Integrated International Economic Essay
Executive summary Thailand is an opportunist country. Last few years shown that Thailand economy has great scope to improve in almost every field. Even though they have export oriented economy but still there is a lot more to come. Education sector is one of them. Thailand Gobo. Is responsible to provide education from pre-school to high school. And it is compulsory for Thai citizens to attend school for at least 9 years. That’s why Thailand has literacy rate of 94%. Primary languages of Thailand are Thai and English. Australian gobo. Is helping Thailand education system systematically since 1991 to improve educational level of Thailand.
As per Australian official website in Thailand, followings are the fields of education in which Australian gobo. Is already working in Thailand. A) Vocational education and training; b) Higher education; c) Strategic planning and management in education, research and training; d) Curriculum development and benchmarking of educational outcomes; e) Distance education; f) English and Thai language training; g) Student, education personnel and academic exchange; h) Qualifications recognition; and I) Education management training The Wiggles has great scope to flourish in economies like Thailand as the conditions re very favorable.
Gobo is very supportive and encouraging foreign investment. A
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They were formed in Sydney, Australia in 1991. The Wiggle’s basic educational ideology is to teach young kids pre-school) with their songs and simple performances with movements. They are very famous not only is Australia but also in different parts of the world. The Wiggles wants to enter into the Thailand but their theme of educational theory is unique but different for Thai people because of their cultural and social aspects. Different macro-environmental factors are needed to be determined for The Wiggles before entering into the Thailand.
There are different models are available to determine various risk factors like economic policies, political instability, trade barriers, tax changes, demographic variations. These factors can be well explained and summarized in PEST model which is explaining political, economical, social, technological factors, along with Foreign Direct Investment and Finance. This model can help to evaluate and formulate The Wiggle’s business strategy for Thailand. Economic Factors: Thailand is a very promising country. Bangkok is the Capital of Thailand. Their currency is called Thai Baht (TAB).
GAP of Thailand is $345. 649 billion and showing as upward trend in economic growth of 3. 7% as per their third quarter of 2012. Inflation (ICP) is 3. 8% and it is showing an upward trend that’s why Thai government has educed the interest rate (World Economic Database Outlook, 2012). Their capita per income is $5,394 which is satisfactory. Some of the main indicators of Thailand economy can be summarized as under: TABLE 1 population (2010) 66 million SEAN Population 600 million Literacy Rate 96% Minimum Wage (1 Par’12, Bangkok) 300 Baht/day GAP (2011) US$345. Billion GAP per capita (2011) US$5,113 GAP Growth (2011) 0. 1% GAP Growth (2012, projected) 5. 5-6. 0% Export Growth (2011) 16. 4% Export Growth (2012, projected) 7. 3% US$23. 5 billion Current Account Balance (2011) US$11. 9 billion International Reserves (2011) US$175. 2 billion Capacity Utilization (2011) 58. 14% Manufacturing Production Index (2011) 172. 39 Consumer Price Index (Swept 2012) (2007=100) 116. 67 Source: 801, Thailand The FED Stock is SUDS 19. 5 Billion and foreign reserves are ISSUED Billion. GAP growth trend after the economic crisis is showing an upward trend ( Figure 2).
Source: World economic outlook Database 2012, MIFF. Thailand is the member of various trade organizations including WTFO, APACE, ‘OR-ARC, SEAN (Okinawa Chancellorship, Drawn Vibraphone, Permeate Vamoosing, 2008). Thailand has also free trade agreements with India and Australia. Thailand is a evolving economy which is strongly relying on exports and investment with a well- developed infrastructure. Because of that Thailand has experienced a very prominent economic growth from 2000 to 2007, averaging more than 4% per year, after recovering from the Asian financial crisis of 1997-98.
