Which Australian Companies

are Thriving in Thailand?

Could Yours?

James Wise

Australian Ambassador to Thailand

Greg Wallis

Senior Trade Commissioner

Australian Embassy

Bangkok

Australia Unlimited

Roadshow on Thailand: WHY?

Australian companies in Thailand are asking:

• How good can it get?

• Why are so few Australian companies here?

What is Thailand really like?

Thai market is misunderstood in Australia?

• Why?

2

Australia Unlimited

Why Is Thailand’s Profile Low?

• Overshadowed by understandable focus on: – China

– India

• Indonesia naturally looms large

• Other ASEANs more familiar: – Singapore, Malaysia, Vietnam

• “Flavours of the month” – Myanmar

3

Australia Unlimited

Thailand: Common Views

• Poor and undeveloped

• Good place for a holiday

• Language barrier

• Natural disasters

• Corruption

• Political instability

4

Australia Unlimited

ASEAN Ranking

Rank

Country

2011

GDP (PPP)

(Billions)

15 Indonesia 1,125

24 Thailand 602

29 Malaysia 464

32 Philippines 391

39 Singapore 315

41 Vietnam 300

75 Myanmar 83

102 Cambodia 34

122 Brunei 21

130 Lao P.D.R. 17

Source: IMF, World Economic Outlook Database, October 2012

Rank

Country

2011 GDP (PPP)

($Billions)

1 United States 15,076

2 China 11,300

3 Japan 4,444

4 India 4,421

5 Germany 3,114

6 Russia 2,383

7 Brazil 2,294

8 United Kingdom 2,288

9 France 2,214

10 Italy 1,847

11 Mexico 1,667

12 Korea 1,554

13 Spain 1,406

14 Canada 1,395

15 Indonesia 1,125

16 Turkey 1,075

17 Iran 991

18 Australia 915

19 Taiwan, China 876

20 Poland 771

21 Argentina 716

22 Netherlands 701

23 Saudi Arabia 688

24 Thailand 602

25 South Africa 555

Thai Economy: Big

5

Australia Unlimited

Thai Economy: Sophisticated

• 10th biggest car maker (>2m cars)

• Regional hub for auto, electronics, consumer goods, processed food.

• Middle class: 12 million

- Malaysia (12m)

- Indonesia (2.6m)

- Vietnam (1.6m)

• Dynamic retail sector

6

Australia Unlimited

Great Place for a Holiday

7

Australia Unlimited

Great Place for a Holiday

• 952,000 Australian visitors

– ≅ one in 25 Australians

• Over 99% have a trouble-free stay

8

Australia Unlimited

But I don’t speak Thai ….

