AGRICULTURE AND AGRO INDUSTRIES

Thailand's land and labour resources are used to produce a wide variety of agricultural products (rice, canned fruits), aquacultural products (shrimp, fish), and animal husbandry products (pork products, chickens). Although the share of GDP produced by the agricultural sector has decreased from 27 percent in 1970 to 11 percent in 1996, approximately 51 percent of Thailand's labour force is engaged in agriculture.

Due to increased competitiveness, Thai agricultural and farm product exports, which were valued at 183,962 million baht in 1997, grew to 211,092 million baht in 1998. According to the Thai Farmers Bank Research Centre, the fall in the value of he baht since July 2, 1997 has made export prices more attractive in global markets.

However, the benefits of lower export prices will be partly offset by the higher cost of imported chemical fertiliser and substances, seeds, machinery and the fuel. According to the Agriculture and Co-operatives Ministry, the value of imported materials for agricultural production is likely to reach 24.9 billion baht in 1999, 10 percent to 12 percent more than 1998.
 

Crop production

While other sectors of the Thai economy have experienced a market slowdown over 1996, agricultural production has maintained a steady growth rate of three percent. Thailand's major products include rice, rubber, maize, tapioca, and sugar cane. In 1997, the government earmarked 6.5 billion baht for farmer assistance measures and domestic price suports for 16 agricultural products. With the slowdown in the economy in 1997 leading to the baht's depreciation against major currencies, exports of agricultural products enjoyed an increase of 234 billion baht, or a 33.6 percent growth.

During early 1999, exports of agricultural products fell by 5.3 percent, compared to the same period in 1998, the Ministry of Commerce reported. This resulted from the strengthening baht and the competitive world market. Prices of paddy rice, palm oil, cassava, pineapple and rubber have also declined, due to oversupply on the world markets.

In late 1998, the government granted 9.98 million baht to farmers for marketing and production purposes under theFarmer Assistance Policy Fund. Other issues were also addressed. These included increasing counter trade and credit terms for purchasers of agricultural products, eliminating export barriers, and reducing taxes on the import of raw materials.
 

Production of major agricultural crops, 1994-1998

Crops	1994	1995	1996	1997	1998
Paddy Rice	20,125.50	20,678.60	22,081.90	22,332.00	23,580.00
Rubber	1,737.00	1,810.00	1,937.00	2,169.00	2,162.00
Maize	3,900.00	4,060.00	3,970.00	3,842.00	4,986.00
Tapioca	15,374.00	17,387.80	18,087.90	15,958.50	16,692.00
Sugar cane	50,458.90	57,693.40	56,190.00	45,850.00	46,025.00

Sources: Bank of Thailand and Ministry of Agriculture and Agricultural Co-operatives.

In 1996, rice production grew slightly to 22.1 million metric tons. Production for 1998 is 23,580 thousand tons and exports are worth 86,803.1 million baht, 33.35 percent more than last year, due to baht depreciation against dollar and increased overseas demand. The growth is aimed at 4 percent in 1999 since, during the beginning of the year, export price is found more expensive than some other competititors. It is expected to sell to major export partners, Indonesia and the Philippines, 2-3 million tons in 1999, compared to 6 million tons in 1998 as a result of improved cultivation in those countries.

The Agriculture and Agricultural Co-operatives Ministry is promoting the production of high-quality rice for exports by encouraging farmers to switch crops to keep up with market demand for gragrant rice from China, Hong Kong and Singapore. By growing higher quality rice, Thailand strives to maintain its top position in rice exports and hold off increasing competition from India and Vietnam. Currently, promotion on some long grain rice such as RD7, RD23, SPR1, SPR2, SKLG1, SHPR and the leader in the overseas market, KDML105 jasmine rice, has been implementing, according to the Patumthani Centre of Rice Research.

Thailand remains the number one producer of rubber in the world, and the Ministry of Agriculture reported that rubber production accounted for 2,169 thousand tons in 1997, then slightly down to 2,162 thousand tons in 1998. Exports rose from 1.92 million tons in 1997 to 1.99 million tons in 1998. Local consumption reached 190,000 tons in 1998, up from 183,000 tons in 1997, due to the growth of rubber-related industries, such as tyre production. In addition, a contract signed by the Thai Rubber Association with Japan to supply guaranteed high-quality rubber products for Japan in 1998 should increase rubber exports.

In August 1998, Thailand entered an agreement with Malaysia to co-operate in establishing a mutual rubber "buffer" of approximately 30,000 tons to protect prices. Under the greement, Thailand will annually export rubber to the value of between 2.1 and 2.2 million baht, down from the current 2.4 to 2.5 million baht. Furthermore, Thailand will pull out of the International Rubber Organisation in March 2000 since the organisation has not backed Thailand's push for price protection in the world market. Market intervention will be pursued to assist domestic producers.

Sugar cane is the key crop in the production of sugar. One-third of Thailand's sugar production is for the local market. The rest is exported, making sugar among the country's top 10 export items and making the country among the world's topo five sugar exporters. The volume of sugar production has shrunk continually since 1995. However, it increased slightly from 4.58 million tons in 1997 to 4.60 million tons in 1998. It is projected to produce 52.6 million tons between November 1999 to May 2000, against 51.9 million tons in first half of 1999. Unlike production, exports dropped 40.8 percent, from 4.9 million tons in 1997 to 2.9 million tons in 1998 as a result of surplus supply and diminished demand in the world market. This in turn caused producers severe debt burden problems. In response, in 1998 the government allocated 10 billion baht to support sugar plant operations.

