INDUSTRIES AND MANUFACTURING IN THAILAND: TEXTILES, FOOD AND JAPANESE CARS

INDUSTRIES AND MANUFACTURING IN THAILAND

Manufacturing and industry have played a significant role in Thailand’s economic growth. Since most manufactured products are export items they bring tremendous amount of income to the country each year. Major Industries include: tourism, textiles and garments, agricultural processing, beverages, tobacco, cement, light manufacturing such as jewelry and electric appliances, computers and parts, integrated circuits, furniture, plastics, automobiles and automotive parts.

Thailand is presently also a major center of the auto assembling industry in Southeast Asia. The industry creates employment and income for Thailand and the Thai people, and enables further development of the steel production industry. In addition, world's second-largest tungsten producer and third-largest tin producer

Thailand is Asia's most developed auto parts market and a hub for the likes of Toyota, Honda and Mercedes-Benz, making cars and car parts the country's No. 1 export in 2012. The floods in 2011 disrupted more than 100 components makers.

Thailand is the second-largest exporter of computer hard drives and makers other components used in personal computers. Thailand’s electronics industry faces competition from China, Malaysia and Singapore. Important and fast-growing production industries are machinery and electric tools, furniture and wood products, canned food, and plastic products, while production industries that account for major export items are high-technology products such as integrated circuits and parts, hard disc drives, electrical appliances, vehicles, and vehicle parts. [Source: Thailand Foreign Office, The Government Public Relations Department]

In 2006 industry contributed 44.9 percent of gross domestic product (GDP) but employed only 23 percent of the workforce. This relationship is the opposite of the one applying to agriculture. Industry expanded at an average annual rate of 3.4 percent during the 1995–2004 period. The most important subsector of industry is manufacturing, which accounted for 34.5 percent of GDP in 2004. The industrial production growth rate in 2011 was -9.3 percent (2011 est.). country comparison to the world: 165. [Source: Library of Congress, CIA World Factbook]

Over the years Thai manufacturing has been plagued by low production and sloppy work; the manufacturing base was weak; and the component base of industry was foreign owned. Traditional village-level industries: sewing machine operation, blacksmithing, boat building. Brass, pottery and charcoal manufacturing. In Chiang Mai, hundred of highly-skilled women make fishing lures. Most are exported to the United States, which boats a $1-billion-a-year fly-fishing market.

Some companies that had factories in Thailand have switched their operations to China. Thailand and Malaysia took 10 years building their expertise, production base and infrastructure for a precision metalworks that could sell components to Swiss watchmakers. The Chinese took over the business in only a year. China is also creating a market for Thai goods.

In the 1980s, South Korea was leading manufacture of sports shoes and cheap textiles. These products are now made in China, Thailand and Indonesia while South Korea now manufactures semi-conductors and other high tech products. Thailand has hoped to follow a similar model.

Nike and Poor Working Conditions

Nikes are manufactured in Vietnam, China, Indonesia and Thailand. It has been criticized for hiring underage workers, paying subsistence wages, hiring abusive managed and exposing employees to dangerously high levels of toxic chemicals. Some Nike factories have been described as "little more than prison labor camps." Employees work 72 hour weeks and can be fired for refusing over time. One study found that workers at factories that make Nikes and Reeboks, monitored in 1995 and 1997, earned as little as 10 cents an hour and toiled for up to 17 hours a day. In response to criticisms, Nike asserts it doesn't make shoes, it subcontract the work.

Responding the criticism Nike promised to raise the age of employment to 18, improve safety use water-based rather solvent-based glues and use machines that do cause serious injuries. Some factories offer free day car and health checks and provide continuing education for their employees.

In 1998, Tim Larimer of Time wrote: "Nike's factories in the region are above average...[We] found them to be clean, brightly lit and well-ventilated. Where the employees have to use foul-smelling glues, there are plenty of fans to carry the fumes.”

Mattel has a factory in Thailand See China

Industrial and Manufacturing Areas in Thailand

There are vast industrial zones around Bangkok. The ones north of Bangkok in the Ayutthaya area were severely flooded in 2011 (See Floods Under Nature). In terms of regions: 1) central Thailand is a major center for industry. 2) Fishing, rubber, tin mining and tourism are the primary money earners in southern Thailand. 3) In the north tourism is an important industry. Opium is still grown but is no longer the cash crop it once was (heorin labs are in Laos and Myanmar). 4) The Northeast is Thailand’ poorest region. Most people are farmers. Hand-woven textiles are also a major product there.

