which it has an efficient distribution system.

Makro, meanwhile, uses its stores as warehouses and directly distributes goods.

Alongkorn said successful negotiations would allow Thai goods to be distributed through the distribution channels of these two major international players. In addition, it would create a win-win situation for the two trading partners and the country in terms of reducing not only operating costs, but also transportation expenses.