The positive impact of AEC to Thailand is that it helps to facilitate investment and trading activities in other ASEAN members as it is now more freely and easier. We can invest in any ASEAN countries and there will be less barriers in terms of trading activities. Moreover, Thailand will become the center of transportation and tourism, as Thailand is located in the center of ASEAN. This will help tourism industry grow bigger. Thailand can also be the center of national conferences, meetings, exhibitions, and telecommunication.
Furthermore, AEC helps Thai manufacturers reduce the cost of production as they can outsource cheaper raw materials from ASEAN members. AEC also helps increase the opportunities of investment as money is easily flowing among ASEAN
AEC comes with the railways development projects which will connect the Greater Mekong Sub-region, ie. East-West Economic Corridor-connecting Vietnam, Laos, Thailand, Myanmar; North-South Economic Corridor-connectingThailand, Myanmar/Laos, and China and; Southern Economic Corridor-connecting Thailand, Cambodia, and Vietnam. The Southern Economic Corridor has a connecting route further to Dawei Deep Sea Port in Myanmar that can distribute products to the Middle East and Europe.
This will bring down the logistic cost of Thailand that depend smuch on expensive road transportation.
In about 2 years, we are going to be a part of AEC which we need to prepare for this situation. It is not just only industry sector that need to prepare for the bigger market and the larger amount of competitors, but the small sector like logistic is also need to be improved to get along with the intense competition for helping companies survive from the easier movement of goods, service, investment, capital and people.
When there is a free flow of goods, service, skilled labor, etc, the infrastructure also needs to be developed to serve those inflows.
AEC would be a great challenge for supply chain management to manage the timing for delivering goods with more comfortable infrastructure which is able to reduce the cost of transportation as well, and it is a nice opportunity to enhance the cross border trade facilitation by simplified border procedures. Moreover, supporting the transportation among ASEAN countries PTT also started to set up gas stations at main roads in many member countries already. This opportunity tends to generate lots of income for our nation as the high standard of PTT gas station and the well quality of service.
When we become a part of AEC, it has a several negative impacts on the supply chain in Thailand. Thai firms need to expand both their manufacture and inventory, in an order to produce and store more goods to serve wider range of customers. As a result, it will definitely affect their fixed cost, and total cost of production will then rise respectively. Besides, the extensive concentration on manufacturing and inventory can be problematic in that it places additional pressure on the environment, which might be a clear evidence in unwelcome impacts upon important sectors of the economy, such as tourism.
AEC will cause in a lot of labour movement and this can be a negative impact on supply chain as well. Of course, skilled labour will move to the country that offer them a higher opportunity and higher wage, such as Singapore and Malaysia. As the Thai skilled labour move out, the foreign unskilled labour might move in. The unskilled labour, who may be more wage competitive than the Thai worker, move in. This caused an disadvantage in the market and on Thai labour as well. Also, this might depress local markets and diminish consumption of manufactured items.
Due to a various wider customers, it will be harder for the manufacture to reach economy of scale. Instead of just producing one goods to server domestic market, the firms may need to come up with several creative goods to server customers who come from many country. This also can increase a cost of production for the firm.
Thailand has relatively high logistic cost to GDP (18%) when compared with Singapore (8%) and Malaysia (13%). For Thailand’s overall logistic cost, the share of transportation cost is the largest. Thailand may lose its strategy to be the hub of ASEAN from the higher logistic cost comparing to other AEC countries, such as Singapore and Malaysia, if Thailand’s logistic infrastructures, for example, railways and highways network that link AEC, haven’t been built completely in 2015.
Some labor intensive industries may die when AEC is fully integrated because of Thai minimum wage policy. The minimum wage policy will affect everyone in the supply chain both directly and indirectly. These businesses, such as food and beverage and vehicles and vehicle parts, will see higher costs for goods and services on the form of rising price of raw materials and logistics pushing through the supply chain. Moreover, the strong companies, which can survive, may leave Thai markets to find new channels to increase earnings and counter profit erosion from rising domestic costs. If many industries leave Thailand, the rest industries will leave also like domino falls.