In the 1980s manufacturing was heavily concentrated in the Bangkok metropolitan area, as indicated by its share of 35.3 percent of total manufacturing employment. The next highest area of concentration was in the Center. Industries outside Bangkok were based primarily on the processing of agricultural products, such as rubber, sugar, cassava, and rice, or on the repair of agricultural implements. Bangkok's role as the manufacturing center resulted from its position as the leading port, the largest market, and the transportation, communications, and financial center of the country.[Library of Congress, 1987 *]

In the late 1980s, Thailand was considering large-scale industrial development plans, such as the Eastern Seaboard Development Program, which included deep-sea port facilities, a natural gas-based petrochemical complex, a soda ash project, a fertilizer plant, and an integrated steel complex. The petrochemical industries complex was to be developed southeast of Bangkok and was to include a plant to process ethane and propane into ethylene and propylene. It was to be a public and private joint-venture project costing an estimated US$600 million. * Eastern Seaboard Development Program

The Eastern Seaboard Development Program has created a major industrial zone that extends from east of Bangkok toward the Cambodian border. Its importance lies in the fact that it is Thailand's center for export oriented industries. High value goods, such as Japanese branded automobiles, which are manufactured there and shipped to other ports, are among the many exports. The region comprises Chon Buri Province, Chachoengsao Province, Samut Prakan Province and Rayong Province. [Source: Wikipedia/\]

The site was chosen because of its proximity to Bangkok, access to raw materials and labor supplies from the Northeast, availability of an existing deep-sea port on the Gulf of Thailand, and excellent road and communications infrastructure. One objective of the program was to decentralize economic activities away from Bangkok. The other goals were the development of a wide range of industries, including agro-industries, around Si Racha-Laem Chabang and the development of tourism in and around Pattaya, a popular beach resort area. The total capital requirement for the project was estimated at US$4.5 billion: about 66 percent for heavy industrial development; about 20 percent for infrastructure; 7 percent for housing, industrial estates, and urban services; and the remainder for light industries. [Library of Congress, 1987 *]

Laem Chabang port, Thailand's largest and 20th busiest port in the world as of 2008, is the region's port. Bangkok, Suvarnabhumi Airport and the port are all linked by the Bang Na Expressway tollway. Two large infrastructure projects worth a total of 36 billion baht, both railways, were approved in October 2007, to be built to railway links up from Korat and Lat Krabang with Laem Chabang port In addition, the Chon Buri Motorway, Thailand's first motorway, also links the region with Suvarnabhumi Airport and Bangkok. In November 2007, Thailand's completed its second motorway, Bangkok's Outer Ring Road. /\

The region is home to many huge industrial estates. Other than its manufacturing and shipping industries, it also has a diverse service sector consisting of the tourism, construction, and retail industries. Pattaya, the major tourist city, is also located here, and is only second to Bangkok in Thailand for the number of high rises. The region is also popular as a retirement area for foreigners. /\

However, development hasn't come without consequences. Serious problems resulting from pollution have plagued the Map Ta Phut Industrial Estate in Rayong, an industrial zone for petrochemical and heavy industries that has suffered from heavy metal and organophosphates poisoning. Factory workers in the region are among the highest paid in Thailand, often more than doctors in the region, but occasionally suffer physiological ailments. A lawsuit filed by local villagers in 2007 led to a cascade of decisions that in 2009 stopped work on many projects under construction, for not being in compliance with environmental provisions in the country’s new Constitution. /\

Industry and Manufacturing in Thailand in the 1970s and 1980s

The industrial sector in Thailand contributed considerably to economic growth during the 1970s and 1980s. As a percentage of GDP, industry accounted for an average of 25.7 percent in the 1970s and about 29 percent in the mid-1980s. The average annual growth rate was 9.3 percent for the 1970s, with a slowdown to 6.7 percent in 1985, which was still very respectable by international standards. Manufacturing constituted the most important industrial subsector, providing an average of 17.9 percent of GDP in the 1970s and about 19.8 percent in the mid1980s . Construction accounted for an average of 4.8 percent of GDP during the 1970s and rose to 5.1 by the mid-1980s. Mining and quarrying represented an average of 1.8 percent of GDP in the 1970s and remained fairly constant. The annual growth rate was the highest for the public utilities industrial subsector in the 1970s and mid-1980s, 13.1 percent and 8.8 percent, respectively. The annual growth rate for manufacturing dropped from an average of 10.1 percent in the 1970s to 7.3 percent in 1985. A decline in the growth rate of mining and construction occurred during the same period. [Source: Library of Congress *]

Manufacturing was the most important industrial subsector in Thailand, comprising on average 25 percent of each addition to GDP (incremental GDP), or 70 percent of all industrial value added during the 1970s and mid-1980s. Manufacturing was characterized by a high reliance on agricultural products, including rubber products, textile products, food processing, beverages, and tobacco. Thailand's food and agriculture share of manufacturing value added was about 36 percent by the mid-1980s, compared with 20 percent for South Korea and 22 percent for Malaysia. The next most important area of manufacturing was textiles, clothing, and leather products, produced mainly for export, with 23 percent of manufacturing value added. Machinery and transport equipment, which consisted mostly of repair and assembly of motor vehicles, accounted for 11 percent, and chemicals accounted for 7 percent. The remaining 23 percent included processed minerals, wood, rubber, carpets, batteries, rope, gunnysacks, plastic goods, tires, footwear, and an expanding domestic small arms production. *

