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					Ministry of Industry Urges Collaboration for Sustainable Competitiveness
BOI applications double to US$16.4 billion in 2004
Minister of Industry H.E. Pongsak Ruktapongpisal delivers the keynote speech at the seminar “Industry and Investment: Strategy to Global Competitiveness.”
complex and quickly changing needs, concentrating on R&D, and collaborating so that human resources are developed to meet the needs of the industrial sector to be ready for changes in free trade. Pongsak urged government and entrepreneurs to develop their cluster systems, even regional-level clusters, and expand capacity building to move products. A main focus of the daylong seminar was the necessity to balance industrial needs with those of the environment, increasingly important with the expanding economy. “Preserving and recycling our resources on a continuous basis is imperative for sustainable development. We as an emerging industrial country have to take this into account,” Pongsak stated, noting the need for a campaign to promote ISO14000 standards. Other strategies to build sustainable competitiveness included the development of industrial estates in border regions to take advantage of low labor costs; efforts to reduce industrial water costs; adopting international standards and developing Thai standards; upstream-to-downstream production; changing laws to improve competitiveness, such as those to assist assessment companies; tax-free zones to increase investments; and incentives for relocating companies as a means for environmental and industrial problem-solving. As a key speaker in the seminar, BOI Secretary General
1US$ = 40 THB 2002 Total Investment Total Foreign Investment 100% Foreign 784 560 291 2003 961 668 305

By Renee Santo
ith foreign and domestic investments into Thailand reaching new highs in 2004, the Ministry of Industry is focusing on the challenges of sustaining both industrial competitiveness and environmental protection. A Ministry-hosted seminar, “Industry and Investment: Strategy to Global Competitiveness” on January 20, was attended by a packed audience of over 1,000 members of the business community, institutions, academia, and government. Simultaneously translated into English and Japanese, speakers and panelists urged the foreign and Thai business communities to work together and with government in collaborative problem-solving. “Of course companies must compete with one another, but in order to take on the global market, we must all join together,” stated Minister of Industry Pongsak Ruktapongpisal in his opening speech. “In the 21st century Thailand and other countries are creating knowledge societies and entering the knowledge economy,” stated Minister Pongsak and noted that involves producing for consumers, understanding their infinitely

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Net Applications to BOI
# of Projects 2004 1,268 749 334 Value USD Millions 2002 $6,233 $4,466 $2,570 2003 $7,618 $6,217 $2,655 2004 $16,402 $7,675 $2,741

Continued on Page 10

TSUNAMI DONORS/BOI APPLICATIONS........................2 TSUNAMI RELIEF EFFORTS............................................3 WHY THAILAND: COST OF BUSINESS........................4-5 FOCUS ON: FASHION..................................................6-7

COMPANY SPOTLIGHT: SIAM MITSUI PTA..............8 GUEST INTERVIEW: LOGISTICS................................9 BOI INVESTMENT MISSIONS................................ ..10 NEW INITIATIVES REVIEW.....................................11

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The BOI wishes to thank the following companies for their generous contributions to the tsunami relief efforts.
Abric Eastern International Co., Ltd. Accounting Staff from Kohbunshi (Thailand) Ltd. Adams International Ltd. Aekwanakij Co., Ltd. Mr. Preecha Apaiyanukorn Arrow Wood Co., Ltd. Barbe (Thailand) Ltd. Boss Leather Goods Co., Ltd. Bright Wheels (Thailand) Co., Ltd. Charoenpalmrachakrud Co., Ltd. Chumporn Palm Oil Industry Public Co., Ltd. Colonel Wanchai Wongisaret, Rajavej Ubolrachathani Hospital Concrete Chuan Yoo Mankong Co., Ltd. Dexter Industry Co., Ltd. DKT Ltd. Eastern Polymer Industry Co., Ltd. Engelhard Chemcat (Thailand) Co., Ltd. Euroceramic Technologies Co., Ltd. and Employees Fisba (Thailand) Co., Ltd. Hayakawa Eastern Rubber Co., Ltd. Heil Asia Co., Ltd. Hoya Corporation Tokyo Japan Inoue Rubber (Thailand) Public Co., Ltd. Mr. Tatsuhiko Iwamoto JLF Associates Ltd. JRD Bright Motor Industries Co., Ltd. Kamalaya Co., Ltd. Mr. Akitoshi Karasawa Ms. Sunee Kaweerat (Sinpakdi Cold Storage) Khahom Electricity Generating Co., Ltd. Kitwattana Co.,Ltd. Kohbunshi (Thailand) Ltd. Korat Denki Ltd. Korat Waste To Energy Co., Ltd. Kulthorn Kirby Public Co., Ltd. Lamae Parawood Co., Ltd. Lotus Crystal Co., Ltd. Mai Thai Hotel Roi-Et Meshtech International Co., Ltd. Muang Mai Guthrie Co., Ltd. Nambu CYL (Thailand) Co.,Ltd. Nippon Super Precision Co., Ltd. P.K. Marine Trading Co., Ltd. Poom-Park Industry Co., Ltd. Precision Abrasive (Thailand) Co., Ltd. Pupanich Palm Oil Co., Ltd. Qualimer Co., Ltd. Quality Coils Industries (P.B.) Co., Ltd. Rajavej Ubolrachathani Hospital ROHM GROUP Co., Ltd. Rosy Blue Diamond Co., Ltd. S&A Management Consultant Co., Ltd. S. Pack & Print Public Co., Ltd. Sadao Rubber Industry (1988) Co., Ltd. Savee Palm Oil Industries Co., Ltd. SEIKO Instruments (Thailand) Ltd. and Employees Setsuyo Astec (Thailand) Co., Ltd. Sigma Ceramics Ltd. Sima Technology Co., Ltd. SK Latex Co., Ltd. Sumiko Leadframe (Thailand) Co., Ltd. Mr. Piyawat Supakatitam Surat Packaging Co., Ltd. Tenco Rubber Technology Co., Ltd. Thai Foods International Co., Ltd. Thai Kikuwa Industries Co., Ltd. Thai Nakorn Parawood Co., Ltd. Thai Scantube Ltd. Thai Synergy Works Co., Ltd. and Employees Thai Tech Matsuda Co., Ltd. Thaiindo Palm Oil Factory Co., Ltd. Thung Thong Agriculture Palm Oil Co., Ltd. Thung Yai Rubber Co., Ltd. Tokai Eastern Rubber (Thailand) Ltd. and Employees Tokai Rubber Ind., Ltd. Toyo Millenium Co., Ltd. Triumph Industries (Thailand) Co., Ltd. Wireform A.N. (Thailand) Co., Ltd. World Electric (Thailand) Co., Ltd. Y.M.P. (Thailand) Co., Ltd. Yupa Silver Hand Co., Ltd. Zeon Advanced Polymix Co., Ltd.

