Expanding or moving business operations into Southeast Asia requires a deep understanding of the different emerging economies in the region. Navigating the political system, understanding consumer purchasing patterns, recognizing the dark horse that others overlook for investment, and finding the right local business partners are all important factors, as Chris Bruton, Director for Thailand and Indochina at Dataconsult, shared with us during the last official business meeting of the study abroad program.
Of the 10 countries in the Association of Southeast Asian nations, the ASEAN 5 (Thailand, Cambodia, Laos, Myanmar, Vietnam) currently account for 1/4 of its GDP and roughly 39% of ASEAN’s population. Having seen first hand the rapid growth taking place in Ho Chi Minh City and Siem Reap, and the consumerism rapidly spreading throughout their respective countries, this put in perspective for me the great opportunity present in these developing economies.
Thailand leads, growth and infrastructure-wise, its sister countries in the ASEAN 5. It is considered a manufacturing center, especially for consumer goods, and an air transportation hub (Suvarnabhumi Airport handled 48 million passengers last year, just surpassing Singapore Changi Airport). The flood, which tragically hit the country in October, actually created a promising infrastructure investment opportunity as $50B in damages presents a chance to build new state-of-the-art plants and facilities. In fact, Habitat for Humanity has been involved in the aid of post-flood rebuilding.
Doing business in Thailand is relatively easy for Americans. The Treaty of Amity and Economic Relations from 1966 allows U.S. and Thai companies’ equal economic access to one another’s markets. Thailand ranked 17th in the World Bank for ease of doing business but lacks adequate education programs to compete on a global scale (ranked 62 in the World Economic Forum, still significantly higher than the ASEAN 4). Thailand also ranks relatively low in political stability because, here, the caste system is still very much in practice. This means that everyone has a distinct place in society – Brahmin social elite, merchant class, peasant & worker class – and it is difficult, if not nearly impossible, to escape their rank. Improved education is the key both to overcoming these challenges and to long-term democracy. As the boom in internet access spreads through Thailand and the ASEAN 4, knowledge spreads and dissatisfaction grows with current systems, as we’ve recently seen in other regions of the world.
After travelling to 3 of the 5 ASEAN nations, it does appears that Thailand is more “with it” than its neighbors. After learning from Chris for an hour, I would now attribute that to a recent history devoid of war, being more capital-intensive (rather than labor intensive), and possessing the factors which resulted in a higher WEF competitiveness ranking.
The other 4 nations in the ASEAN 5 rank low in ease of doing business (Vietnam ranks 98, Cambodia ranks 138, Laos ranks 165), competitiveness (Vietnam ranks 65, Cambodia ranks 97), and, as we had learned only days before, the education system in Vietnam and Cambodia are quite poor (Vietnam ranks 103, Cambodia ranks 120). Communist authoritarianism in Laos and Vietnam and endemic corruption in the region create substantial challenges for any business to run successfully. As we saw with businesses like Intel, helping the governments with policy formulation and follow through is necessary – these nations have poor records of carrying out newly created policies. My classmates and I learned at Fulbright that, in the case of Vietnam, reform is needed within the banking system as bank insolvency is one of the largest causes of the recent inflation of the dong.
Mr. Bruton mentioned that Myanmar is a dark horse in the region, showing a lot of potential. Largely ignored because of its relatively ”closed off” history to the rest of the world, it appears to be in a turning point politically. The country has a vast energy, mineral, and agricultural resource base, but like its neighbors, has huge challenges in infrastructure, bureaucracy, financing and labor.
During this incredible study abroad program, Dr. Shultz provided us a total immersion in the local customs, a unique exposure to and perspective of international culture, and lessons of endlessly fantastic opportunity in a truly beautiful part of the world. I am forever grateful to him for the countless lessons he has bestowed upon me.