Our comprehensive assessment of Thailand's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Thailand, as well as the latest industry developments that could impact Thailand's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Thailand before your competitors.

Country Risk

Thailand Country Risk

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Core Views

  • With General Prayuth Chan-ocha being elected as Interim Prime Minister, the junta has gained full control of governance. Huge power amassed by the Junta could be left unchecked, risking a further deepening of the political divide. Political reforms meanwhile continue to lack clarity. While near-term stability bodes well for the economy, we maintain our downbeat outlook on Thai politics.

  • While Thailand's economy has rebounded in Q214, we believe it has yet to turn the corner, as domestic demand has remained soft. That said, ongoing efforts by the junta to revive the economy will likely gain momentum. We are forecasting real GDP growth of 2.0% in 2014 and 4.1% in 2015. Policy uncertainty under military rule and high household debt remain salient risks in our view.

  • We expect Thailand's budget to be ready at the start of FY2014/15,...

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Thailand Operational Risk Coverage (9)

Thailand Operational Risk

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BMI View:   Thailand poses moderate o perational risks to investors, though the rising cost of labour is a growing concern , as is the country's political instability. Thailand's overall Operational Risk score is boosted by a number of factors, namely its developed logistics network, an open economy and its increasing trend towards economic liberalisation. That said, significant risks do exist, notably the potential for an escalation of the current political violence into civil war, as well as the ongoing separatist violence in the south of the country. For these reasons, Thailand receives a ...

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Thailand Crime & Security

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Thailand is a generally safe place for foreign business travellers, expatriate workers and tourists, although ongoing criminal risks persist, particularly in urban areas. The main criminal risk to foreign workers in the country is petty crime such as pick-pocketing, as well as credit card fraud. That said, violent crime and sexual violence are not uncommon, particularly in and around Bangkok. There is also a risk that the current political instability could escalate into an urban guerrilla warfare campaign approaching civil war. Ongoing separatist violence poses a further threat in the south of the country. Thailand receives an overall score of 50.7 for Crime and Security Risk, which puts it 16th regionally.

Criminal risks in Thailand are moderate by regional standards, and there is no systemic threat to foreign workers in the country. The majority of crimes committed in Thailand consist of petty crimes such as pick-pocketing and purse-...

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Thailand Labour Market

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Compared to other Southeast Asian countries, Thailand's labour market competitiveness is slipping. Due to a shortage of technical skills and unskilled labour, combined with rising labour costs, the country's is losing appeal as a manufacturing destination. Meanwhile , weakness in the education sector is preventing evolution of a knowledge-based economy, and poor foreign language skills prevent investment in international services.

Rising labour costs are the greatest element of labour market risk in the Thai economy, while a shortage of skills in key areas is another area of concern commonly cited by investors. This results from misalignment between industry and the education system, although education policy has improved significantly in the last decade. These elements combine to give Thailand a Labour Market risk score of 55.9 out of 100, ranking 54 th out of...

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Thailand Logistics

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Thailand has established a strong logistics sector, supported by modern infrastructure and services - with the exception of the rail network. That said, the long-term competitiveness of Thailand's logistics sector is threatened by regular political upheavals. The Thai government has repeatedly failed to implement large-scale transport development plans, particularly in the rail sector, which has been neglected for decades. As a result, investors will start looking increasingly to Malaysia and Vietnam as manufacturing hub alternatives, offering stronger supply chain options. As an industrialised country with a large production base, Thailand has become a hub for international trade. Growth in trade and consumption has been matched by development in transport and utilities infrastructure. Subsequently, Thailand scores 73.0 out of 100 for Logistics Risk, ranking seventh in Asia, ahead of Vietnam (11 th), Cambodia (20 th) and Laos (24 th...

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Thailand Trade & Investment

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Foreign direct investment (FDI) is falling in Thailand as investors back off amid political upheaval. Despite the slowdown, international trade continues, albeit at lower rates of growth. Strong fundamentals in the financial sector have maintained confidence in the national economy and have offered economic resilience in the face of political stress. Thailand scores 55.6 out of 100 in the BMI Trade and Investment Risk Index and is ranked 66th out of 170 countries globally. There are higher levels of risk in terms of the country's legal environment and moderate risk in terms of government intervention. Thailand performs most strongly for economic openness.

Thailand's lowest score in the Trade and Investment Risk Index is on the Legal component. Laws are geared in favour of domestic firms and state-owned companies, while the government retains power to implement controls and distort the market, which warps the playing...

