THAILAND v/s MALAYSIA

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Group 4 Nikesh Desai (23), Rohit Kumbhar (34), Vinayak 1/22/13 Group No 4 (PGDM- IB Naik (56)

Agenda

History and evolution of the countries Factor Conditions for both countries Current macro economic scenario Risk Analysis Key sectors Opportunities the countries offer Implications for MNEs
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Thailand History & Evolution

1782 - Beginning of the Chakri dynasty under King Rama I, which rules to this day. The country is known as Siam. New capital of Bangkok founded. 1939 - Siam changes its name to Thailand ("Land of the Free"). 1941 - Japanese forces land. After negotiations Thailand allows Japanese to advance towards British-controlled Malay Peninsula, Singapore and Burma. 1945 - End of World War II. Thailand compelled to return territory it had seized from Laos, Cambodia and Malaya. Exiled King Ananda returns. 1946 - King Ananda assassinated. 1947 - Military coup by the wartime, pro-Japanese leader Phibun Songkhram. The military retain power until 1973. 1973 - Student riots in Bangkok bring about the fall of the military 1/22/13 Group No 4 (PGDM- IB 33 government. Free elections are held but the resulting governments

Thailand History & Evolution

1997 - Asian financial crisis: The baht falls sharply against the dollar, leading to bankruptcies and unemployment. The IMF steps in. Chuan Leekpai becomes prime minister. 1998 - Chuan involves the opposition in his government in order to push through economic reforms. 1999 - Economy begins to pick up again. Thai media highlight high cost of drug treatments for Aids and HIV. Thailand begins to put pressure on drugs companies to find ways to make the drugs cheaper. 2001 - Leader Thaksin Shinawatra forms coalition government. 2001 June - Burma-Thailand border crossing, which was closed after clashes between the two countries' troops in February, re-opens after Thaksin visits Burma. 2002 May - Burma closes border with Thailand again after Thai army fires shells into Burma during battle between Burmese army and 1/22/13 Group No 4 (PGDM- IB 44 ethnic Shan rebels. Border reopens in October.

Malaysia History & Evolution

14th century - Conversion of Malays to Islam begins. 1895 - Four Malay states combine to form the Federated Malay States. 1942-45 - Japanese occupation. 1948 - British-ruled Malayan territories unified under Federation of Malaya. 1948-60 - State of emergency to counter local communist insurgency. 1971 - Government introduces minimum quotas for Malays in business, education and the civil service. 1990 - Sarawak communist insurgents sign peace accord with government. 1993 - Sultans lose legal immunity. 1/22/13 Group No 4 (PGDM- IB 55 1997 - Asian financial crisis spells end of decade of impressive

Malaysia History & Evolution

2009 - Malaysia bans recruitment of foreign workers to protect its citizens from unemployment during the economic downturn. 2011 - Police use tear gas and water cannon to disperse thousands of people taking part in Kuala Lumpur rally calling for electoral reform.

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Malaysia Factor Conditions

Physical Infrastructure

Valued at US$4.7bn in 2009 Under the Ninth Malaysia Plan (2006-2010), the state has set aside funds to the tune of MYR220bn (US$60bn) for the infrastructure sector The waterways and shipping lanes that surround Malaysia continue to experience the threat of piracy and terrorism

Labor Force

Malaysia's labor force numbers 12.6mn out of a population of 27.9mn More than half of the workforce is employed in the burgeoning service sector, just over one-third in industry, and around 13% in agriculture 1/22/13 Group No 4 (PGDM- IB Shortage of skilled labor 77

Thailand Factor Conditions

Physical Infrastructure

Thailand has 57,403km of roads, 4,071km of railways and 4,000km of waterways An extensive air transport network that encompasses 28 commercial airports, meaning that all of Thailand's regions are about an hour's flight from Bangkok Thailand's infrastructure is considered to be well developed compared to some of its regional counterparts

