It may be a mid-tier economy right now, but Thailand is aiming for the big leagues. To make that happen, it's embarking on an ambitious growth plan that includes $50 billion in infrastructure spending.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
Thailand is ready to take the next step economically. Sitting among the world's mid-tier economies, Thailand plans to invest heavily in infrastructure to raise its profile among foreign investors and position itself as one of Southeast Asia's primary gateways for commerce.
This nation of 68 million people already has a lot going for it. Its manufacturing sector is strong, particularly in the automotive and technology areas. It is the world's number-two producer of hard disk drives. It ranks 12th in automotive manufacturing and sixth in the production of rubber tires. It is also the seventh-largest maker of computer devices. On top of that, Thailand boasts a fairly robust growth rate of 3.2 percent, a low cost of living, and a business-friendly environment—the World Bank ranks it the fifth-best nation in Eastern Asia when it comes to ease of doing business.
Part of its economic success is a result of its location. Thailand is surrounded by many of the globe's fastest-growing economies. Its neighbors include the powerhouse markets of China and India, and it's situated within a short journey of half the world's population. It's easy to see why Thailand aims to position itself as the gateway to these substantial markets.
But location and past success are not enough to assure a solid future for a mid-range economy. Many nations languish for years in the middle of the economic pack. To avoid this fate, Thailand has launched an ambitious economic growth plan designed to kick-start its economy and future-proof its workforce and industrial base. Known as "Thailand 4.0" (the initiative is the fourth iteration of the government's ongoing growth plan), the program is essentially a strategy for transforming a trade-based economy into a technology- and innovation-driven one.
"To gain economic growth, we need to introduce size and innovation," says Dr. Bonggot Anuroj, senior executive adviser with the Thailand Board of Investment.
As part of the effort, the government of Thailand is now finalizing plans that include a US$53.4 billion investment in major infrastructure projects through 2022. Once the plan is approved (which is expected to be next month), work will begin immediately to improve roadways, deep-sea ports, airports, and rail connections to create a logistics corridor that will have few rivals in Southeast Asia.
GROWTH INDUSTRIES
As for where the money will go, government leaders in Thailand have identified five industries "of existing strength" for further investment: automotive, intelligent electronics, advanced agriculture and biotechnology, food processing, and tourism. They have also identified five emerging growth areas for further development: aviation, biofuels and biochemicals, medicine and healthcare, digital technologies, and—of particular importance to the supply chain profession—robotics and advanced automation.
Dr. Anuroj says the latter will also play a critical role in addressing Thailand's future labor needs. Much like Japan and other developed Asian nations, Thailand is facing an aging population. "We may experience a lack of manpower in the future. So we are looking to grow our automation and robotics capabilities. These will be new engines of our growth," he says.
With respect to geography, almost all of the investment will be concentrated on three provinces on the eastern shore of the Gulf of Thailand. Known as the Eastern Economic Corridor (EEC), the target region includes the provinces of Chonburi, Chachengsao, and Rayong, which all lie within 150 miles of Bangkok. This area has been the industrial heart of Thailand for more than 30 years. Most of the major automotive manufacturers, including Honda, Toyota, Ford, General Motors, and BMW, have plants in the region. The area also boasts the world's 20th busiest port, Laem Chabang. In addition, it is home to a healthy oil and gas industry as well as a second port, Map Ta Phut, that handles bulk commodities.
Thailand believes that further infrastructure investment within this region will help it compete with Asia's other top logistics centers, like those in China, Japan, and Singapore. "We want Thailand to be a logistics hub," says Dr. Anuroj.
WHAT WILL BE BOUGHT WITH BAHT
All this will come at a hefty cost. To position the Eastern Economic Corridor as a major logistics center, Thailand's government will invest 1.5 trillion Thai baht (US$43 billion) in the area over the next five years.
One beneficiary of the spending will be the deep-sea cargo port of Laem Chabang, which is already one of the region's busiest. Its container operations currently handle 7.6 million TEUs (twenty-foot equivalent units) annually, and it does a robust roll-on/roll-off (Ro-Ro) business of 1.2 million automobiles a year.
