The Thai Regional Economic Sentiment Index (RSI) in May pointed to rising confidence in economy on a six-month outlook nationwide.

The rise in sentiment was most marked in the Central, Eastern and Northern parts of the country, said Soraphol Tulayasathien, deputy spokesman for the Finance Ministry, yesterday.

For the Central region, the RSI index was 91.4, reflecting businesses’ strong optimism on the outlook for the economy, driven by rising exports and an expansion in the manufacturing sector, Soraphol said.

Auto and part manufacturers based in Ayutthaya province had increased their production to meet rising global demand, he said. The province also benefited from an increase in the number of tourists drawn by the smash-hit soap opera “Love Destiny”.

For the Eastern region, the RSI index was at 89.2, with respondents citing expanding investment, including in industrial production. The region has been blessed as the beneficiary of legislation for the Eastern Economic Corridor, which took effect recently.

Investment also rose in the provinces neighbouring the EEC provinces of Rayong, Chon Buri and Chachoengsao. Soraphol cited the increased investment in hotels in Nakhon Nayok and in factories in Sa Kaew.

For the Northern provinces, the staging of national sporting events in Chiang Rai had contributed to the rising of confidence in that region. The RSI index was at 86.7, Soraphol said. Demand for industrial products in the domestic and export markets had also expanded production activities, he said. Another positive was the government’s implementation of a special economic zone in Tak province that boosted the regional economy, he added.

An index above 50 suggests more confidence in the future than at present, while a reading below that mark indicates a lack of confidence in the future.

Sustained increases in exports also benefitted the Northeast, with a reading of 83.2 in the confidence index. Rising prices for maize, sugarcane and cassava root contributed to the expansion of the region’s economy.

Another boost comes from newly built factories in Ubon Ratchathani, Kalasin and Surin.

An increase in the number of foreign tourists contributed to rising confidence in the Western parts of the country. The RSI index for that region was 83.1. More tourists visited Ratchaburi, Suphanburi and Phetchaburi. Retail sales in the region also shows signs of rising.

The South also shared in the benefits of the increase in tourism. More visitors went to new tourist attractions in Pattalung and many of them continued to visit the tourism mainstays of Phuket and Krabi provinces. The index was 69.1.

Soraphol said that other economic indicators pointed to continued growth in April, after gross domestic product expanded 4.8 per cent between January and March.

On the consumption side, car sales rose 17.2 per cent year on year, extending gains to 15 consecutive months. The collection of value-added tax increased 7 per cent. And collection of VAT from imported consumer goods saw a rise an impressive rise of 12 per cent from negative growth over a number of months previously. Imports of consumer goods rose 17.6 per cent.

On the investment side, sales of commercial cars rose 30.6 per cent and imports of capital goods, 3.4 per cent. Exports in US dollar terms rose 12.3 per cent, extending a winning streak to 14 straight months. Tourist arrivals came in at 3.09 million, up 9.4 per cent year on year in April.

Meanwhile, Supant Mongkolsuthree, chairman of the Federation of Thai Industries, said that the political crisis in Italy – with the fears for an impact on Europe – was not likely to affect Thailand’s exports. He believed that the European Union would rescue Italy if its economy suffered badly as a result of the political gridlock.

Supant said the baht’s weakening to around Bt32 to the US dollar is good for the export sector. If it strengthens, back to Bt31, this would hurt exports, he said.

Sakda Pongcharoenyong, president of Tris Rating, said that Thai-listed companies possess the financial strength to deal with possible risks, as seen in their earnings results following the Thai economic expansion.

Most of the companies are free of liquidity crunch and cash-flow problems, given their ability to obtain bank borrowings and raise capital through the bond market.

However, the business sector should be well-prepared for higher borrowing costs in light of the uptrend in interest rates amid consistent signs of a global economic recovery, he said.

