AEC has a Positive Impact on Investment in Thailand.

By

Karis Katekovit
(Cliff) G.1109

Introduction

AEC (ASEAN Economic Community) is a community where the region of SEAs

(South East Asia) economic integrates as one whole. Its a community where its envisioned

as a single market, production base, a highly competitive region, and fully integrated into the

global economy. AEC allows a free flow of goods, services, investments, capital, and skilled

labor in ASEAN (About AEC, 2017). Those are the main factors that can expand

Thailands economy. AEC has amplified Thailands chances of foreign investment, opening

more regional cooperation, trading, and etc. It also has reduced the manufacturing costs

because of cheap supplies investment. Tourism has also been a part of Thailands economic

growth as well as transportation goods. AEC is important to everyone because it is another

economic community that will influence on the economic affecting all individuals around the

world. Due to all of the factors said above, AEC has a positive impact on investment in

Thailand.

The Manufacturing Cost

AEC has a Positive Impact on Investment in Thailand. Karis Katekovit (Cliff) G.1109

Since Thailand has entered AEC, the benefits of it had allowed trading and the

production cost to reduce significantly; a decent objective for manufacturers. This vast

economic community allows members to exchange goods and supplies at a cheap price. This

influences the manufactures to develop potentially, and more production. Therefore, it is an

interesting option for investors to make an investment. According to the data from an online

article, Unlocking ASEANs manufacturing potential. The implemented free-trade system in

Southeast Asia is resulting in interdependency, integration of investment, impacting

financially, and economic management, by making free trade and non-tariff barriers. This

means that goods produced by ASEAN countries will be imported with tax-free to each

ASEAN member countries for most of the product (O'Brien, 2015). Also, a journal about

ASEAN Economic Community: A General Equilibrium Analysis has said that, the trade cost is

about 5 percent of the value of the trade. Also, other studies of trade facilitation have shown

that 10 percent savings of transaction cost will rise the trade by about 6 percent; a higher

approximation. This is a substantial range of price. The reduction in trade cost is modeled

using an iceberg approach an economic model of transportation cost, means that the cost

of transporting a good with a portion of the transported good (Peter A. Petri, 2012). By

reducing the transaction cost can reduce manufacturing cost. This is one way how AEC has

reduced the manufacturing cost and has helped in many countries (Hartung, 2015). Therefore,

the development of manufactures will indeed have positive impacts on investing in Thailand.

Transportation

The country that is roughly at the center of South East Asia (SEA) is Thailand. This

country benefits from being in the center of ASEAN. Its geological position is approximately

in the middle, which makes an advantage in many ways. One of them is transportation, which

is currently growing and an interesting subject for foreigners to invest in. A data from The

Board of Investment of Thailand (BOI) says that, there are as many as 30 Thai provinces

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AEC has a Positive Impact on Investment in Thailand. Karis Katekovit (Cliff) G.1109

physically connected with Cambodia, Laos, Myanmar, and Malaysia. It is linked with all

kinds of transportation kinds, such as, roads, waterways, and air routes. By having 4

neighbors connected to Thailand and also positioned in the middle of ASEAN, this makes

Thailand transportation industry benefit from the geography that Thailand has (Logistics,

n.d.). According to an online article Thailand: Transportation investment by Oxford Business

group (2013), Thailand is located in the middle of South East Asia, a region that has the

potential to have a strong economic growth and had recovered from many economic crises

noticeably quicker than European and North America countries. Foreign investors are

expecting the upcoming high-speed railway project. Chinese officials are very interested in

the rail links to Chiang Mai and Nong Khai, as they will soon connect to the Chinese network

route. If this large scheme successes with Thailand in the center of ASEAN. There would be a

better flow of capital, and improving Thailands economic drastically. By being in such

advantageous position in South East Asia, Thailand is currently planning to use the benefit to

the most of it. This is an interesting subject to invest because; transportation has always been

one of the factors that make economics flow. Thus, it will have positive impacts on Thailand

by it being a part of AEC.

