In 2015, Thailand and 9 other Southeast Asian Nations will become one foundation known as the Asian Economic Community (AEC). The regional integration’s objective is to create a competitive market of over 600 million people in Asean countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. There will be free flow of goods, services, investment capital and skilled labor following the liberalization.
These will include tariff reductions and streamlining of certain administrative procedures.
Many industries will face a number of challenges and will also gain a number of opportunities once the AEC commences. It is essential Thai businesses within these industries prepare themselves ahead of time to meet the challenges and opportunities of the Asean Economic Community (AEC). Along with its tourism industry, Thailand’s property development industry is another that could well see challenges and opportunities in 2015, and Phuketindex.com have been lucky enough to speak to one of the leading players in Thailand’s property development industries, Mr. Songkran Issara, about Thailand’s property development industry come 2015. Khun Songkran is Managing Director of Charn Issara group, who have long been an initiator and a leader of many property developments for more than three decades, and have recently won the Best Developer Award at the 2012 Thailand Property Awards.
1. How do you think the property development business will change in Thailand once it joins the AEC in 2015?
I think it will be a lot more positive for the property business here. Once the AEC starts, the market will be so much bigger, growing from only 50 million people to 600 million people. But this will not only benefi t Thai businesses, it will benefit businesses of each of the 10 member countries. However, some countries will benefi t more from some industries than others, whilst some will lose. For Thailand as a whole, the GDP is expected to grow by around 2%, the second best increase after Singapore. When we talk about this growth, you have to understand that in terms of GDP; even .10% of growth is a lot. So moving from 4% to 6% is a massive and significant jump.
Thailand is a strong country when it comes to tourism, communications & automobile industries, so these areas will benefit even more from the AEC than other industries here such as property development.
2. Do you think it will be easy for Thai property developers to expand into other countries within the AEC?
It is my belief that this will not be easy, not just for Thai businesses to go to other countries, but for all countries to move into another country. There is a lot of local knowledge required when it comes to laws, culture and marketing. I also believe there is a lot of cross border risks, for example politics and more importantly currency. You may start a project with the belief you will make money, but should the currency from the country in which you’re doing business change, which is very highly possible nowadays; you could end up losing a lot of money.
3. How do think Thai property developments compare to those in other countries within the AEC?
In my opinion, we are the strongest country. The biggest property developers who remain in business in Thailand today have, along with the country, been through many tough economical challenges and survived. Many people would believe Singapore is the strongest, however, that’s because in Singapore there are a lot less big players in the property
development industry. The market which they are in is an oligopoly, meaning their market is dominated by a small number of sellers. Because there are few sellers, each oligopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are infl uenced by, the decisions of other firms. Their property development companies may have a lot of money, but this does not necessarily mean they are strong. In Thailand, there are so many more competitors in the industry so the competition is really strong. Here, it really is a case of only the strongest can survive, irrelevant of how much money they have.
4. What do property developers need to do to make sure they are ready for AEC 2015?
First of all, they must understand what joining the AEC means, not only for Thailand but for their business. There are many here in Thailand that still doesn’t know what joining the AEC means and what the implications of joining are. They need to understand the benefi ts and downfalls they will face. In the other member countries they have been preparing themselves for a very long time, but here they are just starting to do it. It is also essential the companies fully update themselves on local laws; if they are up to scratch then I’m sure they have nothing to fear from the overseas competitors.
5. How prepared are you for 2015, and what do you still need to do to be prepared?
As for us, we are very prepared. We started a project earlier this year in Cha Am which consists of 300 units spread over 20,000sqm. They have already sold out so we are ready to start a new phase in the next couple of months. We are also involved in a new hotel business in the area too.
We are also building a new project in Bangkok, along with a project in the Koh Yai area.
6. What do you think the future holds for Phuket come 2015?
I believe we need to have a strong leader and also to be run as a special economic zone. If we do not become a special economic zone, we may not get the required amount of budget to keep up with our annual growth. Phuket makes so much money for Thailand and gets so little in return. Unfortunately, the government only takes into account the number of registered people living on the island when it comes to budget, they don’t take into account the large number of people who pass through here as unregistered, and this really needs to change.
Businesses are doing all they can to bring them up to scratch with the AEC, but they are doing it off their own backs with little assistance from the government. There are certain issues which businesses cannot tackle, only the government can. Not until the government get’s more involved can these issues change. I am happy to outline for you what I feel needs to change to bring us in line with other member countries.
Security needs to be brought to an international level, not only for local people, but also for the millions of tourists who pass through here each and every year. This includes increasing police numbers, improving CCTV coverage etc.
I also feel a lot needs to be improved with regards to the cleanness of the island. It’s not nice to drive around the island and see piles of rubbish dumped at the roadside. Imagine what a sight that is for the tourists that come here, and it’s something which can be improved so simply. In addition to this, it will also help the environment in which we all live, something which a number of people are trying to work on, but without government input it will improve very slowly.
We are a world class tourist destination, which boasts of having world class facilities and an International airport. You don’t have to travel that far away from Thailand to realise that much of Phuket’s infrastructure is in no way world class. The international airport, which at least they are starting to work on, may be named as Phuket International Airport, but it is no way up to international standards. The terminals are terrible, there are not enough runways, and the one there is, is barely long enough, and I don’t want to mention too much about the queues at immigration, as I believe your readers will already be fully aware of these. The roads around the majority of the island are in a terrible state of repair, or have been patched up so many times they are like driving on a dirt track. In additional to this, what happened to the Conference Center that was talked about so much not so long ago? Many people think we have enough marinas already, but I am of a different opinion, these people with boats are big spenders and bring so much money to the island, why can’t we accommodate for more of them? Unfortunately, there have been so many things talked about, such as the monorail and conference center, which are all great ideas but nothing ever materialises.
Finally, and this goes back to property, it’s time that land leasing laws were updated. We cannot continue with the 30 year leasing rules and this applies to foreigners and Thais. In my opinion, if the law was changed to make the leases 50 or 70 years everybody would be a lot better off. Now I’ve got that off of my chest, at the end of the day, not only businesses here in Thailand, but also the Thai Government needs to go outside of Thailand and actually see what competition they have when it comes to the AEC. Nobody can tell a business how to prepare for the AEC, the business has to see for themselves, and it is down to them to learn about what they are likely to face in 2015. If you don’t go outside of
Thailand, how can you compare your business to a business the same as yours which is in Burma or Bali.
I have just returned from Burma and what I have found from there I now have to apply to my business here.