Business-to-Business (B2B) e-marketplace and trade directories are helping reduce India-Thailand trade gap, said Mrs. Amparwon Pichalai, Deputy Director- General, Department of International Trade Promotion (DITP), a government organization under the Ministry of Commerce, Thailand.
In an exclusive interview with SME Times, Mrs. Pichalai said, "The new technology that is used in the market is assisting small and medium enterprises (SMEs) add considerable value to their business, various trade directories and trade portals have helped facilitate trade between India and other countries and this is reducing the barrier to trade between Thailand and India."
DITP performs its role as the main promoter of Thai exports. The organization provides a comprehensive range of services for Thai exporters and international investors wishing to do business with Thailand. Acting as a one-stop service center, the trade body provides trade information and advisory services, match-making link-ups, business networking, statistics on Thai products and manufacturers, as well as helps businesses find suitable trade partners.
Excerpts of the interview...
Recently, Tradeindia.com (managed by Infocom Network Ltd.) has signed an MoU with Thailand's Department of International Trade Promotion (DITP), Ministry of Commerce, effective April 2013. How this will benefit SMEs of both sides?
Amparwon Pichalai: According to the MoU, Thaitrade.com and strategic partner will work together to promote Thai SMEs and Indian SMEs through online channel (world class e-marketplace), online activities, online and offline business matching event and also business opportunity will be increased by market analysis and trade information sharing.
What do you think are the challenges Thai businesses face while trying to do business in India?
Amparwon Pichalai: Any Thai company investing into India has to pass the threshold test of whether such investment is permitted under the government's Foreign Direct Investment (FDI) regulations. FDI regulations apply irrespective of the vehicle of investment, i.e investment, joint ventures or acquisitions.
The next challenge is to identify the vehicle of investment. If 100% investment is allowed under the FDI policy, the investor has the option to set up a wholly owned subsidiary (WOS). If not, a joint venture is available as an option, provided an Indian partner is found as a co-shareholder; this could be one of the many challenges faced by Thai businessmen.
Also if the Thai company decides to invest in India and chooses either a Wholly Owned Subsidiaries (WOS) or a joint venture, funding is the next key issue. Unlike in most other countries, Indian subsidiaries of foreign holding companies cannot be funded by a monthly or yearly transfer of funds from the bank account of the holding company.
Also Creditworthiness of some Indian companies has lately been adversely affected due to cash flow problems in the market. The Thai company should look at bank guarantees (BGs) or letters of credits (LCs) to secure payments. Typically BGs are provided by authorized banks as performance guarantees or guarantees against warranty remediation and LCs are provided (by banks) to secure supply of goods and equipment.
These are some of the major challenges most Thai companies face while trying to do business with India.
How this platform will work?
India and Thailand are neighbours and are linked by millennia-old ties of culture and civilisation. Indo-Thai cooperation is growing in multiple dimensions - emphasizing that India and Thailand stand to benefit from increased trade. The Prime Ministers of both countries recently have directed their respective commerce ministers to work out the India-Thailand Free Trade Agreement (FTA) "at the earliest". When this FTA will come to reality?
Amparwon Pichalai: FTA between Thailand and India has made much progress since the beginning, however there are still a lot of topics that we need to cover in detail to create mutual benefits between both sides such as Trade in Goods, India still not open its market for many Thai major export products. As for service trade, India wants Thailand to allow Indians to come to Thailand and set up business freely, while India will not allow Thai business person to open their business or still have barriers for Thai business person to invest in India.
There are still many standards, including food and agriculture products, between Thailand and India that are not the same. However, for both countries to emerge victorious we must set asides our differences and aiming for mutual benefits through our trade negotiation.
How you see this handshaking?
Amparwon Pichalai: I see it in a very positive way. We can already see that there has been a good and a very healthy past relationship with regards to business between India and Thailand from our FTA's between the 2 countries. We already now have two FTA's. The Thai-India FTA under the Early Harvest Scheme and the ASEAN - India agreement.