Tapioca production fell 2.1 million tons in 1997, and then slightly increased by 0.7 million tons in 1998. It is expected that the production value will drop by as much as 34 percent, or 18,007 million baht, in 1999. This is because of over-production in the world market.

As the European Union (EU) is Thailand's main export destination for tapioca products, exports to that region are capped with a 5.25 million ton per year quota. Exports world-wide during the first quarter of 1999 grew to 1.9 million tons, compared with 1.4 million tons for the same period in 1998, due to increased demand from the EU to substitute its costly domestic grain. However, because of conversion from the EU currency to the weaker US dollar, the price of tapioca has dropped from US$80-99 to US$72-73 per ton.

The production of maize has risen sharply over 1998, attributed mainly to an increase in local consumption of 5.74 percent, from 4.35 to 4.6 million tons. In addition, the price of maize has gone up over the previous year. For the period 1995-99, goverment policy measures have encouraged the incorporation of higher technology in maize cultivation, advising farmers on more efficient harvesting and storage techniques, and a greater role for the private sector in marketing.
 

Fisheries and livestock production

The Association of Thai Swine Raisers reports that in the first quarter of 1999 production of pigs fell from 10 million to 8.8 million pigs over the same period last year as a result in a drop in the number of breeders from 700,000 to about 550,000 to 600,000.

Prices also fell because of inefficient supply and disease. Domestic consumption generally remains slow, and it has dropped sharply in the south of Thailand, to 6,000 pigs a month, due to infection by the Nipah virus in Malaysia.

The production of chicken and ducks has risen due to a slowdown in world markets, the depreciation of the yen, and increasing competition from other exporters. At present, rather than simply produce raw chicken meat, more value-added chicken is being promoted for export, such as chicken on a stick, baked chicken and chicken ham. Shipments in 1999 are expected to account for 270,000 tons, compared with 281,719 last year. Key foreign markets include Japan and Europe.

Production of livestock and fishery products

	1994	1995	1996	1997	1998	1999	2000 P
Livestock
Cattle	7,637	8,044	8,092	7,911	7,700	6,615	6,475
Swine	15,191	15,547	16,354	17,867	15,937	14,443	15,677
Chicken	646,540	664,290	705,000	764,875	828,000	836,000	852,000
Ducks	21,812	18,897	21,400	21,829	19,748	n/a	n/a
Fishery products
Marine capture	2,804	2,827	2,786	2,666	2,600	2,617	2,582
Inland capture	202	191	208	212	235	249	254
Freshwater culture	170	196	229	216	229	243	261
Coastal aquaculture	346	358	326	317	333	327	316

Source: Ministry of Agriculture and Agricultural Co-operatives
 

Agro-based industries

The bulk of investment in agriculture and agricultural products is concentrated on the production of rubber and rubber products, and the production of canned/processed seafood and refrigerated/frozen seafood. Exports of agro-industrial products rose by 18.82 percent in 1998, from 170,500 billion baht in 1997.

Most promoted investment projects in this industry are family businesses that have adopted advanced technology and management. This has helped Thailand earn a sound reputation on world markets for the quality of its goods. Thailand is a world leader in pineapple, shrimp and canned tuna exports. The latter in 1998 were worth US$611.1 million. Continued efforts are being made to improve shrimp production, such as the development of black tiger prawn breeds, and the establishment of a tiger prawn estate.

Because of the economic crisis, producers in agro-based industries have faced financial constraints. Some have sought to increase investment from foreign shareholders. In 1998, 123 Board of Investment approved projects accounted for 18,824 million baht, involving 32,793 new employees. In addition to the investment promotion strategy to expand the industry, Thai producers have adopted the Environmental Management System (EMS) in their production processes. This will help Thai products meet international standards, such as ISO 14000, and also protect exports against trade barriers.

The government believes there is great potential in rubber production due to its strong and stable qualities that meet international standards, as well as its contribution as a mixer in the production of automotive tyres. The government continues to promote Standard Thai Rubber (STR) and conentrated latex production. The trend in the export of rubber gloves is positive as many companies are relocating production from Malaysia and Indonesia.
 
 

Halal food

Government policy

Given the competitive world food market, the Thai government is concentrating on targeting specific markets, in particular halal food. Demand is driven by 1.5 billion Muslim consumers world-wide, generating 80 billion US dollar per year.

The government plans to promote the souther province of Pattani as the centre of world Islamic/halal food production, with projected revenue of US$80,000 million. The project is currently in its early stages. The government has provided funds for infrastructure, arranged ttax incentives and soft loans, assisted in promotions, such as trade shows, and brought together potential investors to study opportunities to open markets in Arabic countries, and South Africa.

However, due to the economic crisis, Thailand has had to reconsider its original plan of expansion in Pattani area, concentrating for the time being on developing available resources in the region.