Labor Force

The labor force is estimated at 38.8mn, nearly 60% of the total population Unemployment is low at around 1% of the total labor force Shortages of skilled labor in certain sectors, with poor levels of 1/22/13 remaining a disincentive (PGDM- IB Group No 4 for investing in Thailand 88 training

Trade Bloc ASEAN

ASEAN Free Trade Area (AFTA) is a trade bloc agreement by the Association of Southeast Asian Nations supporting local manufacturing in all ASEAN countries which includes both Malaysia and Thailand ASEAN itself is increasingly playing a large role in free trade negotiation on 1/22/13 Group No 4 (PGDM99 behalf of its members IB

Malaysia Macro Economic Outlook

Malaysian economy is in the midst of rebalancing. Deteriorating global economic conditions have become a major drag on manufacturing exports. Meanwhile, increased public spending has helped to boost domestic demand. Economic growth is poised to remain relatively subdued at 3.8% for 2012 before witnessing a mild pickup towards 4.6% in 1/22/13 Group No 4 (PGDM- IB 1010 2013.

Malaysia Macro Economic Outlook

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Thailand Macro Economic Outlook

Thailand 's economy grew by a seasonally adjusted 3.3% quarter-on-quarter (q-o-q) in Q212 The full-year growth will come in at 4.0% in 2012 Recent economic data across the region continue to indicate a sustained slowdown in exports The true extent of trade linkages between China and economies in the South East 1/22/13 Group No 4 (PGDM- IB 1212 Asian region, and the resulting

Thailand Macro Economic Outlook

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Malaysia Risk Analysis

Legal

Malaysian law is founded on English common law. The country has a single-structured court system consisting of superior courts and subordinate courts. Transparency levels are fairly high, and the legal system is seen as relatively supportive of business, furnishing investors with sufficient powers of redress to feel comfortable Cases of disputes involving foreign investors are rare, and the legal system has tended to handle claims amiably

Property Rights

Malaysian law ensures adequate protection of private property The World Bank ranks Malaysia 60th among 183 countries for the ease of registering property, which takes an average of 56 days, and 113th in starting a business, which involves five government-required procedures and takes an average of 17 days

Intellectual Property Rights

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Corruption

Malaysia Risk Analysis

Corruption is a key concern despite substantial efforts from the government to crack down on bribery Malaysia was ranked 60th among 182 countries in Transparency International's Corruption Perceptions Index in 2012

Operational Risk

There is a general threat from terrorism in Malaysia. The British Foreign and Commonwealth Office warns that attacks could be indiscriminate, including in places frequented by expatriates and foreign travellers The overall crime rate in Malaysia is rated as medium by the US Overseas Security Advisory Council.

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Thailand Risk Analysis

Legal

Thailand operates a system of mixed common and civil law, based on European traditions Decisions of foreign courts are not accepted or enforceable in Thai courts

Property Rights

According to the International Property Rights Index (IPRI) 2010, Thailand ranked 59th out of 125 countries surveyed with regard to protection of overall property rights. As regards physical property rights, Thailand ranked 33rd Thailand has a relatively robust system of property rights protection

Intellectual Property Rights

Thailand scored worst on the Intellectual Property Rights 1/22/13 Group No which gave 1616 subcategory of the IPRI survey, 4 (PGDM- IB it a rank of 79 out of the

Thailand Risk Analysis

Corruption

Thailand is the 80th most corrupt country in the world out of 182 surveyed in Transparency International's 2011 Corruption Perception Index Corruption is an occupational hazard for companies operating in Thailand According to some studies of Thailand, a cultural propensity to forgive bribes as a normal part of doing business and to equate cash payments with finders' fees or consultants' charges, coupled with the low salaries of civil servants, encourages officials to accept illegal inducements

Operational Risk

The UK Foreign and Commonwealth Office (FCO) considers that there is a high risk of terrorism in Thailand and the country is ranked number 85 worldwide in the Global Terrorism Indicator index Apart from this risk of terrorism, there also exists a moderate security risk. Petty theft is common in crowded areas such as markets, airports and bus and railway stations