• You don‟t have to

• Money and English are the languages of business

• English is more widely spoken than before

– and its use will continue to spread

• Bilingual professional help easy to find

9

Australia Unlimited

Natural Disasters

10

Australia Unlimited

Floods

• Floods showed Thailand is critical to supply chains

• Forced Japan to reassess Thailand – Verdict: nowhere

better

– New Japanese investment boom

11

Australia Unlimited

Corruption

• Corruption risk is in

government sector

• Massive private sector

is corruption-free

Country Ranking

Singapore 5

Brunei 46

Malaysia 54

China 80

Thailand 88

India 94

Philippines 105

Indonesia 118

Vietnam 123

Cambodia 157

Laos 160

Myanmar 172

Source: Transparency International

12

Australia Unlimited

Corporate Governance

2007 2010 2012

1. Hong Kong (67) 1. Singapore (67) 1. Singapore (69)

2. Singapore (65) 2. Hong Kong (65) 2. Hong Kong (66)

3. India (56) 3. Japan (57) 3. Thailand (58)

4. Taiwan (54) 4. Thailand (55) 4. Japan (55)

5. Japan (52) 4. Taiwan (55) 4. Malaysia (55)

6. Korea (49) 6. Malaysia (52) 6. Taiwan (53)

6. Malaysia (49) 7. India (49) 7. India (51)

8. Thailand (47) 7. China (49) 8. Korea (49)

9. China (45) 9. Korea (45) 9. China (45)

10. Philippines (41) 10. Indonesia (40) 10. Philippines (41)

11. Indonesia (37) 11. Philippines (37) 11. Indonesia (37)

Source: Asian Corporate Governance Association, September 2012

13

Australia Unlimited

Corporate Governance

154

signatory companies 14

Australia Unlimited

Political Instability

2011 Tsunami

and floods

2008 GFC

1997-98 Asian

Financial Crisis

Source: GDP Data from Thailand‟s National Economic and Social Board

Coup

Attempted coup

Major protests

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

%

15

Australia Unlimited

Meritocracy, Money and Virtue

• Uneven government, strong administration

• Workplaces are not politicised

• All politicians are pro-market, pro-business

• Virtue in Thailand to be rich or richer

• Thais are pragmatic

16

Australia Unlimited

What colour is this car?

This car

is red.

This car is

green.

This car is black.

This car is blue-red.

17

The Business

Environment for

Australia in Thailand

18

Australia Unlimited

Ease of Doing Business

1. Singapore 1. Singapore

12. Malaysia

18. Thailand

79. Brunei

91. China

99. Vietnam

128. Indonesia

132. India

133. Cambodia

138. Philippines

163. Lao PDR

ASEAN + China/India

Source: The World Bank‟s Doing Business 2013

2. Hong Kong, China

3. New Zealand

4. United States

5. Denmark

6. Norway

7. United Kingdom

8. Korea, Rep

9. Georgia

10. Australia

11. Finland

12. Malaysia

13. Sweden

14. Iceland

15. Ireland

16. Taiwan, China

17. Canada

18. Thailand

19. Mauritius

20. Germany

19

Australia Unlimited

Bloomberg’s Most-Promising Emerging Markets

for Investors*

Rank Country Overall Score

1 China 80.2

2 Thailand 63.5

3 Peru 60.9

4 Chile 56.5

5 Malaysia 52.4

6 Poland 51.3

7 Turkey 50.9

8 Russia 50.5

9 Indonesia 49.8

10 Czech Republic 47.7

11 Hungary 47.4

12 Colombia 47.1

13 South Africa 44.7

14 Mexico 44.0

15 India 42.3

* March 2012 issue of

Bloomberg Markets

20

Australia Unlimited

Thailand and Australia (1)

› Australia‟s 9th biggest trading partner

› Bilateral trade (2011-2012) worth A$ 17.7 billion

› Bilateral trade (1989-2011) has grown 3.6 times faster

than Australia‟s global trade

› Important source of students

› 20,000 students (6th biggest globally)

› TAFTA in place since 2005

› Strong government links

21

Australia Unlimited

Thailand and Australia (2)

› Significant Australian investments in Thailand:

Sectors:

Companies: Bluescope, Worley Parsons, ANCA, Visy, Toll, Linfox,

Kingsgate, Futuris, Grant Thornton, Blackmores, Macquarie,

Brambles, QBE

22

• Auto Parts • Consumer • Marine

• Manufacturing • Mining • Logistics

• Infrastructure &

Construction

• Professional

Services

Australia Unlimited 23

Australia Unlimited

What are 23 Australian Companies in Thailand

Saying?

› “We are here because Australia isn’t big enough.”

› “It is a good business environment; much easier than

China, Vietnam, India & Indonesia”.

› “think about your ROE”

› “ Business is good, with strong growth & profitability.”

› “Our engineering and R&D is still done in Australia.”

24

Australia Unlimited

What are 23 Australian Companies in Thailand

Saying?

› “There is a shortage of skilled labour.”

› “Thailand is no longer a low cost labour market.”

› “Productivity needs to be improved.”