The United States has gradually raised the Fed funds rate since late 2015 and this year Federal Reserve is expected to hike the rate twice or three times. The Fed has already increased the policy rate once to 1.50-1.75 per cent this year.

After the US rate hike, other countries, particularly emerging economies with rapid expansion, followed suit in an effort to keep foreign capital in their countries instead of moving back to the US.

The policy rates are the benchmark for money-market rates which are regarded as the borrowing costs for the business sector.

As the rise in interest rates continued, bond yields increased in the past two months. The Thai government bond yield has risen 30 basis points on average, prompting investors to slow down their investments and adopt a wait-and-see attitude for the rate to stabilise.

Basically, markets have been making corrections and investors should be on the sideline for one to two months as a number of bond issues will be launched. If demand drops, yields are expected to accelerate to attract investors.

“Increased yields have prompted less demand which have waited to see interest rates to be steady but this could be short term. It does not mean all-time slowdown. Next month, a lot of bond issues will be launched and we have to wait to see how much demand is,” he said.

Although the private sector’s costs will increase in line with trends for interest rates and crude prices, he said, but believing that business operations will not be highly affected as most companies are well-prepared for higher costs.

In the past two to three years, large-sized companies have launched a number of debentures, given their expectations for interest rate upward trend. Increased crude prices have been seen to affect some businesses.

Thai business sector are stronger in terms of capital, resources and human resources to be able to cope with possible business risks and open for business opportunities in light of growing Thai economy, Sakda said.

He expected the Thai economy to expand in the rest of this year, driven by internal and external factors.

“Increased cost may affect businesses by sector. There has not been any concerns for the overall businesses. Only the agriculture have been affected by low prices,” he said.

On another front, Thai bourse have been confronting block trade.

Sutthisit Jamdee, assistant managing director of Kasikorn Securities, block trade volume in Thailand Futures Exchange has increased to Bt50 billion this year from Bt20-Bt30 billion, given entries of foreign securities from Singapore and the US into Thailand.

Now, there are 10 players for block trade services from the previous’s five local players.

More challenges will exist for block trade with TFEX’s new regulations which will allow more stocks for the transactions. According to the previous regulations, block trade could be made in stocks in SET100 only.

Sutthisit said that Kasikorn Securities has focused on risk management and faster transactions for customers. Customers will easily move in and out with brokerage-house safety.

One of the first things you realise when you get there is that while it is a long way away physically, it’s actually a whole world away where it matters – in its culture of innovation.

It’s not just the visual cues like the airport body scanners and automated immigration process or the Uber ride in a Tesla (yes really!) down to my Airbnb accommodation in Palo Alto; you can get that experience all over the world, but the point is that they were all created here. This place is changing the world; this is where you come to see the future being created.

I spent a week with a group of Thai business leaders learning from Stanford University Faculty and industry gurus to understand more about this future world and what we should be doing to survive, let alone thrive, in it.

Several takeaways stand out for me. The first two are the power are customer motivation and market innovation. Where these two ideas meet is where true disruption occurs and where the future is born.

The key point about customer motivation is that power has shifted to the customers, where it should always have been. Until recently customers have been poorly served by many industries; forced to pay for things they don’t want to get something they do want, faced with limited choice and no personalisation. That is all changing very quickly now. It requires a shift in mindset from ‘what can/do we deliver?’ to ‘what should we deliver?’ What does the customer actually value? Customers will pay for what they value but they will not tolerate being taken advantage of anymore.

This power shift to the customers is being enabled by remarkable Market Innovation in the shape of incredible technological innovation and the new business models. To use the obvious examples of Uber, the technology of mobile devices and Google Maps combined with underutilised resources (cars and drivers) to create a new platform business model – a ride service that owns no vehicles and employs no drivers.

Furthermore, it coincided with changing consumer preferences for a sharing economy. This intersection of consumer motivation and market innovation accounts for the extraordinary growth of Uber and other sharing platforms.

