Logistics is one of sectors within the ASEAN Framework Agreement on Services (AFAS), and one that will be fully liberalized in 2013.This agreement provides a framework for ASEAN investors to increase shareholdings in logistics companies within the bloc to not less than 51 percent by 2010, and 70 percent by 2013.
KResearch is of view that competition within Thailand's logistics services business will not change much over the short-term once this sector is fully deregulated, because legal and regulatory issues, plus customary practices and local operators' better understanding of the domestic market will be major barriers for other ASEAN and foreign investors entering the Thai market, and vice versa. However, it is expected that progress toward full logistics liberalization within ASEAN may be opposed by some because the depth of liberalization goes beyond the scope permitted by the internal laws of some ASEAN members.
Over the long-term, however, Thai SME logistics providers will inevitably be pressured by many factors, including heightened competition from larger, international logistics firms that may expand into Thailand in a similar manner undertaken by large foreign retailers, thus allowing them to gain greater bargaining power. Moreover, domestic logistics providers will likely face many unpredictable economic hindrances, particularly increases in energy costs.
KResearch also believes that our domestic land transport business, which has the largest number of SMEs, will likely be the most vulnerable to foreign competition. We have estimated that the value of Thai domestic land transport business in 2009 was about THB380 billion, or 48 percent of our total THB800-billion logistics business turnover.
On the other hand, liberalization of the logistics sector within ASEAN may offer greater opportunities for Thai businesses to tap into ASEAN markets and other neighboring countries, especially China, which is one of the world's largest and fastest-growing markets for trade in goods and services. The development of integrated transportation systems and cooperation on cross-border road transportation within ASEAN will help improve land freight business within the region, which features truck-laden, refrigerated and hazardous material transport between Thailand and China.
Weproject that in 2010 the value of cross-border trade between Thailand and our neighbors such as Malaysia, Myanmar, Laos, Cambodia and the southern region of China will increase 16.0-22.0 percent to around THB750-790 billion in turnover, increasing markedly over the THB646.813 billion in 2009.
Because logistics sector liberalization will have a long-term impact on Thai logistics providers, especially SMEs, the government should not only have remedial measures ready, but also provide other support for them, such as that made possible by investments in basic infrastructure. Thai logistics companies must expedite plans to enhance their competitiveness and be ready for heightened competition, seizing opportunities that may arise in the future.