Retail giants preparing for AEC

Economy May 26, 2014 00:00

By Kwanchai Rungfapaisarn
The Na

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Major retailers including Central Group and The Mall are expanding into several high-potential locations, particularly in the border provinces and tourism cities, to cash in on next year's implementation of the Asean Economic Community, which will attrac

The AEC will likely increase regional economic prosperity and stability as well as bring new business opportunities, they believe.

Suthichart Chirathivat, vice chairman of the board of the Central Group of Companies, said he did not expect any significant change in the domestic retail market due to the AEC, which will be fully effective next year.

“The local retail sector has reached maturity as the big local players have fully penetrated the market and gained a high competitive advantage over foreign retailers. However, the implementation of the AEC will allow major local retailers to penetrate new markets in other AEC countries,” he said.

Suthichart said this was the right time for Central Group to expand its retail business abroad, especially in countries such as Vietnam and Indonesia, as well as Europe.

“We may phase out our retail business in China as we are facing tough competition from local operators, and focus on other markets instead, such as those in the AEC and Europe.”

Tatiya Sorsothikul, managing director of Seacon Square, said the full implementation of the AEC would drive a rapid increase in the number of foreign tourists coming to Thailand.

Low-cost airlines are quite popular at this moment and this has driven strong growth in the number of tourists travelling around Asean. Travel costs are coming down quite significantly.

“Seacon Square will be cautious when launching any new retail project. We will not focus on gaining market share, but profit. That is quite different from major retail players that need to expand their projects continuously to maintain market share,” Tatiya said.

He said that during this time of political and economic uncertainty, it would be quite difficult to make new shopping malls perform well, as construction costs were getting higher. It takes longer for return on investment, about 10 years compared with seven or eight years previously. Many big players have seen the need to list on the stock market to issue property funds.

Supaluck Umpujh, vice chairwoman of The Mall Group Co, said that in 2015, Thailand’s participation in the AEC would herald a major change in the country’s position as a leading regional shopping hub and top tourist destination. There are 10 Asean member countries, totalling 600 million in population.

The improved infrastructure, transport facilities and airports in key Thai cities are expected to increase inbound tourism from 25 million to 40 million people within the next five years. The destination cities include Bangkok, Phuket, Pattaya, Hua Hin and Chiang Mai among others.

Dr Chatchai Tuangrattanapan, director of the Thai Retailers’ Association, said it would take up to five years after next year’s AEC implementation for the real effect to be seen.

“Based on my trips to several countries in Asean such as Malaysia and Singapore, I believe that less than 50 per cent of their people are concerned about the coming of the AEC,” he said.

Chatchai said the AEC would allow a free flow of trade as import duties for particular goods would be cut. However, there are many negotiations, such as those concerning the service sector and human resources that have yet to be finalised.

He said he did not think any drastic change would hit the local retail industry when the AEC kicks off next year.