History of industrial estates in Thailand
By Jon Fernquest |
A mini-history of industrial estates in Thailand is the subject of an article in today's Bangkok Post business section.
If you ever wondered what all those large factories are doing along the coast south of Bangkok, stretching past Pattaya to Rayong, today's article gives you the background and history of the Eastern Seaboard Development Project that first developed this area.
Photo on right is of the Map Ta Phut Industrial Estate and petrochemical and petroleum complex on the Eastern Seaboard.
Here is the article in full:
BY Invitation
Thailand's industrial property evolution
JAMES PITCHONMonday July 07, 2008
Industrial estates first appeared in Thailand in the 1970s, after the government introduced plans to raise standards of living by increasing agricultural, industrial and power production. Infrastructure was still poor but these measures improved living standards and brought new roads, irrigation and land reform to the Bangkok region. The growing income gap caused an influx of rural workers into the capital. The government responded by promoting industrial development outside Bangkok and also began to promote export-oriented industries to leverage the nation's cheap labour.
The Industrial Estate Authority of Thailand (IEAT) was established in 1972 under the Industry Ministry to oversee industrial development policies. The IEAT currently presides over almost 40 estates, some of which it owns and manages while others have private investors. Growth has stemmed from to favourable government policies, including allowing foreign ownership of industrial estate land (from 1977) and the development of government-funded infrastructure to support industries.
The first industrial estates were completed in the late 1970s, led by Bangchan Industrial Estate, which housed 51 companies producing a wide range of products. Another early estate, Lat Krabang, also near Bangkok, has a general industrial area and a duty-free export-processing zone (EPZ) for export-oriented manufacturers.
Eastern Seaboard Development Project (1991)
Prime Minister Gen Prem Tinsulanonda initiated the Eastern Seaboard Development Project to encourage development outside Bangkok and take advantage of proximity to the Gulf of Thailand. The project was approved in 1988, with Japan providing technical assistance and financing for many infrastructure projects. A major development during this period was Laem Chabang container port that was completed in 1991 and where capacity is now being expanded.
The IEAT in 1989 established Map Ta Phut Industrial Estate as a petrochemical and petroleum complex and logistics base in the Eastern Seaboard. With almost 60 factories employing 13,600 people, and a total investment of 470.4 billion baht, it is located near Map Ta Phut industrial port, where most of the raw materials for petrochemical and petroleum companies arrive.
The first private industrial estate, Bang Pakong (later renamed Amata Nakorn), was built by Amata Corp in the late 1980s. This was followed by Hemaraj's Chon Buri estate and a venture by Rojana, another major player.
The financial crisis in 1997 caused the devaluation of the baht, which made export industries more competitive. The industrial sector became a beneficiary as foreign direct investment (FDI) poured in when many manufacturers made Thailand their production base.
Automotive Sector
Much publicity has focused on the automotive sector and the government's plan to transform Thailand into "Detroit of the East." The Eastern Seaboard Industrial Estate (ESIE) in Rayong is one of the most integrated automotive industrial estates in the world. Although the Board of Investment (BoI) started supporting auto assembly plants in 1961, the industry truly gained steam in the mid-1990s, when AutoAlliance, a joint venture between Ford and Mazda, began to make pickup trucks for local and overseas markets. General Motors and Toyota soon followed. Thailand is the second largest local market and exporter of one-ton pickup trucks, behind only the US. This creates economies of scale, while Thailand's trade privileges within Asean give it access to a sizeable regional market as well.
The automotive industry is strategically vital, both for its ability to compete globally and because of the high local value-added content of parts. Many automotive parts companies, including manufacturers of glass, plastics, metal processing, steel service centres, forging plants, chemicals and other related activities have located themselves in ESIE. The next step is to move upstream from assembly into value-added services such as research and development (R&D). To this end, Toyota has set up an R&D centre in Thailand, the only one located in Asia (outside Japan), while Honda is also building a similar centre that is expected to open next year.
Thailand overtook Singapore as the world's largest manufacturer of hard disk drives (HDDs) in 2006 and HDDs now account for more than 50% of all electronics exports from Thailand. The sector has grown substantially over the past decade, and now employs more than 100,000 workers generating more than 400 billion baht in exports.