Employment in the manufacturing subsector accounted for 7.9 percent of total employment by the mid-1980s and had absorbed over 16 percent of labor force growth during the 1970s. Textile, apparel, and leather firms had the highest share of manufacturing employment, with 25.8 percent in the early 1980s, followed by processed food, beverage, and tobacco firms, which accounted for 19.9 percent. Furniture and other wood products firms accounted for 15.8 percent of manufacturing employment; minerals, metals, and metal products, 12.6 percent; transportation equipment, 8.5 percent; and other manufacturing firms accounted for the remaining 17.4 percent. The growth in manufacturing employment resulted both from the absolute growth of the subsector itself and from the labor intensiveness of such industries as textiles. Small-scale firms with fewer than 10 workers employed 50 percent more workers at the beginning of the 1980s than all larger firms. However, both groups had the same average annual growth rate of around 10 percent in the 1970s. *

Exports and State-Owned Industries in Thailand in the 1980s

The composition of Thai foreign trade reflected the manufacturing sector of the Thai economy. Exports of processed food, leather, wood, rubber, and basic metals represented a considerable share of manufacturing output. The capital and intermediate goods industries were less developed, however, necessitating high levels of imports of those products. Exports of manufactured goods grew from 5.5 percent of total exports in the 1970s to about 30 percent by the mid-1980s. Textiles and garments were the most important contributors in the 1970s, accounting for almost half of the total manufactured exports, but by the mid-1980s they had dropped to about 13 percent because of rising foreign protectionism of textiles. Exports of manufactured goods that grew rapidly during this period were wood products, nonmetallic minerals, electronics, electrical machinery, jewelry, and precious stones. [Library of Congress *]

State-owned manufacturing firms produced tobacco, playing cards, liquor, marble, jute, sugar, paper, textiles, leather goods, glass, batteries, and pharmaceutical products. Each state enterprise was required to submit an annual operational and investment budget to be approved by its board of directors, its parent ministry, the Bureau of the Budget, and the National Economic and Social Development Board under the Office of the Prime Minister. Each firm had on its board of directors between nine and eleven members, all of whom were appointed by the parent ministry. The board was responsible for setting prices with the approval of the parent ministry. State enterprises were more unionized and more powerful than private firms and often had salaries 50 percent higher than those in the civil service and in some private firms. They also offered higher fringe benefits, bonuses, and overtime pay. Planning for privatization of some unprofitable state-owned manufacturing firms was under way in the mid-1980s, but the government faced labor opposition and other difficulties in selling these firms. *

Industrial Policy in Thailand in the 1980s

The Thai industrial sector was under the supervision of seven governmental agencies. The Ministry of Finance administered taxes and duties and provided tax refunds on exports. It was involved in large-scale industrial projects in the role of deciding on government equity participation, arranging public foreign borrowing to support the project, and extending protection through tariffs. The Board of Investment provided investment incentives, and the Ministry of Commerce controlled prices and international trade. The Ministry of Industry issued factory licenses, drew up industrial regulations, and enforced zoning laws. It also provided technical assistance, management training, and financing for small- and medium-sized enterprises. The Industrial Finance Corporation of Thailand lent long-term funds to medium- and large-scale firms from credit given by the government. The Bank of Thailand provided foreign exchange and rediscount facilities to selected industries and exporters at concessionary terms. Finally, the National Economic and Social Development Board established policy guidelines and targets for the industrial sector. In 1982 the Industrial Restructuring Committee was created to coordinate the various agencies and to formulate detailed policy proposals in line with economic development plans. [Library of Congress *]

Import tariffs were the most important protective measure used for the industrial sector. In the 1960s, the nominal tariff rates were low, ranging from 25 to 30 percent. In the 1970s, the rate went up to a range of 30 to 55 percent for consumer goods. By the end of 1978, nine import categories had tariff rates above 90 percent, including alcoholic beverages, shoes, perfume, cosmetics, and automobiles. In the early 1980s, the government attempted a more uniform tariff structure and lower protectionism in conformity with the Fifth Economic Development Plan. The adjustments included a reduction in tariffs to 60 percent on 270 categories of imported commodities; a change in tariffs to 30 percent for 1,970 items; and an increase in rate to 5 percent for those nonessential items that had been exempted. Goods considered essential, such as milk for infants or fibers used in textiles, remained exempted. *

Other protective measures included price controls, which were quite pervasive in the 1970s but were relaxed at the beginning of the 1980s, except on petroleum products, white sugar, and sweetened condensed milk. Quantitative restrictions on imports were increased in the early 1980s to cover forty-six products. Regulations requiring a certain percentage of domestic content in manufactured imports included 30 to 40 percent for commercial vehicles, 45 percent for automobiles, and 70 percent for motorcycles. *

In order to encourage investment, the Board of Investment provided incentives, such as guarantees against nationalization and price controls, tax exemptions of up to 8 years, and tariff surcharges of up to 50 percent to protect against competing imports. The basic objectives of the board were to promote laborintensive industries, exports, and regional decentralization of industry. *

Japanese Manufacturers in Thailand

There are more than 7,000 Japanese companies and 46,000 Japanese business people in Thailand. Japanese companies employ more than 700,000 Thai workers. On top of that Japan is also Thailand’s largest investor and biggest trading partner. Japan began moving into Thailand in a big way in the 1970s and 80s. A number of Japanese companies set up factories in the kingdom after the rise in the value of the yen after the 2008-2009 global financial crisis and the March 2011 earthquake and tsunami. For many Japanese companies Southeast Asia provides a convenient alternative to China, where anti-Japanese sentiments can run high.

