Invest to expand

Some local trade officials anticipate that in the mid-term China will become one of the key investors in the Kingdom. The Board of Investment has ramped up its efforts to attract Chinese capital over the past few years and to encourage Chinese firms to set up operations within Thailand.

Part of the Board of Investment’s strategy was to establish a special China desk to strengthen relations. The desk has helped organize a number of road shows to try and attract more direct investment in the Kingdom. Organizations such as the Thailand-China Business Council and the Chinese-Thai Business Association were also set up to facilitate trade between the two countries. 

This followed earlier co-operations which saw the establishment of a range of ventures, including the construction of the Thai-Chinese Rayong Industrial Zone, an industrial estate which was built to support the logistics and storage needs of Chinese companies operating in the Kingdom.

As a result, Thailand has been very successful at luring our northern friends to channel their capital into the country or set up operations here. But what about efforts to make sure trade and investment flows both ways? What is being done to help Thai companies establish themselves in the north? How can our local firms find investors in the world’s largest domestic market? 

One possible solution would be for the local government and the private sector to collaborate in developing a strategy similar to Beijing’s “Going Out” program. Of course, China’s story is in many ways different from Thailand’s. “Going Out” was formulated on the back of Deng Xiaoping’s policy of Four Modernizations which was aimed at opening China up to the world a decade or so after the death of Mao Zedong. China also had accumulated vast foreign reserves which it needed to spend. But the crucial point here is that Beijing policymakers saw an opportunity – the ability to invest in a fast-expanding regional market – and formulated a strategy to deal with it. 

The need for Thai companies to expand regionally and internationally is fast becoming apparent. Key players in some industries, such as property, have spread their wings due to the lack of growth opportunities in the local market. As Thailand moves up the value chain local firms may choose to look at expanding into other countries as a means of accessing new markets and reducing labor and logistics costs. We also need to reduce our operational risks – after all, it was not only international firms that took a heavy hit when a number of key industrial estates were inundated in the recent floods. 

Looking to China, some successful groundwork has taken place in recent years. A business-matching symposium for Thai and Chinese companies held in Guangzhou in 2009 was reported to have netted some 20 billion baht in potential trade and investment deals. The biggest export deal for Thai firms was the signing of nine memoranda of understanding, totaling 10.5 billion baht, between local fruit producers and Chinese partners. While this was a significant outcome, it is also an example of Thailand sticking to its traditional role as a commodity exporter. As a country we need to start thinking bigger and more creatively in terms of where and how we operate.

Thai firms have come of age in recent years; no longer is the Kingdom viewed only as a market for cheap manual labor. Now it is time for local industry to look further afield and to “go out” on its own. China’s should be one of the first doors we knock on.

 

For more columns in this series please see www.bangkokbank.com