Day 10

January 19th, 2010 by under Uncategorized. No Comments.

In an attempt to be cognizant of the importance of writing in an organized manner, I am going to break today’s session into 3 different parts, each part highlighting a different speaking session. At 12:30 p.m., we had already spoken with the U.S. Embassy, Uli Gulich on Real Estate, and AmCham. Although I feel on the brink of information overload at this point, I want to outline a few important lessons learned.

On the U.S. Embassy: Robert Griffins and Chip Peters from the U.S. Embassy graciously opened our eyes to U.S. relations with Thailand. On the surface, Thailand has gone from exporting 25% of its goods to the U.S. to 11% over the past few decades. However, the decrease represents a growth in Thai exports rather than a decrease in U.S. consumption of them. To dig a bit deeper into U.S. and Thailand’s history is to find a story about the “treaty of amity.”  Renewed in 1966, this treaty concluded that American businesses in Thailand would be treated as Thai businesses, and vice versa. In the 1997 financial crisis, the Thai Baht dropped significantly from $25 to $1, diminishing the wealth of the even richest Thai. Because of the original treaty and long standing trade with the U.S., Thailand-and most the world, presumed that the U.S. would lend Thailand money to relieve debt. At the time, the U.S. was doing very well economically and had decided to take a more rational approach to foreign economics, a more responsible approach. The decision was made to stay out of the crisis, to “float the baht.”

*A fun fact on Business in Thailand: in the brand new Thai constitution, it is stated that an environmental and health-impact assessment be made before any industrial state is constructed or implemented.

On Uli Gulich and Thai Real Estate: Look for a beautiful country on the rise economically and you will find Thailand and real estate. Uli, a Smith Alumni with fearlessness for travel and an entrepreneurial nature unmatched, briefed us on the rising market. Winding through her 5 step process in handling foreign strategy, Uli showed us a survey taken by real estate developers in Phuket, a beautiful region along Thailand’s coastline. A market with a 2000% growth rate in just one year, there was a lot to be learned. For instance, reputation is deemed less important by the developers because everything is so new. What is more important, however, is creativity. That is, creativity in financial situations and creating competitive advantage. While illustrating Porter’s Five Forces, Uli added another box about infrastructure availability. Convenience in getting around and obtaining resources has become the most vital aspect in some perspectives. It should also be noted that the real estate in Phuket is not simply about a nice villa with a kitchen and pool, but also a community with security, a golf course for appeal, and cultural attractions for meaning. The holistic value to Phuket’s real estate is undeniably necessary.

On AmCham: Judy Ben, and AmCham employee and resident of the aforementioned “Global Village” for 20 years, spoke with us about business in Thailand; a common theme of the trip. However, Judy specifically enlightened the room on the topic of Intellectual Property.  After asking us who had bought, or was planning to buy, knock-off goods, Judy proclaimed that she would change our minds. Skeptical as any group of American, college students looking to get a great deal, we were intrigued on what was to come. Within the five minutes it took for Judy to explain the nature of the knock-off goods, my sentiment went from surprised to almost righteously anti-knock offs. Here’s why: the fake Louis on the street is a product that is part of the business to fund criminal activity. What kind of criminal activity? Terrorism. It seems that the drug trade and sex trafficking was becoming too risky and not returning enough profit. So, expanding into another field of “fundraising,” if you will, came about through knock-off goods. Easy to produce, very low risk in retribution and almost 1000% monetary returns are apparently a gleaming appeal. Contrary to surface assumptions, the bag you buy will not support the local economy and has not “fallen off the back of the truck.” This money fuels the supply chain of corruption and the slave labor involved; invaluable insight to the dark side of business.

So where does the need for knock-offs come from? Although a consumer may not be able to truly afford a real Gucci handbag, sporting the latest “knock-off” creates a mental illusion of wealth. The Thai market, better known as the “Night Bazaar” or “Weekend Bazaar”, has a set-up that is similar to a shopping mall that is only made up of small kiosks and is outdoors. Competition for sales is fierce, so haggling is strongly recommended.  A typical sale may take anywhere from three to thirty minutes and sometimes longer depending on the vendor at the kiosk. Offers in the bazaar are similar in nature to those made in the American housing market. Offers should be priced low enough so that they do not offend the seller, but high enough so that the seller knows the purchaser is serious. So, there is a systematic approach to selling the knock-offs. These counterfeit products have a negative effect on the economy and cause many fashion designers to lose major profits and exclusivity of their product. As a matter of fact, counterfeiting and piracy sap $200 billion to $250 billion from the U.S. economy annually, according to the U.S. Chamber of Commerce (Clark). Also, designers have been robbed of their ideas and their profits.  And on top of it, it’s funding terrorism. Moral of the story; it’s bad, bad, bad.

The night bazaar, however, is a great segue to to the entreprenuerial aspect of Southeast Asian countries, like Thailand (and Vietnam). The incentives to start a business in countries such as these are much more pronounced, as the necessity for a steady income and the desire for independence is much more crucial to sustaining a living. In the United States, government programs such as welfare and the ready availability of resources and aid create an ideology of a safety net, despite unemployment. As validated by labor statistics, which show these countries as maintaining much lower unemployment rates than the United States, job creation is more widespread in Thailand, Vietnam, and Singapore. The most recently updated CIA World Factbook ranks countries by unemployment rates, with Thailand at number 8, Vietnam at 23, and Singapore at 25, with unemployment rates of 1.6%, 2.9%, and 3%, respectively. On the contrary, the United States has an unemployment rate of 9.4%, and is listed at an exorbitantly high rank of 108. While residents of the U.S. are dependent on the government, the people of Southeast Asia are focused on self-reliance, and as a result most people become self-employed rather than depend on the government or anyone else for employment. This self employment is shown through the kiosks at the night bazaar and food stands on the street throughou