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Thailand Industry Coverage (22)

Agribusiness

Thailand Agribusiness

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BMI View:   Thailand will maintain its status as a key Asian agricultural provider in the coming years, as the sector benefits from strong export opportunities and government support as well as an efficient food-producing industry. The sugar and livestock sectors are especially promising; h owever, the government's interference in the market, especially in the rice sector, will hind er the competitiveness of Thailand's production relative to its Asian rivals. Thailand will remain a key rice exporter but may lose out to secondary exporters owing to growing instability in its trade policy.

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Autos

Thailand Autos

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According to the Federation of Thai Industries (FTI), March 2014 auto sales in Thailand declined 46.7% year-on-year (y-o-y), to 83,983 units, bringing sales for Q114 to 224,171 units, a decrease of 45.8% y-o-y. Despite a rise in month-on-month (m-o-m) sales for the past two months, y-o-y growth rates remain firmly in negative territory.

We cautioned in February 2014 that a prolonged stalemate of the country's precarious political situation would result in enduring weakness in the market and exert a downside risk to our forecast ( see 'Slashing Forecasts Due To Political Unrest', February 24). True enough, the volatile situation suggests no meaningful compromise to the ongoing political turmoil and our Country Risk team does not expect the situation to improve significantly over the remainder of the year, which will also result in a weaker growth outlook ( see 'Weaker Growth Outlook Due To Domestic...

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Commercial Banking

Thailand Commercial Banking

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Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Thailand Consumer Electronics

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BMI View: We have a bullish medium term outlook for the Thai consumer electronics market, however in the short-term p olitical instability and baht depreciation will continue to be a drag on spending growth . As the economy strengthens from 2015 we expect the fastest growth will be in demand for smart devices, such as tablets, smartphones, smart-TVs and the emerging hybrid/convertible notebook category. Demand will be boosted by price competition between vendors, with a number of global vendors targeting the market for growth, as well as operator investment in data network expansion and digital TV migration. Over the medium term our outlook for consumer electronics spending is positive as incomes rise, and the declining price of devices in key product categories will ensure the...

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Defence & Security

Thailand Defence & Security

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BMI View:   Thailand's military government remains in place under the premiership of General Prayuth Chan-ocha following the military coup of May 2014. As intended, this action has restored order and stability, although it is not a long-term solution. Even if the planned return to democracy by October 2015 goes ahead, the Thai military will enjoy excessive influence in the country. Its budget is bloated and inefficient yet the army will continue to exert sufficient power to prevent any meaningful reform.

The ouster of Prime Minister Yingluck Shinawatra on constitutional grounds in May 2014 triggered a rapid escalation in civil tensions across Thailand, pitting her 'red shirt' supporters against the, largely urban, pro-establishment, 'yellow shirts'. With the caretaker government unable to calm tensions, the military stepped in and dismissed the interim administration....

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Food & Drink

Thailand Food & Drink

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BMI View :  Incoming evidence of the economic damage caused by the Thai political crisis and our expectations that the political situation will not improve significantly over the remainder of the year ha s caused us to downgrade Thailand's GDP growth outlook for 2014. The Thai economy has weathered a series of economic storms in recent years (from the global financial crisis, to the Japanese tsunami, to devastating floods) , and we do not expect the political crisis to plunge the economy into recession. However, when we combine the uncertainty posed by the political stalemate with the downbeat outlook for Thai households amid elevated debt burdens, and an impending slowdown in the country's main trading partner, China, real GDP growth seems likely to come in very weak, and we are forecasting a drop to 2.0...

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Freight Transport

Thailand Freight Transport

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With General Prayuth Chan-ocha being elected as Interim Prime Minister, the Junta has gained full control of governance. Huge power amassed by the Junta could be left unchecked, risking a further deepening of the political divide. Political reforms meanwhile continue to lack clarity. That said, near-term stability bodes well for the economy, and so for freight transport volumes also.

Although some of our freight transport forecasts are unchanged from last quarter, we had already 'priced in' a fair amount of political risk. The fact that cranes have been moved to Laem Chabang to help the port cope with demand is encouraging, as is the approval of some infrastructure investment plans into projects such as high-speed railways. Nevertheless, risks to all our freight transport throughput forecasts are tilted to the downside in light of ongoing developments.

Headline Industry Data

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Information Technology

Thailand Information Technology

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BMI View: Thailand's IT market continues to be impacted by economic and political uncertainty, which is a drag on enterprise and consumer confidence . H igh household debt and baht depreciation also weigh on our forecast in 2014, but we expect the situation to improve markedly from 2015. Over the medium term s trong growth is forecast across all IT segments mak ing the Thai IT market one of the largest and fastest growing in the region. Drivers such as high private final consumption and the economy's...

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Infrastructure

Thailand Infrastructure

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BMI View: The near-term outlook for Thailand's construction and infrastructure sectors has improved due to greater political and policy certainty. However, the long-term outlook for both sectors remains highly uncertain due to the potential for further project delays, revisions and cancellations from political and financing factors.

