ASIA FOCUS : Hub plan represents a golden opportunity

ASIA FOCUS : Hub plan represents a golden opportunity.

The strategic location of Thailand in Southeast Asia could offer entrepreneurs the opportunity to tap into what could possibly become one of the country's core strategic advantages in the future - being a logistics hub of the booming Asian countries.

"The various initiatives by the government and proximity of Thailand to places such as, say, southern China and its linkage to the ports of Singapore offer huge opportunities," said Chackrit Duangphastra, a university lecturer and an official at the Department of Trade Negotiation at the Commerce Ministry.

The move to make Thailand the regional hub for logistics was given some impetus after the interim government approved initial plans drafted by its predecessor.

Deputy Prime Minister and Finance Minister M.R. Pridiyathorn Devakula is reported to have approved the Transport Ministry's plans to switch the development from Laem Chabang to Chiang Saen on the Mekong River and Pakbara port in Satun province. The reason is that ports in the two locations give Thailand the connectivity to some of the world's largest markets; namely, China, India and the European Union.

The port development was part of ousted Prime Minister Thaksin Shinawatra's master plan to make Thailand the logistics hub of the region. Among the five core elements of the plan, the most important is the development of ports on the Andaman Sea, as most Thai ports are currently concentrated around the Gulf of Thailand. The development also includes the construction of another port in Chiang Saen and the expansion of Pakbara port.

Under the plan, the two ports will be connected by railways and new distribution points will be set up, which call for more investment from the government. "The biggest problem in implementing the plan has been funding," says Mr Chackrit.

He says that the move to increase Thailand's competitiveness has become even more urgent after it became more evident that competition in the region for investments has increased.

Thailand faces stiff competition from countries such as Vietnam for inflow of funds, and with the industrial sector's average logistic cost at around 16% against 8% in developed markets.

To lower its logistic costs, Thailand set aside a 1.2-billion-baht budget for a three-year logistics development project to cover services such as transport, freight forwarding and shipping, materials-handling and storage systems, international couriers and warehouses.

The move to establish a link between the booming economy of China and the deep-sea port of Pakbara and then to Singapore has undergone deep discussions at various levels, with the private sector also engaged.

The Thai Chamber of Commerce in its study had suggested that Chiang Rai be the hub through the use of two strategic routes, R3e and R3w, connecting countries in the Greater Mekong Subregion - Thailand, China, Laos, Burma, Cambodia and Vietnam. The North-South Economic Corridor, a transport project focusing on rail, and the East-West Economic Corridor, were among projects that have been studied.

Such a move would help stimulate trade with China and India, as Thailand could become a centre for adding value to products and re-exporting them to a third country.

According to the plan, land along the railway routes could also be available for commercial development, creating revenue for the State Railway of Thailand.

Mr Chackrit says that the various free trade agreements that Thailand has undertaken have also helped increase the demand for logistic services as trade of goods and services have skyrocketed.

But with logistics costs accounting for close to 20% of gross domestic product (GDP) in the agricultural sector, it was necessary for Thailand to look at ways to lower them.Mr Chackrit said that among the other problems facing Thailand was the lack of facilities for logistics.

"The problem is also the availability of services and not logistics costs," he says. "The capacity of logistics is very limited in Thailand, with low availability. This is the area that we should look to improve on."

He too stresses the need to develop links between Thailand and the southern part of China.

"It is quite close to Thailand if we have a road. Then the North and Northeast of Thailand can have greater access to the booming Chinese market."

Bangkok Post
Sunday January 14, 2007