2002: 1US$ = 42.99 2003: 1US$ = 41.49 2004: 1US$ = 40.27

2002

2003

2004
Value Number of Value Projects
5,993 749 7,624

Number of Value Number of Projects Projects
560 4,154 668

Total Foreign Investment
By Sector
Agricultural Products Minerals/Ceramics Light Industries/Textiles Automotive/Metal Processing Electrical/Electronics Chemicals/Paper Services

61 9 42 173 142 59 74 251 35 55 13 37 40 66 21 14 12 10 10

1,310 44 147 1,298 816 292 248 1,672 196 964 268 69 208 321 231 19 69 17 22

57 18 56 213 152 95 77 316 43 67 16 48 62 74 19 17 3 10 9

295 444 358 1,343 1,522 1,263 767 2,563 1,143 191 300 158 351 878 489 20 17 18 232

82 18 61 223 152 107 106 340 39 61 18 29 81 94 23 21 8 12 15

559 1,601 206 1,277 1,972 1,161 848 2,529 875 231 64 73 554 796 50 125 128 24 269

By Country
Japan United States East Asian NICs Taiwan Hong Kong Korea Singapore European Union United Kingdom Germany Switzerland France Netherlands

By Zone
Zone 1 Zone 2 Zone 3
118 302 140 778 1,686 1,689 163 380 125 1,320 3,440 1,233 194 375 180 937 5,066 1,621

Source: BOI International Affairs Division Note: Projects with more than one foreign shareholder are counted twice.
The BOI Investment Review

Unit : US$ Million

BOI Working Group
Dr. Atchaka Brimble Booskorn Vutivijarn Bussarakum Sriratana Warisara Phungtonglow

Kenan Institute Asia Editorial Team
Don Linder, Editor-in-Chief Paul Wedel Renee Santo Alisa Kukarja Kornluck Tantisaeree Marc DaSilva Alita Thomas

Printing

Graphic Designer

Chittrawinee Wichianson Kirativongsakul Co., Ltd. The BOI Investment Review is produced every month by Kenan Institute Asia (www.kiasia.org) on behalf of the Thailand Board of Investment. Any questions or comments regarding content may be addressed to the editor at DonL@kiasia.org. Previous issues of the Investment Review can be downloaded from: www.boi.go.th/english/services/boi_investment_review.asp

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BOI to Assist Tsunami Afflicted Businesses

On February 1, the BOI established short-term promotion policies to aid businesses, particularly hotels, in six provinces affected by the December 26 tsunami. Partially damaged hotels are eligible for machinery import duty exemptions and corporate income tax exemptions for an eight year period, capped at the reconstruction budget. Damaged businesses requiring complete reconstruction will receive the same tax exemptions, worth up to 200% of the re-investment amount. Aid applications must be submitted by December 2005 for partially damaged hotels, and by December 2006 for completely damaged hotels. Support for damaged businesses in other industries is available according to current policies set for each industry.

