Thai exporters prepare for loss of GSP privileges

[webfact]

EXPORT
Exporters prepare for loss of GSP privileges
PETCHANET PRATRUANGKRAI
THE NATION

BANGKOK: -- THAI enterprises in various industries are struggling to adjust their business models and investment plans in preparation for losing Generalised System of Preferences (GSP) privileges in the European Union next year.

Meanwhile, the Commerce Ministry's Foreign Trade Department is organising seminars and other projects to educate enterprises on standing on their own feet, as well as keeping in contact with Brussels to seek other support programs for Thai exporters after the end of GSP.

These measures could include relocating factories to countries that still enjoy tariff privileges or those that have free-trade agreements (FTAs) with the EU, lowering production costs, and sourcing some raw materials from other countries.

Industries that have already moved to other countries are mainly in garments, consumer goods, agricultural products and processed foods.

Thailand's top 15 apparel companies have expanded into other countries to continue benefiting from GSP and to lower production costs.

Vallop Vitanakorn, vice chairman of the Thai National Shippers Council, said many enterprises, not only large firms but also small and medium-sized companies, had tried to adjust their business models in preparation for losing the GSP privileges. Targeted countries for Thai investment are Least Developed Countries (LDCs), including Cambodia, Laos, Myanmar and Bangladesh.

Vietnam is also targeted because it is negotiating an FTA with the EU, while Brussels has suspended talks with Thailand for a similar agreement since the military seized power from the elected government.

Vallop, who is also chief executive of Hi-Tech Apparel, said about 30 Thai garment firms had already invested in other countries, including the top 15 firms.

The GSP benefits are a major reason for encouraging Thai enterprises to expand overseas, followed by the lower cost of labour in such countries. However, Vallop pointed out that low wages were not a top incentive for investing overseas any longer because other countries were also raising workers' incomes.

For instance, the daily wage in Myanmar has doubled to Bt150, from only Bt70-Bt80 in recent years.

Vallop said Hi-Tech Apparel planned to increase its production capacity in other countries, while maintaining its business in Thailand. Currently 80 per cent of its production is in Thailand, but that proportion is to drop to 60 per cent next year, with the balance in other countries such as Laos, Vietnam and Cambodia.

Apparel exports from Thailand to the EU will be subject to an additional tariff of 2.4 per cent after the end of the GSP programme for this country next year.

Paiboon Ponsuwanna, adviser to the TNSC and former president of the Thai Frozen Foods Association, said that unlike other industries, Thai food producers would have little need to expand overseas because foreign consumers have high confidence in Thailand's food standards, in terms of quality and sanitary measures. But to offset some losses from the GSP cancellation, food producers will import some raw materials from neighbouring countries, while keeping final production in Thailand.

To control product quality, Thai enterprises will train workers in other countries that contribute to the supply chain.

Moreover, Thai food companies will seek more trading opportunities domestically and in other Asean countries. Paiboon said they would also focus more on the tourist market. After all, food is consumed not only by the 65 million Thais, but also by the 20 million-plus travellers the country welcomes annually.

Meanwhile, a study by TMB Bank found that some Thai products would become less competitive after the end of GSP because they rely heavily on the EU market. These include electrical appliances and electronic goods, garments, ornaments, processed chicken, frozen shrimp, and industrial machinery and parts.

Last year, Thai exports to the EU were worth US$22 billion (Bt700 billion), or 9.8 per cent of total export value. About 60 per cent of Thai exporters to the EU gained GSP privileges.

The EU is the fourth-largest export market for Thailand, after Asean, China and the United States.

Source: http://www.nationmultimedia.com/business/Exporters-prepare-for-loss-of-GSP-privileges-30240134.html

[thenation]2014-08-04[/thenation]

[noitom]

Unfortunately for poor Thais, the crap runs downhill. So the fall out from this Thai chaos and military dictatorship will be that ordinary working Thais will be laid off and hiring will hit bottom. Thais will not be able to pay their debts. Rich Thais have nothing to worry about. They will not be closing their clubs, country clubs, golf courses, and polo clubs out there in Rayong. But they will cut back on employees and staff. The ordinary Thais will bear the weight of this Thai circus.

