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European companies still optimistic on Thai economy

30 September 2015 - Suchat Sritama, The Nation

European companies still have high hopes of the Thai economy and think that an increase in customer base and market demand will help them gain profits, according to a survey on Business Confidence 2015 conducted by European Association for Business and Commerce (EABC).

Nevertheless, the main reason for possible negative business performance is because of negative government plans and regulations. These have led to lower investment expansion in the Thai market, the survey revealed.

Rolf-Dieter Daniel, president of EABC, said last Friday that feedback on the cancellation of the generalised system of preferences (GSP) from respondents showed a concern on the competitiveness of the Thai economy affecting European business in Thailand. However, the potential renegotiation of the EU-Thailand FTA doesn’t seem to be a complete solution that helps improving business performance. Regulatory reforms are also an important complementary element for upgrading Thailand’s strength.

The survey also showed that political uncertainty is the biggest worry for the European business community while maintaining profitability, enhancing customer base, and sales activities are top priorities. The respondents consider cooperation between the private sector and government as a tool to drive and maintain business in Thailand.

EABC conducted the survey from April to May this year. It sought opinion and feedback from chief executive officers and those in high managerial positions in European companies in Thailand. They were asked about confidence in the Thai economy and their views on current trade and investment issues, especially issues for the EU – Thailand free-trade agreement and the cancellation of the GSP.

“They were optimistic and confident about the Thai economy. Even after the recent deadly bomb blast at Erawan Shrine in Bangkok, they said the event did not have much of an impact on trading between Thailand and the EU,” said Daniel.

He believed that the Thai economy would improve in the next two years while businessmen also trusted that their business performance would improve along with the economic trend, with the main driver being a widening of customer base and market demand.

However, there are concerns about government plans or regulators hampering ease of doing business in the country, thus affecting the decision for foreign investment expansion. A significant concern, the survey revealed, was the impact of losing the GSP on export performance, particularly in the manufacturing sector. Despite the concern, only a few companies have drafted a business plan to adapt to this change.

To deal with the situation, the European business community agreed that support from the chambers of commerce and other trade organisations in terms of business facilitation is crucial, particular in the area of policy dialogue and advocacy.

Phacharaphot Nuntramas, head of economic and financial market research, Economic Intelligence Center, Siam Commercial Bank, said that though the global economy is expected to recover, the regional economies of Asia and Thailand would recover at a slower rate, primarily due to China’s economic slowdown.

He said the four key determinants relative to the Thai economy – concerns over exports, potential decline in consumption, infrastructure/ mega-project investment, and strong tourism growth – were discussed.

The most efficient business strategy is to find a new investment theme that suits the country’s capacity best such as innovative, services industries like ICT, healthcare and pharmaceuticals, financial services for the US and EU businesses, and consumer discretionary sector for Asia business.

With the ASEAN Economic Community (AEC) coming into effect at the end of the year, businesses in Thailand must adopt an ASEAN strategy to maintain their competitiveness. Moreover, it is very important to take advantage of various investment promotion schemes that the Thai government is now offering to the private sector, which include interesting sectors for the European business community such as medical services, digital, automotive, and petrochemicals.

He also emphasised the role of services liberalisation in strengthening Thailand towards a more competitive economy in the global market.