This export market plan was written to give current and potential U.S. exporters of environmental goods and services a broad understanding of the principal drivers in Thailand's environmental market and to provide useful insights into specific projects and methods of doing business in Thailand.
Part One of this report offers an overview of Thailand's market. Part Two provides information on the following specific subsectors within the environmental field:
Water supply and wastewater treatment
Municipal solid waste
Hazardous and industrial waste
Part Three provides information on the Thai business environment, strategies for winning in the Thai market, and the business climate for U.S. companies.
The map on page vi indicates main commercial centers in Thailand.
Field work for this plan and the core report preparation were completed before the devaluation of the baht in July 1997 and the subsequent financial crisis in the region. This crisis has clearly changed the perspective for U.S. exports. Although the crisis is still evolving at this writing, it is evident that it will result in much slower economic growth for 1998 at least, reduced government expenditures, and other changes that will dramatically affect the market for U.S. exports.
Overall, the crisis will reduce demand for environmental goods and services in the short term, as projects are rescheduled, in-country financing becomes more difficult to obtain, and private companies hesitate to make new investments. The Thai Government can also be expected to relax enforcement of environmental regulations on an informal basis in response to public and private pressure to avoid any steps that might impose further pressures on Thai companies’ financial returns or hiring ability in the coming months.
An opportunity precipitated by the economic crisis is investment in privatized infrastructure projects. With limited government funds available, and in order to comply with the general requirements of the International Monetary Fund (IMF), the government is forced to look at privatization schemes.
Overall, the long-term impact of the crisis may be positive. Thailand has an opportunity to set its economy on a more sustainable growth path, addressing structural problems that have been evident for some time. Addressing these deficiencies could lead to a stronger market overall and increase demand for environmental technology.
Public awareness of environmental impacts has also been increased by the reaction to the region-wide smoke crisis that originated in uncontrolled forest burning in Indonesia. This problem, coupled with the economic crisis itself, is likely to lead to stronger public pressure for the Thai Government to ensure that development proceeds on both a sound financial and environmental basis. Public tolerance for evasion of regulations and less-than-transparent contract award processes were high when the public perceived that such policies were leading to rapid growth and rising middle-class incomes. This perception has been dramatically and perhaps permanently altered by the financial crisis. The contraction, still ongoing at this writing, has highlighted the unsustainability of the current economic management model and the potential for unregulated growth to lead to conditions that threaten middle-class prosperity. As a result, the public is now demanding changes in the governance structure that are intended to reduce corruption and strengthen democratic institutions. The recent adoption of the new constitution is one concrete demonstration of this shift in opinion and the government's efforts to respond to it.
Over the long term, increasing democratization and more open processes will increase the demand for environmental investments, such as wastewater treatment systems, and for enforcement of higher standards. If, as seems likely, the current crisis ultimately results in a Thai economy that is more competitive on world markets, local private sector and government capacity to purchase U.S. environmental technology will rebound and may even exceed its current level. Greater transparency is also generally seen as a factor that will strengthen the position of U.S. suppliers.
In the short term, though, the crisis will undeniably lead to the rescheduling or scaling back of many of the specific projects described in this report. The text has been modified to indicate places where changes in growth prospects or project investments can be expected. No effort has been made, however, to modify the underlying analysis to reflect changing economic perspectives, for two reasons. First, it is too early to determine what the middle-term or near-term impact of the crisis will be on government and private sector programming. Any attempt to modify the sectoral analysis, specific project information, or other analysis on the basis of current information would inevitably become outdated almost immediately.
More importantly, the Department of Commerce remains convinced that most of the projects and other measures identified will in fact proceed, albeit on a slower schedule, with modifications in scale or financial structure, or both. U.S. companies should be aware of these opportunities and act now to position themselves for these projects. Indeed, companies that pursue a contrarian strategy and seek to expand their presence in Thailand while others are withdrawing will reap long-term benefits in the form of stronger partnerships forged in a time of challenge for Thailand.