[Payboy]

Well there's always the fallback option to keep the rural economy running - the real GSP.... Good Supply of Poontang.

[MaiChai]

2.5% is hardly a great loss? Companies should be putting their sales departments to work and find an angle to sell their products and get more competitive ? Anyhow i can't see how the Thai garment manufacturers could compete with Bangladesh or other very cheap garment producing countries?

[BSJ]

I was really worried at the start of the article then further down I read it's 2.4%.   2.4%!  WHAT!  Get over it and move forward you babies.

[JesseFrank]

After all, food is consumed not only by the 65 million Thais, but also by the 20 million-plus travellers the country welcomes annually.

 

Well it looks like they are doing their best to destroy that one as well.

[JesseFrank]

I was really worried at the start of the article then further down I read it's 2.4%.   2.4%!  WHAT!  Get over it and move forward you babies.

 

The 2.4% is the least important subject of this article. Below are the important facts.

 

Thailand's top 15 apparel companies have expanded into other countries to continue benefiting from GSP and to lower production costs.

Vallop Vitanakorn, vice chairman of the Thai National Shippers Council, said many enterprises, not only large firms but also small and medium-sized companies, had tried to adjust their business models in preparation for losing the GSP privileges. Targeted countries for Thai investment are Least Developed Countries (LDCs), including Cambodia, Laos, Myanmar and Bangladesh.

Vietnam is also targeted because it is negotiating an FTA with the EU, while Brussels has suspended talks with Thailand for a similar agreement since the military seized power from the elected government.

Vallop, who is also chief executive of Hi-Tech Apparel, said about 30 Thai garment firms had already invested in other countries, including the top 15 firms.

The GSP benefits are a major reason for encouraging Thai enterprises to expand overseas, followed by the lower cost of labour in such countries. However, Vallop pointed out that low wages were not a top incentive for investing overseas any longer because other countries were also raising workers' incomes.

For instance, the daily wage in Myanmar has doubled to Bt150, from only Bt70-Bt80 in recent years.

Vallop said Hi-Tech Apparel planned to increase its production capacity in other countries, while maintaining its business in Thailand. Currently 80 per cent of its production is in Thailand, but that proportion is to drop to 60 per cent next year, with the balance in other countries such as Laos, Vietnam and Cambodia.

 

It looks like bringing back happiness to Thai people is running well

[GAZZPA]

This is much more serious then people realise. It is absolutely not just 2.4% as some people think.

 

The reality is that GSP (General system of preference) being taken away from Thailand is an indication that it is no longer considered a "poorer" country. The EU have made the first initial decision but the US is and will be following and so will India (India has already announced some "significant" changes will be made)

 

For the Asean region that is different because it will be free trade. The other thing to consider is the 0% duty into China for many products, it is possible that this could follow as well. What generally happens is once the import privileges start to fall they all fall.

 

The real problem I see is that I am not sure that Thailand is able to compete without GSP. I work for a Thai manufacturer and although there have been huge improvements over the last few years they are still behind the Chinese factories in terms of expertise and cost management.

 

When China lost its privileges it was already dominant in manufacturing at low cost for global exports. Thailand is not in that place.

 

The nett result of this will be that companies will move, simple as that. It won't just be Thai manufacturers that move either, foreign companies will start to weigh up the odds on why they should continue in Thailand when its cheaper next door, and they have better language skill..

 

in summary

difficult visa requirements

difficult to invest

No duty benefits anymore

higher salaries then neighbouring Asean countries (also with GSP)

Political instability

Tourism visa clamp down

loss of English teachers coming

 

All looking very challenging, it's going to get very difficult for the Thai economy next year.

 

 

[rreddin]

I was really worried at the start of the article then further down I read it's 2.4%.   2.4%!  WHAT!  Get over it and move forward you babies.

 

It speaks volumes that these companies either cannot find or are unwilling to find cost and efficiencty savings of 2.4%. They could be in for a difficult time and they will blame everyone but themselves for their failings.

[soalbundy]

Might be a blessing in disguise, forced efficiency. Maybe they will realize that Thailand isn't the center of the world after all and that ''hubs'' happen for a reason 

[Christie Paul]

Military economic management is to economic management, what military music is to music. 