In addition, Thailand co-operates with other ASEAN countries in the Indonesia-Malaysia-Thailand Growth Triangle. These nations have adopted halal food guidelines, and as a rule Thailand produces under as ASEAN halal logo. It also provides training on halal food preparation, regulation on food control and safety and endorsement.
 

Production by the private sector

Attractive factors facilitating the production of halal food in the Pattani industrial promotion zone include its location close to the source of raw materials, low rentals, adequate infrastructure, a large port, and rental contracts that can be used for loan guarantees with financial institutes. In addition, the large pool of Muslim workers ensures the implementation of proper production procedures in accordance with Islamic principles.

Currently, there are approximately 211 halal food factories in the country, many of them small enterprises. They largely serve the domestic market, although exports are rising, with total exports in 1998 valued at 500 million baht. Exports to the Middle East are expected to reach 535 million baht in 1999, and US$10 billion in 2002. Besides the Middle East, demand is growing in Indonesia, Pakistan, Bangladesh, India, China, the United States and the EU.

In order to increase maket share and meet with international acceptance, product standards - particularly on halal food enrosement and product promotion under a certified Thai halal brand - are being development by many producers.
 

Contacts

Ministry of Agriculture and Co-operatives
Rachadumnoen Nok Road, Bangkok 10200
Tel 2815955
Home Page: http://www.moac.go.th/

Department of Livestock, Ministry of Agriculture and Co-operatives
Phayathai Road, Bangkok 10400
Tel 251513-8
Home Page: http://www.doa.go.th/

Department of Fisheries, Ministry of AGriculture and Co-operatives 
Kasetsart University, Jatujak, Bangkok 10900
Tel 5620600-15
Home Page: http://rahu.fisheries.go.th/

Office of Agricultural Economics, Ministry of Agriculture and Co-operatives
Kasetsart University, Jatujak, Bangkok 10900
Tel 9407239-40

Agro-Industry Division, Bureau of Industrial Sectors Development,
Department of Industrial Promotion, Ministry of Industry
Soi Treemitr, Rama IV Road, Klongtoey, Bangkok 10110
Tel 3901896
Fax 3815571

Patumthani Centre of Rice Research
Rangsit, Thunyaburi, Patumthani 12110
Tel 5771688
 
 
 

AUTOMOTIVE AND PARTS

Thailand has the largest and most dynamic automotive industry in Sotheast Asia. In 1998, motor vehicles sales reached 608,000 units, nearly 40 percent of total demand for the Association of Southeast Asian Nations (ASEAN) market. The automotive industry has experienced impressive annual growth rates of 14 percent, and in 1996 the industry accounted for approximately 6.1 percent of Thailand's GDP (US$12 billion). The industry employs some 15,000 to 20,000 direct (manufacturing) workers, and 1.5 million indirect workers (automotive services, sales, supporting industries and suppliers).

The most salient features of this industry area:

• By 2000, Thailand domestic market is projected to reach one million vehicles

• Japanese manufacturers dominate local production, but US firms are starting to invest

• Under WTO influence, government policy has shifted towards more liberalised trade

• Local content policies have spurred the growth of domestic assemblers and parts makers

• Thailand has over 30 year's experience in auto assembly.

Growth of the domestic market

Thailand is Southeast Asia's fatest growing automobile market. Twelve local assemblers built an estimated total of 608,000 vehicles in 1996, 16 percent more than the year before, and the industry's total output has increased six-fold in a decade. The strength of its automotive assembly business, combined with the government's liberalisation efforts and attractive Board of Investment (BOI) investment policies, have attracted major industry players and hundreds of firms which produce automotive parts and components.

The government's open door policy and well-designed policies and incentive programs have helped maintain high levels of foreign investment in the industry. Sales of vehicles in Thailand rose from 265,560 in 1991 to 589,000 units in 1996 Thailand remains the world's second largest one-ton pick-up market, the world's fourth-largest market for motorcycles and is the main automotive hub of Southeast Asia.

Nonetheless, in the recent years, as a result of the recession, an increase in automobile tax and consumer's financial constraints, the Thai automotive industry has been facing the reduction of market growth. Consumer demand, production and sales have domestically decreased, even though the industry accounts for more than 80 percent on domestic market.

Vehicle sales in the domestic market started to shrink in the wake of the economic crisis, from 589,129 units in 1996 to 363,156 units in 1997 (a 38.3 percent reduction), and consistently down to 144,065 units in 1998 (a 60.3 percent reduction). The passenger car market has been the most affected, decreasing to 46,543 units a drop of 65 percent. Sales volume in 1999 is projected at 180,000 to 200,000 units. Toyota held the largest total market shaer in 1998, at 28.2 percent.

In comparison to passenger cars, sales of commercial vehicles were less affected than those of passenger cars, due in part to the introduction of a range of new models by different producers.

Vehicle statistica reveal that the value of imports of completely built up (CBU) which hold just over a five percent share of the automobile market, has fallen from 11,829 million baht in 1996 to 67,976 million baht in 1997 and 20,288 baht in 1998.
 