25

Australia Unlimited

Reasons for setting up business in Thailand

6.3%

14.1%

59.4%

64.1%

Other

To re-export to Australia

To service Thai market

To service regional or internationalmarket

Source: Online Survey by AustCham Thailand 26

Australia Unlimited

Thailand-Australia Free Trade Agreement

(TAFTA)

› 94% of Thai tariffs on Australian goods eliminated

› Special Agricultural Safeguards (SSGs) limit

import of some products (beef, dairy, some

horticultural) under TAFTA duty rates

› Trigger levels increasing yearly

› Improved access for investors with Australian

ownership permitted in various sectors

› Helps facilitate visa requirements for Australians

working in Thailand

27

Australia Unlimited

Bilateral trade between Australia and Thailand

from 2005-2012

28

9,609 11,336

13,642

16,339 18,707

20,324 19,089

17,708

0

5000

10000

15000

20000

25000

A$M

Source:

1) ABS 5368.0 - International Trade in Goods and Services, Australia, Dec 2012

2) ABS 5368055003 table 5.13 and 7.13- International Trade in Services by Country, by State and by Detailed Services Category,

Financial Year, 2011-12

TAFTA

Australia Unlimited

Board of Investment (BOI)

Incentives to Invest in Thailand

› Many benefits provided

› Current system: 3 zones that have

different levels of incentives

› New regulations (2014) will focus

on type of business activity

› Aim is to boost knowledge based,

creative, green, alternative

energy, hospitality and logistics

sectors

29

Source: BOI Flyer

Australia Unlimited

Board of Investment (BOI) Incentives to Invest

in Thailand

Future Supported Sectors

• Basic infrastructure and logistics

• Basic industry (steel, petrochemicals, pulp and paper, machinery)

• Medical devices and scientific equipment

• Alternative energy and environmental services

• Services that support industrials sectors

• Advanced core technologies (biotechnology, nanotechnology,

advanced material technology)

• Food and agricultural processing

• Hospitality & Wellness

• Automotive and transport equipment

• Electronics and electrical appliances

30

Australian Business

Discovering Thailand:

Export and Investment

Success Stories

31

Australia Unlimited

Futuris Automotive Finds Success in

the 'Detroit of the East'

• One of 20+ Australian companies

• 2011: 7,500 m2 facility

• 2013: new 8,000 m2 facility open

• Supply full seat systems and interior

trim to GM, Ford and AAT in Thailand

plus multiple export contracts

• Design & Development in Melbourne

32

Success Stories # 1 Images used with permission from Futuris

Australia Unlimited

Visy Captures Food Packaging Market

• 2009: VisyFood Plastics

decided to be where its

customers are

• Supply packaging solutions for

Dole, Coca-Cola and Heinz

• Manufacturing in Thailand for

local use and export to Japan,

China and USA

33

Success Stories # 2

Source: www.dole.co.th

Australia Unlimited

Honeycombes Revives Used Cane Harvesters

• Good quality machines in

Queensland

• Demand growing for

mechanisation in Thailand

• 40 refurbished machines sold

• $8 million business to date

34

Success Stories # 3

Before refurbishment

After refurbishment

Australia Unlimited

Sweet Arrival for Pink Lady Apples

• Launched in August 2012 at

Bangkok‟s major supermarket

chain.

• Austrade Bangkok promotion

with the Victorian Government

and Apple and Pear Australia

• Success with an initial export

of three containers in the first

two months

35

Success Stories # 4

Australia Unlimited

Ballantyne’s 60 Years in the Kingdom

• Began in Thailand 60 years ago

selling cheese and dairy produce

to the Royal Household

• Supply cheese powders to

bakeries, and butter and milk

powder to the Kim Chua Group for

its Imperial biscuit line.

36

Success Stories # 5

Source: http://nla.gov.au/nla.pic-an13031955-4

Australia Unlimited

Blackmores Supplements Global Growth

• Blackmores launched into

Thailand in 1997

• Already a market leader and

premium supplement brand

• Growth rate year on year of

over 20%

• Thailand amongst most

profitable markets globally

37

Success Stories # 6

Australia Unlimited

A Precise Springboard for Success

• Gibbens Industries - small Central

Coast (NSW) manufacturer of

industrial springs

• In Thailand to serve regional

markets and customers

• Cash-flow positive 18 months after

arrival in Thailand

38

Success Stories # 7

Australia Unlimited

Where are the Opportunities for

Australian Businesses?

