Eastern Seaboard Report

October 2014 – Prepared by Mark Bowling, Chairman ESB

's bearish automotive market has deterred two Japanese car makers, Mitsubishi Motors Corporation and Nissan Motor, from commencing production of their new eco- car. "Our parent company has not yet approved the exact time frame for production, as the domestic market has experienced weaker growth than was enjoyed in 2012," said Masahiko Ueki, president and chief executive of Mitsubishi Motors (Thailand). "Next year's prospects are unpredictable, as the economy and consumption will take time to recover," he said. Mitsubishi was one of the five companies that applied for Board of Investment (BoI) promotion for the second phase of the eco-car scheme. All eco-car production will be done at Mitsubishi's third plant in Industrial Estate in Chon Buri .  The government confirmed changes to its high-speed development plan, adding a - route and splitting the -Map Ta Phut route into two — Nong Khai- and Nakhon Ratchasima-Bangkok-Map Ta Phut. The Nong Khai- Map Ta Phut route would cover 737 kilometres and cost 393 billion baht, while the Chiang Khong-Phachi route would be 655 km and cost 349 billion. Two high-speed rail routes costing a combined 741 billion baht would link Thailand with southern China.  Bang Na-Trat office demand up - With office rents in Bangkok's central business district rising by 15% last year and nearly 6% more so far this year, more companies are considering Bang Na-Trat Road an alternative due to its competitive rents and convenient access to both the CBD and the Eastern Seaboard. However, the office market in this area suffers from a severe shortage of quality office supply. Suphin Mechuchep, managing director of Jones Lang LaSalle (JLL), said Bang Na-Trat was known predominantly as a major manufacturing and logistics hub in eastern Bangkok. But in recent decades, the area has emerged as a major commercial location, with a number of retail and office developments lining the main road.  The Thai division of South Korea's Posco has broken ground on a continuous galvanising line plant. Posco Coated Steel (Thailand) is setting up the factory to make high-end steel products to satisfy growing demand for automotive steel sheets in Thailand. Construction started in October on the Rayong facility, which will have annual capacity of 450,000 tonnes. The plant is expected to be finished in June 2016 at a cost of US$300 million. The site is in the Amata City Industrial Estate, the epicentre of Thailand's automotive industry and close to Laem Chabang port and many steel buyers.  Taco Bell, the giant Tex-Mex food chain, is testing a new menu platform that's hotter than hot, and it pays homage to a small town in Thailand. About 70 restaurants in the Kansas City market have begun testing Sriracha, the wildly-popular hot sauce - in everything from tacos to nachos. If the test is a hit, the chain is expected to more widely roll-out the Sriracha platform, which is made with the paste of chili peppers and has its origins in Thailand, where it was first made in the Eastern Seaboard town of the same name 80 years ago.

British Chamber of Commerce Thailand, 7th Floor 208 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: 038 427 771 Fax: 038 427 772 Email: [email protected] www.bccthai.com

 PTT Plc, the national oil and gas conglomerate, plans to invest more than 100 billion baht on a new gas pipeline from Rayong's Map Ta Phut to Bangkok. The project will be its fifth pipeline to serve the constantly increasing demand for gas in the future, says chief executive and president Pailin Chuchottaworn. "Our four gas pipelines are operating at nearly full capacity, so we have to prepare for the new one since construction will take years," he said. Details of the new pipeline have yet to be finalised as the company is waiting for the results of the feasibility study. The project would also need to meet the requirements of the state's power development plan (PDP). However, he said that it would probably be routed to link with pipelines carrying gas from in order to secure gas supply in the future.  Leading industrial conglomerates have agreed to make Map Ta Phut Industrial Estate acceptable among the surrounding communities by turning it into an eco-industrial town by 2018, say members of the Community Partnership Association (CPA). CPA was founded by PTT Group, SCG, BLCP Power, Dow Thailand and Glow Group to develop eco- friendly industrial works and provide mutual cooperation. Regulations are under development with the Federation of Thai Industries and the Industrial Works Department to govern raw materials use, energy use, logistics management and green supply chains. "In the last five years, PTT Group has laid a green roadmap that consists of manufacturing processes and finished products," said Pailin Chuchottaworn, president and chief executive of PTT.  Property developer Chewathai Ltd plans to launch three residential projects worth a combined 3 billion baht and 10-20 ready-built factories in 2015 in a show of confidence in the new government. New projects next year will include a high-rise condo near a mass transit line, a low-rise condo and a single-house project. It will also develop 10-20 ready- built factories in Rayong with an investment of 30-40 million baht each. In the first half, it bought a 20-rai site at Amata City in Rayong, where it has a 40-rai plot. It already has 10 ready-built factories after an investment of 300 million baht with full occupancy and rental revenue of 3 million baht per factory per month.  The Industry Ministry is on course to set up six new industrial estates in a bid to accommodate industrial waste management businesses, says Industry Minister Chakramon Phasukvanich. "We're going to choose one plot for each area to build up specific-purpose industrial estates for managing waste from manufacturing," said Mr Chakramon. Mr Chakramon said the plan was to have one industrial estate project each in Rayong, Chon Buri, Chachoengsao, Ratchaburi, and . The plots need to be large enough and located far from local communities.  SET-listed developer Property Perfect Plc (PF) is planning a joint venture with a large industrial estate developer for a residential township project on 100 rai along the Eastern Seaboard by year-end. "We need to diversify into more provinces," Chief Executive Mr Chainid said. "Bangkok property prices keep rising, driven by soaring land costs. Some Bangkokians will eventually be unable to afford a housing unit." The project will comprise residential areas including single houses, townhouses and condominiums across all price ranges.

