10 February Forecasting the future – Business leaders look ahead at 2018 trends in Thailand
By David Venn
Thailand shows no signs of slowing down, and business leaders can expect more growth and change ahead in 2018. That was the theme echoed by a distinguished lineup of panelists at CanCham Thailand’s 3rd annual multi-chamber Crystal Ball Business Luncheon.
The first premier chamber event of the year hosted at the Sheraton Grande Sukhumvit brought together more than 165 business leaders from all sectors and offered guests a look ahead at some of the key financial, political, labour market and communications trends likely to impact Thailand’s economy in coming year.
Media veteran Pichai Chuensuksawadi, Editor-in-Chief of the Bangkok Post, moderated the panel of four who were largely optimistic about the future of Thailand, yet cautious that a looming election and rapid pace of technological change could pose some uncertainties ahead.
Inflation overdue, but financial growth continues
Johan Jooste, Chief Investment Officer with the Bank of Singapore, took to the stage first to present a steady and balanced picture of key financial trends to watch for in 2018.
Following a strong 2017 that saw global markets climb, Mr. Jooste expects the U.S. Federal Reserve to lose its monopoly on monetary value, and believes interest rates will rise over the coming year. The Fed has already started to raise interest rates and tighten monetary policy, leading countries like Canada and Britain to do the same with other economies around the world likely to follow.
One financial prediction to watch for this year is a spike in inflation. Mr. Jooste suggests that the market has essentially ignored inflation since the 2008 financial crisis and that a correction has been overdue for two or three years. “We’ve seen labour markets tighten and industrial capacity being used up everywhere in the world, and we haven’t seen inflation go higher. 2018 might be the year that inflation comes back into play.”
Economic growth also appears positive, with no signs of a recession on the horizon, says Mr. Jooste. “We don’t think there is going to be a global recession in 2018. We see more than enough things happening in Asia, Europe and the United States to continue the growth expansion we saw in 2017.” Despite lots of concern, last year’s geo-political tensions and populist movements had little impact on the overall strength of the market, leaving doubts as to whether they will have any effect again this year.
Looking at other areas of the global financial picture, Mr. Jooste was cautious but not bearish, highlighting that while credit defaults will likely be subdued in the absence of a recession, fixed income valuations are rich and equity markets are priced for perfection.
Delays could push election into 2019
With her finger on the pulse of Thailand’s new political landscape, the luncheon’s second speaker, Dr. Deunden Nikomborirak, Research Director of Economic Governance with the Thailand Development Research Institute, shared her forecast for the country’s upcoming election and current economic policies.
According to the government’s roadmap, it’s anticipated that Thailand’s election may take place in November 2018, but Dr. Nikomborirak believes that a number of “open-ended delays” are likely to postpone the general election and formation of a new government into the first half of 2019. Constitutional support and Royal endorsements are still both needed to move the election bills forward. According to the Constitution, at least 95% of MPs must also be elected during the general election before Parliament can convene to select a new Prime Minister. Any possible delays surrounding these events or failure to meet the constitutional requirements could very well slow the election timeline and push the creation of a new government into next year warns Dr. Nikomborirak.
One item worth watching for on the political front is whether the revamped MP voting system will have an effect on the government’s makeup. “The new system is different. It’s based on popular vote, for the entire country, for every district. This is a new innovation. Even small parties that get only 5% of the vote will now have representation in the Parliament,” says Dr. Nikomborirak. A new election system that favours smaller and mid-sized parties could lead to a coalition government. Thailand’s political system will also depend heavily on the Senate, which is also influential under the new constitution.
Looking ahead, Dr. Nikomborirak unpacked the possibility for two of the country’s new economic policies. A National Strategy which will come into effect in 2018 will guide the country’s policymaking over the next 20 years and set a direction for the newly elected government. Plans behind the Eastern Economic Corridor (EEC) also hold great promise for transforming the country, but should not be seen as a silver bullet. “The EEC is one of the best policies of this government, but whether it is enough to revive the Thai economy is a question. Our prediction is that the EEC will matter for the expansion of existing industries.”
