Digital sectors to Thailand

Trends and opportunities

The market

Thailand is a digitally-savvy, connected society with high internet penetration rates and use of mobile applications which extend well beyond social media.

The Thai government has an ambitious aim for the Digital sector to contribute 25 per cent of national GDP by 2027. This economic and social transformation agenda known as “Thailand Industry 4.0” aims to encourage digital creativity and innovation, the development of new technology and promote development of a stronger, digitally-driven economy.

This is supported by ongoing investment in enabling infrastructure, regulation, an emerging digital innovation and startup ecosystem, plus generous support for qualifying businesses wishing to establish a presence through investment in the region by the Thai Board of Investment.

Local capabilities to meet the potential transformation demands of Thailand’s existing industry sectors are nascent, presenting an opportunity for suppliers to a range of industry sectors.

These sectors include electronics, automobile and household appliance manufacturing; tourism, health and education, and also emerging industries such as aviation, where Thailand is set in the coming years to become a major regional base for the maintenance, repair and overhaul for major aircraft OEMs.

These are sectors where demand for robotics and automation technology, ‘internet of things’ (IoT) connectivity, big data analytics, cyber security, software and systems is required to realise productivity gains and maintain international competitiveness.

For digital businesses, Thailand already offers very good infrastructure including broadband internet, low rates of power shortages and competitive labour costs, although competition for IT skills is increasing. Most data centers in Thailand are Tier 3 Data Centers, with 99.98 per cent uptime and N+1 fault tolerant. Thailand has 96 per cent of High speed internet and penetration rate above 4 Mbps, with average of 10.8 Mbps in Q1 2016. This combination of infrastructure, lower wages plus ease of living is highly attractive to businesses wishing to do business in Thailand.

e-Commerce and Digital Marketing

Thailand has a high internet penetration rate and large base (67 per cent of population) of social media users. Facebook has 46 million users in Thailand, versus 15 million in Australia. Instagram (11 million users) and Twitter (3.1 million active users) experienced significant growth (41 per cent and 70 per cent) respectively between 2016 and 2017. With this increase in social media use, the market size of digital advertising in Thailand grew in 2016 to be valued at USD $281.2 million and is the driving force behind the growth in e-Commerce in Thailand.

e-commerce itself is growing in popularity, growing 12.42 per cent during 2015-2016 from USD $64 billion to USD $72 billion. Lazada is the most popular website for buying online, but many small businesses have a Facebook shop where they can answer enquiries, take orders, process payments and arrange shipments without having to leave their home.

According to PricewaterhouseCoopers (PWC), Thailand is the largest online C2C market in the world. The e-marketplace for consumer products is highly competitive, while others including real estate marketplaces are enjoying success in the market.

Fintech and Digital Startups

The number of transactions, users of mobile and online banking and cashless cards under both bank platforms and service providers is increasing. However the opportunity for new service or technology providers within the cashless transaction sphere is limited, with the Thai government itself offering a national e-payment platform PromptPay, which links payments against mobile number and Citizen ID numbers.

Unlike most other ASEAN countries, Thais are generally well banked with good access to personal bank accounts, but there remains a low level of financial literacy, particularly with understanding savings and investment strategies. While there is an opportunity for the streamlining of bank processes, current regulation is a barrier and significant face to face interaction is still required between consumers and their banks. Consumer access to non asset-backed loan financing is less accessible.

Banks have recently become significant players in Thailand’s innovation ecosystem; initiating their own startups and incubators and acting as partners to connect API (or application programming interface - a technology protocol that allows diverse software components to communicate) for trials. Large corporate and commercial banks are open to and seeking collaboration and partnership in the form of investment through accelerator programs, or commercial partnership. In 2016, the number of VCs grew to more than 60, and more than 75 startups funded.

Opportunities

Thailand is an attractive market destination with a corporate sector receptive to new technologies and lateral business models. With most industrial and digital sectors in Thailand having oligopoly characteristics – with few dominating players in each sub-sector, Australian companies can engage with key contacts and explore potential partnerships in a relatively short time frame, but utilising the connections and assistance of Austrade Bangkok.

The oligarchy characteristics means firms that can offer platforms or solutions to help grow Thai businesses vertically will always be of interest in this market.

With a government focus on economic transformation and business focussed on increasing global competitiveness of its established manufacturing and services sectors, demand for IoT enabling technology, big data analytics, cyber security, industrial software and systems is growing. Accreditation and international reputation are attributes important to Thai companies when considering new suppliers.

B2B e-commerce enabling platforms is seen as an opportunity, with few competitors operating in this space.