Thailand Tsunami Recovery Efforts
Major efforts by the Thai government are underway to help victims of the December 26 Asian Tsunami rebuild their lives and businesses in the six afflicted provinces of southern Thailand (Krabi, Phuket, Phangnga, Ranong, Satun and Trang). The catastrophe left an estimated 283,000 people dead or missing in the affected countries, of which 5,390 people were in Thailand. Government agencies, including the Small and Medium Enterprise Development Bank of Thailand, have set up a 3 billion baht Tsunami Recovery Fund for SMEs and other companies to continue their operations, providing much-needed survival funds. Contributors to this fund also include: Thai Bankers Association: 2 billion baht Government Savings Bank: 500 million baht Siam City Bank: 300 million baht Stock Exchange of Thailand: 200 million baht The Social Security Office, under the Ministry of Labor, approved 120 million baht from the Social Security Fund to finance medical treatment for tsunami victims in 39 hospitals in the six provinces. It has also offered individual loans of five billion baht for affected entrepreneurs, to be administered by six commercial banks. A number of Thai military forces and international troops have joined hands to rebuild various structures destroyed by the tsunami, and the Royal Thai Army is helping to repair and reconstruct roads, bridges, and other facilities on a long-term basis. Striking Thailand’s tropical islands and coastal areas, the tsunami devastated some of Asia’s most popular tourist destinations, packed for the peak season. While the great majority of the hotels and restaurants were unaffected, the severe drop in tourist arrivals during this crucial peak season has caused additional hardships for the industry. Among affected countries, Thailand had the highest concentration of foreigners killed in the tragedy. Thai Airways International Public Co., Ltd. offered all tourists free plane tickets back to their home countries, as many had lost their tickets and their possessions. The Thai Government pledged to repatriate all foreigners who perished and is painstakingly collecting DNA samples and implanting microchips for identification purposes. DNA collection and matching with victims’ living relatives is expected to take nine months, requiring approximately 400 forensics workers from 30 countries. The private sector has also been especially generous in their relief efforts. A partial list of donor companies appears on page 2.

On January 13, 2005, Mr. Tokiyuki Yokoi, General Manager of Rohm Apollo Electronics (Thailand) Co., Ltd., Mr. Hisayuki Baba, General Manager of Rohm Integrated Semiconductor (Thailand) Co., Ltd., and Mr. Yoshiaki Yuasa, President of Rohm Mechatech (Thailand) Co., Ltd., donate 40 million baht to the Thai Government, received by Prime Minister Thaksin Shinawatra.

Mr. Koki Ishizaki, President of Hoya Glass Disk (Thailand) Ltd., and Mr. Nobuo Tanaka, President, and Mr. Suwat Shinkul, Vice President of Hoya Lens Thailand Ltd., on behalf of Hoya Corporation Tokyo Japan donate 11.11 million baht for tsunami relief to Prime Minister Thaksin on January 13, 2005.

On January 19, 2005, Ms. Woraphan Limtrakul donates 1 million baht on behalf of Mr. N. Oda, President of Korat Denki Co., Ltd. and Mr. Katsutake Matsuda, Chairman of World Electric (Thailand) Co., Ltd., to BOI Secretary General Satit Sirirangkamanont.

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The many benefits Thailand offers foreign investors make it one of the region’s most attractive investment destinations. Comparative analysis of costs of doing business in Asia underscores Thailand as a cost-competitive location for investors, offering a quality lifestyle for expatriates. Adding a healthy macroeconomic environment, a positive regulatory business environment and a welcoming culture clearly sets Thailand apart from its competitors.

ThaiLAND OF INVESTMENT

Cost of Doing Business

A recent study commissioned by the Board of Investment compared the cost of living and doing business in Thailand to regional competitor countries including Singapore, Malaysia, China, India and Vietnam. By comparing robust indicators published by multinational organizations such as the World Bank and other prominent groups, the study concluded that Thailand is in an excellent position to maintain its competitive standing among its neighbors, both for current and potential foreign investors.

Positive Business Climate

Improving Competitiveness

The World Bank’s 2004-2005 Global Competitiveness Report [www.weforum.org] and the Institute for Management Development’s World Competitiveness Yearbook [www02. imd.ch/wcc/yearbook] reflect Thailand’s improving macroeconomic environment. For example, the health of Thailand’s macro economy is now 23rd among the 104 countries surveyed in the latest Global Competitiveness Report, up three places from last year. The improvement is the result of continued low inflation, reduced external vulnerabilities, a strong fiscal stance with declining government budget deficits, and higher national savings. Growth prospects in Thailand are also strong, with GDP growth in 2005 projected by the World Bank at 5.8%. International trade continues to play an important role in Thailand’s economic stability and growth, with the export of goods and services now accounting for more than 60% of Thailand’s GDP. The rise in demand for Thai exports, combined with increased public investment spending, is expected to continue to stimulate the Thai economy.

Numerous indicators of Thailand’s business regulatory environment have also improved. Based on the seven groups of business environment indicators in the World Bank’s Doing Business 2004-2005 Report, Thailand ranks 20th among the 145 countries surveyed and first in Southeast Asia in terms of ease of doing business. Starting a business in Thailand is significantly easier in terms of procedures required, duration and cost compared to China, India, Malaysia and Vietnam. Lower startup barriers in Thailand allow entrepreneurs and businesses to quickly put their resources to productive uses. Thailand requires the lowest number of procedures in the shortest time to register a business property for foreign investors as compared to Singapore, China, India, Malaysia and Vietnam. It takes only 2 procedures, 2 days and costs 6% of the registered business value to register a property. Thailand also competes favorably regarding business start-up procedures. Further, Thailand was awarded the highest index for disclosure of ownership and financial information to investors by the World Bank. Thai regulations require businesses to disclose information on ownership, such as family, indirect and beneficial ownership, financial performance and the precise nature of business transactions. The Stock Exchange of Thailand publishes all ownership changes and quarterly statements on its website. By enforcing and encouraging transparency, legal protection from expropriation benefits foreign investors in Thailand. Starting a Business
100 90 80 70 60 50 40 30 20 10 0 Thailand Singapore Malaysia China India Vietnam Number of Procedures (Number) Duration (Days) Cost (% of income per capita)