British Chamber of Commerce Thailand, 7th Floor 208 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: 038 427 771 Fax: 038 427 772 Email: [email protected] www.bccthai.com

 Toyota Motor Thailand has urged the Thai government to stimulate domestic auto sales, following a 38% contraction in the first eight months of this year. Export sales also failed to offset the sharp decline during the period, rising by a mere 3% year-on-year. Total production will likely be 1.985 units, short of the 2.1-million-unit target, but the ministry is confident output would reach 2 million units given typically heavy sales promotion campaigns in the fourth quarter. The Toyota executive also asked the government to consider amending the law revising up the maximum weight of trucks to 2.2 tonnes from 1.6 tonnes. With the amendment, Thailand can expand its export markets.  Despite an unfavourable market outlook, German luxury car maker BMW Group Thailand is committed to expanding its outlets and service centres for its three brands — BMW, Mini and BMW Motorrad. President Matthias Pfalz said the group planned to increase its BMW outlets to 23 this year from 17 in 2013, bump its Mini centres from six to 11, and increase BMW Motorrad outlets, the group’s big bike unit, from four to eight. He did not reveal the cost for the expansion. "The group remains confident in luxury car prospects despite Thailand’s bearish car industry," he said. "Luxury car sales are projected to grow by single digits this year from 18,000 units last year," he said. For the first eight months this year, BMW Group Thailand reported its car sales fell by 2.2% year-on-year to 5,051 units. BMW sales dropped 7% for the period to 4,512 units, but Mini sales surged 80% to 539 cars. BMW Motorrad sales rose 30% to 348 units, driven largely by locally assembled motorcycles.  The Board of Investment (BoI) has approved investment applications worth nearly 90 billion baht, mainly for companies making environmentally friendly cars or involved in renewable energy. Secretary-general Udom Wongviwatchai said the BoI approved investment applications worth 89.7 billion baht at Friday's meeting chaired by Prime Minister Prayut Chan-o-cha. The investment is mainly for 18 large projects, with six worth a combined 52.7 billion baht slated for the second phase of the eco-car scheme. Ford Thailand will spend 18.2 billion baht to make environmentally friendly cars, with annual production capacity of 180,000 vehicles and 2,000 engines. Its US peer General Motors will invest 13.1 billion baht to make 158,000 vehicles annually.  Thailand-based developer Kingdom Property debuted last weekend its latest beachfront retail project in Central called ‘The Bay’, with a total value of THB5 billion (USD154 million). Construction of the development is set to begin this November. Owned by Beachfront Capital, the project was fully financed by Krung Thai Bank, whilst Colliers International Thailand has been tasked to market the development. According to Nigel Cornick, CEO of Kingdom Property, The Bay will push Pattaya’s revival as a world-class and family-friendly retail estate investment destination.

The following news items kindly provided by the SATCC.

 Nawarat Patanakarn Plc (NWR) have several new projects in the bidding process. These include construction of Baranee Park, Romklao valued at Bt500mn, road improvement in Lao PDR valued at Bt600mn and PTT jetty work in Rayong for Bt600mn.

