Brexit impact on Thailand limited but other challenges loom 

Much uncertainty surrounds how the UK’s exit from the 28-member trading bloc will impact EU citizens, as well as economies and industries around the world. Putting aside personal opinions about whether the nature of the Brexit that the UK government is now seeking was what the British people voted for last June, we all now have to move on and, as the UK prime minister said, be bold and ambitious. Above all, our clients will want as much clarity as possible as quickly as possible and we want to see a stable and strong Europe.
So how will Brexit affect Thailand and its businesses, and how can they prepare as the process, which is likely to take more than two years, is finalised?
On the face of it, Brexit is likely to have limited direct impact on the Thai economy given the relatively little exposure it has to the British economy with the UK representing only 1.7 per cent of Thai exports, while Thailand accounts for 0.9 per cent of UK’s total imports. 
The same goes for foreign direct investment (UK represents 0.8 per cent of Thailand’s total FDI), with Japanese, Singaporean, Chinese 
and South Korean investors still dominant.
On the other hand, instability in the wider EU market could have a more significant impact on Thailand. Exports to the EU (excluding the UK) make up 8.6 per cent of total exports from Thailand. EU (excluding the UK) represents 7.2 per cent of Thailand’s total FDI. So not insubstantial figures.
Major Thai exports to the EU-27 include automatic data processing machines and parts, motor cars, parts and accessories, air-conditioning machines and parts, integrated circuits, and precious stones and jewellery.
As these commodities and goods will stay in demand for some time, issues around trade are unlikely to directly affect Thailand. Sentiment and confidence, on the other hand, could play a much more significant role.
There is no doubt that there is a strong mood of populism in the EU and wider afield at the moment. Brexit is the most visible example of this feeling but the election of US President Donald Trump and the recent successes of nationalist parties in European elections are also clear illustrations of the prevailing frame of mind.
Elections are looming in France, Germany and Italy. If the anti-establishment parties do well it could shake the EU to its core. This could result in a significant drop in business confidenceglobally and have a knock-on effect on cutting growth with Thailand’s key trading partners – including the top three of the US, China and Japan. Commodity prices and global trade volume could also stall. This would hit Thailand’s export sector, particularly manufacturing, as well as the all-important tourism trade.
 Personally I’m an optimist and so I think such a negative outcome is unlikely but in the mean time Thailand needs to focus on creatively marketing its economy, companies, goods and services to get to the front of the queue for the new free-trade agreement discussions that will begin once the EU and Britain have completed their divorce.
This would be a savvy move, but Thai companies must do more, which brings me to the second question. Brexit will increase uncertainty, but businesses in Thailand face far greater, more long-term, challenges.
I had the pleasure of spending the last week in Bangkok where we held our Annual Asia Pacific meeting. To coincide with the event, we released the findings of our Asia Pacific Business Complexities Survey 2017. The research, which surveyed 150 business leaders from across the region, identified the need to drive innovation by adopting new technologies as the number one challenge facing businesses in the region. This was followed by cost pressures and shrinking margins, and technological disruption from competitors. Regulatory risk and a resulting expected increase in enforcement and litigation were also seen as key issues.
These findings were reinforced through our discussions with hundreds of regional clients who attended the Bangkok summit. While many are concerned about how Brexit, and the Trump Administration, could affect global trade and geopolitics, they are more focused in the medium to long term on responding to the deeper-rooted issues that we identified.
The research also highlighted the long-term shift in influence or “soft power” in the region. Our analysis highlighted that 48 per cent of respondents thought US influence in the region would decline over the next five years while that of India and China will rise by 95 per cent and 77 per cent, respectively. The Asean Economic Community also offers much hope for driving regional prosperity through intra-Asean integration and cooperation.
Brexit is important, but it also provides an example of how companies can be distracted by major global events at the risk of overlooking more serious long term challenges in their own markets. And no company whether in Bangkok or London can afford to be complacent or wait upon events. 

The writer is global chair of Baker McKenzie