World Bank’s Doing Business Report: The number of procedures, duration and cost necessary to start a business in 2004 in Thailand, Singapore, Malaysia, China, India, and Vietnam [http://rru.worldbank.org/DoingBusiness/]

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By Alita Thomas

Low Business Costs

Annual costs for A-grade office space in Bangkok’s central business district are the lowest of any city surveyed, at approximately US$13/sq.ft./year — less than Bangkok’s closest competitor city Kula Lumpur (US$14.20) — and substantially lower than other regional hubs such as New Delhi, Shanghai and Singapore. This is in addition to significantly lower rental rates for industrial space outside Bangkok. Industrial electrical power and water costs are also highly competitive. Further, investors find that the cost of wages for skilled labor in Thailand are extremely inviting.
45 40 35 30 25 20 15 10 5 0 CBD-Grade A Rent (US$/sq.ft./year)
Thailand (Bangkok) Malaysia (Kuala Lumpur) Singapore China (Shanghai) Vietnam (Ho Chi Minh City) India (New Delhi)

Vibrant Regional Transportation Hub

CB Richard Ellis, Global Market Rents, August 2004: Approximate Yearly Cost for Grade-A Office Space in Central Business Districts
Gross Wages
45000 40000 35000 30000 25000 20000 15000 10000 5000 0

Bangkok serves as a convenient hub for transportation throughout the Southeast Asian region. The Royal Thai Government plans to further improve Thailand’s infrastructure, and although the final amounts are still being finalized, the investments could total up to 1 - 1.5 trillion baht (US$26 billion) over the next four years. Major infrastructure developments include the upgraded capacity of Laem Chabang Port, which will vastly improve efficiency of sea freight cargo for importers and exporters. The new Suvarnabhumi International Airport, a state-of-the-art facility set to open in September 2005, will boast a yearly passenger capacity of 45 million, expandable to 100 million. Bangkok’s underground mass rapid transit system will be developed further to connect with other modes of transportation in Bangkok, vastly reducing traffic and road congestion. Such projects will ensure Thailand’s place as a regional transportation hub for years to come.

Attractive Tax Rates and Government Incentives

Product Manager Department Heads Engineers Building Labourers Skilled Industrial Workers

Bangkok

Singapore

Kuala Lumpur

Shanghai

Mumbai

UBS 2003 Prices and Earnings Report: Labor Costs: Sample Yearly Salaries in US$ for a Cross Section of the Workforce in Selected Countries

Corporate income taxes in Thailand are also low, ranging from 30% down to 10%, based on criteria such as profits, listing on the Stock Exchange of Thailand, and operating status under Thai law. For example, regional operating headquarters are taxed at only 10%. In addition, the Board of Investment offers numerous investment incentives that substantially reduce and/or eliminate tax liabilities, depending on a variety of circumstances. [For more information on BOI tax incentives, visit www.boi.go.th]

US$ Year

CORRECTIONS

Low Cost of Living for Expatriates

Costs for luxury residential apartments for expatriates are very attractive in Thailand. For example, the average monthly rent for an executive level, 4-bedroom, fully furnished apartment in central Bangkok is less than half of the cost of similar accommodations in Singapore. Presently, there are a large number of apartment projects being constructed and planned in the downtown Bangkok area, where condominium stock will rise significantly in 2005, ensuring greater choice and competitive rents for prospective tenants.

The following corrections are made to the article Company Spotlight: Bayer Thai Co., Ltd. 40 Years of Success, Expansion and Responsible Care in Thailand (January 2004). The correct figure for Bayer's 2003 sales is approximately 24.8 billion baht, or US$620 million. The Investment Review would also like to emphasize that materials science is the core of Bayer's operations in Thailand. Legally established in 1962, the company established its Map Tha Phut production facility to produce high-tech thermoplastics, polymers and polycarbonates for export to world markets since 1996 and will be expanding its production to 200,000 tons by next year. Our apologies to our readers and to Bayer Thai Co., Ltd.