Annual GAP growth rate of Thailand from 2006-2011 clearly shows Thailand affected economy because of the economic crisis (Figure 2). Source: World economic outlook Database 2012, MIFF. Main exports are textiles and footwear, machinery and electronic components, fishery products, rice and other agricultural commodities, automobiles, and Jewelry. Its main export partners are China, Japan, U. S. , Hong Kong, Malaysia and Singapore (Figure 3). And Australia is the 8th biggest exporter of Thailand with the 3. % of total export volume (Thailand Trading Report, 2012). Source: Ministry of Commerce, Thailand, 2012 The main imports of Thailand are consumer goods, raw materials, oil and oil related products and capital goods. Main importers are Japan, China, AAU, U. S. , Malaysia and South Korea (Figure 4). Source: Ministry of Commerce, Thailand, 2012 Per capita income of Thai people shows an upward trend since 2000(Figure 5). According to the report “doing Business in Thailand 2013” by World Bank, Thailand is ranked 18th in the world.
It shows that conditions are very favorable and government policies are supportive for international investors to do business easily at Thailand because of special relaxations especially tax relaxations. Finance Bank of Thailand is the central bank of Thailand was established in 1942. It operates like other country’s central banks like under the supervision of Government works as an independent body and its entire capital is owned by the government. The financial sector is very diverse. According to the Bank of Thailand, in 2002 there were 33 banks were operating.
The list is as under: 17 local Thai commercial and retail bank 16 foreign owned. The top three Thai banks are Grunge Thai Bank, Bangkok Bank, and Thai Farmers Bank. Many of Thailand domestic banks are owned by a few wealthy Chinese families. Shareholdings in even the largest banks, led by Bangkok Bank and the Thai Farmers Bank, are structured to insure family control. US banks with full branches in Thailand include Citibank, Chase Manhattan Bank, and Bank of America. According to the world economic outlook 2012, 3. 5% is the interest rate at which the central bank is lending to other various financial institutions in the short term.
Baht (BOTH) is the currency of Thailand. In the beginning, before 1963, Thailand adopted a floating exchange rate regime. But Since 2 July 1997, Thailand has adopted the managed-float exchange rate regime, of which the value of the Baht is determined by market forces. But The Bank of Thailand has the right to intervene in the market only when necessary to attain policy targets and to avoid any exchange rate vulnerabilities. Following is the exchange rate of Thai baht (World Currency Yearbook, 2012) ?¬1 100% = 31. 00 baht = 39. 86 baht = 49. 92 baht = 39. 7 baht There are different taxation rules on Thailand. According the Thailand embassy website there are 2 kinds of taxes, 1) Direct Taxes: taxes those are collected by the government from the taxpayers These taxes are corporate income tax, personal income tax, petroleum income tax 2) Indirect tax: taxes those are collected by intermediaries. These taxes are VAT, specific business tax, excise tax, stamp duty for business. A list of important figures related to taxes are as under: TABLE 2 Corporate Income Tax 10-23% Withholding Tax 10-15% Value Added Tax 7% Trade Balance (2011) Source: 801, Thailand.
Foreign Direct Investment (FED) Foreign Investment plays an important role in the economic development and growth of any country. As Thailand is an export oriented country, so it is major relying on the business by foreigners in their country after agriculture. Figure is showing the total FED in Thailand year by year. According to the World Bank report, Japan is the main foreign investor, especially investing in the field of manufacturing. It is clearly showing that mainly there is a trend of FED inflow which constitutes a major factor for GAP growth in Thailand (Figure 7).
Source: World economic outlook Database 2012, MIFF Thailand is the 17th easiest country in the world in which to do business and second in Southeast Asia by World Banks 2012 Ease of Doing Business report. And also the 10th most attractive host economy in the world ranked by United Nations Conference on Trade and development 2012). According to 801, Foreigners can easily open up a business in Thailand. Even Thai government encourages FED to the country and gives them a lot of easiness and incentives like special land allocation, tax exemption/reduction, duty exemptions/ reductions, cheap labor, electricity, etc.
