Brexit impact on Thailand limited but other challenges loom

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Brexit impact on Thailand limited but other challenges loom 

 

BANGKOK: -- Brexit finally became a reality last Wednesday when the UK’s Prime Minister, Theresa May, triggered Article 50 of the Treaty of Lisbon, formally starting the process by which the countrywill withdraw from the European Union after 44 years of being a member.

 

Much uncertainty surrounds how the UK’s exit from the 28-member trading bloc will impact EU citizens, as well as economies and industries around the world. Putting aside personal opinions about whether the nature of the Brexit that the UK government is now seeking was what the British people voted for last June, we all now have to move on and, as the UK prime minister said, be bold and ambitious. Above all, our clients will want as much clarity as possible as quickly as possible and we want to see a stable and strong Europe.

 

So how will Brexit affect Thailand and its businesses, and how can they prepare as the process, which is likely to take more than two years, is finalised?

 

On the face of it, Brexit is likely to have limited direct impact on the Thai economy given the relatively little exposure it has to the British economy with the UK representing only 1.7 per cent of Thai exports, while Thailand accounts for 0.9 per cent of UK’s total imports. 

 

The same goes for foreign direct investment (UK represents 0.8 per cent of Thailand’s total FDI), with Japanese, Singaporean, Chinese and South Korean investors still dominant.

 

On the other hand, instability in the wider EU market could have a more significant impact on Thailand. Exports to the EU (excluding the UK) make up 8.6 per cent of total exports from Thailand. EU (excluding the UK) represents 7.2 per cent of Thailand’s total FDI. So not insubstantial figures.

 

Major Thai exports to the EU-27 include automatic data processing machines and parts, motor cars, parts and accessories, air-conditioning machines and parts, integrated circuits, and precious stones and jewellery.

 

As these commodities and goods will stay in demand for some time, issues around trade are unlikely to directly affect Thailand. Sentiment and confidence, on the other hand, could play a much more significant role.

 

There is no doubt that there is a strong mood of populism in the EU and wider afield at the moment. Brexit is the most visible example of this feeling but the election of US President Donald Trump and the recent successes of nationalist parties in European elections are also clear illustrations of the prevailing frame of mind.

 

Elections are looming in France, Germany and Italy. If the anti-establishment parties do well it could shake the EU to its core. This could result in a significant drop in business confidenceglobally and have a knock-on effect on cutting growth with Thailand’s key trading partners – including the top three of the US, China and Japan. Commodity prices and global trade volume could also stall. This would hit Thailand’s export sector, particularly manufacturing, as well as the all-important tourism trade.

 

 Personally I’m an optimist and so I think such a negative outcome is unlikely but in the mean time Thailand needs to focus on creatively marketing its economy, companies, goods and services to get to the front of the queue for the new free-trade agreement discussions that will begin once the EU and Britain have completed their divorce.

 

This would be a savvy move, but Thai companies must do more, which brings me to the second question. Brexit will increase uncertainty, but businesses in Thailand face far greater, more long-term, challenges.

 

I had the pleasure of spending the last week in Bangkok where we held our Annual Asia Pacific meeting. To coincide with the event, we released the findings of our Asia Pacific Business Complexities Survey 2017. The research, which surveyed 150 business leaders from across the region, identified the need to drive innovation by adopting new technologies as the number one challenge facing businesses in the region. This was followed by cost pressures and shrinking margins, and technological disruption from competitors. Regulatory risk and a resulting expected increase in enforcement and litigation were also seen as key issues.

 

These findings were reinforced through our discussions with hundreds of regional clients who attended the Bangkok summit. While many are concerned about how Brexit, and the Trump Administration, could affect global trade and geopolitics, they are more focused in the medium to long term on responding to the deeper-rooted issues that we identified.

 

The research also highlighted the long-term shift in influence or “soft power” in the region. Our analysis highlighted that 48 per cent of respondents thought US influence in the region would decline over the next five years while that of India and China will rise by 95 per cent and 77 per cent, respectively. The Asean Economic Community also offers much hope for driving regional prosperity through intra-Asean integration and cooperation.

 

Brexit is important, but it also provides an example of how companies can be distracted by major global events at the risk of overlooking more serious long term challenges in their own markets. And no company whether in Bangkok or London can afford to be complacent or wait upon events. 