Growth of the export market

Vehicle exports are anticipated to rise steadily over the next few years due to capacity expansion by existing assemblers, including Mitsubishi, Nissan, Toyota, and Isuzu, and in order to compensate for the drop in local demand. The decline in value of the baht has helped make exports more competitive. As producton volumes grow, manufacturers are upgrading factories from import substitution assembly plants into fully integrated manufacturing bases.

In 1999, an expected 160,000 units are expected to be exported, from 66,772 units in 1998. Dominant auto producers include Mitsubishi, Toyota, Honda, Ford and Mazda. With the continued economic recovery and the reduction of tariff rates in ASEAN countries, export volumes are expected to continue to rise. Toyota projects to export 300,000 to 400,000 units in 2004, in addition to total domestic sales of 600,000 units.

Thailand's key export markets for passenger cars are the United Kingdom, Singapore, New Zealand, Australia and Hong Kong. The commercial vehicles market is occupied by Australia, Portugal, Germany, Spain and Italy. New Zealand and Australia have also recently become attractive markets.

Among auto exporters, Mitsubishi is Thailand's biggest, with a 90 percent market share, followed by Honda and Toyota. Mitsubishi has relocated production of its pickup trucks from Nagoya in Japan to Thailand.
 
 

Major industry players

Japanese manufacturers dominate both the assembly and components sectors, through direct investments, joint ventures with Thai companies, and technical and licensing arrangements. Japanese assemblers account for 87 percent of Thailand's vehicle manufacturing capacity, with Toyota, Isuzu, and Mitsubishi holding the top three positions.

American multinational firms such as Ford and Chrysler have recently invested in Thailand by setting up production units. Ford and Mazda, with a mutual factory, operated in 1998 with 100,000 vehicles.

General Motors (GM), in 1996, chose to set up a US$750 million vehicle production base in Thailand and recently expressed interest in joining ASEAN's Industrial Co-operation (AICO - see below) in a bid to cut costs. GM's factory is due to begin production in 2000 after initial investment was reduced to US$500 million. Zafira production will begin with an initial production of 40,000 units a year, 70 percent for export GM will be the irst factory in the Eastern Seaboard Industrial Estate.

BMW is establishing its first wholly-owned plant in Asia in Thailand as a production base for BMW and Rover cars for export in the region. Initial capacity will be 10,000 units a year, increasing to 60,000 units a year after the second phase is completed.

Honda is spending US$160 million on a new plant for the Accord and Civic. Toyota will invest US$460 million to expand production and build a training centre for service technicians. It is expected to reach full capacity of production by 2004. Mitsubishi will spend at least US$560 million to move a portion of its pickup truck production to Thailand. Auto Alliance (Ford/Mazda) has announced a joint venture of US$472 million to produce pickups.

Aside from cars and trucks, Thailand is internationally competitive with its motorcycle industry and ranks fourth behind China, Japan, and India for world-wide production. Nevertheless, due to lessened purchasing power, motorcycle sales fell in 1998 by 47.4 percent from 818,435 in 1997 to 430,131 units in October 1998. Suzuki, Honda and Yamaha dominate the market and produce the majority of bikes sold domestically.

In 1999, production of two-stroke bikes will be stopped in compliance with new government regulations aimed at curbing air and noise pollution. In response, manufacturers are developing local technology for four-stroke bike engines that are expected to cost a minimum of 25 percent more than the two-stroke models. The increasing sophistication of Thailand's motorcycle manufacturing is expected to boost export possibilities over the next several years.
 

Important government policies

In the 1970s, Thailand's local automotive industry was regulated by protectionist policies againt imports. Local content requirements were introduced in 1975. In addition to local content requirements, the goernment maintained steep tariff duties on imports, both on component kits for assembly (CDKs) and completely built up (CBUs) vehicles. This resulted in vehicle prices in Thailand being among the highest in the world.

In July 1991, the government cut these duties and has moved towards broad liberalisation of the automotive industry ever since. These changes include the lowering of import duties, the gradual phasing out of local content regulations, an agreement among the members of ASEAN to exchange car parts on preerential tariff terms, and the government's promotion of an export-oriented approach for the industry.

Local content requirements are being phased out in time for the year 2000 deadline set by the World Trade Organisation. In February 1999 the government calcelled a 54 percent local content for CDKs applied to all other countries and adjusted import tariffs on CKDs from 20 percent to 33 percent. Under the new law, effective on January 1, 2000, auto producers will be able to use either domestic or imported suppliers.
 

Incentives

The Thailand Board of Investment has designed incentive packages to attract foreign auto makers and, at the same time, strengthen the country's industrial competitiveness. These include:
 
 

Code	Category
4.23	Manufacture of engine parts, transmission, brakes, steering, or suspension systems
4.24	Manufacture of vehicle parts, radiators, fuel tanks, filters, air filters, oil and fuel filters, wiring harnesses, gaskets, leaf springs
4.25	Manufacture of other vehicle parts
4.27	Automotive assembly
4.28	Surface treatment
4.29	Heat treatment
4.30	Production of electric-powered vehicles

Local parts and assembly firms

The expansion of the market for motor vehicles and parts, and the local content requirements, have resulted in the growth of Thai-owned producers of parts and local assembly plants. Most of these are medium and small-size parts producers.