› Global Value Chains (GVCs), especially in the automotive, manufacturing,

and food sectors

› Education (at all levels)

› Skills development & vocational training for industry, especially in the

automotive, manufacturing, and food sectors

› Meat, wine, seafood, dairy, grocery, grains & horticultural produce

› Consumer & lifestyle products

› Energy and energy technologies

› Transport infrastructure

› Agricultural business

› Marine

› Green Building Products and Technologies

› Deep open-cut lignite (brown coal) mining

› Oil & Gas

39

Australia Unlimited

Automotive component supply and aftermarket

• Global production base of 1-tonne pick-up trucks

• Opportunity to access Global Supply Chains

• Vehicle production in 2012 was 2.45 million units

• Australia has a reputation as the premier off-road

aftermarket design and innovation centre

40

Source: www.saveprakan.com

Australia Unlimited

Education

Education dominates Australia‟s services exports to

Thailand. An Australian education is highly regarded by

Thais

Opportunities:

• English language skills

• Teacher training (up to Masters and PhD levels) and

teaching and learning methodologies

• University research collaboration, curriculum

development, student and staff exchange, internship

programs, study tours

41

Australia Unlimited

Skills development and vocational training

• Traditionally, a „higher education prestige oriented‟

society

• Thailand needs to address critical skills shortages in its

manufacturing and services sectors;

1) Automotive

2) Hospitality (food safety and food handling)

3) Aged care

42

Australia Unlimited

Meat, wine, seafood, dairy, grocery, grains &

horticultural produce (1)

BEEF & LAMB

• Growing demand for beef as local production is

limited and inferior quality

• Australian beef has 90% of the imported beef

market

• Beef from Australia has TAFTA tariff of 18.67% in

2013 (normal tariff of 50%)

• Lamb can be imported without any TAFTA tariff

(normal rate 30%)

WINE

• France used to dominate, but Australian wines now

run a close second (35% vs 28%)

• From Penfolds to Berri Estates

43

Image used with permission of

Bangkok Beer & Beverages

Australia Unlimited

Meat, wine, seafood, dairy, grocery, grains &

horticultural produce (2)

SEAFOOD

• All seafood without tariff under TAFTA

• Growing demand due to higher disposable

income

• More higher-value products for supply to the

growing tourism industry

DAIRY

• Thailand is not self-sufficient in dairy

production

• TAFTA has helped Australia gain market

share (various tariffs apply)

• Growing interest in specialty products,

especially cheeses

44

Australia Unlimited

Meat, wine, seafood, dairy, grocery, grains &

horticultural produce (3)

GROCERY

• Main competitors are from Europe, USA and Japan, not low cost

suppliers

• Increasing interest in gluten-free and healthy snacks, high-fibre, low-

sugar, organic foods

• More than 50 brands available - Arnotts, Bickfords, Uncle Tobys,

Beerenberg, Capilano, Olive Grove, Bulla, Coon, Meadow Lea,

Allowrie, Peerless, Sanger, Tassal, San Remo, Cerebos, Berri, True

Organics

GRAINS

• All grains under TAFTA are tariff free

• Growing demand for grains for food production and feed grade

HORTICULTURE

• Thailand is negotiating with Australia on import protocols

• Most fruit enjoys lower or zero tariff under TAFTA

45

Australia Unlimited

Consumer & lifestyle products

LIFESTYLE

• Australia has credibility and aspirational status

• Billabong, Quiksilver, Roxy, Seafolly, Bloch, Holster, Diva ++

COSMETICS

• Niche market opportunities e.g. natural spa products, natural skin care, cosmetic ingredients

• Cancer Council, Jurlique, Skin Doctors, Emu ++

NATURAL HEALTH SUPPLEMENTS

• Beauty and appearance create demand for specific segment e.g. Coenzyme Q10, Glucosamine, Calcium

