Published: 10/02/2011 at 12:00 AM
- Newspaper section: Business
Thai companies should be prepared for escalating risks globally such as energy price fluctuations, internal and cross-border conflicts, and foreign exchange volatility, say business leaders.
Unequal wealth distribution has increasingly become a cause of conflicts, as the protests in Tunisia and Egypt attest, said Tevin Vongvanich, chief financial officer of PTT Plc.
Meanwhile, cross-border conflicts caused by political and economic differences such as the current situation between Thailand and Cambodia, as well as global monetary imbalances pose challenges for Thai companies managing their businesses in the future, he said.
"These kinds of situations, once they escalate, normally cause uncertainty for companies making overseas investments," said Mr Tevin at a Thai Management Association conference titled "TMA Day 2011: CEO Perspectives on Future Challenges".
Growing consumption, climate change and a scarcity of resources are threats for energy businesses because they will drive costs higher and affect the ability to secure supplies globally, he said.
"Applying international monetary policies and establishing boundary (territorial) agreements are solutions that could solve these problems," he added.
Dusit Nontanakorn, chairman of the Thai Chamber of Commerce, warned that Thailand would lose out to neighbouring countries when the Asean Economic Community (AEC) is established in 2015 unless major improvements are made in infrastructure, education and the tax system.
"Thailand's internet and logistics networks are less developed than our neighbours, while the English skills of new graduates are very poor," he said.
Thailand's corporate income tax is also higher than in Singapore and Malaysia, while corruption is a concern of both local and foreign investors, he said.
"The tax system needs to be overhauled, or investors will choose other countries once the AEC takes effect."
Prasert Bunsumpun, president and chief executive of PTT Plc, said large corporations should prepare scenario planning and risk management to cope with the complexities of business.
"Complexity causes uncertainties, so leaders should create strategies that simplify complexity in organisations and operations," he said. "Rolling scenario planning allows firms to have the flexibility for quick responses.
Thailand is heavily reliant on energy imports, making it vulnerable to price volatility, said Mr Prasert, adding that energy imports amount to 10% of the kingdom's gross domestic product while domestic consumption of fuel accounts for 20% of GDP.
"Energy consumption of 20% of GDP is very high and this is partly caused by subsidies that do not encourage efficient use of energy," he said.
Current high oil prices have pushed refinery costs to rise and will certainly result in higher prices for refined oil, he added.
Kobchai Chirathivat, president of Central Pattana Plc, said local businesses had an immediate challenge in adjusting to the entry of dominant new players when economic integration happens in a few years.
Competition in the retail sector is expected to greatly increase as the AEC allows for the free mobility of professionals, investment and trade. More multinational companies could make inroads in the local market. China, South Korea and Japan, which are now associated members of Asean, might join the local economic integration in the future, he predicted.
"Regional multinational firms have stronger financial backing and might withstand losses from dumping in the first few years to gain a firm foothold," said Mr Kobchai.
In the wake of rising energy prices, local firms could be at a disadvantage to certain regional peers because of Thailand's high dependence on imports.
"Firms from Singapore, India and Malaysia could be very competitive," he said.
The Thai government should do more to assist businesses in venturing abroad, as the assistance to date has been far less effective than in some neighbouring countries, he said.
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