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Business sentiments in Thailand is on a rise after a new government has been put in place and all sectors are witnessing a resurgence in prospects of growth.
One big indicator has been the continued rise of the Stock Exchange of Thailand (SET), which has risen by more than 141 points since August 16th when Paetongtarn Shinawatra won the mandate in the parliament to be 31st Prime Minister has seen the SET Index rise of about 11% and overall sentiment has returned to being positive.
The rise/fall in the stock market is usually considered as the indicator of what is to come in the future, the market rises, it means that the outlook for the economy is better and vice-versa.
This surge in optimism is reflected in a recent survey of businesses, which showed that nearly 8 in 10 businesses in Thailand expect revenues and operations to pick up in 2025 and beyond, despite 2024 being written off as ‘moderate’ growth year, according to the recent findings.
The survey coupled with a recent research report by UOB, Singapore’s 2nd largest commercial bank, showed that Thailand’s industrial sector was poised for a new S-Curve.
Enrico Tanuwidjaja, ASEAN Economist, Global Economics and Market Research of UOB Group, said in a note to clients that Thailand aims to transform the country’s manufacturing sector by targeting the 10 new S-curve industries: agricultural and biotechnology, smart electronics, affluent medical and wellness tourism, next-generation automotive, and food for the future, biofuel and biochemical, the digital economy, the medical hub, automation and robotics, and aviation and logistics.
Enrico, based in Singapore, highlighted that Thailand continues to see strong foreign direct investments (FDI), inflow especially in the eastern economic corridor (EEC), supported by data from from the Board of Investments (BoI).
He says that capitalizing on Thailand’s existing capabilities and policy direction towards Thailand 4.0, potential sectors for both domestic and foreign investment are (1) agriculture and food, (2) tourism and wellness services, (3) clean energy, (4) the next-gen automotive and related supply chains, (5) biofuel and biochemical and (6) electronics.
Thailand’s economic evolution can be traced through distinct phases: from the agriculture-based economy of Thailand 1.0 (inaugurated with the first Economic Development Plan in 1961), light-industry-focused Thailand 2.0, and the heavy industry stage of Thailand 3.0. The current phase, Thailand 4.0, marks a strategic pivot towards high-value and innovation-driven growth aligned with global sustainability commitments. This agenda is implemented through the Bio-Circular-Green (BCG) model, which is in harmony with the UN’s 2030 Agenda for Sustainable Development and supports Thailand’s pledge to achieve carbon neutrality by 2050 and net zero emissions by 2065.
Thailand has, over a year the years, attracted substantial FDI inflows, reaching a record high approved FDI value since the 1997 Asian Financial Crisis despite external and domestic challenges, particularly in the EEC area, according to the BOI.
A cornerstone of the Thailand 4.0 strategy is the Eastern Economic Corridor (EEC), a special economic zone first launched in 2017 and spans the provinces of Rayong, Chonburi, and Chachoengsao. This zone extends beyond the established Eastern Seaboard Economic Zone, positioning the EEC as a hub for investment in key technologies and industries crucial to Thailand’s long-term growth. The BOI and the Eastern Economic Corridor Office of Thailand (EECO) spearhead efforts to attract and facilitate high-impact investments within the EEC.
These positive developments mean that it would offer more opportunities for businesses who mostly have faith in the future of Thailand’s future as shown by the survey undertaken.
The survey which saw response from executives of small & medium sized enterprises (SME) and above companies in diverse segments of the industry, showed that although most businesses feel that 2024 is slow, in the next 3-years as much as 75% of the nearly 600 companies surveyed said their revenues would rise between 30-50% from the figures they have recorded last year.
To cope with the expected recovery in revenue stream, businesses have started to use the time to become more digital savvy, while at the same time reducing their costs along with streamlining their operations to take advantage of the expected upswing in the years ahead.
Among the nearly 600 companies surveyed, nearly 6 in 10 businesses continue want to improve automation to ease customer service to meet changing customer expectations.