The 3 main areas in which the two countries need to focus more on is Trade, Investments & Services. Both countries will benefit by concentration on these 3 fields.
Last year (2012-13), bilateral trade between Thailand and India crossed USD 9.2 billion. Over the past five-years, trade increased at over 15 percent per annum. But still the share of SME sector is very limited as the tourism and food processing sectors are the only major contributor in bilateral trade. Tell more about your focus in Indian SME sector.
Amparwon Pichalai: India which is home to about 48.8 million small and medium business (SMB) units is all set to become the largest SME nation globally, Indian SME space today is largely dominated by micro scale businesses, contributing 95 percent of the SME landscape, followed by small scale businesses contributing 4.8 percent and the rest 0.2 percent by medium scale businesses. As Thailand has already turned into a global tourism spot and Thai food has always been in a great demand in India this could be the reason why these two sectors caught pace over the others, both countries are making efforts to push the other sectors also, as the FTA's are one of the major efforts put in by both countries.
Also the other reasons why only tourism and food processing sectors are the major contributors in bilateral trade could be due to the absence of adequate and timely banking finance, limited capital, non-availability of suitable technology, low production capacity, week marketing strategy, to which we are aware that the Indian and Thai government agencies are working hard to resolve these problems.
What are the possible areas of cooperation with India in SME sector?
Amparwon Pichalai: The possible areas of cooperation between India and Thailand are very wide. Increasing bilateral trade can give opportunities for Thailand to explore the SMEs sectors in India.
The SME sector in India produces a wide range of industrial products such as food products, beverage, tobacco products, cotton textiles, wool, silk, furniture and fixtures, paper & paper products, but products like artificial gems and jewellery, food products, fresh flowers, ornaments and handicrafts have good potential for higher trade and cooperation with India and Thailand.
There have also been several factors that have contributed towards the growth of Indian SMEs and few of these include; funding of SMEs by local and foreign investors, the new technology that is used in the market is assisting SMEs add considerable value to their business, various trade directories and trade portals have helped facilitate trade between India and other countries and this is reducing the barrier to trade between Thailand and India. So we can surely see a great potential for increasing are trade with Indian SME sectors. We are also aware that the Indian Government has been pushing and also financially supporting the SME sector for trade between ASEAN Countries.
For Thailand side, the Department of International Trade Promotion has just introduced new program for Thai SMEs, "SMEs Proactive". The program aims to support Thai SMEs to expand their trade to overseas markets all over the world through various incentive mechanisms. India is one of our target countries on which Thai SMEs pay more attention.
Both the countries have highlighted growing India-Thailand business opportunities, which are the result of Thailand's "Look West Policy' and India's 'Look East Policy". Your view on this?
Amparwon Pichalai: My view on this is very positive as Thailand and India could serve their respective "Look East" and "Look West" economic policies even though the slowing growth globally, as both countries have high potential to expand and serve as gateways to the Asean and South Asian markets.
The new transport routes which are linking Thailand, Myanmar and northern India totaling up to 1,306 kilometers, which will be completed in 2016. This development should promote stronger connectivity between India and Thailand and greatly facilitate business growth. Thailand would greatly benefit from the improved road connectivity, which would facilitate export of many goods to India and Myanmar, so also India can explore a much larger market.
Also the ASEAN Economic Community, which by 2015 will bring greater integration in the region, will also have higher attractiveness for Indian enterprises wishing to trade and invest more in the region; the trade between the two nations is projected to reach US$14 billion by 2014.
Amid slowdowns in many Asian countries, including China and Japan, the two economic giants of Asia, the Indian market has one of the highest potentials for Thai traders and investors. Also, Thailand could have high potential for Indian businesses looking for closer ties with the ASEAN region. So far, Thailand and India have agreed to liberalize trade under the early-harvest scheme covering 83 products, which shows are interest to do business with India.