 

The writer is global chair of Baker McKenzie

 

Source: http://www.nationmultimedia.com/news/opinion/30311110

 

-- © Copyright The Nation 2017-04-03

[scotchonrocks]

I don't think for one moment that Thais are distracted by comparatively trivial and unconnected events like Brexit from the fire blazing in its own backyard.

[SupermarineS6B]

Brexit ?  Most Thais probably think it's something to do with food....... and can you blame them ?......... If you're looking for problems, just have a look outside....... Plenty....... and building....

[peter48]

One impact is the fall in Sterling which means both Ex-Pats and British tourists will have less to spend over time. Indeed it could affect tourists who will search out  cheaper destinations like Greece. Pensioners will get less value too. Possibly up market tourist spots will be less affected as they attract the better off such as the Xmas Phuket , Kho Sumi Londoners etc., 

 

The UK leaving a neighbouring 'tariff free ' wealthy bloc of 500 million consumers is madness. It's currency will  continue its decline as years of unfolding 44 years of EU integration and prosperous trade is negotiated. Nearly half of all UK business is done with Europe. The impacts on low income groups the very people who voted Brexit  in the English and Welsh regions will be worst. As a top a top FT. Writer said Brexit is a tradegy 

[YAHF]

We either like it or lump it but as I'm not a clever guy about these matters I can understand that if its true that the UK pays £40M/day into the EU totalling a staggering amount of £29,200,000,000 in the next two years, why can't we just stop it all now ?

As for the Thai baht rate dropping down to 42.2/£1  I'm now finding it a struggle on my meagre pension to survive as well as I did 18 months ago & very very noticeable is the lack of tourists in Pattaya even though reports are stating that tourism is up, where are the tourists or is this just the number of passengers passing through Bangkok airport???

[nisakiman]

18 minutes ago, peter48 said:

One impact is the fall in Sterling which means both Ex-Pats and British tourists will have less to spend over time. Indeed it could affect tourists who will search out  cheaper destinations like Greece. Pensioners will get less value too. Possibly up market tourist spots will be less affected as they attract the better off such as the Xmas Phuket , Kho Sumi Londoners etc., 

 

The UK leaving a neighbouring 'tariff free ' wealthy bloc of 500 million consumers is madness. It's currency will  continue its decline as years of unfolding 44 years of EU integration and prosperous trade is negotiated. Nearly half of all UK business is done with Europe. The impacts on low income groups the very people who voted Brexit  in the English and Welsh regions will be worst. As a top a top FT. Writer said Brexit is a tradegy 

 

"Nomura believes the pound is up to 25pc undervalued against the dollar, adjusted for price differences and buying power.

The pound plunged against a range of currencies following the Brexit vote, falling from around $1.45 against the dollar to lows not seen since 1985.

 

However, sterling posted its first quarterly gain against dollar since June 2015 in the first quarter, closing at $1.2542.

“We expect the triggering of Article 50 to initiate a ‘sell the rumour, buy the fact’ rebound in sterling from historic undervaluation as ambiguity over Brexit recedes”, said Mr Barth.

Oxford Economics also believes the pound will rise to $1.32 against the dollar by the end of the year, and $1.35 in 2018."

 

http://www.telegraph.co.uk/business/2017/04/02/significantly-undervalued-pound-will-bounce-back-year/

[sammieuk1]

There has been a 25% increase in the cost of living here post brexit that's without any Thai inflation costs or price rises added this will affect the spending power of Brits everywhere so it will have a negative affect in Thai economy.  

[evadgib]

Link to all things Brexit:

 

https://www.gov.uk/government/organisations/department-for-exiting-the-european-union

[rickudon]

11 hours ago, nisakiman said:

However, sterling posted its first quarterly gain against dollar since June 2015 in the first quarter, closing at $1.2542.

“We expect the triggering of Article 50 to initiate a ‘sell the rumour, buy the fact’ rebound in sterling from historic undervaluation as ambiguity over Brexit recedes”, said Mr Barth.

Oxford Economics also believes the pound will rise to $1.32 against the dollar by the end of the year, and $1.35 in 2018."

And business confidence has fallen in the UK for 3 months consecutively. GBP has fallen by about 0.6% against the dollar today. The GBP will only rise if there is positive news - but negative news is more likely over the next year. It is hard to see how Brexit negotiations could possibly go well. Maybe i will short Nomura ....