BOI attracting strategic industries to Thailand
By Jon Fernquest |
Electronics, automobiles, and automobile parts are considered Thailand's strategic industries, so the Thai government gives them special tax privileges.
The Board of Investment (BOI) is the agency of the Thai government in charge of creating incentives to encourage Foreign Direct Investment (FDI) in key industries.
Collectively applications from these three strategic industries for Board of Investment (BOI) privileges rose by 36% in the first 10 months of this year from the same period last year. The BOI expects applications to pick up even further after the December 23rd elections.
These industries are considered "key magnets to spur foreign direct investment [FDI]." They provide parts and components used by manufacturers further downstream in the supply chain. If these parts and components are available in Thailand, they don't have to be imported, so sourcing them becomes a lot easier for manufacturers operating in Thailand. In these industries Thailand has "gained a reputation as a solid regional manufacturing base with good infrastructure and a skilled labour force."
Much can be learned from looking at an example of a German company that has relocated its operations from Singapore to Thailand recently:
Patterer Technical Parts Co Ltd, a German electronics and electrical parts producer, is among the companies looking to expand its capacity in Thailand next year.Plant manager Vibool Chandrangsu said the company expected its export revenue to rise to 100 million baht per year from approximately 60 million once its expansion is completed. The new output would include plastic parts used for mobile phones installed in vehicles.
"We are continuing to invest in Thailand despite political uncertainties. Most investors from Germany deeply understand Thailand, thanks to the country's potential and the clear investment promotion policy," said Mr Vibool.Patterer Technical Parts relocated from Singapore to Thailand in 2006. It now produces electronic and electrical parts for cameras and exports to many countries including Germany, Indonesia, Malaysia and Singapore".
One benefit of FDI is the training that they provide Thai workers in industry best practices, something difficult to receive in schools that are typically constrained by low budgets and limited work experience of teachers in industry.
Industry best practices often eventually gets fed back to schools themselves, improving the training curriculum, via alumni ties that workers often have to their old schools and internships that students have with firms.
Check out a new blog on supply chain management. (Source: Bangkok Post, Business, 06-11-07, temp-link)
Vocabulary:
strategic - about plans made to achieve a goal over a long period
tax privileges - reductions in taxes as a reward for doing certain things
Board of Investment (BOI) - the Thai government agency responsible for providing incentives to encourage investment in Thailand (See website)
Foreign Direct Investment (FDI) - investment by foreign companies by buying assets or companies in the country (the opposite is portfolio investment, buying stocks and bonds of companies in the country)
collectively - together as a group, not individually
applications - requests to do something
privileges - special permission to do restricted things
from the same period last year - comparing activity taking place at the same time, but in two different years
magnets - something that attracts something else
spur - increase activity in
supply chain - materials, information, and finances moving from supplier to manufacturer to wholesaler to retailer to consumer (See Wikipedia)
downstreams in the supply chain - companies that receive components that are used to manufacture a component part, receive from upstream and send downstream
sourcing - when the purchasing department in a company searches for supplies, compares prices, and makes a purchase decision
infrastructure - basic services needed to live and do business in a place, such as water, electricity, roads, and sewage waste removal
relocated - when a business moves to a new location
looking to expand its capacity -
political uncertainties - when people are unsure about government policies and leadership, they are also unsure about economic growth, this uncertainty can itself reduce investment and growth opportunities
curriculum - subjects studied during a course of study at a school
alumni - people who graduated from a school
internships - when a student works at a company during school break to obtain work experience