[Benmart]

Well there's always the fallback option to keep the rural economy running - the real GSP.... Good Supply of Poontang.

Intellectually bankrupt.

[Benmart]

Military economic management is to economic management, what military music is to music. 

I am not an expert on military matters, management, economics or music.

I am, however, an expert on knowing my intellectual boundaries and not purporting I know more than I do.

[Benmart]

This is much more serious then people realise. It is absolutely not just 2.4% as some people think.
 
The reality is that GSP (General system of preference) being taken away from Thailand is an indication that it is no longer considered a "poorer" country. The EU have made the first initial decision but the US is and will be following and so will India (India has already announced some "significant" changes will be made)
 
For the Asean region that is different because it will be free trade. The other thing to consider is the 0% duty into China for many products, it is possible that this could follow as well. What generally happens is once the import privileges start to fall they all fall.
 
The real problem I see is that I am not sure that Thailand is able to compete without GSP. I work for a Thai manufacturer and although there have been huge improvements over the last few years they are still behind the Chinese factories in terms of expertise and cost management.
 
When China lost its privileges it was already dominant in manufacturing at low cost for global exports. Thailand is not in that place.
 
The nett result of this will be that companies will move, simple as that. It won't just be Thai manufacturers that move either, foreign companies will start to weigh up the odds on why they should continue in Thailand when its cheaper next door, and they have better language skill..
 
in summary
difficult visa requirements
difficult to invest
No duty benefits anymore
higher salaries then neighbouring Asean countries (also with GSP)
Political instability
Tourism visa clamp down
loss of English teachers coming
 
All looking very challenging, it's going to get very difficult for the Thai economy next year.
 
 

Well put.

It appears that the years of economic neglect, corruption, inward thinking and political turmoil are bearing bitter fruits.

[green job]

2.5% is hardly a great loss? Companies should be putting their sales departments to work and find an angle to sell their products and get more competitive ? Anyhow i can't see how the Thai garment manufacturers could compete with Bangladesh or other very cheap garment producing countries?

 

2.5% or 2.4% is a fortune,for factories. Most  only make  5 to 10%  after tax,if that.

[quidnunc]

 

This is much more serious then people realise. It is absolutely not just 2.4% as some people think.
 
The reality is that GSP (General system of preference) being taken away from Thailand is an indication that it is no longer considered a "poorer" country. The EU have made the first initial decision but the US is and will be following and so will India (India has already announced some "significant" changes will be made)
 
For the Asean region that is different because it will be free trade. The other thing to consider is the 0% duty into China for many products, it is possible that this could follow as well. What generally happens is once the import privileges start to fall they all fall.
 
The real problem I see is that I am not sure that Thailand is able to compete without GSP. I work for a Thai manufacturer and although there have been huge improvements over the last few years they are still behind the Chinese factories in terms of expertise and cost management.
 
When China lost its privileges it was already dominant in manufacturing at low cost for global exports. Thailand is not in that place.
 
The nett result of this will be that companies will move, simple as that. It won't just be Thai manufacturers that move either, foreign companies will start to weigh up the odds on why they should continue in Thailand when its cheaper next door, and they have better language skill..
 
in summary
difficult visa requirements
difficult to invest
No duty benefits anymore
higher salaries then neighbouring Asean countries (also with GSP)
Political instability
Tourism visa clamp down
loss of English teachers coming
 
All looking very challenging, it's going to get very difficult for the Thai economy next year.
 
 

Well put.

It appears that the years of economic neglect, corruption, inward thinking and political turmoil are bearing bitter fruits.

 

 

 

In your post previous to the one cited above you asserted "I am, however, an expert on knowing my intellectual boundaries and not purporting I know more than I do."

 

Apparently you're not an expert even in that small domain.  Over the past ten years Thailand's economy has grown enormously. Several major automobile manufacturers have chosen to make it an export hub.  The European Union dropped Thailand's tariff exemption precisely because it has been doing so well economically.

