Low Thai productivity 'hindering' Aust investment

Despite a three-fold rise in Thai investment in Australia over the past two years, Australian firms are still under-invested in Thailand due to the low productivity of labour and higher logistics cost, the head of the Bangkok-based bilateral business body said.

“Thailand has to get very serious about productivity, the days of cheap labour are over…Thailand has to be a lot smarter and get a lot better at training, especially vocational training” said Leigh Scott-Kemmis, president of the Australian-Thai Chamber of Commerce.

Australia has a very strong vocational training base and as a result Bluescope, a significant Australian steel production corporation and Australian universities have collaborated to construct training programmes to provide essential know-how to the Thai labour force.

Even though a number of Australian firms have successfully penetrated the Thai market, the biggest challenge they face is a lack of skilled labourers in Thailand in the services and manufacturing sectors.

Scott-Kemmis drew attention to the fact that in spite of Thailand producing 800 qualified accounting graduates a year, that number is merely sufficient for the major accounting companies. There are yet demands required by other businesses.

The second impediment hindering Australian investment in Thailand is the infrastructure expenses.

“The logistics cost in Thailand as a percentage of GDP [gross domestic product] is probably twice the global average and to become competitive, it is not just about reducing the [value of the] baht, it’s about getting all the import cost down” said Scott-Kemmis.

He pointed out that the Australian companies could offer assistance by providing the necessary auxiliary services, not just the construction of locomotives and highways, to bring down the infrastructure cost.

There are areas Thailand and Australia can be optimistic about.

 Since the inception of the Thailand-Australia Free Trade Agreement (TAFTA), some merchandise trade has more than quadrupled and Thailand and Australia have now become the global 7th-largest trading partners globally.

Thailand and Australia’s economies are complementary and that leaves rooms for synergy of bilateral businesses, Scott-Kemmis emphasised.

Mitr Phol Sugar Group, a major Thai sugar producer, and its Australian counterpart have teamed up and planned to keep their production running throughout the year.

Apart from agricultural products, the main Thai import from Australia is gold, while the principal export to Australia is motor vehicles and auto parts.

Scott-Kemiss disregarded concerns about the recent appreciation of the baht having an impact on the bilateral business relationship. The quantitative easing pursued by major central banks had also driven up the value of the Australian dollar. Therefore, the exchange rate between the Australian dollar and Thai baht has remained relatively stable at around Bt28-Bt31 per Australian dollar.

As of 2011, Australia’s investment in Thailand was worth $2.11 billion Australian dollars and Thailand’s investment in Australia amounted to A$13.41 billion. Australian exports to Thailand were valued at A$5.71 billion and imports from Thailand A$8.64 billion.