"Our goal for Laem Chabang is to be one of the top 15 ports in the world and to be the prime gateway to Asia," says Kamit Sangsubhan, secretary general for the EEC Office of Thailand.
New rail connections are already under construction at Laem Chabang that will provide the capacity to haul 2 million TEUs annually between the port and Bangkok. Plans also call for the addition of six on-dock tracks for building trainloads.
The port will soon enter Phase III of its development project. This phase, which is expected to take seven to eight years to complete and will come at a cost of US$2.5 billion, will include the addition of a new basin and terminals to service ships.
The channel at Laem Chabang will also be deepened from its current 16 meters to 18.5 meters (just over 60 feet). Capacity will increase to 18.1 million TEUs. Other planned enhancements will boost the port's Ro-Ro capacity to 3 million vehicles annually.
In a bid to alleviate congestion, the port will soon introduce an electronic scheduling system for trucks. New access roads will further improve container flow in and out of the port. In addition, a "coastal terminal" will open next year that will accommodate the smaller vessels and barges that ply the Chao Phraya River (the inland waterway to Bangkok) and feed cargo to smaller ports in the region. The coastal terminal is expected to process 300,000 TEUs per year.
The terminal operators at the port will also make significant investments in technology once Phase III gets under way.
"We have a lot of technology to operate our port," says Anat Machima, senior operations manager at Hutchison Ports, a terminal operator that handles about 30 percent of the current container volume at Laem Chabang. Among other enhancements, automated cranes will be installed for loading and unloading ships at the berths. These will be remote-controlled from an adjoining building, as will the rubber-tired gantries that will work the new container yards. "We are the most modern port in Southeast Asia. The technology drives us to be competitive," he adds.
THE SKY'S THE LIMIT
Over on the aircargo side, work is under way to expand U-Tapao Airport, a former U.S. military base now operated by the Thai navy. Total investment at the airport, which lies about 90 miles southeast of Bangkok, is budgeted at US$5.7 billion. The airport already has a passenger terminal, which is being expanded to turn U-Tapao into Thailand's third international airport (a move aimed at reducing the strain on Bangkok's other two airports). Last year, 700,000 passengers used U-Tapao, and traffic is on pace to increase 20 percent this year.
Next year, construction will begin on a second runway and a new aircargo terminal. The EEC office also hopes to make the airport a center for aviation maintenance, repair, and overhaul. Thai Airways already has a three-hangar maintenance operation at U-Tapao for both narrow- and wide-body airplanes. However, the facility sits on the site of the new runway, so it will soon be demolished and replaced with a new building containing five hangars.
The area around U-Tapao is currently home to some 20 industrial developments, with more to come. There are plans in the works to develop properties adjacent to the airport for cold-chain logistics and other distribution operations, including the establishment of a large free-trade zone.
As for the region's ground transportation network, the Eastern Economic Corridor is currently slated for rail-track upgrades. In addition to the on-dock tracks being built at the port, US$1.8 billion will be spent to upgrade existing lines and double-track the rails between the EEC region and Bangkok to accommodate higher volumes of intermodal container traffic.
High-speed passenger service connecting Bangkok to the EEC will be added within the next few years, funded by a US$4.5 billion government investment. An extensive highway improvement project is also on the docket to facilitate the movement of freight by truck. This includes adding lanes to existing highways as well as the construction of new roads. The budget for the highway projects is US$1 billion.
DEVELOPING A TALENT PIPELINE
While Thailand plans to spend heavily on infrastructure improvements, it is not neglecting investments in human capital. Working with private industry, the government is establishing "Cities of Innovation" within the EEC region. These "cities," which are essentially research clusters containing educational facilities and hands-on laboratories, are designed to promote the development of new technologies and train the next generation of business leaders. The first City of Innovation—a center devoted to research on biochemicals, biofuels, and agriculture—is already up and running. The second, which will focus on automation, artificial intelligence, and robotics, will open soon. Planning is under way for a third center that will be dedicated to aeronautics and space technology.