In September 2010, The Nation reported: “Japan has long been one of the biggest investors in Thailand. Over the years, the Japanese investment record here has been demonstrably impressive, with long-term interest a priority factor, along with a solid commitment to continually transfer technology to local staff. One of the successes has been the Thai automobile assembly industry, which has successfully developed because of the presence of Japanese car companies since the 1970s. At that time it became too expensive for Japanese investors to keep certain manufacturing facilities at home, so they looked to promising investment opportunities abroad - of which Thailand was one. [Source: The Nation, September 3, 2010~]

“Since the yen has strengthened versus the US dollar, it makes sense again for Japanese investors to look overseas. With the yen rising to a 15-year high, the Japanese now see continuing cooperation with developing countries as essential to maintaining competitiveness. Aside from relocating industrial plants to more competitive locations, the Japanese government's cooperation in infrastructure projects also provides opportunities for its companies to engage in infrastructure development in emerging economies. Other Asean members such as Vietnam and Malaysia are aware of this and have been vigorously attracting Japanese investment, because they see technology development as national priorities. ~

“Over the past 40 years, Thailand has successfully followed Japan's "flying geese" development model, and has taken great strides up the technological ladder. Thais have become familiar with the Japanese business culture, and have welcomed the employment security that this culture has traditionally brought with it. The new wave of Japanese investment suggests that Japanese businesses are moving towards environment-friendly operations, energy efficiency and effective waste management. These are areas in which Thailand has a strongly shared interest with Japan.” ~

With the relationship between Japan and China having become troubled, some observers predict Thailand will enjoy increased importance as a production base in Asia.

Japanese Firms in Thailand

Many Japanese companies have plants and other business facilities in the suburbs of Bangkok and other provincial areas. According to the Thai Board of Investment, Japan is the largest investing country in Thailand. For Japanese automakers and electrical appliance manufacturers, the country is a leading production base. According to the Japan External Trade Organisation, 1,458 Japanese companies were operating in Thailand as of April. In 2012, Japanese companies made 761 investments worth a total of 348.4 billion baht (about 1.11 trillion yen or US$11 billion). [Source: Masahiro Takeishi and Takahiro Tsujimoto, Yomiuri Shimbun, December 3, 2013]

In Thailand, large-scale antigovernment demonstrations erupted in 2006, 2008 and 2010. Economists estimate the demonstrations in 2010 caused 460 billion yen worth of damage to that nation’s economy. At the time, Mitsubishi Heavy Industries Ltd. closed an office of its local affiliate in Bangkok. Mos Food Services Inc., which was operating its Mos Burger chain in the country, suspended services at three restaurants in central Bangkok.

Massive floods in 2011 submerged the factories of automakers, major electrical appliance makers, parts makers and many other companies, forcing them to suspend production. Canon Inc.’s plant, which manufactures ink-jet printers, halted production for about two months after the floods. Sony Corp.’s plant, which manufactures digital cameras and other products, also suffered serious damage. The floods caused sales losses of about 200 billion yen and cut about 70 billion yen from operating profit in Sony’s fiscal 2011 consolidated business results.

Some Japanese companies have moved or plan to move operational bases from Thailand to nearby countries, such as Cambodia and Laos. In October, Nikon Corp. established a new plant that makes single-lens reflex cameras in Laos and transferred part of its Thai plant production processes there.

Compounding these fears is the fact that the current Thai administration raised the minimum wage in January 2013, pushing up labour costs. Keiichiro Oizumi, a senior research fellow of the Japan Research Institute, said Japanese companies will likely continue to reevaluate their operations in Thailand. “Moves to transfer some production processes to other countries with lower labor costs while keeping production bases in Thailand will also accelerate,” Oizumi said.

Thailand is a production and export base for Toyota, whose four factories here churned out nearly 800,000 vehicles last year. Tanada hoped production could reach 1 million in three to four years, a goal that would probably require another 15-20 billion baht ($455-$610 million) of investment, he estimated.

Difficulty of Finding Markets for Thai-Produced Consumer Goods

Anthony Faiola wrote in the Washington Post, “What troubles economists deeply is that there is no easy answer to how countries like Thailand can get back on globalization's gravy train. One of the Asian tigers that collapsed in 1997 in a debt and currency crisis, it emerged from its ashes like its neighbors, by exporting to the United States and Europe. For now, that route is closed. [Source: Anthony Faiola, Washington Post, March 5, 2009 =*=]

“In Bangkok, the export industry is in triage. Ami Zarchi, president of Tel-Dan textiles, is an entrepreneur looking for a cure. When his main markets in United States and Europe went south last year, he did what many economists say Asian-based exporters must do to survive: tap local markets while seeking out new consumers in the developing world, particularly in China. He has managed to market more of his company's pillows and sheets to Thais in recent months. But even during boom times -- which these are decidedly not -- profit margins for domestic sales are not the same. Thais simply cannot pay as much as Americans for his wares. So he has slashed production, reducing his workforce to 250 from 600 over the past six months. =*=

