The economy of Malaysia is the 3rd largest in Southeast Asia, after Indonesia and Thailand, and is the 35th largest economy in the world. Malaysian labor productivity is significantly higher than neighboring Thailand, Indonesia, Philippines or Vietnam due to a high density of knowledge-based industries and adoption of cutting edge technology for manufacturing and digital economy. According to the Global Competitiveness Report 2018, the Malaysian economy is the 25th most competitive country in the world in the period of 2018–19.
Malaysian citizens lead a much more affluent lifestyle compared to their peers in upper-middle income countries like Mexico, Turkey, and Brazil. This is due to a low national income tax, low cost of local food, transport fuel, household essentials, a fully subsidized single payer public-healthcare and comprehensive social welfare benefit with direct cash transfer. With an income per capita of 28,681 PPP Dollars (World Bank, 2017) or 10,620 nominal US Dollars, Malaysia is the third wealthiest nation in Southeast Asia after the smaller city-states of Singapore and Brunei. Malaysia has a newly industrialized market economy, which is relatively open and state-oriented. The Malaysian economy is
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highly robust and diversified with the export value of high-tech products in 2015 standing at US$57.258 billion, the second highest after Singapore in ASEAN.
Despite government policies to increase income per capita in order to hasten the progress towards high income country by 2020, Malaysia's growth in wages has been very slow, lagging behind the OECD standard. Academic research by the IMF and World Bank have repeatedly called for structural reform and endogenous innovation to move the country up the value chain of manufacturing into allowing Malaysia to escape the current middle income trap. Due to a heavy reliance on oil exports for central government revenue, the currency fluctuations have been very volatile, noticeably during the supply glut and oil price collapse in 2015. However the government stepped up measures to increase revenue by introducing the Sales and Service Tax (SST) at 6% rate to reduce deficits and meet federal debt obligations and Table 2.4 present Malaysia Macroeconomic trends.
Table 2.4: Malaysia Macroeconomic trends
30 B. Malaysia Exports – Imports
1. Exports Comprised of two similarly sized land masses in Southeast Asia, namely Peninsular Malaysia and East Malaysia, Malaysia shipped US$247.3 billion worth of goods around the globe in 2018. From a continental perspective, 72.2% of Malaysian exports by value in 2018 were delivered to fellow Asian countries while 10.6% was sold to importers in Europe.
2. Imports Located in Southeast Asia near powerful trade partners including Thailand, Singapore, Vietnam and the Philippines, Malaysia imported US$217.5 billion worth of goods from around the globe in 2018.
Table 2.5: Totals Malaysia Exports & Imports of goods, and services
(In US Billion)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Exports 156 124 165 187 196 206 209 176 168 195 272 Imports 199 157 199 228 228 228 234 199 190 218 247
Source: World Bank
VII. Economy of Cambodia
A. Overview Economy of Cambodia
The economy of Cambodia at present follows an open market system (market economy) and has seen rapid economic progress in the last decade. Cambodia had a GDP of $18.05 billion in 2015. Per capita income, although rapidly increasing, is low compared with most neighboring countries. Cambodia's two largest industries are textiles and tourism, while agricultural activities remain the main source of income for many Cambodians living in rural areas. The service sector is heavily concentrated on trading
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activities and catering-related services. Recently, Cambodia has reported that oil and natural gas reserves have been found off-shore.
Currently, Cambodia's foreign policy focuses on establishing friendly borders with its neighbors (such as Thailand and Vietnam), as well as integrating itself into regional (ASEAN) and global (WTO) trading systems. Table 2.6 present Cambodia globe in 2018. That dollar amount reflects a 177.4% increase since 2014 and a 5.9% uptick from 2017 to 2018.
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The latest available data from 2016 shows that 81.5% of products exported from Cambodia were bought by importers in: United States (21.3% of the global total), United Kingdom (9.5%), Germany (9%), Japan (8.2%), Canada (6.5%), China (6.1%), Thailand (4.2%), Spain (4%), Belgium (3.9%), France (3.6%), Netherlands (3%) and Vietnam (2.3%).