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Fashion

Bangkok Aims to be Asian Fashion Center
The fast-growing Thai fashion industry, encompassing leather, jewelry and garment industries, contributes to Bangkok’s creative and energetic ambiance.
Fashion is still a young industry in Thailand compared to European fashion houses, as its first brands appeared some 25 years ago. Nevertheless, in terms of market range, the Thai fashion industry has grown to cover nearly the whole prêt-à-porter sector: women’s, men’s, and children’s fashions are all well-represented in Bangkok’s shop windows and department stores. Bangkok fashion houses are highly diversified. At one end of the market, a broad array of independent labels launched by upstart designers display their low-price collections in small outlets nestled in Bangkok’s shopping districts. In the middle-range market, several retailers’ brands such as Jaspal, AIIZ, and Pena House, have ensured a strong grip on their segments. They keep close control of their distribution channels via cooperative agreements with shopping malls and department stores. Upmarket fashion houses, such as Greyhound, Senada or Fly Now, distinguish themselves with strong brand identities, sophisticated designs and concept stores. Nevertheless, when time comes to “go international,” Thai designers still face severe impediments. Aside from financial shortfalls in comparison to western brands, the industry lacks international exposure and business skills. Anticipating the expiration of the Multifiber Agreement on January 1, 2005, ending restrictive quotas placed on Thai textile exports, the Thai government placed fashion on the national agenda, making it one of five sectors targeted for priority development. Brand building is a key issue for the industry, as it enables companies to make the necessary switch from an OEM-based garment industry to an upmarket fashion industry. “Cost-wise, we can’t compete with China, but we should be able to produce higher-quality products,” according to Chavalit Nimla, the head of the textiles and clothing section of the Federation of Thai Industries. Launched in order to develop a competitive edge in the international fashion market, the Bangkok Fashion City Project was allotted a 1.82 billion baht (over US$46 million) budget to leverage business skills applied to the fashion business and increase the international exposure of Thai brands. The roadmap defines eleven key projects: 1. International Fashion School 2. Fashion Trend Center 3. Textile and Garment Industry Competitiveness Development 4. Leather Industry Competitiveness Development 5. Jewelry Industry Competitiveness Development 6. Bangkok Fashion Week 7. Trend Setting (Fashion Workshops) 8. International Fashion Contest 9. Top Fashion Report 10. Fashion Roadshow 11. Bangkok Fashion City Promotion The creation of an international fashion school was the first project implemented: Chulalongkorn University in conjunction with Fashion Institute of Technology in New York and Institut Français de la Mode in Paris, opened the Bangkok International Fashion Academy (BIFA) (www.bifa.chula.ac.th) in December 2004. BIFA offers programs in Fashion Design, Fashion Merchandising and Fashion Technology and Management to bridge the gap between designing skills and business skills. “To be successful, a talented designer should also be an able manager, shouldering the same responsibilities as any manager in any industry,” said Michel Testard, member of the Bangkok Fashion City Project. “In addition, the fashion industry poses its own challenges. Aside from creative skills, a designer needs to cooperate closely with workshops and hence needs a technical background to handle concepts of trends and seasonality and to develop specific marketing, sales, and sourcing strategies,” he explained. Furthermore, on January 19, 2005 Industry Minister Pongsak Raktapongpisal signed four contracts with two Thai universities and two Thai companies to manage four other projects worth Bt624 million (US$15.6 million). Rajamangkala Institute of Technology will operate the Textile and Garment Industry Competitiveness Development Project while Srinakarinwirot University is to set up eleven

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by Francois Langella
courses focusing on jewelry and accessory design. Two Bangkok Fashion Weeks are also planned in the next 18 months to be organized by AV Project Co., Ltd. Another company, Pimplus PR Co., Ltd., will oversee the 1,000 square-meter Fashion Trend Center opening next July. The six remaining projects should be tapped within a month, according to Minister Pongsak. As a direct result of these plans, seven Thai designers’ brands (among them Senada, Greyhound, Fly Now and Jim Thompson) were short-listed to participate in WHITE, an international fashion contest which took place last September as part of the Milan Fashion Week. Giorgio Armani subsequently offered internships lasting from six months to one year for young Thai designers, pending the results of design competitions to be organized by the Ministry of Industry early in 2005. Linking the fashion industry to the robust Thai tourism industry is another immense opportunity to raise international awareness of Thai fashion. Around 9.7 million tourists visited Thailand in 2003, many of whom were potential buyers. Acting on this channel, Thai Airways became the first Asian carrier to offer direct connections from Milan to Southeast Asia, making it easier for the city’s fashion-conscious tourists to visit Thailand. Increasing international exposure and building a business culture among designers, the Bangkok Fashion City Project is poised to set Bangkok on the track to become a fashion haven.

\ Albedo and Ausfie : High Quality Leather Brands
R R

Although many industries in Thailand have long exported their products under their customers’ international labels, MBP Leather Industries Co., Ltd. has seen success in creating its own brands. “In Thailand’s fashion industry, it was really the leather products companies that were the first to start branding,” says Tawat Chiu, the Managing Director of the 100% Thai company. “Our customers buy us for our quality leather. The longer you use our wallets and cases, the better the leather looks and feels,” he stated. Though the Ausfie branded office desk accessories have been attracting attention in Thailand since 1983 and is the most recognized MBP brand among Thais, the company nowadays is focusing more on building the Albédo brand for executive leather goods. By targeting business executives, the Albédo brand is meeting domestic demand for quality, competitively priced leather products. Of the company’s current production, including 10,000 wallets and 1,000 bags per month, only 25% is for export. By opening showrooms in upscale Bangkok outlets such as All Seasons Place, Central and Emporium Department Store, MBP is convincing high-end customers not only to open their wallets, but to replace them as well. The company is also now differentiating some of its products by using vegetable dyes, techniques long ago used to decorate horse saddles. This use of natural treatments is a bit more expensive and timeconsuming, but “our customers like that it’s nature-friendly,” said Chiu. Along with their success, the company must endure imitators who have caught on to the strengths of MBP’s designs. Though export production to Japan, the U.S., the Middle East and other countries is mostly OEM-oriented, MBP is working to change that. “With China, we’re not going to win on cost alone, and we don’t need to,” Chiu stated, noting strong sales of its brand in Japan. “This year we’re planning to start exporting our brand into China’s markets. We’re investing four years to get established there. “We’re investing in our brands, because we have to prepare for our future. Sometimes it takes longer to achieve goals, sometimes shorter. When we started, I thought it would take three years to be #1 in Thailand, but it only took two,” Chiu said. With good luck and a string of successes behind them, Chiu declares, “We are confident our brands will continue to strengthen and move into international markets.”