He has also tried China, but tapping the Chinese consumer, he said, is like scaling the Great Wall. The same is true for countries like Singapore, where China passed the United States as a larger trading partner in the mid-2000s. Despite that growth, only 4 percent of Singapore's exports, including circuitry, microchips and food-processing materials, are bought by China's hundreds of millions of new consumers. =*=

Instead, the vast majority of items Singapore, Thailand and other Asian nations sell to China are part of a now-broken global supply chain. China bought up parts and materials from the region largely for use in its own assembly lines churning out televisions, DVD players and other goods destined for the United States and Europe. "Look, you can't sell consumer products to the Chinese because they make everything cheaper there already," Zarchi said. "Unless you have a fruit they cannot grow, a fish they cannot catch or medical equipment they cannot make -- yet -- then it's nearly impossible. I don't see how China can be our future. And yet, I don't know what else will be either. The Americans? The Europeans? Not for a while." =*=

Thailand's Food Industry

Thailand has a large fresh, frozen and semi-cooked food industry. In 2000, it exported over $10 billion worth of food. Among the interestingly-named products you can buy in Thailand are Shrak brand chili peppers, Pigeon brand canned foods and Dragonfly sauce. Bottles of pickled chilies have pictures of sea horse on the labels. Thai farmers and food producers make Western-style foods such as ricotta and mascarpone. Cream cheeses are produced from cows that graze in grasslands around Khao Yai National Park. Thailand’s Chateau Interfarm for a time was Southeast Asia’s only foie grass producer. Most its product was sold to five-star hotels.

According to the Thai government: “Thailand ranks among the top of the world's food producing countries in several food categories, such as rice, cassava, potatoes, sugar, chicken, lobster, canned fish, and fruit. Thailand is therefore considered one of the world's important food exporting countries. The fast-growing demand for food by the world's population bodes well for the limitless expansion of the consumer market.[Source: Thailand Foreign Office, The Government Public Relations Department]

One Thai entrepreneur hoped to strike it rich, marketing ready-to-eat canned rice. The canned rice came in three varieties—brown, jasmine and glutinous—and could be prepared by placing the can in boiling water for three minutes and emptying the can into a bowl and heating in a microwave oven.

See Agriculture, Poultry, Shrimp

Textile Industry in Thailand

The textile and clothing industry is the biggest manufacturing employer in Thailand, with more than 1 million workers, and is a major export-oriented textile industry. Thailand exports about $6 billion of ready-to-wear clothing. It is manufacturing center for famous international fashion houses such as Espirit, Guy Laroche, Giordano and Polo Ralph Lauren. Thailand is trying to develop its own domestic brand names to be sold on international market.

According to ASEAN report: “Although Thailand is usually thought of as an agricultural powerhouse, its textile and apparel industry continues to make a large contribution to the country’s economic growth. The industry is fully integrated, meaning it has an upstream sector (synthetic fiber and yarn manufacturing), an intermediate sector (manufacturing fabric, spinning, weaving, knitting, bleaching and dyeing ) and a downstream sector (apparel manufacturing) . [Source: SourceAsean.com, thaitextile.org August 11, 2010]

Apparel has been the largest sector in terms of production, employment and, for a long time, export value. But since 2007 the export value of textiles has exceeded that of apparel. Thai textile and apparel industries accounted for 3.4 percent of the country’s gross domestic product in 2008, or $ 9.93 billion. Textiles and apparel is considered the second - most important industrial segment for employment. Some 4,300 firms employ more than 1.05 million workers. Apparel accounts for the overwhelming majority of that number, but employment gradually decreased in 2009 because of new machinery .

In 2009 , textile and apparel export s to the US, Europe, Japan and the Association of Southeast Asian Nations ( ASEAN ) significantly decreased from the previous year due to decreased consumption and intense competition . Export s totaled $6.444 billion in 2009. In 2008 the most popular items were T - shirt s, synthetic filament yarn, and synthetic stable fiber. Thailand still imports most of the cot ton, yarn and fabric it needs for textile and apparel production, limiting its return on exports. Cotton growing is curbed by a government ban on commercialization of all transgenic plants. Thailand does not subsidize cotton prices, leaving little incentive to grow the crop. Thus, sugarcane and cassava are more lucrative for farmers . Thailand is a major global producer of fabric, though much of it is low-to-medium quality and used locally. Apparel manufacturers use most of the fabric, with the upholstery, bedding , and furniture sectors accounting for the rest . Most high - end apparel produced for export uses higher qu ality fabric from Japan, Taiwan, and South Korea.

Value of clothing and textiles exports in 2002: $5.3 billion, 18th in the world. Textiles were a big export earner for Thailand in the 1980s and 90s with earnings topping $5 billion a year. [Source: WTO and OECD]

See Fashion, Silk.