Let’s take a look at another story. What will your company do when what you currently sell is available free? Remember when you used to have to pay for Wi-Fi, and when you had to pay to phone your friends or send them a message? The ubiquity of Wi-Fi and the emergence of social apps took billions of dollars of revenue from the telecoms companies and gave it back to the consumer. In its place emerged a whole new industry called Apps and most of these are free too.

What will happen when electricity is free? Almost everything is being commoditised and is becoming virtually, or actually, free. Established businesses need to get creative in finding ways to find value for customers in services around their former core. This brings me to my final big learning point. At the close of the programme we heard from innovation guru Geoffrey Moore on why established companies are so bad at innovation. Companies that are still making money, that are still growing, have a vested interest in the status quo. Executing innovation means moving resources from money-making areas and putting them into an innovation that may lose money for up to two years.

It means the company’s stock price taking a hit and missing performance targets, whilst you go through transformation. Boards and investors don’t like that and it’s hard to see the disruption coming until it’s too late.

On the other hand startups thrive in this environment. They have no established business, just the relentless search to find the fit between their product and the market before they run out of money. This is why startups keep disrupting huge, established industries and businesses. They deliver what customers really value, they leverage platform models with technology, and they are 100 per cent focused on finding product-market fit.

Silicon Valley is inventing a bold new future. It’s one we all want as customers, there’s no stopping it, so we all have to rethink “what” and “how” we deliver to create true value and stay relevant in the future.

ARINYA TALERNGSRI is chief capability officer and managing director at SEAC (formerly APMGroup) Southeast Asia’s leading executive, leadership and innovation capability development centre.

She can be reached at arinya_t@seasiacenter.com or https://www.linkedin.com/in/arinya-talerngsri-53b81aa

For daily updates, visit https://www.facebook.com/seasiacenter

 The agencies have been monitoring the advertising of products and have attracted attention by pulling scores of advertisements on TV and social media networks that they deemed to be inappropriate or were found to have made exaggerated claims about the products.

Now the agencies are extending their watch to include ads on community radio stations across the country.

NBTC commissioner Peerapong Manakit said yesterday that they were also closely examining some TV programmes that feature medical experts reviewing highlighted products and they will be on the lookout for any unfounded claims made in support of such products.

In their joint actions, the NBTC and the FDA have since May 4 removed some 97 inappropriate advertisements from digital, satellite and cable TV networks and social network channels.

Most of the ads were for health supplements and cosmetic products that carried misleading advertising claims.

From May 21 to 25, both organisations jointly suspended three offending ads on each of three digital TV channels, along with ads for 11 products on eight satellite and cable TV channels, and those on 50 Web pages.

The NBTC and FDA recently agreed to work together more closely to shorten response times and enable the faster removal of advertisements that breach broadcasting standards.

Earlier, if the NBTC found an offending advertisement, it would present the content of the ad to a subcommittee on consumer protection. If the subcommittee concluded that the content was illegal, it would forward the content to the FDA for its own examination. The process would typically take between 40 and 60 days before an illegal advertisement was finally removed from a TV or social media channel.

After the recent agreement, the FDA has sent its officials to work in the NBTC centre where media content is monitored. Once they detect an offending advertisement, they will ask the NBTC secretary general to execute an order to suspend the airing of the advertisement and, at the same time, present the case to the NBTC consumer protection subcommittee and then to the NBTC for its own examination.

“We are confident that total Thai rice exports this year will be higher than 10 million tonnes, given exports in the first five months reached 4.21 million tonnes or an increase of 6.2 per cent from the same period last year,” he said.

Thai ranked second in global rice exports in the first five months, following India which exported 4.77 million tonnes during the period, up 4.6 per cent from the same period last year. Vietnam ranked third with export volume of 2.52 million tonnes in the first five months, a rise of 16 per cent from the same period last year.

“There are several indicators for crude prices to change direction from an upward to downward trend,” he said.

