Thailand: ASEAN’s Key Logistics Hub

Thailand’s Border Countries

Centrally located in Indochina or Mainland Southeast Asia, Thailand is one of the key ASEAN transport and logistics hubs. More than 30 Thai provinces share borders with Myanmar, Laos, Cambodia and Malaysia. With production costs surging in China and some of the more developed ASEAN countries, foreign manufacturers are increasingly looking to set up bases in countries with lower production costs in the Greater Mekong Sub-region (GMS), particularly in Vietnam and Myanmar. The search for alternative manufacturing bases in Southeast Asia, however, has not diminished Thailand’s role as a regional manufacturing powerhouse, while it also fulfils the role of a key logistics hub for Indochina.

Exports account for more than half of Thailand’s GDP, while the manufacturing sector accounts for more than 80% of the country’s total exports. Apart from being the largest automotive producer in ASEAN, Thailand is also the trade bloc’s leading supplier of electronic parts and components destined for further processing in other ASEAN or Asian countries. It is also a major producer of electrical appliances. In essence, electronics is the largest export category for Thailand, with its output consisting mainly of computers parts, integrated circuits and parts, and related electrical items.

As the second largest exporter in ASEAN, Thailand plays a key role in the increasingly sophisticated regional supply chain, especially in terms of meeting the rising demand for cross-border logistics services. These services encompass transporting machinery and parts and components, as well as managing supply chain functions, from sourcing through to distribution. Thailand’s exports to other ASEAN countries grew by an annual average of 12% during the period 2009-2014, with a more rapid growth in exports to neighbouring GMS countries (Myanmar, Cambodia and Laos), which expanded by 20% annually over the same period.

GMS Economic Corridors

Thailand’s logistics sector is dominated by road transport, which accounts for about 80% of total freight volume. Road infrastructure is the most developed mode of transport in Thailand, with about 98% of its highway networks having been paved. Within the ASEAN highway network, there are 13 highways connecting Thailand with its neighbours, the highest number among the ASEAN bloc. Currently, the major highways linking Thailand to other GMS countries are routes within the ‘East-West Economic Corridor’, ‘North-South Economic Corridor’ and ‘Southern Economic Corridor’. These corridors form the backbone of the GMS transportation infrastructure.

GMS East-West Economic Corridor

Currently the most frequently used route by cross-border logistics companies is the East-West Economic Corridor (EWEC), which connects Myanmar's Mawlamyine Port in the west, through Central and Northeastern Thailand and Laos, to Vietnam’s port city of Danang in the east. This route allows faster access to the seaport in Vietnam from Thailand and Laos, hence reducing transportation costs by allowing land-sea multimodal transport. Currently, more than half of the 800-kilometre Thailand section of the EWEC is a four-lane highway, which is largely maintained in a good condition.

Mega Home branch in Mae Sot – providing retail and wholesale distribution of construction materials, furniture and electrical appliances targetted at Thai locals and buyers from Myanmar.

The increased level of manufacturing activities and the growing consumer markets in the GMS are fostering trade between Thailand and its GMS neighbours. Thailand’s border trade with its four neighbours reached some THB 900 billion (US$ 27.6 billion) in 2014. Malaysia was its largest border-trade partner, accounting for about half of Thailand’s total border trade, followed by Myanmar (21% share), Laos (15%) and Cambodia (11%). Cross-border trade by road has also become an important part of Thailand’s logistics industry. Many leading local and foreign logistics companies provide cross-border logistics services between Thailand and its bordering countries. Well Transportation Myanmar Ltd, a subsidiary of Sinotrans (HK) Logistics, was founded in 2010 to provide land haulage and trailer services across the borders of Thailand-Myanmar. Additionally, Sumisho Global Logistics (Thailand), a subsidiary of Japan’s Sumitomo Corporation, offers land transport services via Thai-Laos-Vietnam and Thai-Cambodia routes.

Mega Home

With the continual economic liberalisation of Myanmar and Laos, Thai border trade with these two countries is expected to flourish. In view of the formation of the AEC, many retailers and distributors are expanding border trade areas in the north and northeast of Thailand to capitalise on the opportunities arising from greater economic integration between Myanmar and Laos, a development that will stimulate demand for cross-border logistics services. (More details on Thailand’s border trade market will be examined in an upcoming article “New Trends in Thailand’s Retail Market”.)