FROM January to September this year, investments worth Bt242.9 billion have been channelled overseas, according to the Bank of Thailand.
Of those investments, 27 per cent was ploughed into other Asean nations, amounting to Bt64.75 billion. The investment sum increased significantly from the Bt23 billion reported in 2005, with Bt3 billion or just 13 per cent earmarked for Asean.
Thai companies have shown a clear trend to venture overseas to grow their businesses and Asean has been a key destination, thanks chiefly to the Asean Economic Community (AEC), which promises free flow of trade, investment and labour.
Big corporate names like Charoen Pokphand Group, Siam Cement Group, PTT Group, Siam City Cement, Thai Beverage Group, Banpu Group, Ratchaburi Electricity Generating Holding and Thai Union Group are among the first firms to make forays into other Asean nations.
Following in their footsteps, several small and medium-sized firms from various industries are also establishing a footprint abroad to cash in on regional economic integration.
For example, the Siang Pure Oil Group has expanded its investments in Cambodia, and MK Restaurant will open branches in Indonesia, Malaysia, and Singapore. Coca Holding International, which is part of Coca Suki, opened new branches in Laos, Cambodia, Vietnam, Singapore, Indonesia and Malaysia.
BOT data shows that net investment outflows from Thailand to other Asean countries have been constantly increasing over the past four years. Thai direct investment to Asean hit Bt84 billion in 2012, rising from Bt69 billion in 2011. The amount fell in 2013 when Thailand was hard hit by political instability, before peaking at Bt100 billion in 2014.
“Our business strategy is to expand our investment in Asean and overseas to drive our business’s sustainable growth in the long term,” said Kan Trakulhoon, the outgoing president and CEO of SCG group.
Many such investment projects have materialised before the AEC takes effect at the end of this year. And each country has a different appeal.
Vikrom Kromadit, the founder and executive chairman of Amata Corp, which has invested extensively in Vietnam, said Vietnam has a lot of potential thanks mainly to its huge population of young, hard-working people and political stability.
In the region, Myanmar should be next on the radar of Thai investors, due to its vast land, abundant resources and cheap labour costs.
SCG has established a cement plant in Cambodia, while investing in a paper plant in Vietnam. Outside Asean, it has a stake in Mehr Petrochemical in Iran.
PTT Group also has a business strategy to be a market leader in petrochemicals in Asean by expanding investments in Asean countries such as Laos, Brunei, Indonesia and Singapore. The group will also expand its investments in other countries such as Dubai in the UAE and China.
Somruedee Chaimongkol, Banpu’s chief executive director, said the group would expand investments into Laos to take advantage of the country’s electricity generating potential. The income from this new business will help the company cope with diminishing revenue from the coal-mining business.
Laos aims to be the battery of Asia.
“We expect income from power generating to account for 50 per cent of our total revenue in the next five years. Asean countries are our target to expand our investment,” she said.
All the companies realise that with the smaller population growth and the growing ageing population at home, they cannot solely rely on domestic demand. Asean’s gross domestic product (GDP) is now worth US$2 trillion, or about three per cent of the world’s GDP. AEC offers the opportunity for expansion, but it also brings about challenges.
Pitaya Phanphensophon, Coca Holding International’s CEO, said the expansion into Asean would benefit the company and help it cope with fiercer competition at home.
“We have to expand our investments. Meanwhile, we also need to be mindful of the competition at home when other food firms from Asean set foot here,” he said.
AEC will make it easier for intra-regional investment, thanks to the streamlining of rules and regulations, said Vikrom of Amata.
Yet, he noted that all Thai companies should know that it will require more than unbridled enthusiasm to succeed in overseas expansion.
A successful venture requires international knowledge and international standards in administration, aside from firm financial supports and international connections.
“Failing to embrace internationally acclaimed standards, they will have to struggle hard for success overseas,” he noted.