[h90]

Unfortunately for poor Thais, the crap runs downhill. So the fall out from this Thai chaos and military dictatorship will be that ordinary working Thais will be laid off and hiring will hit bottom. Thais will not be able to pay their debts. Rich Thais have nothing to worry about. They will not be closing their clubs, country clubs, golf courses, and polo clubs out there in Rayong. But they will cut back on employees and staff. The ordinary Thais will bear the weight of this Thai circus.

 

2.4 % is nothing....surely much less than the Shinawatras would steal.

[GAZZPA]

 

I was really worried at the start of the article then further down I read it's 2.4%.   2.4%!  WHAT!  Get over it and move forward you babies.

 

It speaks volumes that these companies either cannot find or are unwilling to find cost and efficiencty savings of 2.4%. They could be in for a difficult time and they will blame everyone but themselves for their failings.

 

You have misunderstood the post. It is not the factories that have to save 2.4%, that is the estimation in loss of GDP.

 

For example, China exports to India and in a lot of cases the duty of products from China to India is 10%. However because Thailand has FTA with India (special privileges for delveoping country) Thai products can be exported to India with 0% import duty attached. That means that customers in India can chose either China or Thailand and the duty saving from Thailand means they are able to compete with China (without it they cannot).

 

So, for the EU the priveleges are called (GSP, same as US) and very roughly speaking the duty is about 4% to 6% cheaper then China depending on the product.

 

So, factories will need to find 10% plus in their costs to compete with countries like China,,

 

hope thats clear.

[h90]

 

2.5% is hardly a great loss? Companies should be putting their sales departments to work and find an angle to sell their products and get more competitive ? Anyhow i can't see how the Thai garment manufacturers could compete with Bangladesh or other very cheap garment producing countries?

 

2.5% or 2.4% is a fortune,for factories. Most  only make  5 to 10%  after tax,if that.

 

 

yes because with good accounting a company never makes profit.....

[h90]

Maybe the right time for Thailand to have a word with Russia on some trade agreements.....They just stopped to buy fruits from Greece and Poland and chicken from USA.....

Thai Chicken would be a good alternative.

[GAZZPA]

 

 

This is much more serious then people realise. It is absolutely not just 2.4% as some people think.
 
The reality is that GSP (General system of preference) being taken away from Thailand is an indication that it is no longer considered a "poorer" country. The EU have made the first initial decision but the US is and will be following and so will India (India has already announced some "significant" changes will be made)
 
For the Asean region that is different because it will be free trade. The other thing to consider is the 0% duty into China for many products, it is possible that this could follow as well. What generally happens is once the import privileges start to fall they all fall.
 
The real problem I see is that I am not sure that Thailand is able to compete without GSP. I work for a Thai manufacturer and although there have been huge improvements over the last few years they are still behind the Chinese factories in terms of expertise and cost management.
 
When China lost its privileges it was already dominant in manufacturing at low cost for global exports. Thailand is not in that place.
 
The nett result of this will be that companies will move, simple as that. It won't just be Thai manufacturers that move either, foreign companies will start to weigh up the odds on why they should continue in Thailand when its cheaper next door, and they have better language skill..
 
in summary
difficult visa requirements
difficult to invest
No duty benefits anymore
higher salaries then neighbouring Asean countries (also with GSP)
Political instability
Tourism visa clamp down
loss of English teachers coming
 
All looking very challenging, it's going to get very difficult for the Thai economy next year.
 
 

Well put.

It appears that the years of economic neglect, corruption, inward thinking and political turmoil are bearing bitter fruits.

 

 

 

In your post previous to the one cited above you asserted "I am, however, an expert on knowing my intellectual boundaries and not purporting I know more than I do."

 

Apparently you're not an expert even in that small domain.  Over the past ten years Thailand's economy has grown enormously. Several major automobile manufacturers have chosen to make it an export hub.  The European Union dropped Thailand's tariff exemption precisely because it has been doing so well economically.

 

Sorry but you are missing the point. GSP is not a definitive yes or no for ALL privileges. There are some areas where Thailand has more advanced manufacturing facilities, 2 I know of are cars and hard drives. But, they are generally behind some neighbouring countries for other industries, especially China where they cannot compete, this is where GSP helps.

