Production costs may lower Kingdom's ranking

According to the centre’s latest study on the progress over the past two years of Thai companies in preparation for the AEC, the country’s export growth rate was slower than that of the other nine countries in Asean during that period. This could lead to the Kingdom losing market share to others.

Singapore is the leading exporter in Asean with a 44-per-cent share, followed by Thailand at 18 per cent, Malaysia at 17.2 per cent, Indonesia at 11.8 per cent, and Vietnam at 4.2 per cent.

Growth of Thailand’s export to Asean markets slowed from 39.5 per cent in 2010 to only 20.7 per cent last year. It was the lowest growth figure in Asean. Brunei’s exports saw the highest growth, at 46.9 per cent in 2011 compared with 2010, followed by Cambodia, which rose by 27.6 per cent, Vietnam by 13.4 per cent, and Burma by 11.7 per cent.

Thai goods that are facing a worsening export situation in Asean include rice, palm oil, coffee, tapioca products, processed seafood, textile and garments, wood products, petroleum and coal, and paper and printing products.

The centre’s director Aat Pisanwanich said higher costs of labour, raw materials and management had worsened Thai enterprises’ competitiveness in Asean.

“Without assistance by the government, Thai companies, especially SMEs, will be forced to close down soon. Meanwhile, there will be a lot more enterprises moving out the Kingdom to seek lower production costs,” Aat said.

Small and medium-sized enterprises account for more than 95 per cent of Thai companies. However, only 28 per cent of Thailand’s export value to other Asean countries comes from SMEs. 

He said it was not only local enterprises that would have trouble continuing to operate in Thailand, but foreign investors as well. Other countries in Asean, mainly Indonesia, Burma, Cambodia and Vietnam, will become the new centres of agricultural and industrial production instead of Thailand after the AEC comes into full force, he predicted.

In addition, the Bt300 minimum daily wage, which will come into effect in seven provinces on Sunday, will dampen Thailand’s ability to compete with its low-wage rivals in less developed Asean nations. Labour costs in Thailand will be as high as Malaysia’s, while in Indonesia labourers earn only Bt100-Bt200 a day, in Vietnam Bt80, and in Cambodia Bt70-Bt80. In Burma, long held back by its military government, labour can be had for only Bt40-60 a day.

To ensure Thai enterprises’ competitiveness, especially SMEs, Aat suggested that the government help them increase efficiency in terms of managing production costs. It should also promote the development of product quality and standards of SMEs, and help them set up businesses in border provinces and in other Asean countries to reduce their labour costs.