Thailand’s economy has historically been a significant contributor to the ASEAN Gross Domestic Product (GDP), being the second largest economy in Southeast Asia after Indonesia, and the 8th largest in Asia as a whole. Currently a middle-income nation, Thailand is showing signs of becoming a more stable, inclusive and sustainable country, which the government hopes will lead to it becoming a high-income nation within five years.
- The Status of the Thai Economy
Thailand is an export-oriented economy with exports accounting for around 65 percent of the GDP. The country mainly exports manufactured goods (86 percent of total shipments with a value of more than 250 billion USD) with electronics, vehicles, machinery and equipment, processed food, agricultural and petrochemical products. Agriculture (e.g. rice, rubber) and Agro manufacturing products, accounted for about 19% of total shipments in 2018.
Thailand has made remarkable progress in social and economic development, moving from a low-income country to an upper-income country in less than a generation. Thailand’s long-term economic goals are laid out in the country’s 20-Year National Strategy (2017-2036) for attaining developed country status.
According to the plan, the country will seek to achieve this through broad reforms including addressing economic stability, human capital constraints, equal access to economic opportunities, environmental sustainability, competitiveness and effective governance.
Attracting foreign investment, developing infrastructure and training a more skilled workforce are some of the hurdles that Thailand faces in developing its economy, the end goal being Thailand 4.0. It’s a new initiative introduced by the government to transform the country to an innovation-driven economy.
The sustained pace and quality reforms, as well as sound implementation, will be crucial for translating the reform effort into the desired economic outcomes.
- Integration of Thailand 4.0
Thailand 4.0 is an economic model that aims to unlock the country from several economic challenges resulting from past economic development models which place emphasis on agriculture, light industry and advanced industry.
The concrete steps to be taken so far for this initiative, include the fast-tracking and digitalization of work permits (SMART Visa Program), pushing through key investment projects, and developing infrastructure around key areas. Perhaps the most ambitious of these infrastructure projects include Eastern Economic Corridor (EEC), in which three provinces, Chachoengsao, Chonburi and Rayong, have been included in a pilot project for the economic development of Thailand’s Eastern Seaboard.
The ten targeted industries for the EEC are mostly new high-tech and add-value industries such as automobiles (5.8 percent of Thailand’s GDP), smart electronics (24 percent of all national export), wellness tourism, agriculture and biotechnology (8.4 percent of the GDP), food, robotics for industry, logistic and aviation, biofuels and biochemical, digital and medical services.
Eastern region is Thailand’s industrial center, and the government is hoping to support it by improving the public utilities, logistic and transportation, so that it can become a major metropolitan hub of industry, as well as a tourist attraction.
Thailand sees this region as a “strategic gateway” to Asia, given the number of airports, sea ports and potential rail connection with other Thai cities and ASEAN countries. Thailand geographical positioning in Asia and the designated 900bn THB investment puts it in a strong position to have many positive effects on the Thai economy, and on the real estate sector in particular.
- How the real estate sector will benefit from this plan?
Of the major investment projects and changes contained within the EEC plan, the real estate industry in Thailand can benefit from following:
- The Eastern Economic Corridor Act provides incentives and benefits to Thai and non-Thai business operators operating in the Special Economic Promotion Zone (“SEPZ”) in Chonburi, Rayong and Chachoengsao. Approved last year (February 2018), it reduces the restrictions on foreign investment via corporate income tax and personal income tax cuts for investors in the EEC, increasing the maximum land lease period to 50 years, and allowing a free flow of foreign currencies in this area. The EECA also allows foreigners to own a land in the SEPZ for business operation or own a condominium for residential purposes.
- Foreign experts in key fields will be eligible for tax exemptions and more freedom in the job roles they can take on, with fast-track visas and a plan to allow full ownership in EEC land to attract more foreign direct investment in the property sector.
- The High-Speed Eastern Rail (The High-Speed Rail Linked 3 Airport Project) consists of five lines, being laid outwards from Bangkok, and trains reaching a maximum speed of 250km/h. The first of three phases of construction has begun, with the initial development focused on links to U-Tapao airport, Nakhon Ratchasima in the north-east of the country, and the seaside town of Hua Hin.
New transport links are essential in developing a regions attractiveness to residents and investors, and the new rail links connecting the three provinces to Bangkok and other major ASEAN cities hopes to attract this investment.
Land prices in the three provinces mentioned have already doubled over the past five years, fueled by strong demand for sites of industrial, commercial and residential projects. Up to half of the property sales in this area came from people moving to the area to take up work in the industrial estates, while local buyers make up the rest.
- Major Infrastructure Projects in Bangkok
Bangkok is at the centre of South East Asia, and one of the fastest growing cities in the region, so it is rapidly expanding outwards and upwards.
In the last 20 years, the landscape of Bangkok has changed drastically. This already immense metropolis continues to expand and the government continues to invest in the public infrastructure. In recent times, a series of new transit systems have been developed which has greatly improved the transportation system within Bangkok.
In the next 5-10 years, the government looks to build and develop a whole new range of transport lines throughout the city. The government has listed a total of eleven new transit lines spanning across Bangkok. This new network will stretch for a combined 480 kilometres (128 new stations) and will bring a host of new connections with in the city limits. The planned construction is due to progress until 2024.
As plans are drawn and work commences, we can already see changes taking effect in the Bangkok property market. New BTS (Skytrain which transports over 750 000 passengers every day) lines extensions have already had major impacts on Bangkok’s real estate market. Residential and commercial properties both benefit from this project. More people can travel in and out of the city which allows these residential areas to develop. Also, the new BTS line plans are for better connectivity within the city. It will give people more mobility while in the city center, which will benefit the commercial businesses there.
The MRT is the underground mass transit system of Bangkok. It’s also getting a significant overhaul in development thanks to the growth of the city. The central line of the MRT is the Blue Line, which transports over 360,000 passengers daily. With expectations of having more people going in and out of the city, the development company are adding a line extension from Hua Lamphong – Tha Phra – Lak Song, and part of it is expected to open in September 2019, with the full extension open by April 2020.
By 2025, Bangkok will have more mass transit lines than London, which is quite impressive considering that it took London almost a century to build up its train network to what it is today. Thailand will have done so in around a third of the time.