In 2007, the BoI approved tax privileges for eco-car assemblers. Carmakers including Honda, Toyota, Suzuki, Ford-Mazda, Tata and Mitsubishi have all chosen Thailand as their base for car and eco-car manufacturing. Combined with investment by parts suppliers, this should support Thailand's industrial sector in the short to medium term.
Going forward, I believe Thailand will encounter increasing competition for its role as a manufacturing base. China is now considered to be the "world's factory", while Vietnam was seeing strong FDI until its recent problems. To compete, Thailand will have to increase its attractiveness to potential investors through the use of expanded tax privileges and better infrastructure while developing human talent to provide a well-trained, readily available workforce.
James Pitchon is Executive Director and Head of Industrial Services of CB Richard Ellis. This article is the third of a weekly series examining the evolution of the Thai property market to mark the 20th anniversary of CBRE in Thailand. For more information, please visit http://www.cbre.co.th
(Source: Bangkok Post, business, 07-07-08, page B10, JAMES PITCHON, temp-link)
Vocabulary:
an industrial estate, industrial park - an area of land set aside for industrial development, located close to transport facilities (ports, highways, railroads, airports, rivers), equipped with infrastructure essential for heavy industry such as high-power electric supplies (often including three-phase power), high-end communications cables, large-volume water supplies, and high-volume gas lines (See Wikipedia)
a standard of living - a country's per capita income, the average income of people in the country, or other measures of the quality of life in a country compared to other countries
raise standards of living - increase the average amount of money that people in the country earn
infrastructure - basic services needed to live and do business in a place, such as water, electricity, roads, and sewage waste removal
reform - changes to improve laws, society, or government (See glossary)
an influx - when a large number of people arrive come to a place
rural areas - farming areas far away from large cities
rural workers - workers from rural farming areas
leverage - using some resource to get larger than normal returns
leverage the nation's cheap labour - use the nation's cheap labour for national gain
Industrial Estate Authority of Thailand (IEAT) - a government agency that has developed and manages 34 industrial estates around Thailand (See website and description at BOI website)
Eastern Seaboard Development Project - a project to economically develop the coastal area south of Bangkok from Conburi to Rayong for industrial use, initiated by Prime Minister Prem Tinsulanonda in 1988, Japanese technical assistance and financing provided, includes Laem Chabang container port and the Map Ta Phut petrochemical and petroleum complex
proximity to Y - being near to Y
a container - a standard metal box to ship things, that can be loaded on a ship, a truck, or train (See Wikipedia on containerization and container ship)
Laem Chabang container port - Thailand's larger port for container ships, located on the road from Bangkok to Pattaya and Rayong
petrochemical - chemicals obtained from oil (petroleum) or natural gas
petroleum - oil
a complex - a group of special purpose buildings or one building split into different areas
logistics - transportation and storage of goods, from the factory to stores and wholesalers or between factories (See Wikipedia)
a logistics base - a central location where goods are stored and transported from
private - owned by companies (not the government)
private industrial estate - an industrial estate owned by companies (not the government)
Foreign Direct Investment (FDI) - "Investing directly in production in another country, either by buying a company there or establishing new operations of an existing business" (See The Economist)
publicity - when some event generates great public interest in something (See glossary)
Board of Investment (BOI) - the Thai government agency responsible for providing incentives to encourage investment in Thailand (See website)
economies of scale - produce more goods then lower cost, as production increases the average cost of each good decreases, since overhead and fixed costs are spread over more units of production (See The Economist glossary)
trade privileges within Asean - reduced tariffs and greater access to the markets of other ASEAN member states
strategy - making long-term plans for competition
vital - important
strategically vital - very important factor in making long-term plans for competition
high local value-added content of parts - a lot of the finished product was built locally (in the country)
forge an object out of metal - heat the metal and then hammer and bend the metal into the required shape
forging plants, a forge - a place where metal goods are made by heating metal and shaping it
upstream and downstream in the supply chain - companies that receive components that are used to manufacture a component part, receive from upstream and send downstream
move upstream from assembly into value-added services - build more of a finished product, rather than just final assembly
research and development (R&D) - research within companies to find new products and improve existing products (See Wikipedia)
X overtook Y - X passed Y
talent - the ability to something well
developing human talent - increasing the ability of people to do things well