“We’re investing in our brands, because we have to prepare for our future.”
Started in 1983, Modern Business Products Co., Ltd. introduced three main brands: Ausfie in 1983 for its desk sets and office accessories, Albédo in 1994 for its line of leather wallets, briefcases and accessories for executives, and The Beverly brand for women’s bags in 2002. The company was the first to receive the Prime Minister’s Export Award in 1992 in the leather products category and most recently received the Prime Minister’s Industry Award for outstanding achievement in management for small and medium-sized enterprises (SMEs).

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By Renee Santo

Thai petrochemicals leader Siam Mitsui PTA Co., Ltd.
iam Mitsui PTA Co., Ltd. has been upbeat on its prospects for growth and success since its entry into the Thai petrochemicals industry in 1996. Using parent company Mitsui’s most technologically advanced processes to produce PTA (Purified Terephthalic Acid), an essential raw material of polyester, Siam Mitsui now has over 50% of domestic market share. The company attributes its initial success and decision to expand in Thailand to multiple factors, including a strategic location in Asia, a strong Thai partner, and a large petrochemicals market steadily expanding in step with the country’s high GDP. The result is a major plant expansion coming on line in the 4th quarter of 2005. After successively building upon a start-up capacity of 350,000 tons of PTA, Siam Mitsui has expanded production four times in six years, currently producing 900,000 tons of PTA per year. The opening of its third facility in the coming 4th quarter will boost production of the upstream material by 500,000 tons annually. This expansion will feed the growing demands for products in Thailand and neighboring countries. From beverage bottles and easy-care garments to industrial fibers and coatings, PTA eventually finds its way into consumer and industrial products around the world. Siam Mitsui PTA sells a substantial volume of its products domestically. In addition, access to regional markets has led to the company’s plans to increase its presence as a supplier to neighboring countries such as China. “With Thailand’s geographical advantages, we can enjoy easy access to the huge market in China,” stated Akira Tsuzaki, the company’s Managing Director. Siam Mitsui believes that the strength of its successful joint venture with Thai conglomerate Siam Cement was key to quickly and easily setting up operations in Thailand and to their ability to attract top domestic talent. In 1996, a healthy polyester industry was already based in Thailand, attracted in part by the large supply of the essential raw material paraxylene. The partnership with Siam Cement was one of

Ramping up Thai PTA production to feed growing regional demands

S

the main reasons for Mitsui selecting Thailand as a site for its Southeast Asian operations. With their dependence on crude oil and natural gas as key production inputs, Siam Mitsui and other companies look favorably on the Thai Government’s efforts to secure natural resources. Thailand will likely use its trading strengths, bolstered by free trade agreements around the world, and growing international alliances to secure the supply for its growing industries. Overall, Siam Mitsui is optimistic about its future in Thailand. “There are very positive aspects to operating in Thailand. Some of the best aspects are the large market and the strong prospects for future growth here and in neighboring countries,” stated Tsuzaki.

Profile of Siam Mitsui Co., Ltd.
Product: Purified Terephthalic Acid (PTA) Largest supplier of PTA in Thailand, one of the largest in Asia Established: January 26, 1996 Registered Capital: US$70million Shareholding: Mitsui Chemicals, Inc. (Japan): 50.02% Cementhai Chemicals Co., Ltd. (Thailand): 49.98% Number of employees: 275 Number of expatriate employees: 5 Japanese nationals Area: 297,601 sq. meters

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Logistics Thailand
What are Malee’s main activities?
We export over 3,000 containers of juices and canned fruits and vegetables per year. To do this, we need systems to cover everything from seed selection, planting, good agricultural practices and crop management to post-harvest logistics, receiving, and, of course quality control issues throughout. These include HACCP, GMP, ethical trading practices, finished goods logistics, export logistics and customer services.

By Renee Santo

Dr. Krizz Chantjiraporn is the Vice President of Malee Sampran Public Co., Ltd. He founded the Thai Logistics and Production Society (TLAPS) in 1993.

various computer systems, that is a problem. It’s the ability to inter-operate and really incorporate systems into certain standards that’s important. There are many providers, but few understand the whole system. Instead of slow improvements, we need planning that is right the first time. Developing standards across systems from point of sale to source suppliers and all the intermediary points is essential.