The low level of financial literacy combined with a variety of financial products offered in the market means there is opportunity for robo-advisory, gamification, and data analytics. Simplifying processes and gamification tools to change the ways banks operate are areas banks are exploring, however systems remain constrained by regulation.

Insurance companies and advisory firms also look for Insuretech. With a government plan to launch national (decentralised) digital ID systems, identity facilitation business is another opportunity for Australian companies to explore.

Competitive Environment

Depending on the level of market saturation and qualification of existing players, some areas such as broadband internet service may be highly competitive. Nevertheless, some telecommunication companies prefer working with a limited number of partners in order to handle projects more effectively.

Major American technology companies, such as Cisco and IBM, and the strongest Chinese newcomer, Huawei, have strong presence in the market. Thai companies see technology companies with presence in the market as more trustworthy and believe local presence would better support their business and assist with troubleshooting. To avoid high-risk investment in setting up office, Australian companies may look to local technology companies to represent them in approaching customers in the market at the first stage.

With regards to industrial or specialised software and embedded software systems, some sectors such as oil and gas industries are more open to foreign participation than other sectors which develop domestically including restaurants and food service. We should take note of long term established relationships between Thailand and Japan in automotive and manufacturing robotic sectors, as a result working with Japanese technology providers to service the market may be a good market entry choice.

At consumer level, we have not seen new entrants who are technology disruptors, given large corporates and banks are dominating markets due to their credibility, service coverage and extended relationship which creates barriers of entry. As industry evolves, we may see some structural changes as small players work aggressively to gain market shares. Australian companies who have unique preposition and have gained reputation regionally still have a chance.

The local e-marketplace in the C to C segment is highly competitive, requires Thai language, local payment options and substantial marketing effort in order to attract customers to sites. Cross border transactions are required to comply with traditional import duty regulations, however consumers are experienced in making international purchases, through sites such as Amazon.

Banks and financial institutions are interested in financial technologies to create better customer experience, reduce costs and broaden their financial product portfolio. They prefer to work in partnership with proven fintech companies, and are very open to international collaboration.

Tariffs, Regulations and Customs

The Thai government through the Board of Investment offers a wide range of tax and non-tax investment incentives including corporate income tax exemption, waiving of import duty on machinery and raw material, permission to bring in expatriates, permissions to own land and take or remit foreign currency abroad. For more information, please visit the Thailand Board of Investments. 

With regards to Fintech, the Bank of Thailand and Securities and Exchange Commission have opened a fintech regulatory sandbox to enable developers to experiment their services and business. Regulators are invited to consider drafting or revising laws and regulations including proper eKYC (Know Your Customer) and national digital ID to open access to potential use of technology.

Marketing your products and services

Market entry

For the IT and software sector, offerings in the market should take into consideration some specific constraints such as the ability for government to setup annual maintenance budgets and training services. In many cases, Australian companies must demonstrate the ability to convince customers the long term benefit of employing their technology, by that it may also mean offering total package solutions together with local consortium or system integrators rather than individual unit or segregrated systems whose price per unit is higher than that of competitors. Also important to note is that when dealing with state-owned enterprises and government, companies may also be required to designate local representatives in order to comply with the companies’ procurement rules and standards.

Business should take into account cultural context, language issues, and level of compliance for example, some KYC (Know Your Customers) standards and practices in Thailand are still rigid and administrative (eg. self-declaration in Australia VS due diligence in Thailand) , as a result Australians who do not understand this context may be perceived as in a loose control solution.

For manufacturing and industrial technology, given the dominant role of Japanese supply chain in Thailand, it may be wise to consider working with established Japanese technology providers in Thailand who have a customer base to support expansion in the market. Due to relatively low labour costs, targeting SMEs are reluctant to invest in technology. This means either Australian companies not focusing on SME levels need to be prepares to educate their customers and clearly point out cost benefits of automation.

Fintech and Digital Startups

Generally, Thai established corporates are receptive to work with Australian companies who have a certain degree of good business or have a record of expansion, to help develop the market for Thailand and CLMV (Cambodia, Laos, Myanmar, Vietnam) countries. Dealing with these companies and VC under them also let to market channels and and connection which strongly supports business.

Australian Fintech and Startup brings along matured experience that are integrated into offered technologies, and as a result it is deliberate and create good user experiences. We believe this is the area that should be highlighted when discussing with allies and partners in the market.

Links and industry contacts

Thailand-Australia Free Trade Portal
Thailand’s Board of Investment 
Ministry of Digital Economy and Society 
Office of Digital Economy 

Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.

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