Key Trends And Developments

  • In June 2014, the military junta scrapped the country's THB350bn long-term water management and flood prevention scheme, with the projects under the scheme being reviewed and revised by the junta (cited from the Nation). This took place even though the projects were already awarded to companies in 2013 - we do however highlight that the contracts for these projects have not yet been signed at the time of their cancellation. At present, only THB13bn worth of water-management...

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Insurance

Thailand Insurance

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BMI View: Strong growth has continued across the Thai insurance industry, with both the life and non-life sectors expanding by over 9% in 2013. 2014, however, is likely to see slower growth of approximately 4% in both markets. The non-life segment is underdeveloped, with per capita premiums unlikely to break USD100 in 2014, the majority of which is contributed by the automobile insurance line. Motor insurance remains our pick for strong growth, although health insurance is also set to grow at over 10% from 2014.

The life sector is far larger than non-life in Thailand, with premiums totalling USD13.7bn in 2013, compared with just USD6.5bn in non-life. Within this, a small number of firms dominate, with the top 5 enjoying over 70% of premiums, led by AIA, with a 26% share. Growth in the sector will continue at rates of around 10% year-on-year (y-o-y) throughout the...

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Medical Devices

Thailand Medical Devices

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Espicom Industry View: The Thai market's continued reliance on imported medical devices means demand has remain ed strong, resulting in an attractive 13.7% C AGR growth rate for the forecast period. Local manufacturers , as well as mu ltinationals, in the country remain focused on producing basic supplies mainly geared for export and this trend is not expected to change in the near future. Imports currently account for over 85 % of the market. The current political situation, if prolonged or takes a turn for the worse, could very well impact this projected growth.

Headline...

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Mining

Thailand Mining

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BMI View: The cooling of the Chinese economy will remove the shine off mining investment in South East Asia . Frontier regions will be the first places where miners pull back their investment as brownfield projects take precedence . Nonetheless, it is certainly not all gloomy in the mining sector. Resilient demand from the power sector will continue to support growth in coal production, while the positive development of the nuclear sector in South Korea fuels uranium mining production.

Despite the rich deposits of untapped minerals on offer, we believe South East Asia's mining sector will struggle to uncover its potential over the coming years. The cooling of Chinese economic growth will remove a crucial pillar of support for mineral prices, particularly industrial metals such as iron ore and copper. For instance, we...

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Oil & Gas

Thailand Oil & Gas

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BMI View: Thailand remains driven by a strong oil and gas demand which far outweigh s domestic production. With declining oil and gas reserves and with several delays already affecting the planned 21st licensing round, we expect long-term oil and gas production trends to remain one of stagnation or decline, despite an slight increase in the medium-term. With no scope for the country to become self sufficient, it will be critical to develop the necessary gas import infrastructure to avoid gas shortfalls.

Headline Forecasts (Thailand 2012-2018)
Indicator 2012e ...

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Petrochemicals

Thailand Petrochemicals

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Thailand's petrochemicals outlook is clouded by the domestic political crisis and the local market slowdown, but hopes for export-oriented growth to offset slower sales back home are being diminished by slow Chinese growth, warns BMI's latest Thailand Petrochemicals Report.

We cautioned in previous quarterly reports that a prolonged stalemate of the country's precarious political situation would result in enduring weakness in the market and exert a downside risk to the petrochemicals industry. True enough, the volatile situation suggests no meaningful compromise to the ongoing political turmoil and our Country Risk team does not expect the situation to improve significantly over the remainder of the year, which will also result in a weaker growth outlook.

  • Demand for engineering plastics, polyurethanes and rubber will be undermined by a decline of 10.9% year-on-year (y-o-y) in automotive...

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Pharmaceuticals & Healthcare

Thailand Pharmaceuticals & Healthcare

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BMI View:   The stability brought about from the Junta will mitigate the uncertainty weighing down Thailand's pharmaceutical market. With its ageing population and universal healthcare, Thailand presents good market opportunities though risks stemming from cost containment policies and patent approval delays dampen the overall attractiveness.  

Headline Expenditure Projections

  • Pharmaceuticals: THB142.5bn (USD4.64bn) in 2013 to THB146bn (USD4.49bn) in 2014; +2.49% in local currency terms and -3.12% in US dollar terms.

  • Healthcare: THB473.3bn (USD15.4bn) in 2013 to THB506bn (USD15.5bn) in 2014; +6.93% in local currency terms and +1.08% in US dollar terms.