There are over 600 auto parts manufacturers in Thailand and 200 to 300 suppliers for after-sale repairs. The BOI actively promotes the build-up of supporting industries, including metal forging, steel mills, and plastics and chemical production. More complex and capital intensive industries like transmission and drive-train component manufacturers, electronic parts assemblers and fuel injection unit manufacturers are also being sought.

It is estimated that about 60 percent of the value of all auto components are still imported. Imports from Japan account for 75 percent of the total, followed by Germany with 12 percent. North America and Europe make of the balance.

There are huge opportunities for auto parts expors if Thai auto parts makers become a part of the supplier's network for giant companies in Thailand, such as GM and Ford, as it will be much easier for them to sell parts to other companies in foreign markets.
 
 

Regional incentives

Brand-to-Brand Complementation (BBC)

Thailand is also a member of the BBC, which is an ASEAN organisation aimed at promoting co-operation and economies of scale in auto parts manufacturing. There are two clear benefits under the BBC. First, import tariffs on parts traded within ASEAN are reduced by 50 percent. Second, parts sourced within ASEAN are included in the local content calculation in each country.
 

ASEAN Industrial Co-operation (AICO)

AICO has been developed to be more effective than the BBC in exchanging products within the region. AICO has the following regulations:

• A corporation can seek promotional privileges from AICO if at least 30 percent of its equity is held by an ASEAN nation or 40 percent by more than than two ASEAN concerns.

• An eligible company should be able to produce new products and introduce new production technology beneficial to the development of regional industry.

• An eligible company must export more than 50 percent of its products.

• An ASEAN government may grant AICO privileges to projects implemented under the BBC scheme.

Contacts

Federation of Thai Industries
Queen Sirikit National Convention Center Zone C, 4th Floor, 
60 New Rachadapisek Road, Klongtoey, Bangkok 10110
Tel 2294255
Fax 2294941-2
Home Page: http://www.fti.or.th

Board of Investment
555 Vipavadee-Rangsit Road, Jatujak, Bangkok 10900
Tel 5378111
Fax 5378177
Home Page: http://www.boi.go.th

Bank of Thailand
273 Sansen Road, Bangkok 10200
Tel 2835353
Fax 2800449
Home Page: http://www.bot.or.th

Thai Auto-Parts Manufacturers Association
32-33 Moo 17 Bangna-Trad Km. 11 Road, Bangleeyai, Bangplee, Samuthprakarn 10540
Tel 3168800-7
Fax 3165629
 
 

ELECTRONICS AND ELECTRICAL EQUIPMENT INDUSTRY

The combined electronics and electrical appliance industry is by far the largest export industry in Thailand. The loss in value in the baht since 1997 has favoured the industry, allowing it to be more competitive in global terms. The electronics industry is one of the few industries that has survived the crisis with minimal impacts. In 1998, computers and computer parts were the number one export products, with total export value of 318 billion baht, accounting for 14 percent of the country's total exports. The FOB value of computers and parts exports increased by 45 percent from the 1997 level. Domestic demand for electronic products is still relatively strong.

The most salient features of this industry are:

Overall, the electronics and electrical industry has grown more quickly than GDP in recent years.

The industry, being the leading export sector, continues to contribute substantially to Thailand's foreign trade.

Thailand is one of the top production bases for hard disk drives in the region, second only to Singapore among ASEAN member countries.
 

OVERVIEW

With the establishment of Tanin Industrial Co., Ltd. in 1962 to assemble radios and televisions for the domestic market, the electronics industry in Thailand was born. Since then, the industry has come a long way and it now boasts of nearly 2,000 companies in operation carrying a wide array of products.

Initially, starting as an import substitution industry, it is now highly regarded as export-oriented, in fact locally-assembled electronics and electrical equipment have been the top export earner for the country since 1994.

Thailand's electronics and electrical equipment industry has registered spectacular yearly double-digit growth in recent years, consistently surpassing the overall economic growth. From 1990-1994, the output from the electronics and electrical machinery sector increased in the range of over 20 percent per annum - supported by the expansion in the domestic and export markets. In comparison, GDP growth averaged about 9.1 percent per year during the same time frame. Industry growth for 1995 and 1996 remained steady at an average of just under 20 percent, while GDP grew at 8.8 percent and 5.5 percent, respectively. In 1997, the industry slipped to a single-digit growth in relation to the overall GDP growth of -0.4 percent.

In ASEAN, Singapore's production showed the highest development, followed by Malaysia, with Thailand ranking third. While Singapore's technology is regarded as highly-developed, high-labour intensive facilities are moving to Malaysia and Thailand in the face of labour shortages. Thailand is positioned as a middle-level technology producer in the region.

The combined export value of electroic and electrical equipment grew from 475.5 billion baht in 1996 to 623.1 billion baht in 1997, or an increase of 31 percent. Export growth for 1998 was 29 percent up on 1997, reached 803.7 billion baht.
 

Consumer equipment

This segment covers consumer electronic (including television sets, radios, audio and videocassette recorders, camcorders and electronic watehs), and consumer electrical products (such as white goods / other electrical appliances). The manufacture or assembly of consumer electronic products in Thailand still relies heavily on imported parts. On the other hand, consumer electrical products have a higher level of local content than imported parts.