More technological disruption on the horizon
The labour market in the ASEAN region is changing rapidly, and nowhere is this more apparent than in Thailand. Today’s industries are both growing and evolving at a rapid pace, fuelled in large part by the adoption of new technologies. Gary Rynhart, Senior Employers Specialist South East Asia with the International Labor Organization, believes that although disruptive technologies have always existed, there are three reasons why we should be paying more attention now.
The first he emphasizes is speed. The time between innovative ideas hitting the mainstream and adoption in the firm or factory has increased dramatically. Pointing to examples like Uber and AirBnb – companies that have turned the taxi and hospitality industries upside down – Mr. Rynhart highlights that today’s technology is being used to disrupt traditional sectors faster than ever before.
Another reason why things are different now has to do with skills. In the past, technology has had a particular impact on lower-skilled jobs, but that’s no longer the case says Mr. Rynhart. “This wave of technology is eradicating a lot of those jobs and it’s also impacting on every single skill level. So, it’s no longer just the lower, repetitive type skills, it’s also affecting higher skills across all sectors.” The challenge will be for policy and education to keep up, training today’s workforce for tomorrow’s labour market.
Finally, Mr. Rynhart points to cost as another key factor in why technological disruption will have a greater impact in this day and age, particularly on the millions of low skilled jobs in ASEAN’s manufacturing sector. Companies that may have been reluctant to invest in robotics in the past because of the expense can now do so. The technologies have become cheaper, reusable and more adaptable, presenting a viable opportunity for all sectors to improve productivity. This shift, however, is not without its obstacles. In textiles manufacturing for example, the use of automation technology to produce clothing and footwear is becoming so affordable that it’s eliminating jobs in countries such as Cambodia, Myanmar, Bangladesh.
If one thing is for sure in 2018, we can expect technology to continue to disrupt existing industries, and pave the way for new ones to emerge.
Social commerce ready to breakout
A final trend to keep an eye on this year is the rise of social commerce. In Thailand, it’s estimated that the size of the market is roughly $500 million per year with plenty of room for upside. Rounding out the panel, Natasak Rodjanapiches, Managing Director with Oracle Corporation (Thailand) Co., Ltd., predicts that opportunities for social commerce growth and investment will continue in 2018.
During his presentation, Mr. Rodjanapiches cited several examples of companies that are already changing the way consumers shop and interact with products online. Philips in Singapore is now selling electrical equipment through Facebook, using chatbots and machine learning to interact with customers. In Thailand, LINE Pay, Uber Eats and Kerry Express are all using technology to better deliver products and services to end users.But getting goods to people faster remains a distinct challenge. “One of the biggest trends, according to recent studies, is that for a company to be successful they need to look at a one-day delivery. We are seeing emerging partnerships between logistics and social commerce companies.” Mr. Rodjanapiches also expects companies to continue to use artificial intelligence and big data to track and analyze consumer behaviour.
“Reckless” predictions for the future
Following a lively Q&A that raised questions about everything from cryptocurrencies to robotics to drone delivery, moderator Mr. Chuensuksawadi asked the panel for one “reckless” prediction for the future to close out the event.
Mr. Jooste envisioned that an unlikely player on the scale of Apple or Google will muscle into world of financial services. Dr. Nikomborirak was optimistic that the government will consider one combined work and immigration permit for people to move through customs easily. Mr. Rynhart stuck to his prediction that one country, perhaps China or Singapore, will make a bold leap forward with the implementation of driverless cars. Mr. Rodjanapiches, meanwhile, sees great potential for things to come in Thailand, including the rise of an Internet of Things for the country.
Whether the panel and their prophecies will come true or not, only time will tell.
(Partners for the conference, included: the Bank of Singapore, the Thailand Development Research Institution, the International Labour Organization as well as the American-Thai Chamber of Commerce, the Australian-Thai Chamber of Commerce, the British Chamber of Commerce in Thailand, the Belgium-Luxemburg-Thai Chamber of Commerce, the Board of Trade of Thailand, the Franco-Thai Chamber of Commerce, the Joint Foreign Chamber of Commerce in Thailand, the Malaysian-Thai Chamber of Commerce, the Norwegian-Thai Chamber of Commerce, the Netherlands-Thai Chamber of Commerce, the New Zealand-Thai Chamber of Commerce, the Singapore-Thai Chamber of Commerce, the Hong Kong Thai Trade Association and the Thai Chamber of Commerce.)