That’s quite a lot to administer. What are some other supply chain management considerations for Malee and other large agro processors?
We’re dealing with interaction of everything at the same time: availability of carriers, plant diseases, insects, customer demands, labor constraints, systems, packaging, the weather... everything. We have the idea of the logistics systems we want in place, but so far our providers haven’t been able to do it all.

What logistics areas are you looking to improve?

Well, we are looking at alternative transportation and the prospect of using a land bridge connecting into Vietnam from our production facilities in the Northeast. That would allow us to get to the sea via a much shorter route. But we have to think about the road quality between points, facilities in Vietnam, potential border hassles, and the port facilities.

The automotive and electronics industries are famous for cutting edge logistics systems. Are you benefiting from these industries which are both strong in Thailand?
Just-in-time logistics in the electronics and auto industries require a very different mentality from agro-industry. If they miss a shipment, their products are still intact. But in the agro industry, being late or missing a shipment means that essential product freshness disappears. You have to hire someone to destroy your products. And, of course, all of our products have to have total traceability.

What efforts are being made to improve human resources training in logistics?
In 2000, I started the first business logistics program in Thailand. Now every university has courses, and more are needed. People are also getting independently certified, such as through the U.S.-based APICS courses: Certified in Production and Inventory Management (CPIM) and Certified in Integrated Resource Management (CIRM). TLAPS strongly promotes this.

What are the main opportunities for foreign investments in logistics in Thailand?
There aren’t enough cold storage facilities. In the food industry there are also still opportunities in packaging. There are so many packers and so few packagers. For example, we are trying to invite some tin can providers to locate near our facilities in the northeast. Right now we are buying empty cans from central Thailand and trucking them up there — basically we’re moving air. If we can get suppliers up there, we can lower production costs, reduce our prices and supply more. Tin factories at the moment are enjoying good sales. Another area is quality testing. The technology is pretty simple, but we need more service providers, especially in the food products sector. Also, there are a lot of foreign companies providing logistics consulting, but very few in some key areas.

What can Thailand do to take advantage of its logistics positioning in ASEAN to be a manufacturing hub?
The Thai Government is studying this very issue and has hired consultants to research multimodal logistics systems. In the end, they’ll need a very integrated, holistic policy beyond logistics. The multimodal systems and other ways to integrate infrastructure will improve our competitiveness in the region.

What are some of the logistics problems in Thailand?

Communications systems and ICT infrastructure is okay. But the design on how to lay the foundations to link with

For more information on Malee Sampran Public Co., Ltd., see www.malee.co.th. Information on the Thai Logistics and Production Society (TLAPS) can be found at www.tlaps.or.th.

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By Yuthasak Kanasawat, Salil Wisalswadi and Krisada Wechwitayakhlung

On January 12, 2005, the BOI, in cooperation with the International Enterprise Singapore, hosted the Investment Opportunities in Thailand Seminar at the Hilton Hotel in Singapore, focusing on 3 sectors: electronics & precision engineering, information & communication technology, and logistics. Vice Minister of Foreign Affairs H.E. Sorajak Kasemsuwan opened the seminar by emphasizing the close trade and investment relationship between Thailand and Singapore. BOI Secretary General Satit Sirirangkamanont enumerated the many advantages of investing in Thailand. Presentations promoting investments in each sector were made by a number of companies and Thai Government agencies, including Toyota Motor Thailand, Innovalues Precision Ltd., the Federation of Thai Industries and Thai Computer Industry. Deputy Secretary of Thailand’s National Economic and

Destination: Singapore

Social Development Board, Ms. Wilaiporn Liwgasemsan, discussed the government’s commitment to improve competitiveness in logistics. KPN-ST Logistics Co., Ltd.’s Managing Director, Mr. Leong Choong Cheng, stated that the Singaporean-Thai company has recently experienced double-digit growth and that he firmly believes Thailand is poised to be the air and land transportation hub for Asia and the Pacific. Hitachi Global Storage Technologies (Thailand) Ltd.'s Deputy Managing Director Mr. Nakorn Tansujaritpun noted that HGST had expanded its annual production capacity of hard disk drives from 30 to 60 million units and that Thailand would remain its main production base. dominant investor in Thailand, at almost half the number of foreign projects and one-third the investment value. Mr. Salil also reported significant investment opportunities in the Mr. Salil Wisalswadi leads the BOI’s presentation on investment opportunities in Thailand for automotive and auto automotive parts, on January 18 in Tokyo. parts sector. Thailand has maintained continuous growth in this sector for several years and now has the largest market and highest number of vehicles produced in ASEAN. In 2010, Thailand aims to produce 1.8 million cars of which 44% will be exported.