Thailand's consumer electronics and electrical sub-sector has an increasing tendency to be export oriented. This segment's export was worth 148.1 billion baht in 1998, increasing by 14 percent from 1997 figures.

Thai exports of consumer electronics and electrical products, 1996-1999 (Jan-July)

	1996	1997	1998	1999
Electronics	60.2	82.9	97.7	40.7
Electrical	39.6	46.7	50.4	48.1
Total	99.8	129.6	148.1	88.8

Source: Department of Customs
 

The television production line is the most important single product in this sub-sector, exhibiting export growths of 25 percent and 15 percent in 1997 and 1998, rspectively. The overseas market for television sets exceeded 37.3 billion baht in 1998 while export during the first seven months of 1999 registered 12.1 billion baht. During the past three years (1996 to 1998), the country produced around seven to eight million TV sets yearly.
 

INDUSTRIAL EQUIPMENT

This segment covers industrial electronics such as office automation equipment, computers and peripherals, and telecommunications equipment; and industrial electrical products such as electric products such as electric motors and transformers.

In 1998, exports of industrial electronic and electrical products were worth 408.3 billion baht, an increase of 38 percent from 1997 level. During the first seven months of 1999, this sub-sector's export reached 219.4 billion baht.

Thai exports of industrial electronics and electrical products, 1996-1999 (Jan-July)

	1996	1997	1998	1999
Electronics	193.5	250.3	357.0	186.8
Electrical	33.5	46.3	51.3	32.6
Total	227.0	296.6	408.3	219.4

Source: Department of Customs
 
 

Computers and Peripherals

From 1996-1998, the local production of floppy disk drives (FDD) amounted to 15 to 18 million units and hard disk drives (HDD) - 20 to 40 million units per year. Within ASEAN, Thailand ranks second only to Singapore's approximately 56-64 million units produced annual. Presently, local sourcing is limited to a few basic activities such as die casting metal base plates, and cover and controller board assembly.

The development of the precision mechanical engineering sector should also serve as a strong inducement to the technological upgrading of the machinery sector through demand for more sophisticated machine tools and precision dies and moulds.

Thailand is beginning to establish a printer manufacturing capacity as well, with several foreign firms doing full or partial assembly of printers here. Annual local production of printers was about three to four million units per year from 1996 to 1998, compared with Singapore's annual output of 11-13 million units.

The total value of computers and computer parts exports increased by a margin of 45 percent from 219.7 billion baht in 1997 to 318 billion baht in 1998. During the first even months of 1999, total exports were recorded at 165.8 billion baht.
 

Telecommunications equipment

Many types of telecommunications equipment are now produced in Thailand, including telephone sets, telephone answering machines, facsimile machines and small PABXs. From 1996 to 1998, the combined local production of telephone sets and facsimile machines was about seven to eight million units per annum.

Potentially the biggest boost to the local telecommunications equipment industry could come from future projects to install new telephone lines. As part of the Eighth National Plan Economic and Social Development Plan, teledensity is targeted to reach 20 phones per 100 households during the course of the plan (1997-2001). This will require installation of an additional six million lines by 2001. The export value of telecommunications equipment grew from 29.3 billion baht in 1997 to 37.4 billion baht in 1998, registering a 28 percent increase. During the first seven months of 1999, total exports were valued 18.5 billion baht.
 

COMPONENTS AND PARTS

This segment covers electronic parts (i.e. printed circuit board (PCB), integrated circuits (IC) and motor transistor capacitors) and electrical parts (i.e. compressors).

The total export value of electronic and electrical components and parts grew from 196.9 billion baht in 1997 to 247.3 billion baht in 1998, or 26 percent. During the first seven months of 1999, total exports reached 158.4 billion baht in FOB value.

Thai exports of electronics and electrical components and parts, 1996-1999 (Jan-July)

	1996	1997	1998	1999
Electronics	132.8	176.6	220.4	143.1
Electrical	15.9	20.3	26.9	15.3
Total	148.7	196.9	247.3	158.4

     Source: Department of Customs
 

Integrated Circuits (ICs)

The IC industry is mostly export-oriented. IC assembly operations in Thialand have become progressively automated over the past decade, though they are still large employers in absolute terms. In 1997, exports of ICs were valued at 75.7 billion baht, up 30 percent from 1996 figures. Exports increased 24 percent (93.8 billion baht) in 1998 over the previous year. From January to July of 1999, IC exports reached 56.3 billion baht.
 

Printed Circuit Board Assemblies (PCBAs)

PCB assembly is one of the largest and fatest growing segments of Thailand's electronic industry. The sector continues to require large inputs of skilled labour in certain processes. The export value of PCB has grown apace in recent years. Growth for 1997 was 71 percent while in 1998 it recorded a 60 percent expansion - a highly respectable performance during these hard times. During the first seven months of 1999, exports of PCB totalled 15.2 billion baht.
 

ATTRACTIVE GOVERNMENT POLICIES

The Thailand Board of Investment (BOI) has contributed largely to the sector by promoting the industry and attracting multinationals in the process - mainly from Japan, the United States, Taiwan and other Asian NICs (newly industrialised countries).

