Speech

By: Sean Riley, Austrade Senior Trade Commissioner, Thailand
Date: 1 November 2006

Thailand is not only a rite of passage for Australian holidaymakers, but also Australia’s second largest export market in South East Asia and Australia’s 10th largest trading partner. However, emerging economic giants China and India are given preferential treatment by Australian exporters although the recent Thailand-Australia Free Trade Agreement (TAFTA) has opened up unprecedented opportunities.

TAFTA has reduced the cost of doing business in Thailand and given Australian companies an instant competitive advantage. Companies previously locked out of the Thai market by high tariffs and quotas can now take advantage of significant tariff reductions in key sectors simply by selling Australian made products or services. More than half of Thailand’s tariffs, accounting for nearly 80 per cent of Australian exports have been eliminated by TAFTA and 98% of tariffs in two-way trade will be phased out by 2010.

So what does this mean for Australian exporters?  While delivering smaller export revenues to Australia, diversification of exports to Thailand means that Australian companies are able to gain a foothold in a greater range of sectors.

In 2005-06 Austrade helped 225 businesses - 28 per cent higher than the previous financial year - achieve export success in Thailand with deals worth $422 million, and new exporters, particularly SMEs, can duplicate this success. In the first year since TAFTA came into existence, Thai companies looking to purchase from Australia grew by 27% and Australia’s exports to Thailand increased by 34.7% to $4.1 billion, and two-way trade with Thailand was worth over $8.9 billion. Yet, this is just the tip of the iceberg. Although Thailand may not boast the staggering market volume of China or India, the increasingly affluent middle class of 20 million (almost equal to the total Australian population) with a significant purchasing power and sophisticated consumer culture is driving the Thai economy, which boasts an annual growth rate of 5% GDP, and creating new opportunities for Australian businesses.

Undergoing a rapid transformation as a result is the Thai consumer and lifestyle market. Australian products enjoy growing recognition and market share. Thailand is Australia’s largest importer of food and beverage products in South East Asia, with Australian exports in this sector worth over $295 million last year. Thai supermarket shelves are lined with Australian meat and vegetables, yoghurts, cheese and even antipasto – a testimony to Australia’s growing reputation as a quality supplier of food products.

Australian apparel, cosmetics and skincare companies are also big winners following TAFTA with an unprecedented tariff reduction from 40% - 60% to 16%. More and more Australian brands are becoming major household names, and Thailand’s major departmental stores are now showcasing a collection of Australian lifestyle brands include Billabong, Aztec Rose and Ken Done.

Not all sectors enjoy such significant tariff reductions. In some cases, tariffs are creeping down slowly, but our exporters have a window of opportunity to exploit lower tariffs than their foreign competitors while Thailand continues to negotiate free-trade agreements with other countries. Australian companies should think long-term and plan for the future to make the most of TAFTA.

A burgeoning sector for Australian exporters is services, particularly education and training, with last year’s exports adding up to $920 million. There are increasing opportunities for corporate training, industry focused training programs and consultancy services to Thai businesses and government departments. Since TAFTA, conditions for two–way trade in services have improved through legally binding rules that promote liberalisation and transparency in regulatory procedures.

Australian capability is making strides in priority sectors like automotive, building and construction, arts and entertainment, ICT and tourism. Australian exporters are providing information management systems to Thailand’s largest public hospital and setting up auto-parts manufacturing plants in Thailand to service the world’s major automotive manufacturers. Australian innovative technology together with a skilled Thai work force makes these operations integral for the globalisation of Australian business. Australian Kingsgate Consolidated is Thailand’s most successful mining operation valued at over $100 million.

Finding the right partner and investing in that relationship is critical to success in the Thai market. Austrade can help Australian companies do just that and our network of industry experts and market specialists can provide practical advice and market intelligence to make your business a success in Thailand. For more information about exporting to Thailand, contact your local Austrade office.