Meanwhile, the global political situation and speculations in the futures markets could lead to short-term fluctuations and must be monitored, he said.

PTT may revise its forecast for this year’s crude price from US$55 per barrel to $60-$65 per barrel as it has risen higher than the company’s earlier estimate.

The company is also considering cutting its retail oil prices following drops in Dubai crude price. Every US$1 decrease in Dubai crude price will affect PTT’s retail oil price by Bt0.24 per litre.

Effective on May 26, PTT has reduced its retail prices of both gasoline and diesel by Bt0.50 per litre to reflect the drops in crude price.

Deputy Transport Minister Pailin Chuchottaworn said the ministry has proposed that the plans for the three agencies be submitted to the State Enterprise Policy Commission, adding that he was confident that the plans would gain approval when the commission meets on July 30.

The commission meeting will be chaired by Prime Minister Prayut Chan-o-cha.

He said that THAI’s rehabilitation plan has been carried out in thorough detail and specifies the responsible people to oversee it and clear evaluation criteria through key performance indicators. The company’s goal focuses on reducing the variety of aircraft types, similar to the business plans of low-cost airlines, as a way to reduce maintenance costs and mitigate risks if unused aircraft are sold.

“The main cost reduction for THAI is the focus on the reduction in diversity of the aircraft due to relatively high maintenance costs as a result of diverse spare parts,” Pailin said. “For example, the types of aircraft used had been eight and this number may be lowered to five or six. Therefore, THAI may need to accelerate sales of their unused aircraft.”

If THAI were to ask for approval to purchase more aircraft, the planned purchase must be for existing types of current aircraft and such purchases must be for the replacement of those decommissioned first, he said. “Any future purchases for expansion will be considered by the management,” Pailin said.

THAI must find opportunities for non-core businesses – extending from transport and catering to a maintenance, repair and overhaul centre – to generate income aside from its aviation services, the deputy minister said.

The company’s marketing team has to work proactively to achieve measurable results, Pailin said. THAI’s asset management unit is also required to appraise unused assets and market them for income and cost management.

Cost cuts under way

Parts of THAI’s rehabilitation plan has been implemented. For example, THAI has moved its subsidiaries’ offices into its headquarters to lower management costs and has sold office buildings in the country and overseas. Reportedly, THAI has sold a decommissioned Airbus 340.

Usanee Sangsingkeo, acting president of THAI, said that THAI’s revised rehabilitation plan has focused on strengthening business operations and some of these elements have been executed.

Pailin said that in regard to SRT’s rehabilitation plan, the agency’s goal is to become the largest railway state enterprise in Asean, and this would position Thailand as the centre for a rail system that would be the largest in Asean by 2027,

He said the SRT board is strong and is steering the organisation towards its targets in several areas, including the development of double-track railways and non-core businesses.

In 2027, on expectation of income growth from asset management and more cost management, SRT targets profits of over Bt20 billion. This would cut its net loss to Bt8.8 billion. In 2017, the state enterprise suffered a loss Bt17 billion.

Pailin said that BMTA’s rehabilitation plan will hinge on cost reductions, organisational restructuring and consistent income generation. If the plan gains the commission’s approval, the next step is to procure, through rent and purchase, about 2,700 hybrid-engine public buses to upgrade BMTA’s services.

The Cabinet in a meeting yesterday also gave the green light to a budget for annual expenditure Bt3 trillion in fiscal 2019, up 3.4 per cent – or Bt100 billion – from the previous fiscal year. Annual revenue is projected to reach Bt2.55 trillion, up 4.1 per cent, or Bt100 billion.

Overall, the national budget will face a deficit of Bt450 billion.

The cabinet also approves a budget deficit plan till 2022 in order to drive the country’s economy towards growth of 3.5 per cent and 4.5 per cent a year.

In the same meeting, the Cabinet approved an extension to the timeframe for the disabled and bed-ridden patients to register for benefits until June 30.