Absolutely Paramount

What is the primary purpose of the EABC?

Because Thailand does not consider the EU or Europe as one nation or allow non-nations to have chambers of commerce, we are acting as a representative body for European countries as a whole. It is important to have an association that represents the interests of Europe as a whole, because as a whole, Europe represents the second largest trading partner to Thailand. Similarly, from the government’s point of view, it doesn’t want to talk to 28 individual countries, allowing it to concentrate on the US, China, Japan, or Europe as a whole.

What is the importance of the FTA negotiation between Thailand and the EU, and what is EABC’s role in determining its’ outcome?

The FTA negotiation between Thailand and the EU is of paramount importance for European business here because Thailand lost its GSP preferences last year and many European companies here are exporting back to Europe. Depending on the commodity, companies pay between 2% and 20% more on import duties. The FTA was supposed to replace these GSP preferences, to give you an idea of how important the FTA would be for Thailand. It is a win-win situation. It is important for Thailand, but also for Europe. Every year, there is the EU-ASEAN Business summit. When I first visited the summit, I met the EU trade commissioner, and I was asking him why we don’t restart the FTA negotiation. He said Thailand would not be interested. I took this up, and we had a chance to meet the, at that time, deputy Prime Minister Kittirat. We had a meeting there, and I asked him why Thailand doesn’t have FTA negotiations with the EU and he said he really wanted to. From that day onwards, Thailand really pushed for FTA negotiations. They have had three or four negotiation rounds already, and it has gone very well. It has gotten close to an agreement, but the change in government happened and from that day on it has been interrupted. It’s not suspended, just interrupted.

How would you assess the level of competition in ASEAN countries and where does Thailand fit into this mix?

When you look at the ASEAN countries, every country has problems at the moment. Indonesia has major problems because of nationalistic policies. If you do not grant work permits to expatriates, how do you expect to get investment into your country? Malaysia has a problem with its prime minister. The currency is down 16.5%, which is a significant problem. If you take Myanmar, it is a darling for investors; however, it is not really taking off yet. Investors need a long-term view. You can look at almost every country in ASEAN, and they have problems, except maybe Vietnam, which just signed an FTA with the EU. Vietnam is the biggest competitor to Thailand at the moment. Otherwise, I don’t see other countries that can replace Thailand as the center of ASEAN, which is why it remains the most important country for European investment in ASEAN. Then you can expand from Thailand to other countries. Of course, there is Singapore, which takes around 50% of the investment in services. We told the Thai government it should liberalize the service sector, which will develop Thailand’s GDP greatly. There is a study and the preliminary results show that from the liberalization of the service sector, Thailand’s GDP could grow 6.28% in one year. We always tell every government that the liberalizing of services will grow the economy. The growth of an economy nowadays isn’t in manufacturing, but in services. And Thailand is limiting its growth by restricting foreign investment in this area. That is an important part of the FTA negotiations. With this liberalization, it could really jumpstart the economy. If you take all the other factors of liberalization from the FTA agreement, it could achieve 9.34% growth in one year according to this study. That’s extremely important to Thailand.

Other than those, what are the main challenges within the Thai economy?

The other challenge to Thailand is the so-called “middle income” trap. That means that Thailand was a good investment place for manufacturing by using relatively cheap labor, but with a high quality level of production. Labor is not so cheap anymore in Thailand; it is much cheaper in Vietnam. Therefore, the industry has to become more competitive. We have explained this to the government, and I trust it has understood it has to change through the promotion of R&D, innovation, and creativity. Maybe it is the wrong timing because when you suddenly change your whole promotional scheme, people get confused. We asked the government to wait a year, but it didn’t listen. Therefore, the middle-income trap is the other challenge. Thai industry has to automate its production and install more efficient , automated machinery. That is the key for the industry. Firms here must renew and reinvent themselves. It is important they take the next step to become more competitive. You have to be very competitive in this world, so your product management must change.

What is the outlook for the agreement in 2016?

There are two levels. When you look at the global level, economies all over the world are in trouble. The growth rates are low, even in China, and Thailand is dependent on China. The EU is not really booming. The US is coming out of its recession, and it is starting to grow, but not remarkably. The state of the economy globally is not at a good pace to really move Thailand forward. Thailand is an export-oriented country, so it is affected by these conditions. The macroeconomic conditions are one part of the equation. The second part is of course the local aspect. That means FTA and GSP are not there. The export business, for European businesses, is down because of that. Then, we have the problem of local confidence. Consumer confidence is weak because most of the consumers have overspent in the last two years. They have no credits left for purchases. Then, we have the public area of investment, which is lacking at the moment. Spending in infrastructure projects is lacking behind and consequently disbursements are not as much as it was supposed to. However, that is going forward now, so there should be some kind of stimulus.