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NEWS UPDATES Asean Affairs    20 July 2012

Thai companies looking at Asean for growth


The private sector in Thailand is pinning its hopes on Asean and other areas such as Eastern Europe as it does not expect the euro-zone crisis to end soon.
The tourism industry is looking for new markets such as Eastern Europe, Sisdivachr Cheewarat-tanaporn, president of the Association of Thai Travel Agents, said yesterday.

Tourism has not been adversely affected yet by the sovereign debt crisis in Europe, as the number of arrivals from that market rose by about 10 per cent in the first half of the year, he said. The industry actually is more worried about political uncertainty here in Thailand than the euro crisis.

However, the industry is also looking for new markets that could help cushion Thailand against future impacts from the ongoing crisis in the euro zone, he said. One of the promising markets is Eastern Europe.

For example, tourists from Russia increased sharply to 1 million last year from about 200,000 in previous years, he said. Poland is also a potential market for Thailand's tourism industry.

Sisdivachr also expects a positive impact from the Asean Economic Community (AEC), which will start in 2015. Thailand could work with neighbouring countries to attract more tourists to the region, he said.

However, he is worried that there might also be negative impacts from the Asean single market, since it may drive out small and medium-sized tour operators because of competition from large firms.

As the government is aiming to double tourism revenue from about 800 billion baht (US$25 billion) annually, the government must be careful about the AEC's impact on small tour operators, he said.

Swift large inflows and outflows could destabilise the market.

Thailand, whose exports account for about 70 per cent of gross domestic product, will also be affected by lower exports because of the crisis in Europe.

Meanwhile China will not face serious problems with capital flows as the country has not yet opened its financial market. India and China also have large domestic markets that they can rely on when the global market is weak, he said.

Kobsidthi Silpachai, head of market and economic research of Kasikornbank Group, said European leaders had not yet found concrete solutions to solve their sovereign debt crises and banking weaknesses.

He said austerity programmes implemented by Greece and other troubled countries would create a vicious cycle of slowing economies, lower tax revenue, larger budget deficits, falling bond and asset prices, and falling bank capital as bank reduced risky assets.

He said that though the European Central Bank had increased money supply, banks were not lending to businesses. This is different from the United States, where banks have started to lend to businesses again, he said, so the market has a positive view of the US economy.

The impact on Thailand from the euro crunch will be both direct and indirect, Kobsidthi said.

Thai exports to the euro area dropped 10 per cent last month. Since Thailand also is actively engaged in global supply chains, trouble in Europe will have indirect impacts on Thailand as well, he said.

"What we can do is to minimise the impact, and we may place hope in the AEC, but lot of work has to be done, such as tax reform," he added.

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