(Source: Thailand Investment Review, June 2017)
As a regional trade hub with a well-diversified economy, Thailand’s manufacturing sector remains a core element for the country, and its machinery industry plays a crucial supporting role in driving growth in manufacturing and in the overall economy. Many companies have already integrated machinery and automation in order to enhance their productivity, reduce waste, and enhance competitiveness.
Thailand’s machinery industry has seen substantial growth in recent years. In 2016, exports of machinery and parts reached THB 261 billion (USD 7.7 billion). The largest sector was industrial machinery with an export value of 77%, followed by agricultural machinery at 13% and machine tool at 10%. The largest export products are air pumps and compressors, liquid pumps and printers, while export destinations include the United States, Japan, and China.
Strength in the manufacturing sector
Thailand has long been known as the Detroit of Asia for its booming automotive industry, as well as an important exporter of electronic components and processed foods. With its position as one of the major manufacturing hubs in the world, the machinery industry plays a crucial role in both developing and encouraging substantial growth in these sectors.
Given the country’s strong industrial position, Thailand has been recognized by several key players in the industry.
ABB Limited, a pioneering global technology leader in power and automation, has been involved in the development of Thailand’s utility and industrial sectors for more than 100 years. The company saw numerous opportunities in the Thai machinery industry. “ABB provides the best solutions with cost effective ways of manufacturing products for our customers geared to support the automotive and food industry,” explained Mr. Chaiyot Piyawannarat, Country Managing Director of ABB in Thailand, Myanmar, Cambodia and Lao PDR.
KUKA, a newcomer to Thailand in 2015, is one of the world’s leading suppliers of intelligent automation solutions. Mr. Martin Wenzel, Chief Executive Officer of KUKA Thailand, said that strong production in the Thai food and beverage, and consumer goods sectors has created a huge demand for robots and machinery. The company helps clients in designing and operating complete solutions of scalable, flexible, and effective manufacturing processes. The company has thus far generated more than 50% of its total revenues from the food and beverage, and consumer goods industries in Thailand.
Patkol PLC is a leading Thai company in food machinery and has been operating for more than 50 years. Given Thailand’s strong agricultural sector, the company plays as an important role in strengthening the value chain from the agricultural to value-added food processing industries. As many companies strive to increase their competitiveness as well as labor cost-savings, Thailand’s food machinery industry is growing at a solid pace, said Mr. Sangchai Chotechuangchutchaval, President of Patkol PLC.
The emergence of CLMV creates huge opportunities
Acting as a gateway to ASEAN given its strategic location, together with its readiness in infrastructure, Thailand has considerable potential to be a manufacturing hub and to serve the large and growing market demand in neighboring countries, dubbed CLMV. ABB, KUKA, and Patkol are just three examples of companies that are using Thailand as a manufacturing hub for the region.
ABB Thailand plays a vital role in Southeast Asia. The production base is the largest in the region and the company is also responsible for operations in Cambodia, Laos and Myanmar.
As noted by Mr. Wenzel at KUKA, he believes that there are huge opportunities to tap into the food and beverage sector in CLMV as the import growth rate for these countries is at 27% annually. This rapid growth presents profitable opportunities for the Thai food and beverage sector which acts as the main exporter to these countries.
With growing demand in ASEAN, Patkol aims to increase its exports to ASEAN with growth in the company’s portfolio expected to more than double from 20% to 50% through its medium-term strategy which aims to use Thailand as a production hub in the region.
Thailand’s robust human resources
With 76 universities and 83 vocational schools, Thailand produced approximately 56,231 graduates from engineering and related courses in 2016. The country has plenty of highly skilled engineers and researchers entering this fast growing market.
According to Mr. Chaiyot, ABB believes the country provides strong competencies in human resources, with employees who are able to absorb and manage the complex technologies from abroad, and work effectively on day-to-day operations with support from ABB Group. As a result, with more than 1,000 employees, ABB Thailand relies on a workforce which is more than 95% Thai.
Patkol has over 300 engineers and 1,000 technicians with a strong foundation to design the machines for its own patents as well as providing the important services needed to serve its customers as a competitive manufacturing base.
Confident in the future of Thailand
As the country focuses on enhancing its competitiveness, there will be increased opportunities for machinery and automation companies to play an important role in further strengthening the Thai manufacturing sector as it continues to advance. ABB, KUKA, and Patkol are confident in investing for a better future with greater solutions in an increasingly dynamic market in Thailand.
Government and BOI are playing a crucial role
As one of the government’s targeted industries, the Thai government and education centers are providing continuous support to develop the machinery industry. Thailand offers various resources for research and development and human resources training such as the Institute of Field Robotics (FIBO),
King Mongkut’s University of Technology, Thonburi, and the Center for Biomedical and Robotics Technology, Mahidol University.
The Board of Investment (BOI) recognizes the importance of the machinery sector and offers attractive incentives to encourage the industry’s growth and development. BOI investment incentives for machinery Industry in Thailand include a tax exemption on import duties on machinery, an exemption of corporate income tax for up to 8 years, and an additional 5-year 50% reduction of corporate income tax on net profit.