2. Imports In 2017 Cambodia imported $12B, making it the 83rd largest importer in the world. During the last five years the imports of Cambodia have increased at an annualized rate of 0.5%, from $11.5B in 2012 to $12B in 2017. The most recent imports are led by Gold which represent 17.6% of the total imports of Cambodia, followed by Light Rubberized Knitted Fabric, which account for 12.5%.Cambodia mainly imports petroleum products, fabrics, vehicles, wholesale yarn, cigarettes, electrical communications equipment and medicine. Cambodia’s main import partners are China, Thailand, Hong Kong, Vietnam, Taiwan and South Korea. Table 2.7 present Totals Cambodia Exports & Imports of goods, and services.
Table 2.7: Totals Cambodia Exports & Imports of goods, and services
(In US Billion)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Exports 7 6 7 9 11 10 11 13 14 16 19
Imports 5 4 5 7 8 7 7 9 10 12 14
Source: World Bank
33 VIII. Economy of Lao PDR
A. Overview Economy of Lao PDR
The economy of Lao PDR is rapidly growing lower-middle income developing economy. Being one of five remaining socialist states, the Laos economic model resembles the Chinese and Vietnamese socialist-oriented market economies by combining high degrees of state ownership with an openness to foreign direct investment in a predominately market-based framework.
Following independence, Laos established a Soviet-type planned economy. As part of economic restructuring that aimed to integrate Laos into the globalized world market, Laos underwent reforms called the New Economic Mechanism in 1986 that decentralized government control and encouraged private enterprise alongside state-owned enterprises. Currently, Laos ranks amongst the fastest growing economies in the world, averaging 8% a year in GDP growth. It is also forecasted that Laos will sustain at least 7%
growth through 2019 as well.
Key goals for the government includes pursuing poverty reduction and education for all children, also with its initiative to become a "land-linked" country. In the current period, the economy of Laos relies largely on foreign direct investment to attract the capital from overseas to support its continual economic rigorousness. The long-term goal of the Lao economy as enshrined in the constitution is economic development in the direction of socialism by creating the material conditions to move towards socialism. A landlocked country, it has inadequate infrastructure and a largely unskilled work force. Nonetheless, Laos continues to attract foreign investment as it integrates with the larger ASEAN
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Economic Community, its plentiful, young workforce, and favorable tax treatment. Table 2.8 present Lao PDR Macroeconomic trends.
1. Exports A landlocked Southeast Asian nation on the Indochinese peninsula, the Lao People’ Democratic Republic shipped an estimated US$5.6 billion worth of goods around the globe in 2018. That dollar amount reflects a 116.5% increase since 2014 and a 7.5% gain from 2017 to 2018.
2. Imports Laos’ main imports partner is Thailand (66 percent). Other imports partners include China and Vietnam. Top products Laos imports such as Petroleum oils, Automobiles with diesel engine, Telecommunication equipment, Non-alcoholic beverages, and Cement.
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Table 2.9: Totals Lao PDR Exports & Imports of goods, and services
(In US Billion)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Exports 1.52 1.49 2.30 2.45 2.97 3.16 4.16 4.62 5.20 5.83 5.42
Imports 2.65 2.73 3.51 4.49 6.14 7.16 7.73 7.46 6.62 6.92 7.10 Source: World Bank
IX. Economy of Myanmar
A. Overview Economy of Myanmar
Myanmar is an emerging economy with a nominal GDP of $69.322 billion in 2017 and an estimated purchasing power adjusted GDP of $327.629 billion in 2017 according to World Bank. For 2018 estimate, the countries per capita will be $6,509 in PPP per capita and $1,490 in nominal per capita. Escalating conflict in Rakhine State has added to the complexity of issues impacting Myanmar, where almost one-third of the country is conflict-affected. Populations in other parts of the country– such as Kachin, Kayah, Kayin and Shan – are experiencing, or are prone to, humanitarian crisis. The Rakhine crisis alone has led to more than 700,000 people fleeing into Bangladesh, with around 150,000 internally displaced people remaining in Rakhine.