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Power

Thailand Power

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BMI View:   We are maintaining our short- and long-term forecasts for the Thai power sector this quarter as key factors supporting our forecasts remain in play. We note the Thai government is in the midst of revamping the privileges and regulations for the renewable energy sector, which is in line with our positive outlook for the sector.

We are maintaining our 2014 electricity generation growth forecast for Thailand at 2.9% this quarter as key factors supporting our forecasts remain in play. The largest source of generation growth in the year will come from thermal generation, followed by non-hydropower renewable generation. We are also maintaining our long-term forecasts for the Thai electricity sector this quarter and forecast generation to grow an average of 3.6% per annum between 2014 and 2023. Growth will be primarily driven by non-hydropower renewables...

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Real Estate

Thailand Real Estate

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BMI View:   Thailand ' s commercial real estate sector holds considerable long-term growth potential, with a vibrant tourist industry and growing consumer base providing scope for growth in demand. However, the country ' s recent political problems have affected growth, weighing on both demand and levels of investment.

The Thai commercial real estate sector has a number of strengths, including an investor-friendly business environment as well as the country's advantageous location and its status as a significant exporter. The market is relatively developed, boasting with a number of major players and a recently launched real estate investment trust (REIT) market, although development and transactional activity remains overwhelmingly focused on the capital, Bangkok.

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Renewables

Thailand Renewables

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BMI View : We have revised up our short- and long-term forecasts for non-hydropower renewables generation and capacity in Thailand this quarter on the back of new data and impending changes to the regulatory environment. Growth in 2014 will be largely driven by the solar sector, but we see growth across all sectors over the long-term.

We have made slight amendments to our 2014 forecasts for non-hydropower renewables generation and capacity in Thailand this quarter on the back of new data. While our forecasts for solar and wind energy remain unchanged, we have revised up our forecasts for the biomass sector to account for a stronger-than-expected project pipeline.

We have also revised up our long-term forecasts this quarter. This upward revision was partially prompted by data from the DEDE (referenced above), as well as impending changes to the...

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Shipping

Thailand Shipping

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With General Prayuth Chan-ocha being elected as Interim Prime Minister, the Junta has gained full control of governance. Huge power amassed by the Junta could be left unchecked, risking a further deepening of the political divide. Political reforms meanwhile continue to lack clarity. That said, near-term stability bodes well for the economy, and so for freight transport volumes also.

Although some of our port throughput forecasts are unchanged from last quarter, we had already 'priced in' a fair amount of political risk. The fact that cranes have been moved to Laem Chabang to help the port cope with demand is encouraging. Nevertheless, risks to all our port throughput forecasts are tilted to the downside in light of ongoing developments.

Headline Industry Data

  • Gross tonnage at Laem Chabang, the country's largest port, set to rise by 3.0% to 69.08mn tonnes in...

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Telecommunications

Thailand Telecommunications

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BMI View: The military coup of May 2014 has cast a long shadow over Thailand's telecoms market and uncertainty is likely to prevail in the short term as the junta has arbitrarily cancelled a number of long-awaited initiatives, including the auction of 900/1800MHz spectrum. The state telecoms agencies TOT and CAT Telecom are taking the advantage of the situation to ensure that the next phase of market development is weighted more in their favour and have asked for priority access to 4G spectrum and assurances that private sector players use their under-utilised wireline infrastructure. China Mobile 's investment in True Corporation therefore comes as a surprise from a timing perspective but not from a business perspective as...

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Tourism

Thailand Tourism

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BMI expects to see steady growth in Thailand's already well-established tourism market, with the political environment expected to remain relatively stable in the wake of the military coup in May 2014, in the short term at least. Inbound and outbound travel are forecast to increase over the years to 2018, and a range of international developers continue to invest in this popular Asia Pacific destination.

Following the coup, Thailand will remain under military rule until general elections, which are currently scheduled for October 2015. Although the junta has restored stability to the country, there remains a great deal of uncertainty in terms of longer-term political risk that could impact upon its growth potential. In the short-term, however, things are looking up for tourism; restrictive curfews have been lifted in 25 provinces, including most tourist areas, which will help to restore a more positive outlook,...

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Water

Thailand Water

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As expected, Thailand's water infrastructure sector and the planned development of a national water management programme are still affected by the political turmoil that has gripped the country since November 2013. In a large part, this is due to the fact that the military junta was actively clearing the country's project application backlog.

The NCPO has stated that it will hold democratic elections in October 2015, but a return to a well-functioning democracy is still far from guaranteed. This is because we believe the NCPO is likely to intensify its efforts to remove the Shinawatra family's wide influence on Thai politics, effectively alienating their supporters.

Based on these factors, there is a strong possibility for additional protests and violent confrontations to take place in Thailand. Should this be the case, the extended period of political instability will likely lead to fresh delays in project execution...

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