Some sectors wary and some expect gains from AEC

The sectors are set to be liberalised by 2010, while the bloc's logistics industry is scheduled to open up in 2013. Liberalisation will allow companies in Asean countries to own up to 70 per cent of businesses in these sectors in other member states.

Healthcare

Thailand's healthcare sector stands to benefit the most from this agreement because of its leading

position in this business, according to Boon Vanasin, chairman of Piyavate Hospital and Thonburi

Hospital Group.

Boon sees the agreement as a window of opportunity to expand, and is considering investing in new hospitals in Vietnam and Burma. For the property in Vietnam, he has secured a commitment from a Middle Eastern partner, while a 30:70 joint venture is planned for the expansion into Burma.

"If there are no additional conditions set by the local agencies, we might invest in [Burma] next year," he said.

Though the agreement will allow Asean members to invest in Thailand, Boon said the internation

al standard of local medical professionals gave them a head start when it came to expanding.

Chatree Duangnet, CEO of Bangkok Hospital Medical Centre (BMC), said liberalisation should

lead to the expansion of the healthcare business in Thailand, as existing hospitals will need to invest more to cope with the entry of new rivals. In addition, it will facilitate BMC's goal

of expanding overseas. BMC is already negotiating with several investors in Asean countries to operate medical centres, and is considering a variety of investment models.

Chatree declined to disclose details, however.

"Still, the major obstacle in expanding this business is not money or shareholding limits, but

the adequacy of specialised medical staff [in other Asean countries]," he said.

Telecommunications

The Thai telecom industry is also ready for liberalisation, according to

Sudharma Yoonaidharma, commissioner of the National Telecommunications Commission.

At present, telecom operators in Asean countries can own a maximum of 51 per cent of operators in

other member states, while non-Asean players are limited to shareholdings of 49 per cent.

Sigve Brekke, chief executive of Telenor Asia, said liberalisation is happening all over the world, and predicted that in almost all cases, protectionism will disappear. Special business interests and/or political interests will have to give up their privileged positions, he said, resulting in gains for consumers in the form of more, better and cheaper services.

Telenor Asia oversees the regional investments of Norwegian telecom giant Telenor. Telenor Asia directly owns 34.98 per cent of Total Access Communication (DTAC).

"This is going to come to Thailand also, and I welcome it all," Brekke said.

But the CEO admitted that the potential for new investment in

Southeast Asia was limited. As such, Thai telecom companies are expect

ed to stay focused on their businesses at home, rather than on expansion.

"This is because 3G is coming up, and this requires substantial investment and focus," he said.

The NTC will auction four 3G-2.1 GHz spectrum licences at the end of this year or early next year. It is estimated that the three major Thai private cellular operators will spend a total of nearly Bt50

billion on 3G network roll-outs in the first year after receiving licences.

Asean telecom operators have been investing across the region for a long time. Singapore Telecom, for example, invested in Thailand's largest cellular operator, Advanced Info Service, in 1999. SingTel now owns 19.17 per cent of AIS.

Tourism

Less optimistic about the coming liberalisation are small and medium-sized enterprises (SMEs) in the hotel business, which lack financial strength and competitiveness, said Kongkrit Hiranyakit, chairman of the Tourism Council of Thailand (TCT).

"Some big hotel chains such as Dusit International and Landmark Hotel are strong overseas, but the rest of the hotel industry is weak, and these operators need to be protected," Kongkrit said.

Thai hotel operators are suffering from a sharp drop in visitor numbers, which are expected to fall 22 per cent on year in 2009, the biggest plunge in nearly 50 years. Due to the global economic crisis, Thailand's political problems and the H1N1 flu pandemic, TCT has revised down its

visitor arrivals target from 14.1 mil lion to 11 million this year. The tourism industry is expected to begin showing signs of recovery at the end of this year or early next year.

Kongkrit advised the government to limit the new industry players to large-scale projects that are beyond the means of local investors, like theme parks and ultra-luxury hotels.

But while this will protect SME operators, it will also create new magnets to the industry.

Chairat Trairatanajaratporn, president of the Tourism Association of Rayong Province, said the government must help improve local workers' skills, particularly in international languages and tourism services.

Kongkrit is less worried about the opening of the travel agency segment, as it is difficult for foreigners to compete with locals in terms of knowledge of Thailand. At best, foreigners can serve as assistant guides, or so-called "sitting guides", to help local guides communicate with foreigners.

Air transport and logistics

More mergers and acquisitions of Thai businesses are expected in these sectors as most operators are SMEs struggling with financial shortages and a lack of high-technology equipment, said Assoc Prof Ruth Banomyong, director of the Centre for Logistics Research at Thammasat University.

Thai Airways International (THAI), as the nation's largest cargo

operator, is expected to be hit the hardest by liberalisation, but managing director for cargo and commercial mail Pruet Boobphakam said the airline is ready. THAI's cargo revenue accounts for about 15-17 per cent of total revenue annually.

"Market opening can be viewed as a positive push toward a better business environment," he said.

Air freight forwarders and cargo agents are expected be negatively

impacted in a chain reaction.

Teeranit Isarangkura, managing director of GSA Asia Cargo, a member of Triple i Logistics Group, said Thai operators will lose their market for air shipments of such products as fresh vegetables and other foods, as

well as ornaments, to foreign providers because large firms can reduce costs more efficiently and

reliably.

Shipment of products such as auto and electronics parts, which need high-level guarantees, are nor

mally provided by foreign firms, as this is required by consignees who use the services as part of the

providers' global networks.

The world's "Big Four" logistics-services firms - DHL, UPS, TNT and FedEx - have been players in the Asian market for years. They provide a wide range of international services including express mail and parcels, air freight, sea freight and fully-integrated logistics solutions.

Jarupat Tantimit, vice president of the Thai Licensed Customs Brokers Association, said the reduc

tion of restrictions among Asean members would lead to the Big Four becoming more active in Thailand as they have more money, better technology and global networks.

Foreign providers outside Asean can enjoy 70-per-cent equity participation in each member country by registering their businesses in Singapore first.

"In the future, we may be limited to subcontracts outsourced by large international firms," she said, echoing the views of other logistics experts.

Though liberalisation has been on the horizon for some time, most logistics operators have had their hands full dealing with immediate problems, such as the economic crisis, and have neglected long-term survival strategies, Jarupat said.

This was a problem not only for air-transport firms but also for road-and sea-transport services, Jarupat said.

Ruth, of the Centre for Logistics Research, agreed that the transport and logistics services were the most threatened by big players from the US and Europe. So, while Thailand stands to gain overall from freer trade flow, logistics providers stand to lose. He believes segments in which local companies have strong positions in specialised areas - in particular road-transport service

providers such as Eternity Grand Logistics, Nim See Seng, Blue and White, and SCG Logistics

Management - should be spared liberalisation.

Kasem Jaliyawatwong, chairman of the Thai Airfreight Forwarders Association, urged the government to open the sector slowly, warning that an increase in cross-border operators could wipe out local firms.

Ruth also urged the government to help strengthen Thai firms before liberalisation begins. Lacking access to funds, he said, Thai operators have not been able to finance new IT solutions or equipment.

Note: Nalin Viboonchart, Usanee Mongkolporn, Sirivish Toomgum, Suchat Sritama and

Sasithorn Ongdee contributed to this Special Report.