The 2015 economic integration of the ASEAN Community and the recent aftermath of the APEC Summit are bringing forth renewed efforts for infrastructure projects to stimulate export trade. Of particular interest are Thailand’s efforts to position itself as a logistics hub for the Southeast Asia region. In September, Thailand’s parliament approved a bill to borrow US$65bn to finance a seven year infrastructure project. The centrepiece of the plan is a network of high-speed railway lines to connect the country’s four main regions with Bangkok.
Other projects in Thailand include construction of four-lane highways leading to each of the country’s nine largest border crossings. One of those highways will lead to the Dawei industrial zone, which is under construction in Myanmar, where a Thai construction firm is building a deep-sea port for US$8bn. Thailand also plans to expand existing one-track train lines to two, so that goods can travel in two directions at once, in addition to extending some lines to the country’s borders with neighbours such as Laos.
According to Credit Suisse, these projects are important because of the country’s growing trade with neighbouring ASEAN members such as Cambodia, Laos, Myanmar and Vietnam. In 2012, combined, these countries made up almost 8% of Thailand’s exports, up from almost 4% five years ago. This is in comparison to the European Union which makes up 10% of Thailand’s exports.
It is hoped that all of the infrastructure projects will help to reduce logistics costs. Currently, it is estimated that Thailand’s logistics costs are about 15.2%, higher than neighbouring Malaysia’s which are 13% and the US’ logistics cost of 8%. The planned rail improvements are expected to reduce this cost by 2% by shifting cargo from road to rail.
These efforts will bode well for Thailand’s attempts to be a major Southeast Asian hub. The country is currently the 14th largest in automobile production, second in the production of hard disk drives and first in the production of natural and synthetic rubber.
Logistics and transport providers are also positioning themselves within Thailand. For example, in July, DHL Express opened its 40th DHL Service Point located at Soi Thonglor in Central Bangkok. This fully automated facility was the second service point opened by DHL Express Thailand in Bangkok in the last two months. Also this year, FedEx Trade Networks announced the opening of its first office in the country.
Yusen Logistics has been investing in the country as well. In August, the company announced that it had established its third warehouse at the Yusen Laem Chabang Logistics Center, at Laem Chabang in Thailand. As a result, the company’s total warehousing space in Thailand exceeds 200,000 sq m. Earlier this year, Yusen Logistics also announced a new Less than Container Load (LCL) service from Thailand to Los Angeles, US.
While Thailand invests in its infrastructure, neighbouring countries will need to do so as well in order to provide a complete and seamless network for freight movement across the region. For countries such as Laos, Cambodia, Vietnam and Myanmar, much work is still needed. The largest country in the region, Indonesia, is also undergoing similar infrastructure improvements much like Thailand and is rivalling the country as a manufacturing location as well as a potential major logistics hub for Southeast Asia.