Competition and the Textile Industry in Thailand

Thailand’s textile industry faces competition from China and Vietnam. Nick Cumming-Bruce wrote in the New York Times: “Thai garment manufacturers had been bracing for the end in December 2004 of the Multifibre Arrangement, the World Trade Organization agreement that had regulated the international garment and textile trade, and for the onslaught of Chinese competition that they expected to follow it. "We were thinking a good number of factories would go out of business," Tienchai said. Instead, to the relief and surprise of the Thai industry, it is expanding. By the end of last year, China had agreed to reimpose limits on its exports to the United States, the biggest market for Thai garment producers, and to the European Union. "A lot of customers have come back to Thailand because they just can't get the service they need from China," said Felix Kastner, managing director of Come Prime Fashion Garments near Bangkok. "The more complicated and lower-quantity orders moved in our direction." [Source: Nick Cumming-Bruce, New York Times, August 11, 2005]

“Some Thai companies have closed in the past year, notably those selling mainly to the domestic market, but most of the garment producers are producing at their capacity limit, Kastner said. Indeed, bigger companies are doubling and tripling in size and the industry as a whole needs to find another 60,000 workers, said Tienchai, the president of the manufacturers' association. So acute is the labor shortage, he added, that companies are being forced to relocate from around Bangkok to Thailand's poor northeastern provinces, closer to the main source of labor. This upturn has bought Thailand's garment industry time, but it needs to position itself for the more fierce competition it can expect in the years ahead, according to those in the industry. "We shouldn't try to compete with China and Vietnam," Tienchai said. "Their wages are less than half ours. We have to move on to something different." [Ibid]

Automobile Industry in Thailand

Thailand is Southeast Asia's largest producer of cars and is hub for carmaking serving Southeast Asia, the Middle East and Australia. It was the third largest car exporter in Asia after Japan and South Korea for some time but has been surpassed by China in recent years. The potential for sales in the Thai market is one reason so many car companies set up shop in Thailand.

Over a half million cars were sold in Thailand in 1995, a 19 percent increase from the year bore. At that time more cars were sold in Thailand than Australia. By 2004 automobile production had reached 930,000 units, more than twice as much as in 2001. The industry creates employment and income for Thailand and the Thai people, and enables further development of the steel production industry. Most of the auto plants are in the eastern province of Rayong or north of Bangkok near Ayutthaya.

Thailand now produces over 1.5 million cars a year. Its car production volume is predicted to increase 25 percent to 2 million units in two or three years. Economists say Thailand—with its cheaper labor costs and lower corporate tax rate—will become one of the world's top 10 car producing nations.

A dozen international car companies make cars or truck in Thailand. They include Ford, General Motors,Toyota, Honda, Nissan, Isuzu and Suzuki. Many of these companies make cars that are sold both in and outside Thailand. Toyota and General Motors operate their largest Southeast Asiam manufacturing production sites in Thailand.

In the 1990s, Thailand boasted the second largest pick up truck market in the world after the United States. In 2004, Thailand had an 80 percent tariff on cars built in Japan. A free trade agreements has reduced these tariffs over time.

Thailand is Asia's most developed auto parts market and a hub for the likes of Toyota, Honda and Mercedes-Benz, making cars and car parts the country's No. 1 export in 2012. The floods in 2011 disrupted more than 100 components makers.

Japanese Car Makers in Thailand

Japanese companies dominate the Thai car market. At one time about 80 percent to 90 percent of production, sales and exports were taken up by firms affiliated with Japanese car makers. Toyota, Honda, Mitsubishi, Nissan, Isuzu and Suzuki all have factories in Thailand.

Toyota, Honda and Nissan use Thailand as a production base for exports to neighboring countries and beyond. Nissan makes cars through the Siam Motors Nissan Company. Isuzu has two plants making pick-up trucks in Thailand and has set up the country as the base of its export operations. The second factory opened in 2012, increasing the company’s capacity to 400,000 trucks a year.

Takeshi Nagata and Yoichiro Kagawa wrote in the Yomiuri Shimbun: “Stung by a triple whammy of the strong yen, high corporate tax rate and Japan's tardiness in signing economic partnership agreements, Japanese automakers are increasingly manufacturing compact cars in emerging countries.” [Source: Takeshi Nagata and Yoichiro Kagawa, Yomiuri Shimbun, December 14, 2010]

In December 2010, “Mitsubishi Motors Corp. became the latest automaker to follow this trend when it started construction of a new plant in Thailand. Many Japanese automakers have been constructing plants in Thailand, which some observers have called ‘the Detroit of the East.’ These days, Thailand has become an automotive industry center, ranked alongside China. Nissan Motor Co., which began producing its March compact car in a Thai plant, said vehicle quality is already equal to that of cars made in Japan.” [Ibid]

“Thailand has attracted many Japanese manufacturers due to the all-out preferential treatment given to corporations. Thailand's corporate tax rate is 30 percent, considerably lower than Japan's effective rate of more than 40 percent. Furthermore, Thailand exempts automakers producing fuel-efficient cars from corporate tax for up to eight years. Thailand is a member of the Association of Southeast Asian Nations and has signed free trade agreements with Australia and other countries.” [Ibid]