The BOI promotes the electronics and electrical projects in Investment Promotion Zones 2 and 3. The Board has also extended the time frame for promoted projects to import machinery in the manufacture of electrical products from two to five years, effective January 1, 2000.
 

BOI-approved investment in electronics and electrical by sub sector, 1996-1999 (Jan-June)

	1996	1997	1998	1999
Electronics
Consumer	1,178	468	352	154
Industrial	25,657	1,365	703	2,346
Components	44,304	22,124	54,638	18,334
Sub-total	71,139	23,957	55,694	20,834
Electrical
Consumer	2,520	1,315	2,971	496
Industrial	800	1,670	0	760
Components	1,161	689	977	24
Sub-total	4,481	3,674	3,948	1,280
Total	75,620	27,631	59,642	22,114

Source: Board of Investment
 

Contacts

National Electronics and Computer Technology Center (NECTEC)
Ministry of Science, Technology and environment
Tel 644-8110
Hme page: www.nectec.or.th

Electrical & Electronics Institute
Ministry of Industry
Tel 280-7272
Home Page: www.thaieei.com

Electrical, Electronics & Allied Industries Club
The Federation of Thai Industries (FTI)
Tel 229-4255
Home Page: www.fti.or.th

The Electronics Association of Thailand
King Mongkut's Institute of Technology, North Bangkok
Tel 585-8541, etc. 8102
 
 
 
 

TEXTILES AND GARMENT INDUSTRY

The textiles industry has significantly contributed to economic development and employment in Thailand. The industry is experiencing difficulties at present due to declining purchasing power in both domestic and foreign markets, and fiercer price competition. Textiles ranked third in 1998 among Thailand's exports, behind electronic circuits boards and electrical (7 percent), cotton thread (2.1 percent), household textiles (2.2 percent) and others (7.2 percent) equipment, with a value of 217,101 million baht. Exports include garments (62.4 percent), fabric (16.2 percent), synthetic thread and yarn (5.7 percent), synthetic fibre (3).

In addition to declining demand and over supply in Asia, and high competition from low-end products, the Thai textile industry has faced severe liquidity problems over the past two years. Production has dropped by 20 percent, and many factories have closed.

Overview

The textile and garment industry chain consists of the fibre industry; the spinning yarn and thread industry; the knitting and weaving industry; the dyeing, bleaching, printing and finishing industry; and the garment industry. Manufacture is both capital intensive and labour intensive. Most technology and machinery in Thailand is out-dated, having been in use for more than 15 years. This results in low productivity, high operation costs, and low quality products. However, following the government's economic stimulus measures announced on 10 August 1999, import tariffs on textile and garment industry machines and parts were reduced from 30-35 percent to three percent. This will assist the industry in developing and improving competitiveness in the long term since manufacturers currently lack sufficient capital to invest in new technology.

There are two major export markets for Thailand's textiles and garments:
 

1. Quota markets (under the Multi-Fibre Agreement). This consists of the United States, Canada, Norway, and EU countries. In 1998, Canada abolished import quotas on three types of garment exports from Thailand: Women's clothing, children's shirts, and coats, apart from the men's shirt quota, which had been abolished in 1997.
2. Non-quota markets: These consist mainly of Japan, Poland, Saudi Arabia, Singapore, the United Arab Emirates, Kuwait, Hong Kong, China, and Russia.

Various new rules and regulations have been imposed on the world textile and garment trade in recent years. Firstly, in July 1996, the U.S. announced its new Rules of Origin for textile and garment imports. These strictly enforced the actual country of origin of the exports to the U.S., and broader categories. For example, Rules of Origin were applied to thread and yarn, and clothes exported to the U.S., which previously had not been classified. Assembly Rules, that is, the last country that assembles the garment, are applied for garment exports.

Secondly, Thailand may be curtailed by anti circumvention measures designed to prevent exporters from one country shipping their goods through a third country to avoid duties imposed on the original exporting country.

However, these rules will no longer exist after 1 January 2005 when the world's textile trade is due to be liberalised under the Agreement on Textiles and Clothing (ATC), in addition to import tariff reduction under ASEAN Free Trade Area (AFTA). Nevertheless, human rights concerns in the U.S., such as child labour, and environmental concerns among E.U. countries, such as harmful dyes causing skin cancer, will become increasingly important issues once tariff barriers fall and the textile trade is liberalised.

To ensure Thailand's competitiveness in the world market. Thai manufacturers need to improve the quality of products and need to operate to international standards so that they will not face technical barriers once trade is liberalised. Currently, only 18 factories out of 4,654 have been granted the ISO 9000 certification standard.

To develop the textile and garment industry, the government allocated soft loan funding through the EXIM Bank and the Industrial Finance Corporation of Thailand (IFCT) to Thai manufacturers to introduce new machines, with the condition that the old machines stop operating. However, not many companies were interested because they did not want to increase their liabilities, and the conditions were not sufficiently appealing. The funding expires in the year 2000. The Thai Textile Association has requested the government to extend the funding for another two years.

In addition to the above source of loans for business expansion, the government allocated some funds through the EXIM Bank to provide credit for cash-strapped exporters. The total amunt of Packing Credit that the EXIM Bank authorised through commercial banks totalled 17,546,126,500 million baht in 1996, 16,538,713,500 million baht in 1997, and 17,218,397,200 in 1998.

