Thai e-retailers brace for Jack Ma's 'great durian road'

Alibaba offers fruit growers and farmers access to massive China market

BANGKOK -- At a seminar this month to forecast Thailand's two-way trade with China, the commerce minister, Sonthirat Sonthijirawong, hailed e-commerce as the business model that could propel the country to new heights.

If tapped well, Sonthirat said, online business will expand its share of bilateral trade between Thailand and its biggest trading partner, which is expected to hit $120 billion by 2020 -- a considerable rise from $73 billion last year.

This wider embrace of e-commerce follows the digital touch of Jack Ma, co-founder and executive chairman of Alibaba Group Holding, China's largest e-retailer.

During a recent swing through Bangkok, Ma impressed Thailand's ruling military regime by signing $352.4 million worth of deals to expand Alibaba. Among the deals was a blueprint to attract Thai farmers and fruit growers to tap the Chinese market through Alibaba's Tmall, China's largest online business-to-consumer platform.

To make a point, Ma turned to a popular Thai fruit, the durian -- with its prickly green exterior and pungent smell surrounding a soft, creamy flesh -- and put tens of thousands of them on Tmall for sale.

China's state-run Xinhua News Agency reported what happened then: "Thailand was astounded by the glory of Chinese e-commerce when 80,000 pieces of durians, weighing 200 tons, were snapped up by Chinese consumers on Tmall of Alibaba within 60 seconds."

Ma is dangling even sweeter offers that have the military junta salivating. Over the next five years, he wants to expand his investments in Thailand to $3 billion on the back of plans to bring Thai agriculture products, financial services, logistics, tourism, and small and medium-size enterprises to his online emporium.

"In the near future, 80% of SMEs will be operating globally through online platforms," Ma said, warning those who think otherwise that "companies that operate only locally will find it very hard to thrive."

Ma is entering a market that is witnessing growing competition for online business. More digitally savvy Thai shoppers are buying everything from fashion to fish sauce through digital platforms.

Thailand, with a population of nearly 69 million and with 57 million internet users, leads Southeast Asia for time spent online. According to a report published in January, "Digital 2018 Global Overview," by We Are Social, an online platform based in New York, Thais spent 9.38 hours a day on the internet last year, followed by the Philippines with 9.29 hours, and Indonesia at 8.51 hours.

Such online penetration has kept the Thai e-commerce market ticking. According to the Electronic Transactions Development Agency, a Thai government body, the market was valued at 2.56 trillion baht ($79.72 billion) in 2016. It is forecast to reach 3 trillion baht by next year, with the cross-border e-commerce market being a key driver.

"Cross-border e-commerce is transforming the way SMEs and online merchants operate their business," Smorn Terdthumpiboon, president of Thailand Post, which operates the country's postal service, told a local newspaper.

Lazada Group, a Singapore-based e-commerce operator in Southeast Asia and in which Alibaba has a majority stake, is the e-commerce market leader in Thailand. It competes with regional and international operators such as Shopee, Amazon.com, 11street, and Thailand's first e-commerce website, Tarad.com, which recently was acquired by Thai beverage and retail conglomerate TCC Group.

In addition to the military junta, there are other seasoned economic players in Thailand who are welcoming the prospect of Ma shaking up some business sectors, such as the profitable domestic banking industry, which has resisted opening up to international competition.

Korn Chatikavanij, a former finance minister and chairman of the Thai Fintech Association, regards Thai banks as having been "profitable for too long," and financial services from Alibaba will be a catalyst for change if "competition does not come from traditional banks."

"This will reduce the physical need for traditional collateral, it will reduce lending costs and it will help the poor to access loans than going to loan sharks," Korn told the Nikkei Asian Review.

But a public discussion about Ma's entry into Thailand has also raised troubling questions, including whether the country is ready to manage the Alibaba juggernaut and concerns over the possibility of the Chinese online giant steamrolling local competition.

Pawoot Pongvitayapanu, founder of Tarad, has weighed in with a warning. The Alibaba platform could result in Chinese products flooding the Thai market and open the door for Chinese middlemen to replace Thai intermediaries, he told local news media last month.

Some steps have been taken by the ruling military leaders to slow that tide. Economists at the World Bank say that the Thai government has taken up the challenge to ensure competition before Ma appeared on the horizon.

"Two issues need to be considered for the intersection of a sound competition policy and the digital economy, and Thailand has been addressing the first," said Kiatipong Ariyapruchaya, the Thailand senior country economist at the World Bank. "But Thailand needs a stronger national data strategy to ensure a level playing field in the digital age."

The World Bank flagged that issue in its April publication, "Thailand Economic Monitor: Beyond the Innovation Paradox." The country's 2017 Competition Act tackles aspects that range from the governance of a competition agency and merger control thresholds to anti-competitive agreements. But it will be tested in its implementation, given the poor track record of the previous competition act of 1999. "Although 100 complaints were filed, the 1999 act resulted in only one successful prosecution," the report notes.

The World Bank calls for a more expansive view of data, including vigilance on private-sector data. An arrangement that promotes open data in government and integrating data will ensure better services to the public and to businesses, the report says. Missing are national policies "with regards to nonpersonal machine-generated data or to the conditions in which such data can be exploited or traded," it warns.

Ma's trail also conveys the changes in store for Thai-Chinese trade. One emerging view is that Thai fruit growers and farmers, who Ma wants to attract as suppliers for his online emporium, are set to gain, said Kanathip Thongraweewong, director of the Institute of Digital Media Law at Bangkok's Kasem Bundit University.

But Thai consumers have begun to complain that they will be left with "lower quality fruits and higher prices," he said. "That is a fear during this durian season."

Source: https://asia.nikkei.com/Business/Companies/Thai-e-retailers-brace-for-Jack-Ma-s-great-durian-road