According to international observers, Thailand is the 17th largest
producer of manufacturing output in the world. Among its neighbors,
the Kingdom’s manufacturing sector is ranked second after Indonesia
in terms of production. What measures have manufacturers taken to
ensure they remain competitive in the economic paradigm? What is
the government doing to help the industries to remain competitive?
Thailand’s agricultural commodities exports were equivalent to 70%of its GDP in 2010. The country’s ability to remain economically viable is dependent on the economic situation of the countries it transacts with. This is evident from how increased demands by trade partners helped the Kingdom in recovering from the financial crisis that hit it in 1997—1998.
Recurrence of political turmoil in 2008 and 2014 adversely affected manufacturing production, lowering it by about 36%. Nonetheless, the diversity in the manufacturing industry has always enabled Thailand’s economy to stabilize relatively fast.
In an interview with FDI Spotlight, the Managing Director of Advanced Cool Technology, Mr. Monchai Pornnattawut, revealed, “Thailand used to produce a lot of commodity products and subcontract for developed nations.” This provided Thailand with an advantage in the competitive market by ensuring that it remained solid regardless of any possible political instability or natural calamities.
In 2012, over 2.45 million cars were produced in the Kingdom and about half were exported. Today, Thailand can proudly affirm to be the 7th largest car exporter in through partnerships with auto companies including Ford, Mazda, Honda and Toyota.
“The manufacturing sector is one of Thailand’s most important assets. The automotive industry is the largest player within the sector and plays a significant role in Thailand’s export.” Mr. Taveesak Srisuntisuk, Managing Director at Hexagon Manufacturing Intelligence, asserted regarding Thailand’s automotive industry export.
The government is supportive in expanding manufacturing industry in Thailand. Recently, a corporate tax rate on the car manufacturing sector was reduced to 20%, making Thailand an ideal location for the offsetting up an automotive manufacturing company in the ASEAN region.
Thailand also gains profitably from exports of jewellery manufactured by local artisans. In 2011, jewellery exports generated US $1.23 trillion , signalling high profitability of the sector despite competition from low cost Chinese manufacturers. The government works with companies that provide an immense support to the export business to ensure that they thrive as well as charging lower tax rates for these enterprises.
The consistent economic growth can be attributed to the collaborations between the government and private sector. In 2015, Thailand expanded its GDP by 2.9 % in the third quarter, which was unforeseen. This accelerated growth happened due to higher export demands and increased level of public spending. The people of Thailand are spending money because the government realizes the GDP cannot grow by only depending on the export businesses.
The government of Thailand is working on a proposal to lower the interest rates for manufacturing companies. This program revolves around investing adequate funds and providing undivided attention on the main economic facets in Thailand’s economy. All the stakeholders understand the significance of incorporating hightech level companies in this country and what such companies are seeking when partnering with other like-minded entities.
In an interview with Dr. Katiya Greigarn, the Managing Director of KV Electronics Co., Ltd she asserted, “In this respect, higher technology is something we are looking forward to acquire with a new partner, offering a low-cost skilled labour and the best base for expansion here in SE Asia in exchange.”
The government has supported infrastructural development in the main cities within Thailand, including railway, aviation, roads, water transport and mass transit projects. US$101 billion has been set aside for the Infrastructure Development Plan (2015-2022). The essence is to hasten transport of raw materials and finished products to the respective destinations and consequently increase foreign investment.
More high-tech industries are rapidly increasing in the Kingdom, such as car manufacturers and hardware producers. The government has put up special economic border zones to promote neighboring trade, especially with the launch of AEC. There is essence for the Thai government to have a backup plan that would ensure continuity in improving the manufacturing industry.
Private manufacturing companies enhance this continuity by employing sufficiently trained personnel. Some companies also have sponsorship and in-house training programs for promising candidates who after training lead various departments within the companies. The President and CEO of KCE Electronics Public Company advised that “Thailand needs to continue collaborating with researchers from driving economies like America, China, Japan, and Europe.” With continuous foreign exposure, more companies will be attracted to the country itself.
Thailand is trying to tap into a growing market in the automobile industry – the eco-car. The eco-car is part of a defined niche market that is becoming increasingly popular due to awareness by consumers. Eco-cars have lower fuel costs and help reduce carbon emissions. The government is offering tax rebates, lower registration fees, and other economic benefits for consumers.
The first phase of the eco-friendly car production was attracting foreign investors to manufacture cars in Thailand. The first country to make its mark in car manufacturing in Thailand were Japanese companies like Honda, Toyota, Nissan, Mitsubishi, and Suzuki. These companies received tax breaks of up to 90 percent on import duties for raw materials and finished parts. Currently, Thailand hosts 50 of the top 100 car manufacturing companies in the world.
Thailand’s exports in electronics have raked in in more than US$32 billion in recent years. Computer components make up about 56 percent of the total electronic exports, while integrated circuits make up about 24 percent of the same. Two of the world’s largest hard disc drive manufacturers, Western Digital and Seagate, have based their manufacturing mainly in Thailand. LG Electronics, Sony, and Samsung also have many of their manufacturing plants located in Thailand.
SNC, formerly known as PCL, is a leading OEM and ODM supplying parts for air conditioners, freezers, heaters, and other appliances. In an interview with FDI Spotlight, SNC’s Managing Director, Mr. Somchai Thaisa-nguanvorakul talked about Thailand’s industrial leadership, saying “In ASEAN, Thailand has the biggest supply chain. If we talk about value chains and organizational culture, Thailand is the best in the region. In the industrial, automotive and home appliance industries our nation is certainly leading as well.”
Future investments being projected in Thailand are a broader approach to integrated circuits, which are essential parts of smartphones, and more technologically advanced automotive electronics. Other than high-tech electronics, household appliances are receiving attention by the government as well. Arçelik is a Turkish household appliance manufacturer that recently opened a plant in Thailand that cost US$100 million. Most of the consumers of these devices come from the ASEAN region, which correlates with the economic border zones the Thai government advocates for.
There are also international companies that want to invest in the education of their workers since most of them are already high-skilled. Dr. Watson Ariyaphuttarat, Founder, and CEO of Keen Limited stated, “I would like to educate Thai SMEs and entrepreneurs that you cannot simply be a trading company.The market is saturated with them. Research and development is very important, or you will not grow and expand.”
Thailand has been making its mark by providing high-value products in a vast array of modern markets. The tax incentives and breaks establish Thailand as the top country in the ASEAN community to build manufacturing plants and hire labor. Thailand’s manufacturing industry will continue to experience an acceleration that has potential.