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The spectre of political unrest is very real and sometimes results in

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Malaysia Key Sectors

Oil & Gas

Malaysia has a vibrant oil and gas industry. The national oil company, Petronas, provides about 40% of the federal budget in taxes, dividends and royalties Petronas is also the custodian of oil and gas reserves for Malaysia. Hence, all oil and gas activities are regulated by Petronas. Malaysia encourages foreign oil company participation through production sharing contracts, in which significant amount of oil will be given away to the foreign oil company until it reaches a production milestone Malaysia's oil export revenues and gas export revenues are set to reach US$8.8bn and US$14.0bn by 2016 Malaysia and Thailand has a wedge shaped area 150 km from Kota 1/22/13Bharu, Kelantan andNo 4 (PGDM- IB the shores of Group 260 km from 1818 Songkhla, Thailand which is jointly developed by Petronas

Malaysia Key Sectors

Finance and banking

Finance and Banking sector in Malaysia is regulated by Bank Negara Malaysia. The central bank limits foreign participation through licensing limits The threshold foreign equity ownership has been raised from 49% to 70% and allowed foreign banks to open up new branches and micro-credit facilities

Tourism

Tourism has become Malaysias third largest source of income from foreign exchange. The majority of Malaysia's tourists come from its bordering country, Singapore

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Thailand Key Sectors

Agro-business

Thailand is among the top 5 food exporters in the world. Not only is the country one of the worlds major suppliers of agriculture commodities, it has among the most advanced food processing industries in Southeast Asia Agro-industries which have elected to locate in Thailand have competitive advantage gaining easy access the countrys raw materials, and Thailands infrastructure and transportation networks are also key in timely delivery of products to the market via road, rail, sea and air ports

Tourism

Thailand has long been a well-known travel destination with tourist numbers reaching about 14.5 million in 2007
1/22/13 Group No reputation 2020 Thailand has been gaining a 4 (PGDM- IB for healthcare

Thailand Key Sectors

Healthcare

In 2011, Thailand's pharmaceutical market reached THB130.95bn (US$4.10bn) Annual per capita spending on medicines is calculated to have stood at US$64.3 in 2011, a significant improvement on the 2003 figure of US$22. By 2016 and 2021, the average person in Thailand will spend US$81 and US$113, respectively on pharmaceuticals

Telecommunications

The Thai market supported 77.605mn mobile subscribers at the end of 2011, up by 8.2% from 71.726mn a year earlier. The penetration rate stood at 113.3% at the end of 2011 According to the National Broadcasting and 1/22/13 Group No 4 (PGDM- IB 2121 Telecommunications Commission (NBTC), there were

Malaysia Opportunities

The opportunity for private sector-led growth will improve as the government continues divestment of state shareholdings in order to raise funds to narrow the budget deficit. Rising consumption levels over the coming years will provide new growth avenues in industries such as retail. Malaysia's majority Muslim population 1/22/13 the government's ongoing efforts Group No 4 (PGDM- IB 2222 and

Thailand Opportunities

The Puea Thai Party-led government is likely to maintain populist policies, including the rice price guarantee, large-scale infrastructure projects and welfare subsidies for lower income groups in Thailand. Investment, which has taken a serious knock over the past year owing to falling external and domestic demand, will very likelyGroup No 4 (PGDM- IB resume its recovery 1/22/13 2323

Addressing Risks in Malaysia and Thailand

Before investing

Internal hedging:

Minimization of local equity, Local borrowing, Management contract International integration: Production integration, Marketing integration , International supply sourcing

External hedging:

External hedging: Government insurance, Private insurance, Host government guarantees

After investing

Internal hedging:

Good citizen policy: Prompt response to both the letter and spirit of host government, Contribution to national goals, Contribution to national welfare, Developing a corporate image

Increase in technical contribution 1/22/13 Group No 4 (PGDM- IB

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