Sector Overview The Machinery Industry In Thailand by gdf57j


									Royal Danish Embassy - Bangkok
Danish Trade Council

                                            Date: May 2007

                          Sector Overview
                       The Machinery Industry
                            In Thailand
1 Introduction

           The competition among the developing countries is becoming fiercer and Thai
           producers are disadvantaged by recent economic gains that have driven up the
           price level and reduced the competitiveness of Thai products. In order to
           sustain their lead, Thai manufacturers are increasingly emphasising the
           importance of an efficient and effective production in compliance with
           international standards. Acknowledging these challenges producers in all
           industrial sectors are continuously striving to improve and upgrade production

           However, in Thailand, the number of quality manufacturers of industrial
           machinery and equipment is limited; therefore Thai manufacturers mostly rely
           on imported machinery and equipment. It is expected that Danish suppliers of
           machinery and equipment can materialize from the absent domestic

2 Market indicators

           By attracting foreign investors under BOI promotions the government
           supports the development of Thailand as manufacturing base and facilitates
           the development of the Thai economy, building human capital and transfer of
           know-how. The BOI claims its readiness to support all industries in Thailand
           and is expanding the available resources.

           Additionally, BOI has specific focus on the machinery industry, seeing that
           Thai manufactures of machinery cannot deliver on the current domestic
           demands from the manufacturing industries. In both 2005 and 2006
           machinery imports to Thailand have been around USD 28 billion.

           Table 1. Machinery import to Thailand in million USD
                                                      2005                    2006
           Machinery and appliances                      11,196.7               11,616.8
           Machinery for agriculture                         86.6                   86.7
           Industrial machinery and appliances            7,911.5                8,272.7
           Textile machinery                                419.6                  401.8
           Bellows and liquid pumps                       1,223.3                1,210.2
           Machinery for the printing industry              316.3                  347.2
           Machinery and equipment for
                                                            794.4                   858.1
           processing rubber and plastic
           Machinery and equipment for
                                                            869.4                      883

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Rolling bearing                                        415.9              419.6
Machinery and equipment for
                                                     1,268.4            1,352.9
processing metal
Machinery and equipment for
                                                        77.8              139.5
processing wood
Moulds                                                  85.5                96.8
Machinery and appliances for other
                                                         202              105.6
Other machinery and appliances                       3,015.9           3,005.2
Total                                               27,883.3          28,796.1
Source: Board of Investment

The manufacturing sector is especially important for the Thai economy and is
considered to be one of the main driving forces of the Thai economy. For
several years the manufacturing industries have enjoyed growth, as shown
below in figure 1.

Figure 1. The manufacturing index (2000 = 100)

Source: Bank of Thailand

Due to the increase in the manufacturing industries demand for machinery has
been and is still rising.

Below is mentioned a few sectors in demand of machinery:

              Presently, there is a particular demand for moulds and dies in
              Thailand, and despite the relatively high number of mould and die

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             producers the sector is challenged by import reliance. Investments
             in manufacturing of moulds and dies are essential to further
             develop and expand prime sectors of the economy, including the
             automotive and electronics industries. Furthermore, an increased
             international demand for quality and precision has lead many
             producers to look for international suppliers of machinery, who can
             assure a high level of efficiency in the manufacturers’ productions
             and who can assure that the required level of international
             standards are achieved in all the processes of their production.

             Opportunities can also be found in the food industry both within
             processing and packaging; especially packaging of agricultural
             products. There is a high and growing demand for machinery such
             as filling, closing, sealing, wrapping and labelling machinery. In
             2006 the food industry imported machinery for more than USD
             192 million.

             Thailand has sufficient medium quality plastic, but relies on imports
             of high quality plastic. The plastic industry is further disadvantaged
             by the lack of technology and shortage of human capital. The
             prospects in the petrochemical industry is thus positive due to the
             expected growth in the related industries such as plastic products,
             auto parts and electrical appliances industry. More industries are
             turning to plastic products substituting other more expensive
             materials such as metal.

             Thailand is increasingly recognized as the “Detroit of Asia” with
             production of 1 million cars and auto parts. In 2010 the
             government targets a production of 2 million cars making Thailand
             number 10 among the automotive manufacturing countries. The
             growth in the automotive industry benefits the economy as a whole.
             Recently it is claimed that the growth in the automotive industry
             increased the employment within the country by up to 8% of the
             total employment throughout Thailand. In order to attain these
             goals, the machinery used on production must be of superior

             The textile and fashion industry have become major export
             industries including everything from textile and fashion clothes,
             jewellery, shoes, apparel and accessories. The larger part of
             machinery used in these manufacturing processes are imported.
             This is also valid for the majority of the machinery employed in the
             printing sector.

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                       Finally, during the past years, up to 72,000 entrepreneurs have
                       entered the manufacturing market, which indicates a growing Thai
                       industrial sector and also indicates a future potential market for
                       high quality machineries.

3 Market trends

          As shown above the manufacturing industry is driving the machinery industry.
          Therefore, the growth experienced in manufacturing is expected to have a
          positive impact on the Thai demand for machinery of high quality. This
          should be seen in relation to the fact that Thai machinery producers cannot
          fulfill domestic demand for quality machinery that enables the manufacturing
          sectors to produce in accordance with international standards.

          Moreover, due to BOI’s focus on improving competitiveness in many Thai
          sectors, imports of machinery for BOI chosen sectors can be done on a duty-
          free basis. This is for instance the case for the industry for environmental
          products or parts of the automotive sector. By offering an incentive like this,
          Thai manufactures are encouraged to purchase quality machinery from foreign

          Finally, recent advances in the manufacturing industry have increased the Thai
          consumption of fuel. Additionally, expansion of the manufacturing sectors in
          Thailand has produced high levels of solid waste and wastewater also
          involving high usage of energy. As a result, the Thai government has turned its
          attention to environmental concerns. Hence, opportunities exist within
          development of energy conserving equipment. A government target is that by
          2011 8 % of all energy consumed in Thailand should come from alternative
          energy sources.

4 Market assessment

          In the Thai machinery industry opportunities exist in supplying many of the
          manufacturing sectors employing quality machinery. However, according to
          BOI food technology machinery, computer numerical control (CNC)
          machinery, moulds and dies, as well as energy conserving machinery are all
          particularly favourable segments within the industry of machinery. Therefore,
          the machinery industry could prove favourable for Danish suppliers and
          manufactures of machinery with an interest in exporting to the Thai market,
          especially since local producers of machinery cannot fulfil the domestic

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Moreover, the initiatives made by BOI, as well as the well-functioning
infrastructure, and relatively low labour costs are all factors facilitating and
encouraging Danish companies to operate in the Thai market.

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