Thai economy uncertain but interests remain

Past Performance
In 2012, Thailand's economy grew like a child hitting puberty, making a speedy recovery from the massive 2011 flood that had caused great detriment to the nation. The Phoenix Capital Group reported that the total value of investment from January to November 2012 was just below US$29.6 billion, which confirmed the continuous confidence of foreign investors in Thailand. According to the Industry Minister, Prasert Boonchaisuk, the number of investment applications reached 1,943 projects during the first 11 months of 2012, which is 24.5 percent more than the total number of projects applied for the same period in 2011.

Based on Thailand's 2012 economic performance report from the country's National Economic and Social Development Board, the Thai economy grew by 6.4 percent, with headline inflation of 3 percent and current account surplus of 0.7 percent of GDP in 2012. The hotel and restaurants sector expanded by 11.5 percent and the number of foreign tourists rose by 16 percent, mostly coming from China, Malaysia, Japan, Russia, and South Korea. Meanwhile public construction increased by 27.1 percent, owing to a higher disbursement in capital budget compared to the lagged disbursement caused by the flood in the fourth quarter of 2011, and the real estate sector expanded by 3.9 percent.

By year's end, everyone had high expectations and hopes for Thailand's economy in 2013. Predictions such as continued growth, increase in public and private investments, inflow of foreign investments, etc. were projected from the World Bank.

Unexpected Jolt
China's economic slowdown started a chain of events, affecting economies across the world, especially those that relied on Asian exports. Thailand was not exempt from its influences. According to a report from Trading Economics, growth of the Thai economy moderated from a slowdown in domestic demand and exports. The Bank of Thailand (BoT) reduced gross domestic product (GDP) forecast for 2013 from 5.1 percent to 4.2 percent. However, the BoT maintained its forecast for 2014 GDP growth of 5 percent because “sound fundamentals should help bring the economy back to normality,” according to a statement made by Assistant Governor Paiboon Kittisrikangwan at a news briefing.

After a second meeting on Aug. 21, 2013, the Monetary Policy Committee of the BoT kept its key policy rate at 2.5 percent, unlikely to change for the remainder of the year. One of the factors of maintaining this rate is the high household debt in Thailand. The remainder of 2013 is expected to see gradual recovery as the U.S., E.U., and Japan are seeing signs of improvement, according to the Bangkok Post.

Opportunities and Challenges
Prior to this unexpected turn of event, Thailand had been going through numerous changes, and expectations have been high. New government incentives had been rolling out, along with the anticipation of the ASEAN Economic Community (AEC) and its effects on all ASEAN countries. The resulting impact of many changing social factors is also seen in the current situation of the country and its people.

Government Incentives
Starting April of 2012, the Thai government implemented a new minimum wage in Bangkok, Phuket, and a select few of its 75 provinces, raising the wage from around $6.70 to around $10 per day – an unprecedented 60 percent wage hike. The increase in wages aimed to rebalance wealth and increase purchasing power of the Thai currency. However, economists believe the stronger Baht will very likely cause a decline in foreign investments, which will affect the general workforce of Thailand as a whole. This was affirmed by Henny Beeber, CEO of AES Group, stating security “growth drivers in Thailand include the increase of the minimum wage by 60 percent, driving up the costs of security personnel and causing facilities to increase electronic security to reduce security manpower.” Though the government meant well by this policy, economists believe the wage hike should only remain a short-term solution to improve situations of low-income workers.

Guarding companies must face the challenge of gradually integrating security equipment into its services. This phenomenon will be occurring at a rapid pace, so the security industry and guarding companies can soon be expecting to have in-depth cooperation.

