Industry & Retail
From The Report: Thailand 2014
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On the economic road from farms to factories to services, Thailand has come a long way. Through a combination of low costs, sound policy, a good work ethic and a relative lack of labour activism, the country has managed to make the transition from an economy based on agriculture and commodities to become one of the most industry-oriented nations in the world. Manufacturing makes up 34% of the Thai economy, a larger portion than in all of its regional competitors, and Thailand is the world’s 17th-largest manufacturer and number 14 car maker. Industry value-added in Thailand rose from 18.5% of GDP in 1960 to a high of 44.7% in 2007. Exports grew rapidly over the same period, while agriculture shrank as a portion of GDP. Thailand’s minimum wage law was applied across the country as of January 1, 2013, settling the rate at $9.09 per day. This raised the average wage by 22.4% nationwide, and in some provinces by as much as 70%. Investors in manufacturing are attracted by the prospect of having assemblers and suppliers in multiple ASEAN countries, which would reduce risk as there would be no single bottleneck. If Thailand can move gently to the next generation of production, great rewards await.

This chapter contains an interview with Prasert Boonchaisuk, Minister of Industry.

Articles from this Chapter

Overview

The middle step: An economy heavy on manufacturing undergoes a gradual transition
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On the economic road from farms to factories to services, Thailand has come a long way. Through a combination of low costs, sound policy, a good work ethic and a relative lack of labour activism, the country has managed to make the transition from an economy based on agriculture and commodities to become one of the most industry-oriented nations in the world. Manufacturing makes up 34% of the economy by value added as a portion of GDP, a larger slice than in all of its regional competitors, including…

Interview

OBG talks to Prasert Boonchaisuk, Minister of Industry
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Interview:Prasert Boonchaisuk What can we expect to see as a result of the Board of Investment’s new industrial incentives? PRASERT BOONCHAISUK: The Board of Investment is putting in place incentives to restructure the Thai industrial sector. These will prioritise value-added production, including high-technology products, the employment of environmentally friendly procedures that use less energy and labour, and the preservation of important target industries such as automotives and electronics.…

Analysis

Veins of steel: Despite a host of challenges, the Thai metals industry looks set to remain a strong player
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Thailand is no small player in the steel industry. It is the number 33 manufacturer in the world for crude steel, behind only Malaysia and Vietnam in the ASEAN region, according to World Steel Association figures for 2012. In the first half of 2013, reports the South East Asia Iron & Steel Institute, it was the region’s largest producer of flat steel, and took second place for long steel after Vietnam, with production in the latter up 16.2% year-on-year. Even with such production muscle, the…

Analysis

At home abroad: Industrial companies are cautiously moving into foreign markets
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Investment overseas has risen rapidly in recent years, especially in manufacturing. According to Bank of Thailand statistics, outward foreign direct investment (FDI) by Thai manufacturing companies in 2012 totalled $14.4bn, up from $8.5bn the previous year and $3.0bn in 2007. The largest manufacturing sub-sector for FDI that year was food products, with a total of $3.6bn invested abroad, followed by computer, electronic and optical products ($2.3bn), chemical products ($1.8bn) and beverages ($1.2bn).…

Analysis

Change of clothes: The transfer of capacity overseas is as much about moving up the value chain as about keeping down costs
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Facing a slump in its market for traditional garments and textiles, the industry in Thailand is shifting both its aim and its focus. It is starting to think of regional economies as places not only to sell jeans, suits and dresses but also to manufacture them. With the US, Europe and China seeing weak growth and costs at home going up rapidly, the country has had to change the way it thinks, looking more towards ASEAN for both markets and capacity. In this respect, the situation for garments may…

Overview

Feeding the roots: Even as political unrest holds back sales, the retail sector is investing
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The Thai retail sector is a study in contrasts. On the one hand, it is suffering acutely as the political protests drag on and consumer spending and confidence continue to fall. Investors are worried about the country’s economic future, in the near term at the very least, and are holding their breath and their money. On the other, Thailand is one of the leaders in retail, in the region if not in the world. Its department stores are seen as benchmark-setting, and as likelier to expand, acquire and…

Analysis

Driving stakes abroad: Expansion into foreign countries will spread out returns
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Thai retailers have been rushing overseas, both to the near abroad and across the globe. Three things motivate them: the limits of Thailand’s domestic market size, perceived opportunities in other countries, such as Indonesia, and low prices for acquisition targets, especially in Europe. Another drive is self-confidence: the knowledge that they are very good at what they do. Thai outlets, especially department stores, have a lot to offer consumers and companies in other countries. Their services,…

Analysis

Buy in luxury: Change is under way in the high-end shopping segment
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Thai retailers are moving up the value chain. What is more, they are already coming from the upper rungs, having more or less always catered to the high end. The country’s premier malls in downtown Bangkok are far more tailored to the rich than malls in the West, or even in Singapore and Hong Kong. Not only do they carry the most expensive global brands; they also have a critical mass in many high-end names found in few other places in the world. The line-up at Siam Paragon, for example, has stores…