The Tourism aspect

Tourism industry in Thailand is strong, and will benefit from AEC. Thailand is very

famous for its gorgeous and lively tourism industry. When AEC opens, Thailand will receive

incomes from many ASEAN countries, benefiting the tourism industry. Thus, this will lead to

more government support such as public transportation, better facilities, environmental care,

and etc. According to the data from PR Newswire about Thailand Invigorates Its Investment

in Tourism (2013). In the year of 2011, Thailand experienced a massive flood that made

Thailands economy in a devastated. However, the tourism industry is one of the most

resilient industries that came back from a terrible disaster. In 2011, the tourism industry has

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AEC has a Positive Impact on Investment in Thailand. Karis Katekovit (Cliff) G.1109

earned above 23 billion USD, which was 25.4 billion USD according to Thailand Ministry of

Tourism and Sports. In 2012, tourist has increased rom 19,230,470 in 2011 to 22,303,065 in

2012. Therefore, this explains that government supports tourism industry with great

consideration, because with such terrible disaster that happened in 2011, Thailand managed to

make the tourism industry to run normally again in few month, even an increase amount of

tourist in the next year. This makes the tourism industry in Thailand to develop with great

potential, which makes a good option for foreigners to invest. With AECs help, tourism will

be able to expand more freely in the future. Based on a data from The Nations about

government supports for tourism in Thailand. Thai government supports tourism and plans to

increase the marketing. The government also encourages cross-border tourism with

Cambodia and Myanmar, and pushing marine and cruise tourism by linking Thailand with

Philippines (Sritama, 2016). By having a support from the government, tourism industry can

develop further more. Even, AEC benefits the border crossing into ASEAN countries, which

will make tourism businesses and government support grow. All of the factors said above,

AEC had increased the flow of foreigners entering Thailand, which makes this industry to

develop and a good alternative. Also, knowing that the government is willing to fully support

Thailands tourism industry, thus AEC increases investment.

Conclusion

In summary, The Economic community in South East Asia has positive impacts on

investments in Thailand. Many improvements and supports by the government have occurred

since Thailands entrance of AEC. Firstly, it had benefited the manufacturing costs, by the

zero tariff policy from the ASEAN free trade agreement, which helps reduce the cost of

supplies. Secondly, transportation becomes important because Thailand is geologically

located in the center of ASEAN. A data from The Board of Investment of Thailand informed

that governments are now improving and developing the high-speed railway project. Lastly,

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AEC has a Positive Impact on Investment in Thailand. Karis Katekovit (Cliff) G.1109

since Thailand had entered AEC, the tourism industry had grown significantly. It is also

known that Thailand is sited where there are the most neighboring countries in ASEAN,

which the amount of cross-border tourism had increased, and also supports by the

governments were provided. These are the factors that can have a positive impact on

investment in Thailand. And since AEC is mostly about economics and it is crucial to know

about AEC because it affect every individuals in Thailand. When the economy is strong then

the government can improve on many standard of living such as, medical care, many

facilities, education, military, and etc. Therefore, affecting the citizens of Thailand.

References

About AEC. (2017). Retrieved March 14, 2017 from

http://investasean.asean.org/index.php/page/view/asean-economic-

community/view/670/newsid/755/about-aec.html

Hartung, R. (2015). The ASEAN Economic Community: a new low- cost production

powerhouse. Retrieved February 10, 2017 from https://www.gtnews.com/articles/the-

asean-economic-community-a-new-low-cost-production-powerhouse/

Logistics (n.d.). Retrieved February 4, 2017 from BOI:

http://www.boi.go.th/tir/issue/201410_24_10/42.htm

O'Brien, R. (2015). Unlocking ASEANs manufacturing potential. Retrieved February 7, 2017

from Future Ready Singapore: https://www.futurereadysingapore.com/2015/special-

report-unlocking-aseans-manufacturing-potential.html

Peter A. Petri, M. G. (2012). ASEAN Economic Community: A General Equilibrium Analysis.

Vol.26, Issue 2,pp.10

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AEC has a Positive Impact on Investment in Thailand. Karis Katekovit (Cliff) G.1109

Sritama, S. (2016). Million foreign tourists expected during Chinese New Year. Retrieved

February 19, 2017 from The Nation:

http://www.nationmultimedia.com/news/business/EconomyAndTourism/30277908

Thailand Invigorates Its Investment in Tourism. (2013). Retrieved February 18, 2017 from

http://www.prnewswire.com/news-releases/thailand-invigorates-its-investment-in-

tourism-201384951.html

Thailand: Transportation investment. (2013). Retrieved February 6, 2017 from

http://www.oxfordbusinessgroup.com/news/thailand-transportation-investment