AEC and Its Effects
The introduction of AEC will come into effect on Dec. 15, 2015, with a goal of creating a single regional economic market. The AEC promotes free trade amongst the ASEAN community, which so far comprises of Malaysia, Philippines, Indonesia, Singapore, Thailand, and new entrants such as Brunei, Laos, Vietnam, Burma, and Cambodia. With the existence of AEC, ASEAN members will be able to conduct businesses inside the region much easier than before, thus eliminating or alleviating previous obstacles in terms of obtaining business permits and duration of stay for ASEAN foreigners. Currently, the ASEAN community has free trade agreements with China, Australia, New Zealand, Korea, Japan, and India. It is also in talks with the E.U. about promoting free trade. However, most believe this goal will be unlikely until 2020. The Bangkok Post reported that despite their skepticisms, a survey showed that US companies are optimistic about overall business prospects in the region. Indonesia was named the most attractive country for new business expansion, followed by Vietnam, Thailand, and Myanmar.

The AEC is also an important deciding factor on Thailand's small- and medium-sized enterprises (SME). If the local SMEs intend to survive the intense competition that will arise once the single regional market begins, they need to start gathering themselves together and pick up the pace. “AEC will open the doors between the countries benefiting from free trade and will ensure that Thailand will need to continue to develop their resources including streamlining import/export regulations, education, infrastructure, manufacturing, and farming to become more competitive in the region and globally,” according to Beeber.

Impending Withdrawal of QE4
After the US announcement of the possible withdrawal of the QE4, the whole world is focused on its commencement, and also the moves that the U.S. decides to make, along with the effects it will have on the global economy. As a result from the withdrawal speculations, Thailand's 10-year government bonds and the Thai Baht had been declining, reducing the demand for emerging-market assets. The termination of quantitative easing by the U.S. tends to have the biggest effect on emerging countries.

“I believe that Thailand's economic development growth, infrastructure development, and trade balance will ease most long-term effects of the US changing policy,” Beeber said, remaining hopeful. Some companies have a careful outlook on the future of Thailand's economy. They believe when the Baht is cheaper due to inflation, it encourages tourism, but Thailand will be heavily influenced by whatever is happening around the world, since its economy relies heavily on exports.

Rising Crime Rates
The unwillingness to perform manual labor is affecting the country and its crime rate. “Most Thai people do not want to perform hard labor and would rather work in offices or factories where they can make easy money. A lot of them only want jobs in Bangkok, which results in hard labor being performed only by low-level workers who are imported from Cambodia and Myanmar, which explains the crime rate,” according to Arnon Kulawongvanich GM of Chubb Direct.

The increase in crime rates, however, heightens awareness for security systems and demand for unique product needs as more criminals are being sent to prison. “Due to illegal criminal activity in prisons, we are seeing additional requirements for other technologies such as cell jammers, x-ray scanners, and sophisticated integrated security systems to deter the smuggling of contrabands including drugs and cell phones in and out of prison, and stop certain inmates and drug dealers within the prison still controlling their ongoing criminal operations outside of prison,” said Beeber.

Move to 4G
In May 2013, one of Thailand's major mobile operators, True Move, started to provide 4G service trials with its existing frequencies. Nationwide availability will probably not be available until 2015, just in time for the AEC. The 4G network can be up to five times faster than 3G and is being trialed in Bangkok's central business district areas of Siam Square, Silom Road, and Sathon Road. As Thailand is a very technology-centric and accepting country – its usage of social media platforms such asFacebook is far higher than that of South Korea or Japan – the faster 4G networks will help operators meet the excessive demands for mobile data in Thailand.

According to Suthiphon Thaveechaiyagarn, Commissioner of the National Broadcasting and Telecommunications Commission, 4G network licenses are planned for auction in September 2014 and the licenses are expected to be granted in late 2014. If all things go according to plan, the companies should be able to roll out 4G services by early 2015.

Once the network infrastructure is in place and stable, it will be much easier to promote hosted video surveillance, as well as other related services that will benefit from the high speed internet such as building automation and home automation.

Positive Outlook
Despite the challenges currently faced by the Thai economy, the future of Thailand is not lost. With the introduction of AEC and the implementation of 4G networks in the near future, along with the growing security awareness throughout the country, Thailand is still an appealing market for foreign investors. Thailand has proven itself to be a resilient country several times in the past, and many believe it will not be affected by its current economic situation in the long run.