Economic growth remains strong by regional and global standards but is slowing. Myanmar’s economy grew at 6.8 percent in 2017/18, driven by strong performance in domestic trade and telecommunications, but offset by slowing growth in manufacturing, construction and transport sectors. Real GDP growth is projected to moderate to 6.2 percent in 2018/19.
The medium-term macroeconomic outlook nevertheless remains positive.
Economic growth is set to recover to 6.6 percent by 2020/21, driven by an expected pickup
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in foreign and domestic investment responding to recent government policy measures.
Building on the continuing implementation of the Myanmar Sustainable Development Plan, the government’s policy intent was reflected in recent reforms including implementation of the new Myanmar Companies Law, opening of the insurance sector and wholesale and retail markets to foreign players, services sector liberalization, and loosening restrictions on foreign bank lending and Table 2.10 shown Myanmar Macroeconomic trends.
1. Exports A sovereign state in Southeast Asia, the Republic of the Union of Myanmar shipped an estimated US$15.4 billion worth of goods around the globe in 2018.
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That dollar amount results from a 34.3% gain since 2014 and also signals a 10.8% uptick from 2017 to 2018.
From a continental perspective, 84.4% of Burmese exports by value were delivered to Asian countries while 11.2% were sold to Europe importers. Myanmar shipped another 2.5% worth of goods to North American. Smaller percentages went to Africa (1.3%), Latin America (0.2%) excluding Mexico but including the Caribbean, then Oceania led by Australia (0.2%).
2. Imports a Southeast Asian country surrounded by India, Bangladesh, Thailand, Laos and China, the Republic of the Union of Myanmar imported an estimated total US$24.2 billion worth of goods in 2018. That dollar amount reflects a 48.9% increase since 2014 and a 25.5% gain from 2017 to 2018.Top suppliers accounting for 88.1% of Myanmar’s international purchases were: China (31.8%), Singapore (15.2%), Thailand (11.3%), Japan (5.5%), Malaysia (5.2%), India (5.1%), Indonesia (4.8%), United States (3.6%), Vietnam (3%) then South Korea (2.7%) and Table 2.11 present Totals Myanmar Exports & Imports of goods, and services.
Table 2.11: Totals Myanmar Exports & Imports of goods, and services
(In US Billion)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Exports 4 4 5 9 9 12 16 17 16 19 20
Imports 7 7 9 9 9 11 11 11 12 14 17
Source: World Bank
38 X. Economy of Vietnam
A. Overview Economy of Vietnam
The socialist-oriented market economy of the Socialist Republic of Vietnam is the 45th-largest economy in the world measured by nominal gross domestic product (GDP) and 33rd-largest in the world measured by purchasing power parity (PPP). The country is a member of Asia-Pacific Economic
Vietnam has become a leading agricultural exporter and served as an attractive destination for foreign investment in Southeast Asia. In a similar fashion to other Communist countries after the end of the Cold War, the planned economy of Vietnam lost the momentum for productivity and sustainable growth. In the current period, Vietnam's economy relies largely on foreign direct investment to attract the capital from overseas to support its continual economic rigor. Foreign investment on the luxury hotel and sector and resorts will rise to support high-end tourist industry and Table 2.12 shown Vietnam Macroeconomic trends.
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1. Exports The eastern-most nation on Southeast Asia’s Indochina Peninsula, the Socialist Republic of Vietnam shipped an estimated US$290.4 billion worth of goods around the globe in 2018. That dollar amount reflects a 93.3% gain since 2014 and a 35.7%
improvement from 2017 to 2018.
2. Imports Vietnam imported an estimated US$255.8 billion worth of goods from around the globe in 2018, up by 73% since 2014 and up by 21.5% from 2017 to 2018.