• Weight management and sports nutrition

• Blackmores, Musashi

46

Consumer and lifestyle products that meet Australian country of origin requirements can enter Thailand duty free

Australia Unlimited

Energy and energy technologies

• 2012: Thailand starts to import Liquefied Natural Gas

(LNG)

• Tender for six new power plants in late 2013, with a

combined capacity of 5400MW and cost of US$10.8bn

• Business opportunities from government authorities and

independent power producers:

– Power generators, transmission and distribution equipment

– Clean coal technology: sulphur calcium oxide reduction

– Alternative/renewable energy technology

– Smart Grid, Smart Metering, Smart Energy Management and

Energy Storage Technology

47

Australia Unlimited

Transport Infrastructure

THB4trn (US$63bn) to be invested in transport

infrastructure projects over the next 7 years • High-speed railway network

• Urban transport – Bangkok MRT

• Highway networks - ASEAN Highway Network Project (by 2020)

• Water transport development of 5 ports in south

• Air Transport – 2nd phase Suvarnabhumi

48 Source: Business Monitor International, Thailand Infrastructure Report Q1 2013

Pak Bara: www.thealami.com Image source: www.bangkokmetro.co.th

Australia Unlimited

Agricultural Business

• Services and technology to increase

productivity and competitiveness, for

sugar, livestock, dairy, grains and

horticulture

• Need for increased mechanisation

• Thailand still imports 65% of its

processed dairy products requirements

• Thailand is Australia‟s third biggest

market for cotton

• Co-operation with Thai conglomerates for

supply into their international operations

49

Australia Unlimited

Marine

• Phuket - Asia‟s most attractive leisure marine destination

• Industry in Thailand has grown with tourism growth (> 22

million arrivals in 2013)

• Leisure craft, transfer ferries and related products and

services

• Several Australian manufacturers already active

50

Australia Unlimited

Green Building Products and Technologies

• Climate change concerns drive

demand

• Increasing awareness of building

standards, safety, and

environmentally friendly products

• Future growth in areas outside of

Bangkok, especially Phuket, for

high end luxury condos, hotels and

marinas

51

Australia Unlimited

Deep open-cut lignite (brown coal) mining

• EGAT has issues with operation of deep open-cut lignite

mining

• Opportunities may exist for:

– Slope stability: Geotechnical review and consulting of in-house

pit designs

– Transportation & communication systems

– Environmental management

– Production improvement

– Drainage/Sludge/Pumping systems

52

Australia Unlimited

Oil & Gas

• Equipment Needed for Water and Sand

Management, and Subsea Production

o Enhanced oil recovery

o Marginal field development / innovative

processes for small oil & gas fields including

flare recovery systems

o Water treatment and sand management

o Sub-sea production systems

o Carbon reduction equipment

o Solutions for equipment fatigue, erosion, and

corrosion to prolong equipment life

o Decommissioning of platforms, particularly

fields with high mercury content

53

Australia Unlimited

Summary

› A large & sophisticated market with a high “ROE”

› The “Teflon Economy”

› Global manufacturing power

› Growing middle class driving demand

› Australia a respected partner for supply of consumer goods, foods, grains, services and education

› Australian businesses have come to Thailand to grow regionally

› TAFTA and BOI facilitate business growth

54

Australia Unlimited

Doing Business in Thailand

› Be aware of Thai culture (smile, wai and gifts) and

recognise the cultural and language barriers

› “Yes” doesn‟t always mean “Yes”

› Understand and respect social status

› Respect for the monarchy

› Relationship building is critical

› Be patient with bureaucracy

› Be flexible and accommodating

› Be open for technology transfer

› Use the BOI for investment

55

Australia Unlimited

Useful contacts

• Australian Embassy, Bangkok www.thailand.embassy.gov.au

• Austrade www.austrade.gov.au

• Thailand‟s Board of Investment www.boi.go.th

• Australian-Thai Chamber of Commerce www.austchamthailand.com

• Australia-Thailand Business Council (ATBC) www.aust-thai.org.au

56