The Thais that bind through thick and thin


Thailand has always been a good friend to Australia. For example, in the 1990s, when Australia was first enmeshing itself in the Asia Pacific regional architecture – with APEC and as an observer of ASEAN – it met with some resistance.

Malaysia for instance, was not keen on Australia’s closer involvement and tried to prevent APEC’s momentum (favouring its own East Asian Economic Caucus). This led to Australian Prime Minister’s dispute with Dr Mahatir when he referred to “other recalcitrants” after the Malaysian Prime Minister boycotted the APEC Leaders Summit in Seattle. But it was the Thais who stepped in on behalf of Australia. The Thai Deputy Prime Minister, Dr Supachai at the National Trade and Investment Outlook Conference (NTIOC) in Melbourne in 1994 made it clear that Thailand strongly supported Australia and its inclusion in various regional institutions and APEC when others in ASEAN had tried to exclude Australia to keep “Asia for the Asians”. The favour was returned a decade later when Australian supported Dr Supachai to be the Director General of the new World Trade Organisation (WTO) over a former Prime Minister of New Zealand, Mike Moore. That Australia would favour a Thai over our nearest and dearest Kiwi cousins raised a few eyebrows, but it showed how important Australia viewed its friendship with Thailand.

Australia – particularly the State of South Australia – showed its regard for Thailand when its Government visited the country after the Bangkok bombings of 2015. The Government trade mission to Singapore Malaysia and Thailand lead by South Australia Premier Jay Weatherill took the brave decision to press on with the Bangkok leg of the trip despite the tragedy of the bomb blasts on the very Monday of the weeklong mission. In fact, the Australian Ambassador to Thailand Paul Robilliard said that the 80 strong Trade mission from South Australia was at the time the largest Australian Business mission to Thailand. The Thai ministers of transport Dr Arkhom Termpittayapaisita expressed his and the Thai Government’s appreciation for the mission’s decision to continue to Bangkok so soon after the bombing in his first public appearance since his promotion in a long-mooted cabinet reshuffle. This was important as the state’s ties with Thailand are strong. For many years the Port Adelaide submarine corporation was based in Bangkok under the capable leadership of Graham Storah. Woods Bagot, a century old Adelaide architecture firm was based in Thailand too and SMR an automotive components company based itself on the Eastern Seaboard of Thailand (the ‘Detroit of South East Asia’). And the mission immediately after the Bangkok blasts, included companies from a variety of sectors including premium food and wine aerospace defence education and fashion.  South Australia’s Special Envoy Sir Angus Houston and Trade and Defence Minister Martin Hamilton-Smith lead a high-quality aerospace and defence mission looking to form partnerships with Thai airways and the Thai aeronautical industry. This was coupled up with another trade mission headed by Governor of South Australia Hieu Van Le that focussed on education partnerships with the universities and TAFE SA to match Thailand’s human capital needs in skills and education.

But with Thailand’s reputation for political instability and the incidents like the Bangkok bombings, how does that affect business? The biggest impact is on Thailand’s crucial tourism industry which has been affected over the past year by the coup and related political demonstrations. But other trade sectors of the Thai economy always continue particularly given Thailand’s key position as a trading and logistics hub for the Mekong delta which comprises their neighbouring countries of Vietnam Cambodia Laos and the emerging Myanmar (Burma). That’s why Australian transport and logistics giant Linfox sees Thailand as key to their ASEAN strategy as do other exporters and investors.