Vietnamese imports represent 1.4% of overall global imports which totaled an estimated
$17.788 trillion for 2018 and Table 2.13 present Totals Vietnam Exports & Imports of goods, and services.
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Table 2.13: Totals Vietnam Exports & Imports of goods, and services
(In US Billion)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Exports 81 70 85 107 114 132 148 166 175 212 244
Imports 63 57 72 97 115 132 150 162 177 214 214
Source: World Bank
XI. Thailand’s Border Trade with Neighboring Countries
In the first four months of 2017, Thailand’s border trade with its neighboring countries was valued at 354.6 billion baht, an increase of about 4 percent over the same period in 2016. Out of the value, 222.3 billion baht involved exports, up by 10.5 percent, and 132.3 billion baht involved imports, a decline by 4.6 percent. Thailand gained a trade surplus of 90 billion baht with neighboring countries during the period. The country has common borders with Malaysia, Myanmar, Laos, and Cambodia, with its provincial customs offices supervising cross-border trade. All the customs offices also have temporary and permanent border checkpoints to facilitate border trade, which is considered important for enhancing the country’s competitiveness.
Thailand’s border trade with Malaysia from January to April 2017 was worth 186 billion baht, an increase of 14.5 percent over the same period of 2016. Major Thai exports to Malaysia include rubber and rubber products, iron and steel, electric-circuit boards, and processed wood. Imports from Malaysia include computers, industrial machines, auto parts, and air-conditioners. In the first four months of this year, border trade with Myanmar was valued at 58.5 billion baht, a decrease of 10.3 percent. As for border trade with Laos, it was valued at 65.5 billion baht, an increase of 0.4 percent. Thailand’s border trade with Cambodia was valued at 44.5 billion baht, a decline of 5 percent.
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Thailand attaches great importance to developing relations with neighboring countries in every dimension and at all levels, under the concept of "Stronger Together.” It is ready to move forward with the four neighboring countries, which are also members of ASEAN.
The Ministry of Commerce has played an important role in facilitating trade contact between Thai entrepreneurs and their counterparts in those countries.
XII. Migrant Workers in Thailand
Thailand has become a key destination for migrant workers from neighboring countries, and increasingly from further afield in ASEAN. As of December 2018, there were 3.08 million registered migrant workers in Thailand (Ministry of Labour, 2018).
Women and men migrant workers make a substantial contribution to Thailand’s economic performance. According to a study by the ILO and OECD, migrants were responsible for 4.3 - 6.6 percent of Thailand’s GDP in 2010, while representing 4.7 per cent of the employed population. Thai Government signed Memoranda of Understandings (MOUs) on employment cooperation with the governments of Cambodia, Lao People’s Democratic Republic (Lao PDR) and Myanmar, which established a channel for regular labour migration to Thailand from neighboring countries. However, only a small proportion of migrants have up to recently entered Thailand through the MOU process due to the complicated, lengthy, and expensive procedures involved.
Thailand developed a more comprehensive legal framework to manage labour migration in parallel with the implementation of the MOU processes. While the MOU channel and the border employment scheme remained the two formal channels for migrant
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workers to enter Thailand, the government allowed irregular migrants already working in Thailand to come forward and formally register through the so called regularization procedures. During the period, 1,187,803 migrant workers came forward and completed their regularization process. Overall, an increased number of migrant workers have been recruited through these formal channels from Cambodia, Lao PDR, and Myanmar. The Government of Thailand has announced that with the new legal framework, low-skilled migrant workers from Cambodia, Lao PDR, Myanmar, and Viet Nam will only be recruited through MOU channels or border employment. No further amnesty measures will be granted.
XIII. The PEST analysis
This research is study of Anchor Economy: The case of Thailand by use PEST analysis. A PEST analysis is a strategic business tool used by organizations to discover, evaluate, organize, and track macro-economic factors which can impact on their business now and in the future. The framework examines opportunities and threats due to Political, Economic, Social, and Technological. (College of marketing, Oxford, 2018).
