Riding along with the tigers

Instead of throwing in the towel, Thais are urged to cash in on the China-India boom

UMESH PANDEY, ASIA FOCUS, The Bangkok Post

Thailand's small and medium-sized enterprises need to increase their efficiency and look to move toward the regional economies if they want to be successful in their ventures in the long run.

"The changing situation in Asia mean you can't be satisfied with what you have done but instead you have to continue to adapt to the changing world," Kosit Panpiemras, deputy prime minister and industry ministry, said in his opening remarks at a seminar entitled "Thailand and the New Economic Powers of Asia".

Mr Kosit said that Thai SMEs had to look at the rapidly changing situation in Asia as an opportunity to further their operations rather than a threat.

"We want all of us gathered here to look at the emergence of these two countries (China and India) and look at them as opportunities," he said to a packed audience at the Bangkok Bank auditorium.

He added that partnering with companies in these two countries would help increase the value for Thai SMEs.

"Once we are partners (with companies in China and India), it will be good for us and help change the situation by increasing our efficiencies and by adding value," he said.

"The faster we partner, the stronger we become."

His remarks were echoed through the entire seminar during which academics and economists presented their viewpoints on the two emerging global economic powerhouses.

China and India, which have nearly 2.5 billion people, represent an important market for Thailand with two-way trade with the two countries standing at more than $21 billion during 2005 and is set to increase further this year.

"If we were to say that all roads lead to China, then we would not be understating the facts," Chartsiri Sophonpanich, president of Bangkok Bank Plc, said in his opening remarks.

He added that it was only a matter of time before China took the top position as the world's economic powerhouse but this would help, rather than hurt, the development of the Thai economy.

"It would be both India and China that would help put Asia's growth on a sustainable path going into the future," Mr Chartsiri added.

Most economists do not doubt the fact that the next century would be that of Asia.

"The two economies are what we would compare to as ones that are the RCA (Royal City Avenue) and Center Point of the future," said Assoc Prof Sompop Manarungsan, an adviser to the Chinese studies centre at Chulalongkorn University, drawing an analogy between the young and dynamic nature of both China and India and the popular places for youth culture in Bangkok.

He added that the European, Japanese and the American markets are more mature and will grow at a slow pace.

Citing the need for Thai companies to expand their operations into these countries, Dr Sompop said that it was necessary for Thai corporations and SMEs alike to move into these markets if they were intent on maintaining their competitiveness.

Citing the example of the foreign direct investment (FDI) into China, Dr Sompop said that the staggering figure of $72 billion in 2005 alone was something that investors should start to notice.

India, on the other hand, he says, attracted just $6.6 billion, a far cry from those seen in China but still a commendable figure.

According to him, China is set to grow at a faster pace since the country's literacy rate, at about 90% of the population compared to 60% of India, is something that developing countries need to take into consideration.

China, whose gross domestic product (GDP) stands at around $2.23 trillion in the official exchange rate and $8.88 trillion in purchasing power parity terms, is set to show tremendous growth going forward. Its growth in 2005 was a staggering 9.8% and expectations are that it will grow at an even higher rate this year after exports in the first half alone rose 25% year-on-year.

Dr Sompop added that trade between China and India also surged and was set to reach $50 billion by 2010 from the current levels of $17 billion, compared to a mere $7.3 billion in 2003. "At the rate they are going, the $50-billion mark is easily achievable," he said.

But with all these exciting figures, panelists warned Thai SMEs should carefully study the markets before they enter.

"It used to be said that doing business with the Chinese is difficult and I would suggest that investors seeking to enter these markets learn the languages and cultures before they take the plunge," said Pisanu Rienmahasarn, deputy permanent secretary to the Commerce Ministry.

He said that Thai companies looking to benefit from the ongoing changes in China could take advantage of its offer for Thailand to act as its logistics centre.

"There are various roadway projects that are being undertaken to help improve the logistics in the region and we could tap this market," Mr Pisanu says.

Citing the need for China to enter the Andaman Sea in order to export its goods to nearly 400 million middle-class Indians, Mr Pisanu said that if Thailand could help build a port, a rail link and a road link to some of the southernmost parts of China such as Hainan, Thai products could be shipped to the "Pan Pearl River Delta" area, the highly prized economic zone that has a population of more than 460 million people.

"The tastes and preferences [of people] in this area are similar to those of Thais. Therefore, Thai companies could adapt well there. This is an area where people have high purchasing power and once the Asean-China free trade agreement (FTA) is signed and takes effect, it will benefit Thai companies."

He said potential investors should study the Thailand-China and Asean-China FTAs closely to see how they could benefit from the bilateral agreements.