Thailand set to boom as GMS logistics hub under AEC, study finds
February 04, 2014 00:00 By Pichaya Changsorn
The Asian Economic Community will strengthen Thailand's position as a key transport hub for the Greater Mekong Subregion (GMS), according to a study by Solidiance, a business-to-business marketing consultancy.
Citing the study “Thailand’s Logistic Opportunities in the Cross-Border Trades and AEC Devel-opment”, Solidiance country manager Mickael Feige said the AEC would significantly increase the Kingdom’s trade with its four immediate neighbours – Myanmar, Malaysia, Laos, and Cambodia – as well as nearby countries such as China and Vietnam.
There will be more opportunities for trade with Myanmar and Cambodia as import tariffs on more than 90 per cent of products in their AEC “inclusion lists” have to be brought down to zero. Already, Thailand has benefited from the gradual reduction of import duty for products shipped to the CLMV countries (Cambodia, Laos, Myanmar and Vietnam) such as non-alcoholic drinks, motorcycles, tyres, soap, and cleaning products.
Thailand’s cross-border trade with Myanmar, Laos and Cambodia, which respectively accounted for 20, 14 and 9 per cent of the total in 2012, is expected to reach unprecedented levels in the next few years, with a growth rate of nearly 30 per cent, Solidiance says. Therefore, Thai logistics operators should take this opportunity to expand their business into neighbouring countries. The AEC’s liberalisation of the logistics sector will benefit Thai and other Asean investors, Feige said.
“Until now, the rules have stipulated a minimum of 51 per cent local ownership [of Thai logistics operators]. It is expected that there will be more logistics companies owned by foreigners in the years to come as this sector is becoming more attractive,” he said, noting that AEC rules would allows Asean investors to hold up to 70 per cent in such businesses.
To survive the competition under the AEC, small logistics firms with fewer than 50 trucks in their fleet are advised either to become outsourced business units of global companies or consolidate among themselves to form a larger network.
An increasing number of industrial corporations are outsourcing their transport needs to third-party logistics providers. Furthermore, multinational logistics companies are outsourcing to large Thai firms such as Mon Transport and Bangplee Yai Transport, which have large fleets of more than 800 trucks each.
According to the study, of the four major routes linking Thailand and other GMS countries, R9 is the most frequently used by logistics companies, with a 41.18-per-cent share of all traffic. It is followed by R3A (Chiang Rai-Laos-Kunming), which accounts for 21.57 per cent; R1 (Sa Kaew-Cambodia-Vuong Tao, Vietnam), 15.69 per cent; R3B (Chiang Rai-Myanmar-Jinghong, China), 7.84 per cent; and other routes, 13.73 per cent.
Route R9 connects Mukdahan province to Vietnam (Danang) via Laos by land in two days (510 kilometres), compared with by ship in 15 days. Furthermore, through R9, goods can be transported from Thailand to Guangzhou, China, in four days.
Among the top products that Thailand exported to its neighbouring countries via cross-border trade in 2012 were natural rubber, which accounted for one-quarter of the total; computers and parts, 5 per cent; rubber products, 5 per cent; diesel, 4 per cent; and automobiles and parts, 4 per cent.
Natural gas ranked No 1 among Thailand’s cross-border imports with a 30-per-cent share, followed by electrical machinery and parts (9 per cent), computers and parts (9 per cent), copper products (5 per cent), and data, audio and video recorders (4 per cent).
The heavy-commercial-vehicle (HCV) sector is expected to gain in its share of cross-border transport, thank partly to the rise of long-haul activities. According to the study, the number of new HCV registrations in Thailand is projected to grow from 30,782 units in 2012 to more than 36,000 in 2016.