P = Political factor’s determine the extent to which a government may influence the economy or a certain industry. For example, a government may impose a new tax or duty due to which entire revenue generating structures of organizations might change.
Political factors include tax policies, Fiscal policy, trade tariffs etc. that a government may levy around the fiscal year and it may affect the economic environment to a great extent.
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E = Economic forces that could impact on your success. These factors are determinants of an economy’s performance that directly impacts a company and have resonating long term effects. For example, a rise in the inflation rate of any economy would affect the way companies’ price their products and services. Economic factors include inflation rate, interest rates, foreign exchange rates, economic growth patterns etc. It also accounts for the FDI (foreign direct investment) depending on certain specific industries who’re undergoing this analysis.
S = Social attitudes, behaviors, and trends that impact on your organization and target market. These factors scrutinize the social environment of the market, and gauge determinants like cultural trends, demographics, population analytics etc.
T = Technology that can affect the way you make, distribute, and market your products and services. These factors pertain to innovations in technology that may affect the operations of the industry and the market favorably or unfavorably. This refers to automation, research and development and the amount of technological awareness that a market possesses.
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Chapter 3 : Research Method
I. The PEST Analysis
The methodology used on this thesis is known as the case study. Case study is defined as “a research methodology is used in a postgraduate thesis involving a body of knowledge”. This methodology generally investigates a contemporary phenomenon within its actual situation when the borders between the phenomena and the background are blurry (Yin R. K., 1994).
The first step is use to the PEST analysis in order to understand and extract the characteristics of the Thailand’s economic environment in order to identify possible reasons that keep Thailand international trade, Neighboring Countries trade and migrant workers activity. This tool allows to identify a narrower context of the study and assumes that specific and indirect circumstances that characterize economic environment are able to influence organizational capacity to produce value (Peng & Baptisa Nunes, 2007).
II. The Gravity model
The gravity model has become an efficient tool in the analysis of international economic relations due to its theoretical derivation and ability to explain these relationships. The contending issue now is the appropriate specification and estimation techniques. The large economies tend to spend large amounts on imports because they have large incomes. They also tend to attract large shares of other countries spending because
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they produce a wide range of products. So, other things equal, the trade between any two economies is larger, the lager is either economy (Paul R Krugman, 2011).
III. Data
To determine the sources of Anchor Economy: The case of Thailand, A study is based on secondary data in annual time-series and data covering the period 2008 to 2018.
The major data source for macroeconomic variables in this study from the Office of the Ministry of Labor Thailand, Thailand Information and Communication Technology Center, Customs Department, United Nations Thematic Working Group on Migration, World Bank, and World Trade Organization.
46 IV. Research Framework
The research framework is summarized as follows:
This study in Thailand and neighboring countries economy and look information about numbers of GDP, international trade, imports – exports with neighboring countries, investment and development, migrant workers activity, and use PEST analysis to understand the Thailand economic environment and the theory of gravity model for support thesis information and the last to offer policy recommendations to the government of Thailand.
Figure 3.1: Research Framework Policy Recommendations
Thailand Economy (PEST Analysis, The Gravity model)
Malaysia Economy
Cambodia Economy
Lao PDR Economy Myanmar
Economy
Vietnam Economy
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Chapter 4 : Major Findings
I. PEST Analysis of Thailand
A. Thailand’s Political Analysis
Thailand, officially the Kingdom of Thailand, formerly known as Siam, is a country located at the centre of the Indochina peninsula in Southeast Asia. It is bordered to the north by Myanmar and Lao PDR, to the east by Lao PDR and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the west by the Andaman Sea and the southern extremity of Myanmar. Its maritime boundaries include Vietnam in the Gulf of Thailand to the southeast, and Indonesia and India in the Andaman Sea to the southwest.
Thailand is divided into 77 provinces, which are gathered into 5 groups of
Thailand is divided into 77 provinces, which are gathered into 5 groups of