Thailand’s logistics performance significantly improved in 2018, following massive investment in transport infrastructure and relevant legal reforms, says a new report.
The pick up is timely as e-commerce and automotive logistics are increasingly fuelling substantial growth in the country alongside existing manufacturing like computer hard-drives.
Thailand now ranks in 32nd place in 2018 from 45th in 2016, second only to Singapore in ASEAN, overtaking Malaysia, and was seventh in Asia, according to the World Bank’s Logistics Performance Index 2018.
Helping push it up in the rankings was substantial investment in transport infrastructure under the 12th National Economic and Social Development Plan, according to a new research report by ResearchAndMarkets.com.
Under its economic plan, the Thai government aims to cut the country’s logistics costs to 12 per cent of GDP by 2021 from 14 per cent in 2016 when the 11th Plan (2012-16) ended.
The 12th Plan (2017-2021) will call not only for transport infrastructure development in major cities and border towns, but also improved connectivity with neighboring countries, according to the report titled, ‘Thailand Freight and Logistics Market-Growth, Trends, and Forecast (2019 – 2024)’.
The report notes Thailand’s robust growth rate of a few years ago has since slowed to the 3-4 per cent range, neighbours like Vietnam have seen growth rates close to 7.0 per cent.
But the military-led government is aiming to boost growth through various programmes including Thailand 4.0, which envisions a new economic model for the country. The aim is to push it to the forefront of the global digital economy.
Impact of e-commerce
As incomes in the Association of Southeast Asian Nations (ASEAN) countries steadily rise, fueling a growing middle class, demand for consumer goods is escalating.
With what the report describes as an “evolved e-commerce ecosystem”, much of this nascent middle class demand is fueling e-commerce purchasing.
Thailand is the second-largest economy of ASEAN and has one of the region’s highest number of Internet users, at an estimated 57 million. This expanding Internet user base has made Thailand an ideal growth environment for e-commerce businesses, the report notes.
The continued expansion of e-commerce business has created demand for logistics, which in-turn has brought about significant changes in the supply chain and logistics operations in Thailand.
The report notes that many courier companies have launched cost-effective and high-quality logistics services in the country and brought domestic end-to-end delivery to the market.
The establishment of central warehouses, along with smaller drop off and pickup points has also grown across the nation in response to this demand.
Central Group, Aden, DHL Express Thailand, Kerry Express, Lazada, Pomelo, and Shopee, are some of the major e-commerce and logistics companies currently active in the country, according to the ResearchAndMarkets report.
The growth can be seen by rising air freight handled at Thai airports – with the Airports of Thailand (AOT) seeing more than 1.5 million tonnes of freight passing through its airports in 2017.
The automotive advantage
Thailand – known as the ‘Detroit of Southeast Asia’ – is also a leading automotive production base in the ASEAN region, where automotive demand is growing rapidly. The report notes that over the last 50 years, the country has developed from an assembler of auto parts and components into a top automotive manufacturing and export hub.
With shipments bound for around 100 countries, Thailand is the 13th-largest automotive parts exporter and the sixth-largest commercial vehicle manufacturer in the world, and the largest in the ASEAN region.
By 2020, Thailand aims to manufacture over 3.5 million units of vehicles to become one of the top nations in the global automotive market.
The country has a presence of virtually all of the world’s leading automakers, assemblers, and component manufacturers including: Toyota, Isuzu, Honda, Mitsubishi, Nissan, and BMW, which all together account for a lion’s share of the approximately two million vehicles produced in the country each year.
“The presence of multiple companies denotes the increasing opportunity for the management of their supply chains, and hence, logistics service providers are benefiting from the country’s prosperous automotive industry,” the report stats. As such automotive logistics has rapidly become one of the most important sectors in Thailand and one that continues to grow to this day.
The logistics market in Thailand is fragmented in nature, the report notes, with a mix of global and local players. Citing industry sources, the report points to DHL as the market leader in the Thai logistics market, with a foothold in air and sea freight, alongside the company’s substantial 3PL expertise.
Other global players, such as CEVA, DB Schenker, Nippon Express, Expeditors, Yusen, and FedEx, have a significant presence in the market in specific segments, according to the report. Additionally, Japanese logistics companies are planning to expand their services in the market, due to the rising trade and industrial activities.
The Thai manufacturing industry is dominated by global players and these global players tend to prefer global counterparts for their logistics operations. For instance, Japanese and Korean manufacturers in Thailand bring their domestic logistics partners or prefer to tie up with service providers of the same origin.
With the evolution of Asian Economic Community (AEC), Thailand’s position as a transportation hub for the Greater Mekong Sub-region (GMS) has been strengthened. This initiative has increased the country’s opportunities for cross-border trade and import-export shipments. The most dominant mode of transportation is road transportation in this case.
The report notes: “Fierce competition is expected to occur, as professional multinational logistics companies owned by foreigners are expected to use their competitive advantage to gain significant market shares and compete with local logistics providers.
“To withstand the competition, domestic logistics firms have to identify the risks for their services among the neighboring countries and find avenues to manage the risks.”
For more information about this report visit ResearchAndMarkets.com.