Destination Japan: Tokyo, Nagoya and Hiroshima

Aiming to promote higher foreign investment in the automotive parts sector, BOI Senior Investment Promotion Officer Mr. Salil Wisalswadi led a BOI delegation to Japan from January 17-22. In the three cities of Tokyo, Nagoya and Hiroshima, the BOI organized investment seminars to give Japanese investors up-to-date information on BOI policies and investment opportunities. Mr. Suteo Ogawa, Managing Director of Tokai Eastern Rubber (Thailand) Ltd., a tire parts manufacturer, also shared some of his 15 years of experience in Thailand. In Tokyo 160 participants attended, 60 in Nagoya, and 16 in Hiroshima. Mr. Chitaworn Worasak, Head of the BOI Tokyo Office, noted that Japan remains by far the most

Sustainable Competitiveness, from page 1
Satit Sirirangkamanont announced record-high investment statistics for 2004. “656 billion baht [US$16.4 billion] of requests for investment promotion is recordbreaking,” stated Secretary General Satit. “We went from annual 3-5% increases to a sudden 115% increase.” Noted areas of increased investments included transportation, petrochemicals, logistics, utilities, and services, as well as ship-building and the aircraft industry. Petrochemicals alone jumped from 56 billion baht [US$1.4 billion] to 123 billion baht [US$3.0 billion]. At the same time electronics entrepreneurs, especially foreigners, continued to see Thailand as a competitive place to invest. Acknowledging the extraordinarily large investments in China, Satit stated, “Not all investments are going to China. A lot are staying here. Our HDD (hard disk drive) production is growing and has the #2 spot in world. The Detroit of Asia initiative attracted 60 billion baht [US$1.5 billion] last year. Steel smelting plants and agro-processing continue to be high growth areas as well.” Noting the long-term commitment of investors to the country, he stated that about 50% of all investments are by investors expanding. Looking at the breakdown of total investments, the Secretary General reported that one-third were 100% foreign-owned, 35% were wholly Thai-owned and 38% were joint ventures, achieving a balanced distribution. The Board of Investment estimated that over 200,000 new jobs were created by these projects. By country, Japan maintained its dominant spot with almost three times the amount invested than either the United States or the European Union, the next two largest investors. The Secretary General also emphasized that the BOI actively promotes small and medium-sized enterprises (SMEs) and not just large-scale companies. “As part of our dual track investment policy, we are providing attractive investment incentives for companies, from SMEs to multinationals. This dual track investment policy is key to building sustainable competitiveness,” stated the Secretary General.

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The Board of Investment

BOI Expands Business Process Outsourcing Category

In order to encourage higher investments in Business Process Outsourcing (BPO), the BOI expanded Activity 7.22 to include not only Call Centers but a range of services under the new category name “Business Process Outsourcing (BPO),” covering a wider range of services provided through the telecommunications network. Included are administrative services, finance and accounting services, human resources support, sales and marketing services, customer services, international call centers, and data processing, among others. Activity 7.22 will continue to be granted only non-tax privileges, but the possibility of providing tax incentives in the future is currently under study.

The BOI will provide new incentives to SME subcontractors located in Zone 3 (22 provinces) and to existing electronics manufacturers located in Zone 1 and Zone 2 wishing to relocate to any of twenty-two Zone 3 provinces. The initiative is designed to promote development of electronics manufacturing in these provinces, which have low per capita GPP (Gross Provincial Product) rates, and to encourage companies to contract vendors in these provinces. Criteria include: The company must be in the electrical/electronics sector and either wish to move manufacturing to Zone 3 (22 provinces) or be an SME (small or medium-sized enterprise) subcontractor in Zone 3 (22 provinces). Manufacturers must have a complete production line. If not, the project may apply for special approval
Photos courtesy of Siemens

New Incentives to Support Electronics in 22 Provinces

from the BOI by certifying that it produces the majority of essential components of the finished products. The BOI must approve manufacturing capacity. Investments to improve machinery are considered part of the promoted project and thus must be approved by the BOI. Electronics manufacturers and SME sub-contractors must submit a joint application and provide a recruitment plan demonstrating that at least 200 Thai employees will be employed within 3 years. Applications for promotion must be submitted by December 31, 2008. Relocating manufacturers are eligible to receive exemptions on import duties on machinery used for the project and 50% reductions in corporate income tax for 5 years. SME subcontractors are eligible to receive machinery import tax exemptions, an 8-year corporate income tax exemption not exceeding the investment capital (excluding cost of land and working capital), and 50% reductions in corporate income taxes for 5 years after the initial 8-year period.

Steel Processing Activity Expanded
The BOI will now grant maximum privileges to projects engaged in upstream steel production as well as to projects with continuous up-stream-to-midstream production proPhotos courtesy of Siemens cessing (mid-stream processes will be considered part of the upstream steel manufacturing project). These projects are categorized as priority activities and are eligible to receive: 1) Exemption of import duties on machinery, 2) Corporate income tax exemptions for 8 years, not capped at the amount of investment, and 3) Projects located in Zone 3 will be granted all incentives as described in Article 35.

Information on BOI incentives for promoted activities is provided in the July 2003 Guidelines of the Board of Investment, which can be downloaded from: http://www.boi.go.th/english/about/boi_policies.asp.

BOI Secretary General Satit Sirirangkamanont, BOI Senior Executive Advisor Mr. Suchart Phisitvanich and Mr. Peter J. van Haren, Chairman of the Joint Foreign Chambers of Commerce in Thailand (JFCCT), are the speakers at the luncheon meeting on January 24, 2005, attended by the Presidents of the 26 Chambers of Commerce.

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