“Construction of automotive production centers in Thailand offers carmakers the great advantage of exporting vehicles to Australia and emerging markets such as Southeast Asian countries without paying customs tariffs. Furthermore, production costs are about 20 percent to 30 percent lower than a comparable plant in Japan. Exports of the compact cars to Japan are increasing satisfactorily, the company said.” [Ibid]

“Nissan was able to sell the March for less than 1 million yen due to the model's cost-efficient plant in Thailand. A 47-year-old Thai assembly process manager who was trained at the company's Oppama plant in Yokosuka, Kanagawa Prefecture, said he wants to produce cars of the same quality levels as those in Japan. [Ibid]

Thailand is also a destination for Japanese car-related industries. In April 2011, Nippon Steel said it would open a plant in Thailand to produce high-grade steel for the automobile industry. The plant, located in Rayong Province, will produce 360,000 metric tons of galvanized steel a year. The plant is slated to open in 2013. In February 2102, the Japanese auto parts maker Yorozu said it would open a new plant in Thailand.

Toyota in Thailand

Toyota has about a 40 percent share of the passenger car market in Thailand. In 2012, Toyota’s auto sales in Thailand jumped 78 percent to 516,086 vehicles, with passenger cars up 62.8 percent. As of 2011, Toyota had three functioning auto plants in Thailand. It had a fourth but shut it down in November 2010 to boost efficiency and profitabilty.

In November 2012, Toyota President Akio Toyoda said, “We want to increase our vehicle production capacity in Thailand to 1 million a year in the near future. Toyota’s production capacity at that time was around 600,000 vehicles.

In 2013, Toyota said it planned to invest 12 billion baht ($404 million) in Thailand to build a second plant at the Gateway industrial park to produce environmentally friendly cars as well as vehicles for export. The plant is expected to be completed in the middle of 2013 and will help boost the firm's capacity at Gateway to 300,000 units per year from 220,000.

Toyota produces pick-up truck and SUVs in Thailand. It produced 280,000 vehicles in 2005, with about half of them exported to countries in Asia, Europe and Oceania. Thai-made Isuzu pick up trucks are sold in Russia.

See Floods

Honda in Thailand

The Thai-produced Honda City model was the first Japanese car made in Asia that was not produced first in Japan. More than 2,000 workers work at the Honda plant in Ayutthaya. Honda has made an effort to employ local workers and engineers and buy locally manufactured parts. Its second factory was opened up in 2008 near the first one, doubling Honda’s automobile production in Thailand from 120,000 units to 240,000. Models produced at the plants include the Jazz, City, Civic, CR-V and Accord. More than 6,400 are employed at both facilities.

Honda began making cars in Thailand in 2003. It is Thailand’s No. 2 car maker. In November 2008, Honda picked Thailand as its regional technology transfer center for car manufacturing in other countries.

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Nissan in Thailand

Nissan made 190,00 vehicles in Thailand in 2011. The firm has set a goal to more than doubling its share of the Thai vehicle market to 15 per cent by fiscal 2016. In common with many Japanese companies, Nissan is seeking growth in foreign markets to rebalance the ageing and shrinking consumer base at home. Nissan's plant was largely unscathed by flooding in 2011 although it temporarily stopped production due to a parts shortage. In July 2010, Nissan began selling its Thai-made March compact car in Japan. [Source: AFP-Jiji, November 2, 2012]

In November 2012, AFP-Jiji reported: “Nissan said it would spend about US$358 million to build its second auto assembly plant in Thailand, as it ramps up production away from its costly home base of Japan. The new plant in Samut Prakan province will be constructed close to Nissan's existing factory near Bangkok, which employs about 6,000 people. Japan's second-biggest automaker said it would initially build 75,000 vehicles at the new plant, scheduled to open in August 2014, before expanding annual output to 150,000 units, it said. "(It) will not only enable us to raise our competitiveness in the domestic market, but will ensure Thailand's position as a key strategic global export hub for Nissan," Hiroto Saikawa, Nissan's executive vice president, said in a statement. Nissan's announcement comes as Japanese automakers have cut production in China owing to a sales slump stoked by tensions between Beijing and Tokyo over a group of islands in the East China Sea.

Jiji Press reported: “Nissan's existing auto plant near Bangkok, which can produce up to about 200,000 vehicles a year, is already running at full capacity. The company is therefore outsourcing part of pickup truck production to Mitsubishi Motors Corp.'s Thai plant. Still, Nissan sometimes has to import pickup trucks it makes in Europe to Southeast Asia because inventories there tend to run short, the officials said. [Source: Jiji Press, October 25, 2012]

Mitsubishi in Thailand

Mitsubishi has three plants in Thailand. In July 2010, the company said it was building a plant $450 million plant—its third— in Thailand. The new plant, which opened in 2012, was built in eastern Thailand, where the company has its other two plants. The new plants specilizes in eco-friendly cars and has a capacity of 200,000 units a year,

In March 2012, Mitsubishi Motors said it firm would soon start manufacturing the Mitsubishi Mirage at a Thai factory to MMC aims to export first to Japan and Southeast Asian markets and later to European markets. Takeshi Nagata wrote in the Yomiuri Shimbun: “The Mirage is characterized by its affordable price and fuel efficiency, according to the company. The car holds the key to success for MMC's global strategy, MMC officials said. Under European standards, Mirages produced for the Thai market are able to run 22 kilometers per liter.

