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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 processes. 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 manufacturing. 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 construction Royal Danish Embassy – Bangkok Page 2 of 7 Danish Trade Council 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 industries 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 Royal Danish Embassy – Bangkok Page 3 of 7 Danish Trade Council 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 quality. 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. Royal Danish Embassy – Bangkok Page 4 of 7 Danish Trade Council 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 companies. 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 demand. Royal Danish Embassy – Bangkok Page 5 of 7 Danish Trade Council 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. Royal Danish Embassy – Bangkok Page 6 of 7 Danish Trade Council Royal Danish Embassy - Bangkok 10, Soi Attakarn Prasit South Sathorn Road Bangkok 10120 Tel + 66 2 343 1100 Fax + 66 2 213 1752 E-mail firstname.lastname@example.org www.ambbangkok.um.dk The Royal Danish Embassies in Bangkok is part of the Danish Trade Council, Royal Danish Ministry of Foreign Affairs, which is the official export and investment promotion agency of Denmark. The Danish Trade Council has approx. 350 employees, of whom approx. 280 are based abroad at embassies, consulates general and trade commissions on approx. 100 markets. The Danish Trade Council advises and assists Danish companies in their export activities and internationalisation process according to the vision: We must be the partner preferred by enterprises in international trade and investment activities. The Work in the Danish Trade Council follows specific procedures and quality guidelines that are described in our internal quality manual. In this way our customers are secured the best possible quality under the varying working and market conditions that at any given point of time are in force for the respective embassies, consulates general and trade commissions.
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