All this would lead to what the companies hope would be a better experience for the customers, as digital transformation coupled with focus on improving the customer experiences would likely lead to some more upside for these companies when the turnaround in the business cycle starts to pick momentum.
The survey also indicated what the companies need for having a smoother transition period until the upside starts, and the key among the incentives the companies are looking for were financial measures.
The executives said that financial measures like tax incentives or rebates were the top support desired. Following these 2 incentives was the need to have better connections with industry peers and opportunities to collaborate.
In the era where digital transition is key to any business success, a lot of the businesses are now looking for support on digital infrastructure and solutions and business transformation.
Apart from this lower interest rates were the biggest expectation from banks as it will help deal with current challenges on profitability and operational cost. Something that the Thai government has been calling for since late last year, but the Monetary Policy Committee (MPC) has remained resilient in keeping the rates at status quo.
Enrico said that in February 2024, the government unveiled the Thailand Vision 2030 initiative, titled ‘Ignite Thailand,’ intending to transform the country into a global investment hub across eight key sectors: tourism, wellness and medical services, agriculture and food, aviation, logistics, future mobility, the digital economy, and finance.
He added that this visionary plan is set to accelerate the implementation of the Thailand 4.0 policy by not only drawing foreign investment but also leveraging Thailand’s inherent strengths. The government’s commitment to enhancing soft and hard infrastructure is expected to significantly boost productivity and investment significantly, bolstering the nation’s competitiveness and ensuring robust long-term economic growth. Despite the recent political shift, the new administration is expected to continue promoting the targeted sectors as the new growth sources.
The recent trend in FDI inflows to Thailand has been highly encouraging, as evidenced by the surge in investment applications approved by the Board of Investment (BOI). Since 2017, the approved investment amounts have steadily increased, reaching a record high of 552.5 billion Baht in 2023 —the highest level since the 1997 Asian Financial Crisis.
Going Greener
Going greener is the new trend but the survey showed that most companies were looking for financial measures such as tax incentives, developing renewable energy infrastructure and connections with industry bodies and Government agencies are top support measures needed.
Sustainability adoption is stagnant with just over five in 10 businesses adopting such practices. Relatively higher adoption is seen in Manufacturing & Engineering and Construction & Infrastructure sectors. Higher rate of sustainability adoption is seen among Medium Enterprises than in Small Enterprises. However, sustainability adoption across cities in Bangkok and rest of Thailand is quite similar.
The main draw for sustainability adoption is improved business reputation. Other reasons are attracting investors and enabling talent retention. Businesses in Manufacturing & Engineering are looking to adopt sustainability to attract investors and make working with MNCs easier. Attracting investors and ease of working with MNCs makes sustainability more important for Medium Enterprises.
Increased costs, and impact on short term revenues are key obstacles in sustainability implementation. Cost and revenue are bigger barrier for Small Enterprises while lack of awareness, lack of renewable energy infrastructure hurt more Medium Enterprises. Financial measures such as tax incentives, developing renewable energy infrastructure for SMEs and connections with industry bodies and Government agencies are top support measures needed.
Overseas Expansion
With the rising trend of Thai companies stepping up their gameplan to be focused on bigger and growing markets, there has been an increased interest in regional and global expansion.
Given their priority is to grow customers and revenues, interest in overseas expansion among businesses remains high. Almost nine in 10 businesses want to expand overseas in the next 3 years, the survey concluded.
Cross-border digital trade platforms are likely to remain popular as a means for overseas expansion and these are likely to drive businesses to expand overseas mainly to achieve profitability and growth.
The markets that most Thai companies are looking to expand into are ASEAN and Mainland China. This, the, survey says, will remain so in near future as the markets in the region continue to remain vibrant.
Among the ASEAN countries, Singapore, Malaysia and Vietnam are the top markets for current expansion and will remain so in future.