Thailand investment policies are totally following WTFO regulations. Thailand government is trying to attract more and more FED through providing them a good infrastructure like highway system which is not Cambodia and Vietnam. According to 801, Thailand also offers: 7 international airports Modern city-wide mass transit G/Wife and broadband access 6 deep sea ports and 2 international river ports, including containers, tank farms and liquid Jetties. Government has divided Thailand into 3 special economic zones (Figure 8).
Zone 1 has very less incentives regarding tax exemptions or reduction but zone 3 has higher incentives regarding tax exemptions or reductions. Figure 8: Special Economic Zones Source: Board of investment (801), Thailand On the whole Thai government is providing a very safe environment to foreign business in Thailand but still a lot more FED can come to Thailand if the infrastructure is better. Government is supporting those Fids which are related to technology, manufacturing and skill development. But for The Wiggles, it is a bright opportunity, as very less work has been done by foreign investors in education sector in Thailand.
Even their education system is already good enough to be accepted by roll agencies but with new innovative ideas, which The Wiggles is famous for, can easily take a reasonable share in the market as a good infrastructure and favorable conditions are available for The Wiggles. Legal Factors: Thailand has already formulated set of laws not only the investment of foreigners but also the protection of the rights of the employee. They have devised different acts like Labor Protection act 1998, social security act 1994, alien employment act 1978 and skill development promotion act 2002, etc. Hill labor is discouraged but over 1 5 years can be employed to work in Thailand and labor is allowed to form unions. They have clear laws about working hours which is from 8 hours a day and 48 hours a week. But child employee below age 18 can not perform dangerous work like stamping metal, exposure to extreme heat, work in poisonous micro-organisms etc dames Cocky, 1994). Foreigners are allowed to work in Thailand but need specific skills to work. Foreigners can not do labor kind of works. Right now, mostly foreigners are teachers.
This fact shows that The Wiggles has great scope in Thailand. Employee can go to the court if he or she finds irregularities or injustice shown by the owner or company. Foreigners can easily open up a business in Thailand. Even Thai government encourages FED to the country and gives them a lot of easiness and incentives like special land allocation, tax exemption/reduction, duty exemptions/reductions, cheap Foreigners cannot acquire/buy land directly but can build a house on a land with the help of a Thai owner after getting permission from the government on his/her name.
Thailand has laws about the business and employees clearly stating to protect their rights not only for foreigners but also for locals, but the enforcement is not quite visible. As bribery is very common there this is weakening the legal institution. According to Thailand Constitutional Court 2009 and Thailand Law Reform Commission 2007, Intellectual Property rights Act 1979 along with Trade Mark Act 199 is fully functional. It is protecting patents, trademarks and copy rights. Trade secret acts are protected by trade secret act 2002. Patents and trademarks are needed to be registered.
Copyright doesn’t need registration as it is protected for 50 years. But in case of any problem or dispute, it could be resolved at intellectual property and international trade court dames Cocky, 1994). Business in Thailand but still a lot more FED can come to Thailand if the law enforcement is assured to the foreign companies or investors which are protecting their rights. Political Factors: This factor refers to the government and its policies towards the economy. It also tells how and to what extent government is intervening in the economic policies.
Thailand was under a political turmoil for a long time. But after the 2006 coup, Thailand tried to stabilize its political institution which was governing under the constitution of 2007. As per there constitution, the king is the head of the state while prime minister is the head of government and will be elected by the House of Representatives for axiom 8 years. Even having an elected government in 2007 but still there were huge protests against the government from 2008 to 2010 which affected the economic stability of the country very badly.
Right now they have a monarchy. But still the political risk and uncertainty is very high in Thailand. Foreign entities are very much concerned with the political risk of the country which could affect the business climate to arise uncertainty to invest. That’s why not only investor but tourist industry is badly affected. Even Thai government is trying to promote the audibility for the investors and tourist to come to Thailand. Thai government has devised different plans to develop their country economically and socially.