British Chamber of Commerce Thailand, 7th Floor 208 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: 038 427 771 Fax: 038 427 772 Email: [email protected] www.bccthai.com

Fire Victor plans to launch an initial public offering on the Market for Alternative Investment early next month, becoming the first distributor of fire-protection equipment on the Thai stock market. The IPO proceeds will be used for opening a branch in Rayong, as the firm is gearing up to cater more to petrochemical companies, investing in computer hardware and SAP's software system, to pay back some debts, and to use as working capital.

 Prime Minister General Prayut Chan-o-cha said recently that three routes linking industrial zones with neighbouring countries would be developed under a dual-track rail network, which would utilise the 1.438- metre standard gauge. The routes - part of the Kingdom's five-pronged plan to develop an inter-city transportation network - are Bangkok-Nakhon Ratchasima-Map Ta Phut, Bangkok-Rayong and Nakhon Ratchasima-Nong Khai. They will cover a combined length of 705 kilometres.  The Prime Minister has also announced Laem Chabang port will also be improved, to be able to accommodate more vessels and become a "centre for rail-based container freight transportation".  Amata Corporation Plc (AMATA) expects land sales to grow next year. The investment climate is improving after the restoration of political calm and with that, foreign direct investment (FDI). Also, Amata raised its direct stake in upcoming power projects to 20% from 8-10% now. This means its power exposure will increase to 256MW by 2019 from 78MW. Positives in the pipeline: 1) Thai Chinese Rayong Industrial Realty Development (TC) may buy more land from Amata City Co., as it is meeting strong demand from Chinese expansion. 2) May list Amata B.Grimm Power.  Property Perfect is focusing on residential developments in Bangkok and Eastern Seaboard provinces such as Chon Buri and Rayong  Currently, PTT has a 1st-phase LNG receiving terminal with an annual capacity of 5 million tonnes at Map Ta Phut, in , and is building a 2nd-phase LNG receiving terminal in Map Ta Phut with a similar capacity - with completion scheduled for the second quarter of 2017.  Krungthai Card (KTC) will try to acquire new customers in 14 main provinces after its study showed that the spending habits of people there were similar to Bangkok residents', and their credit-card spending was higher than the national average. The 14 provinces are , , , Nakhon Ratchasima, , , , Chon Buri, Rayong, , , , Prachuap Kiri Khan and Phetchaburi. KTC grouped these provinces as its main targets based on income, population and the number of facilities such as grocery stores, hotels and airports.  Tourism and Sports Minister Kobkarn Wattanavrangkul has announced a one-year plan to reform the tourism sector, aiming to give it a more positive image and promoting the country as a quality destination. One of the plans is for Pattaya, which is faced by many problems, from an oversupply of hotel rooms to its nightlife and prostitution market. "Pattaya is a good place for a pilot project for change. It could be turned into a world-class sports city. I would love to see more world water sports and other events in the city, as well it being a home for athletes' training during the low season," she said.  Fly Now (FN) is renovating three branches in Pak Chong, Hua Hin and Sri Racha at a total cost of about Bt100 million. The other outlets are in Phetchaburi, Sing Buri, and Pattaya.  Pattaya has been urged to rebrand itself as a family and MICE destination after a study showed that more visitors from neighbouring countries will visit the city when the Asean Economic Community comes into full effect next year. According to a recent study by the Designated Areas for Sustainable Tourism Administration (DASTA), Pattaya - famed for its nightlife - needs heavy development in four major areas. They are: addressing water pollution and other environmental issues, building several new landmarks, adding more activities or attractions, and developing infrastructure. However, DASTA said some of the proposed initiatives like new landmarks required consultation with the community before commencing. DASTA managing director Taweebhong Wichaiditgnated said that Pattaya needed to rebrand itself to create a positive image so it attracted more families and a larger slice of the lucrative MICE market. It has budgeted

British Chamber of Commerce Thailand, 7th Floor 208 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: 038 427 771 Fax: 038 427 772 Email: [email protected] www.bccthai.com

Bt154 million for developments in Pattaya next year. In Pattaya, DASTA has proposed upgrading three attractions - the Bali Hai cape, the ancient Chinese town of Chak-ngaew, and the fishing village in Nakrue. It also wants to turn Koh Lan into a green island. Last year, 9 million foreign tourists visited Pattaya, generating revenue of more than Bt80 billion. "If Pattaya's image is restored, the number of tourists could reach 15 million per year in 2019," Taweebhong said.

British Chamber of Commerce Thailand, 7th Floor 208 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: 038 427 771 Fax: 038 427 772 Email: [email protected] www.bccthai.com