Utilizing the Thai government's preferential corporate tax for companies that mass-produce fuel-efficient cars, MMC could start pricing the Mirage as low as 380,000 baht (about 1 million yen). MMC plans to sell 2,000 units a month in Thailand. For the first business year, the company plans to produce 100,000 units at the Thai factory, with 30,000 to be exported to Japan. MMC had earlier announced it would withdraw from production in Europe to focus on Asia, and has been considering producing the Mirage in China. [Source: Takeshi Nagata / Yomiuri Shimbun, March 22, 2012]

Suzuki in Thailand

In 2011, Suzuki sold only 9,600 imported vehicles in Thailand, giving it a market share of merely 1 percent. The company hoped to sell 20,000 cars in 2012, with the made-in-Thailand, low-emission Mirage accounting for about half of the total. Since 1967, Suzuki had manufactured only motorcycles and boat engines in Thailand. It established its 650,000-square-meter car factory in Rayong's Hemaraj Eastern Seaboard Industrial Estate in 2008. [Source: Kyodo, March 21, 2012 <>]

In March 2012, Suzuki announced the start of sales of the new Swift, a compact hatchback "eco-car" being produced at its new plant in the eastern part of the country. Kyodo reported: “The factory, set up in Rayong Province with 21.7 billion yen in capital investment, began producing the "All-New Suzuki Swift" with the initial target of 15,000 units in 2012. <>

“The new Swift, which is also being produced in Japan, Hungary and India, conforms to the eco-car project being promoted by the Thai government, which aims to increase the production of environmentally friendly compact passenger vehicles. Suzuki said it will sell some of the cars in Thailand, and export others to neighboring Southeast Asian countries. The new factory's current production capacity of 50,000 units a year is expected to double in five years. The previous Swift model was produced at seven plants around the world and is sold in more than 100 countries.”

American Car Makers in Thailand

Ford and General Motors have invested more than $1 billion in plants located at a site 90 minutes from Bangkok. The General Motors plant produces cars that are sold in Thailand, Japan, Australia, Chile and the Philippines under the Chevrolet, Opel and Holden names. Ford makes pick up trucks in Thailand and has successfully exploited its relationship with Mazda which has been in Thailand since 1995.

In 1997, General Motors announced plans to open a car plant east of Bangkok to produce 100,000 vehicles a year and turn Thailand into the “Detroit of Asia.” The plan was given a set back by the Asian economic crisis in 1997. The car company lost money because production was way below capacity.

In the 1990s and early 2000s GM made Aveo and Potra models, using technology from South Korea’s Daewoo Motors. At that time GM had only 10 expatiate mangers in Thailand and employed the Japanese kaizen improvement and just-in-time production system. Entry-level workers were paid a monthly wage of $235. In August 2008, GM announced plans to build a $445 million diesel engine plant in Thailand.

In June 2010, Ford said it was building a $450 million plant in Rayong Province in eastern Thailand. The new plant, which opened in 2012, has a capacity of 200,000 units a year, In August 2010 Ford said it and mazda would spend $350 million revanping their joint venure that builds pick-up trucks in Thailand.

Motorcycles in Thailand

In 2003, Honda had a 70 market share of Thai motorcycle and motorscooter market and Yamaha had 12 percent. In 2004, Yamaha sold 340,000 units in Thailand up from 27 percent from the year before. These days motorscooters from China are more common sights but most Thais prefer Japanese-made ones for their reliability.

In 2009, Kawasaki To Move Large-displacement Motorcycle Production To Thailand Kawasaki to move 650cc-and-larger motorcycle production to Thailand to help cut costs—other manufacturers probably will follow [Source: Yomiuri Shimbun, August 2009]

Electronics Industry in Thailand

Thailand exports lots of electronics. It is the second-largest exporter of computer hard drives and makes other components used in personal computers. Electronics overtook textiles and automobiles in Asian export earnings in 1999. Like China, Thailand does a lot of assembly work and subcontracting to make components. In recent years it has tried to make more high-tech factories such as computer-wafer fabrication plants.

Hana Microelectronics PCI is Thailand biggest assembler of memory chips. ACT Manufacturing (the 10th largest electronic firm in the United States), Seagate (a maker of hard drives), IBM, Fujitsu and Read-Rite all have plants in Thailand.

Most of Thailand’s electronics factories in the Bangkok area. A software park was set up in Phuket. Panasonic makes electronics parts, car audio equipment, refrigerators, ice cookers and other goods in Thailand. Hitachi makes disk drives for Apple iPods at a plant in Thailand When music players were became popular Hitachi spent $200 million to double its capacity to keep up with demand. A Hitachi subsidiary in Thailand was the world’s largest hard disc drive maker in 2006.

See Foreign Companies

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Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Tourist Authority of Thailand, Thailand Foreign Office, The Government Public Relations Department, CIA World Factbook, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, Wikipedia, BBC, CNN, NBC News, Fox News and various books and other publications.

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© 2008 Jeffrey Hays

Last updated May 2014

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