Their plan like EXAM 2010 is to support investment by facilitating them through space, infrastructure, food, energy and easy availability and mobility of raw material resources to strengthen investment. Thailand, according to foreign ministry of kingdom of Thailand, is a member of world organizations like United Nations (UN), Asia Pacific Economic Co-operation (APACE), Association of Southeast Asian Nations (SEAN), Asia-Europe Meeting (SEEMS), Group f 77 at the United Nations (677), Non Aligned Movement (NAME), World Trade Organization for Co-operation and Security in Europe (COSEC) (observer) Human Rights Council (MUNCH).
Australia-Thailand free trade agreement (TAFT), signed in 2005, is very comprehensive and protects the rights of investors. Its foreign relationships are making the environment very suitable for foreign investment like The Wiggles to consider Thailand as a potential market. Australian government is already working with Thai Government for the safe investment of their companies in Thailand (World Economic Outlook, 2012). Corruption is a big problem of Thailand. Corruption perception index for Thailand is 37 which is ranking it 88 in the world (Transparency International Report 2012).
It is showing that Thailand is very much exposed to corruption (Figure 9). But Thailand government is trying to get the remedy from this sickness. For that purpose, they have devised a legal framework to tackle with corruption effectively. Source: transparency international, ICP 2012. Even though the trend is showing that corruption is decreasing in Thailand but still foreign investment is still uncertain because they consider corruption as a big hurdle or their protection along with policy instability and inefficient bureaucracy by the Thailand government.
Social Factors: Thailand is country with kind people but has conservative society. As they were never in contact with foreigners before but now they are opening up their mind and accepting foreigners. According to the Greet-Hefted Dimensions, people are very much following the social protocols. They respect to their elders not in their daily life but also in business and show loyalty to their superiors. So, inequalities are acceptable to them. That’s why for them, Royal family is very respectful. They believe on collectivism and like to live in families. Their culture believes on competition.
So, in order to get a good Job or life, they have to work hard. But they don’t like to have troubles. So they don’t like change. They want to let the things happen in their routine. Thai people believe on Buddhism and also on Confucius teachings, so they always believe on praising, hard work and try their best to not let others to feel because of them in front of others. People like to live in families and show strong commitment to their family. They never want to involve in conflicts or troubles. Thai people are managing themselves to avoid from the problems.
They show patience and keep smiling even in a trouble to let the things past smoothly. They like to use chopsticks for eating. If foreigners follow their cultural things, they appreciate it very much. For Thai people, white color is supposed to be wear at funerals and celebrations. They like to eat spicy food. They don’t like to have tip in restaurants (World Fact book 2012). Business meetings are very interesting in Thai business culture. They like to wear formal dresses. In first meeting, they like to exchange cards and use both hands to vomit other’s cards.
Thai people like to have win-win relationship in business and people know English but still they have speaking problems. Thai people take their lunch from 12:00 to 13:00 and they don’t like to have a meeting at that time. Thai business people like to live their lives lavishly. They like to enjoy business meals, drink wine and play golf. Thai business people usually like to have business meetings on a meal. They don’t like to give answers directly. If they are willing then they will respond in anyway but if they don’t like, then are not answering.
More than 94% Thai people are Buddhist. But they have total freedom for religion. The life expectancy is 73 years it shows the suitability of the environment and good health conditions. As per the age group structure of that people mostly people are young(Figure 6). Thailand is in abundance of work force (World Fact book, 2012). Source: World Fact book 2012, CIA Above all the social conditions are pretty favorable for the wiggles to start up their franchise their as the conditions are very suitable for them.
Conclusion and recommendation Thailand is a very promising country. As it is establishing itself so they are asking for help from other world. Education is the basic need of any people but a quality education as provided by the The Wiggles is much demanded. Analysis of Thailand business environment by analyzing different factors like economic, financial, legal, foreign direct investment, social, political, is showing clearly that The Wiggles has great opportunity to develop and capture a great share of education sector.