 

It is common for the EU, US and other countries to withdraw 1 or 2 privileges as they are doing well in those industries, however this statement from the EU is much more significant. It is a complete withdrawal from the GSP system for ALL product categories. The reason for this is that Thailands economy has grown particularly over the previous 3 years which tipped it into an "entry" middle income country. So all privileges are being revoked.

 

I fear that the Thai economy has been propped up by government subsidies over the past 3 years or so such as car schemes, rices subdues etc and in reality it is not doing so well.

 

This means that all industries that currently export under GSP privileges will suffer. It is normal for this to happen eventually such as it did in China but right now I do not believe that many of these industries have the ability to compete.

 

Also, the existing industries such as motor cars will very likely look to manufacture elsewhere as this will effect their profit lines. At the very least they will explore neighbouring countries for some components or perhaps assembly.

 

It all points to a loss of exports whichever way you cut it.

[GAZZPA]

 

2.5% is hardly a great loss? Companies should be putting their sales departments to work and find an angle to sell their products and get more competitive ? Anyhow i can't see how the Thai garment manufacturers could compete with Bangladesh or other very cheap garment producing countries?

 

2.5% or 2.4% is a fortune,for factories. Most  only make  5 to 10%  after tax,if that.

 

Completely agree. 2.4% is not the issue though,, Electronics lose double that and if India follow through (which they already are) then it is 10% for many categories, China is the same, it is currently 0% duty for many categories,, this would rise to whatever level everyone else pays, maybe 5% to 10% plus for some categories..

 

This is a very serious problem, I have worked in China and now in Thailand and China is a long way ahead of Thailand in a lot of respects, particularly large scale, low cost manufacturing. Remember that a lot of the Big manufacturers here are also not Thai companies, so they bring an almost instant level of expertise with them. In China they are nearly all Chinese owned companies and have built home grown expertise.

 

This will be a very bumpy road for Thailand for sure.

[belg]

and the new policy will be :  subsidise

 

 

maybe thais can learn to cut down on CORRUPTION

 

that would take away 20-30% of costs

 

 

Edited August 4, 2014 by belg

[Cake Monster]

This is just a typical Thai " throw the toys out of the pram " attitude that is taken when some organisation or another takes away the free candy.

A free trade deal with the EU and UK would open their eyes, instead of the huge import duties placed upon these countries products, due to " protectionism "  

[Krataiboy]

Thailand used to be a hub for cheap clothes. Now Thai manufacturers are relocating factories to Bangladesh. Can it be that the world is finally starting to run out of sweat-shops? 

[HUAHIN62]

I can make my econmic projection again, but if I do that I will be locked up or deported. So I will sit back and prepare for whats coming.

[Old Man River]

Unfortunately for poor Thais, the crap runs downhill. So the fall out from this Thai chaos and military dictatorship will be that ordinary working Thais will be laid off and hiring will hit bottom. Thais will not be able to pay their debts. Rich Thais have nothing to worry about. They will not be closing their clubs, country clubs, golf courses, and polo clubs out there in Rayong. But they will cut back on employees and staff. The ordinary Thais will bear the weight of this Thai circus.

Huh!

The loss of GSP privileges (what this thread is about) was first announced when YL was PM. Actually, it has nothing to do with Thai politics. The EU has changed the countries that qualify and Thailand no longer qualifies. There has been a one year grace period and it begins January 2015.




Sent from my iPad using Thaivisa Connect Thailand

[soalbundy]

Thailand used to be a hub for cheap clothes. Now Thai manufacturers are relocating factories to Bangladesh. Can it be that the world is finally starting to run out of sweat-shops? 

and hubs

[ginjag]

I can make my econmic projection again, but if I do that I will be locked up or deported. So I will sit back and prepare for whats coming.

 

I beg you to make your economic projection.   Please. 

[Christie Paul]

 

Military economic management is to economic management, what military music is to music. 

I am not an expert on military matters, management, economics or music.

I am, however, an expert on knowing my intellectual boundaries and not purporting I know more than I do.

 

 

Aggrandising one's limitations might be a considered a contradiction in terms. 

 

But the ability to distinguish personal objectivity from subjectivity is a feat of such enormity, it will displace the need for humility.