In addition, private industry is working with government and other agencies to assure a steady supply of talent to fill jobs in manufacturing and logistics. One such collaboration is the Thai German Institute, a center opened in 1992 by the two governments to bring German technology and training to Thailand. German instructors taught at the center for the first 10 years, but today, local instructors provide the advanced technical training with support from private industry. In all, the center offers some 200 courses on topics such as automated systems, electronic controls, machine maintenance, and smart factories.
Companies pay for the training of about 3,000 of their employees annually. These students typically already hold university degrees and have at least five years of experience in the industry before they're sent for the advanced training. Industry suppliers, such as Japan's Sanmei robotics company, provide automated systems and equipment for hands-on work. It's all designed to assure that Thailand can meet the challenges of tomorrow, while keeping the manufacturing plants and logistics centers of today humming.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
The clean energy transition continuing to sweep the globe will give companies in every sector the choice to either be disrupted or to capitalize on new opportunities, a sustainability expert from Deloitte said in a session today at a conference in Orlando held by the enterprise resource planning (ERP) firm IFS.
While corporate chief sustainability officers (CSOs) are likely already tracking those impacts, the truth is that they will actually affect every aspect of operations regardless of people’s role in a business, said John O’Brien, managing director of Deloitte’s sustainability and climate practice.
For example, regulatory requirements on carbon emissions are expanding in every region, which means that even if a specific company doesn’t have to change its own practices, it will almost definitely need to flex to accommodate its partners and suppliers as they track scope 3 emissions or supply chain practices.
Likewise, companies are starting to challenge the classic concept of “force majeure” events than can cancel service providers’ contractual duties due to unforeseeable weather events. As the new argument goes, extreme weather patterns increasingly occur in accordance with climate scientists’ forecasts, so those hurricanes and wildfires are in fact foreseeable after all.
But one strategy for coping with the cost of those changes is to mine the power of the data that most companies will soon need to collect as part of their evolution. Instead of simply tracking its trucks to trim their routes and emissions, a transportation company could use the same data to manage their maintenance and fuel consumption.
“The climate management transition is going to be a massive disruption, but with that comes massive opportunity,” O’Brien said from the keynote stage at the “IFS Unleashed” show. “Don’t waste compliance efforts just on compliance, use it to create new value. You’re collecting all that new data, so use it!”
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
However, that trend is counterbalanced by economic uncertainty driven by geopolitics, which is prompting many companies to diversity their supply chains, Dun & Bradstreet said in its “Q4 2024 Global Business Optimism Insights” report, which was based on research conducted during the third quarter.
“While overall global business optimism has increased and inflation has abated, it’s important to recognize that geopolitics contribute to economic uncertainty,” Neeraj Sahai, president of Dun & Bradstreet International, said in a release. “Industry-specific regulatory risks and more stringent data requirements have emerged as the top concerns among a third of respondents. To mitigate these risks, businesses are considering diversifying their supply chains and markets to manage regulatory risk.”
According to the report, nearly four in five businesses are expressing increased optimism in domestic and export orders, capital expenditures, and financial risk due to a combination of easing financial pressures, shifts in monetary policies, robust regulatory frameworks, and higher participation in sustainability initiatives.
U.S. businesses recorded a nearly 9% rise in optimism, aided by falling inflation and expectations of further rate cuts. Similarly, business optimism in the U.K. and Spain showed notable recoveries as their respective central banks initiated monetary easing, rising by 13% and 9%, respectively. Emerging economies, such as Argentina and India, saw jumps in optimism levels due to declining inflation and increased domestic demand respectively.
"Businesses are increasingly confident as borrowing costs decline, boosting optimism for higher sales, stronger exports, and reduced financial risks," Arun Singh, Global Chief Economist at Dun & Bradstreet, said. "This confidence is driving capital investments, with easing supply chain pressures supporting growth in the year's final quarter."