While there has been little change in the amount of Packing Credit over the past few years, the amount of Pre-Packing Shipment Financing Facility (PSF) credit, which started in 1996 and which directly authorises credit to exporters, has increased gradually. In 1996 and 1997, PSF credit, authorised for the textile and leather industries amounted to 1,278.966 million baht and 3,219,969 million baht respectively. In 1998, PSF credit authorised for the textile and garment industry alone, drastically increased to 4,694.012 million baht.
 

Fibre industry

There are two types of fibre natural and synthetic. Cotton is the most important natural fibre used in Thailand. However, domestic cotton production is not able to supply domestic demand, and as much as 90 percent of consumption has to be met with import. These come mainly from Australia, the United States, Mali and Sudan. Import decreased in 1997 and 1998 due to the weak baht, which caused higher import costs, and declining demand. The economic stimulus measures announced by the Government in August 1999 abolished import tariffs on cotton. This will further enhance Thailand's competitiveness in the textile industry.

Cotton fibre imports and exports to Thailand
 

	1996		1997		1998
	Quantity (Metric tons)	Value (Million baht)	Quantity (Metric tons)	Value (Million baht)	Quantity (Metric tons)	Value (Million baht)
Imports	365.00	17499.10	286.00	14584.50	282.00	18556.50
Exports	5.00	147.90	6.00	192.20	5.00	184.90

    Source: Business Economics Department
 

Synthetic fibre production is a capital-intensive industry, requiring high technology. Most of the manufacturers are joint ventures with foreign investors, mostly from Japan and Taiwan. Thai manufacturers produce medium quality polyester, nylon, acrylic and rayon. Most of the raw materials are imported, and high import tariffs were imposed - five to seven percent - that significantly increased production costs, and reduced competitiveness.

Synthetic fibre imports and exports to Thailand
 

	1996		1997		1998
	Quantity (Metric tons)	Value (Million baht)	Quantity (Metric tons)	Value (Million baht)	Quantity (Metric tons)	Value (Million baht)
Imports	80.20	154.70	81.20	136.10	71.20	103.30
Exports	162.10	248.70	178.90	226.70	328.30	266.10

    Source: Business Economics Department

The synthetic fibre industry is very price competitive, specifically polyester fibre, because of over-supply in past years. Thailand's major competitors are Taiwan, South Korea, Malaysia and Indonesia. Synthetic fibre imports have decreased due to falling demand, while exports increased 86.86 percent in 1998 as a result of the weaker baht.
 
 

Spinning yarn and thread industry

Spinning yarn and thread is a medium to high capital intensive industry. Most of the machines in use have been imported second hand, and have been in use for up to 20 years. As a result, production costs are high and there is a high rate of raw material losses; and the quality of thread is low and not competitive.

The domestic yarn and thread market has suffered in the face of dumping by Taiwanese, South Korean and Indonesian companies. The cheaper products have caused imports to rise, to the detriment small domestic manufacturers.
 

Yarn and thread imports and exports to Thailand
 

	1996		1997		1998
	Quantity (Metric tons)	Value (Million baht)	Quantity (Metric tons)	Value (Million baht)	Quantity (Metric tons)	Value (Million baht)
Imports	57,656.00	7,194.00	61,789.00	7,925.20	72,094.00	10,385.90
Exports	170,489.00	11548.10	190,788.00	16,009.00	184,818.00	16,173.90

Source: Business Economics Department

Major products exported are synthetic and cotton yarn and thread, to markets in Hong Kong, the U.S., South Korea, Taiwan and Japan. The volume of yarn and thread exports from Thailand increased 11.9 percent in 1997, but decreased 3.12 percent in 1998. The decrease illustrated fiercer competition, and the fact that Thai yarn and thread manufacturers are not competitive enough due to relative higher production costs than in Thina, Pakistan and India. These countries can produce cotton domestically, while Indonesia has a large-scale petrochemical industry that support synthetic fibre production, which lowers production costs. In addition, tariffs on polyester, nylon, viscro rayon and acrylic imports to Thailand are considered high, at 10 percent, compared to its competitors. This is a major cost, adding to the already-high cost of raw materials. As a result, Thai thread yarn exports are not price competitive.
 

Knitting and weaving industry

Most of the knitting and weaving factories use outdated machines, particularly in medium and small factories. The industry produces medium and low quality in 100 percent cotton, 100 percent synthetic and mixed fibre fabrics. Sixty percent of the production is woven fabric and 40 percent is knitted fabric.

Fifty percent of the raw materials used - cotton, synthetic yarn and thread - are imported.

Due to the decline in domestic consumption, over production has led to high price competition, to that extent that sales prices have dropped while production costs have risen. Some manufacturers, especially medium and small sized ones, have liquidity problems, and a number have closed.
 

Woven and knitted fabric imports and exports to Thailand
 

	1996		1997		1998
	Quantity (Metric tons)	Value (Million baht)	Quantity (Metric tons)	Value (Million baht)	Quantity (Metric tons)	Value (Million baht)
Imports	94,621.0	22,472.90	150,672.00	23,922.10	100,546.00	30,056.80
Exports