But even without the bombings what is Thailand like as a place to do business? According to Greg Wallis Australia’s Senior Trade commissioner in Bangkok in 2015 at the time of the blast (and a proud South Australian from Kangaroo Island) there are several myths about Thailand that need to be dispelled:

“People often think that Thailand is a poor country but it’s actually a middle-income country with a large urban middle class with healthy purchasing power. It’s not a low labour cost economy either like. Cambodia Laos or Myanmar (Burma). And yes, it has had 12 coups since 1932 but its political instability doesn’t adversely affect Thailand’s continued prosperity. In terms of doing Business it ranks 26 in the World Bank report ahead of the Netherlands on 27 and Japan on 29. It also has the world’s highest number of Facebook users” he explains. As Ambassador to Thailand, Paul Robilliard, puts it: “No government has ever been bad for business in Thailand”

Thailand’s attractiveness to Australian exporters has also been assisted by the Thailand Australia Free Trade Agreement (TAFTA) launched in 2005 at the same time as the more publicised Australia USA Free Trade Agreement (AUSFTA). TAFTA has helped build our trade momentum into ASEAN and the rest of Asia. In fact, in terms of numbers of companies exporting and other trade outcomes TAFTA has been more successful than the trade agreement Australia signed with the USA at the same time. Under TAFTA trade between the two countries has doubled and Thai foreign direct investment (FDI) stocks have doubled. TAFTA has helped consolidate Thailand as a trading hub for the Greater Mekong Delta with emerging economies like Myanmar, Laos and Cambodia coming to the fore and joining more developed neighbours Vietnam and Thailand itself.

TAFTA has also really helped agricultural exporters as since TAFTA took effect in 2005 over 90 per cent of Thai tariffs on Australian imports have been dismantled. Tariff cuts have helped exports in fruit and vegetables but also in the automotive sector, processed tuna, air conditioning and refrigerator components. More than 3,000 Australian manufacturers now export goods to Thailand and there are 200 Australian businesses operating in Thailand including a cluster of around 20 automotive manufacturers in Thailand’s Eastern Economic Corridor (EEC) incorporating the Eastern Seaboard that the airport economist visited with former Victorian Premier Steve Bracks as part of the Automotive Review for the Rudd Labor Government.

TAFTA has helped the agribusiness sector too. One agricultural exporter I interviewed for The Airport Economist TV series, David Flack of Global Horticulture, said that: “My Mandarins used to incur a tariff on 42 per cent, now it is zero. If you pick up a Mandarin in Bangkok it’s likely to be from South Australia’s Riverland.”

But it is not just about tariffs. Australian healthcare company Blackmores established a presence in Thailand more that 30 years ago and according to its country manager Pussadee Suchitchon, “Its safety and quality” that really matters to the Thai consumer. “The Thai middle class consumer is very health conscious and they look for safety and quality in their health products. They are price sensitive but mainly look for value for money,” she said.

Not only has Thailand been a good friend of Australia but Thailand has also been a good friend of the airport economist too. Once at an APEC business summit in Singapore they asked the leaders what their favour book was. US President Barack Obama nominated “A Team of Rivals” by Doris Kearns Goodwin about the creative tension within Abraham Lincoln’s Cabinet, Australian Prime Minister Kevin Rudd said, “the Bible” and the Thai Prime Minister Abhisit Vejjajiva nominated “The Airport Economist.” Austrade Chief Executive Peter O’Byrne and Australia’s then Ambassador to Thailand, James Wise (himself a successful author and authority on Thailand) were in attendance and quickly got my book translated into the Thai language and published by the Bangkok Post.

In fact, Ambassador Wise himself launched the first ever Thai edition of The Airport Economist at the Bangkok Stock exchange with leading Thai TV journalist Dr Rungthip Chotnapalai to a packed audience that helped boost sales. Thailand certainly became the ‘Land of smiles’ for me after that.

Tim’s Tips

“Thailand is the land of smiles bit also the land of coups so take caution with the political situation and keep in touch with the Australia Embassy and Austrade. But even in a fluid political situation many Australian businesses operate in Thailand and use it as a base to the Mekong Delta. The Airport Economist was launched in Bangkok by then Ambassador James Wise (now himself an author on Thailand) and Dr Rungtip Chotnapalai the host of Thai TV 3 so I have a soft spot for the Thais that bind!”

Just a few simple tips:

*Tim Harcourt is the J.W.Nevile Fellow in Economics at UNSW Sydney and host of The Airport Economist TV show and The Airport Economist Podcast