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Saturday, April 26, 2008

Political climate holds key to better business outlook

All thanks to a better political climate following the general election in December.

The king of duty-free shopping - as he likes to be known in Thailand and abroad - Vichai has started to woo back some of the world's luxury brands, such as Rolex, which had previously turned down an offer to open shops at Suvarnabhumi Airport.

He has also approached the chief executive of Korea's Lotte Duty Free, one of the four duty-free retailers at Incheon International Airport, for a partnership to develop a new shopping and entertainment complex near Suvarnabhumi Airport.

In other words, Vichai has regained some confidence lost over the past one-and-a-half years following the September 2006 coup.

Cases filed by King Power Group of Companies seeking restoration of the two duty-free and commercial-retailing contracts previously terminated by Airports of Thailand (AOT) for a massive compensation of Bt67 billion, are pending in court.

Vichai hopes the ongoing dispute with the previous AOT board will be settled over the next few months so that he can come up with clear business plans for the second half of the year.

As a previous duty-free outlet operator at Don Mueang airport - now serving only domestic routes - King Power got its duty-free retailing contract extended when Suvarnabhumi Airport opened in late 2006.

In the commercial-retailing space, the company won the contract in a bidding where Central, Imperial, U Chuliang and DFS groups also took part.

Vichai hopes the country's political atmosphere will remain conducive for growth and the Tourism Authority of Thailand, Thai Airways International and other related public and private sector bodies will join forces to promote the tourism sector.

In his opinion, good facilities for duty-free shopping are important for the country's competitiveness as a tourist destination, especially for emerging markets such as China.

In addition, the duty-free business has become a major source of income for new airports. For instance, Singapore's Changi international airport now earns 60 per cent of its income from non-aero activities, which includes a big chunk from duty-free shopping.

Changi was also ranked fourth in terms of duty-free sales, which are estimated to be more than US$400 million (Bt12.6 billion).

The latest statistics gathered by King Power show that London's Heathrow airport was the world's No 1, with duty-free sales estimated to be more than $900 million for 2006.

In second place is the United Arab Emirates' Dubai at more than $600 million.

Hong Kong International Airport and Suvarnabhumi plus Don Mueang were ranked tenth and 11th, respectively, with sales of more than $300 million.

In Thailand, non-aero activities generate only 40 per cent of AOT's income. Thus, it becomes necessary to boost revenues from duty-free retail outlets and other commercial non-aero activities.

Vichai said the government should also encourage hundreds of thousands of Thai students and workers returning from abroad to buy duty-free goods upon arrival in Thailand instead of buying them from abroad.

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