US$ Million Electrical machines and apparatus having individual functions

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1 Opportunities Abound in Thailand s Machinery Industry Boasting 50,000 enterprises and 400,000 workers, Thailand s machinery and metalworking industry resounds with activity. Demand for more sophisticated machinery is growing, especially among domestic downstream industries, creating attractive opportunities for investors. This is because even with its extensive size, the local industry offers a limited supply of high-end machinery and parts, leaving many companies looking for imports. In fact, machinery and parts rank among Thailand s top 5 most imported goods, with their inbound shipments totaling US$12.57 billion in Japan is the primary source, responsible for 24.6% of imports in 2009, followed by China at 21.3% and the United States at 9.4%. Electrical machines and apparatus with individual functions are the leading product category, with US$9.78 million in imports that year. Thailand s status as a regional export hub also allows local machinery and parts suppliers to benefit from the economic growth of its neighbors. The country s exports of these products have grown by 90% since 2004 to nearly US$8 billion. Favorable trade relations with the signing of the ASEAN Free Trade Agreement (AFTA) is adding fuel to Thai machinery and parts exports. Growth looks likely to continue as demand from developing nations such as Vietnam, Malaysia and Indonesia strengthens. Top 5 Machinery & Parts Imports 2009 Code Description US$ Million 8543 Electrical machines and apparatus having individual functions Air or vacuum pumps, air or other gas compressors, and 932 fans 8411 Turbo-jets, turbo-propellers and other gas turbines Printing machinery used for printing by means of printing type, blocks Refrigerators, freezers and other refrigerating or freezing equipment 721 Agricultural Machinery Thailand is flush with agricultural resources, and the machinery to make efficient use of these resources in the fields and on the processing floors is in high demand. As major suppliers of agricultural machinery in Thailand currently fall short of meeting demand, the domestic market must turn to imports, which increased by more than 80% over six years to reach US$548 million in While importing more modern equipment for use in its fields, Thailand has also increased its exports of agricultural machinery. The period saw exports soar by 77%, with the top categories being tractors and equipment for cleaning, sorting and grading seed and grain. Machine Tools Growth in Thailand s automotive and E&E (electrical appliances and electronics) industries is boosting demand for modern machine tools. Automotive and auto parts companies are the biggest buyers of machine tools, accounting for 35% of the domestic market. The E&E

2 industry purchases 14%. The machine tools sector is heavily dependent on imports, which totaled US$1.2 billion in CNC Machine Tools Reflecting growing demand, Thailand s market for computer numerical controlled (CNC) machine tools also relies strongly on imports, half of which come from Japan. In 2009, total imports of CNC machine tools reached US$87.45 million. Exports that year were worth US$10.55 million, the top categories being lathes and other turning centers for removing metal. Industrial Machinery Thailand s world-class downstream manufacturing industries continue to have a keen hunger for imports of industrial machinery and parts, which in 2009 totaled US$10.82 billion, a 16% jump over six years. Printing machinery showed the biggest increase at 108% to US$3.6 billion. At the same time, however, the country s industrial machinery sector is developing rapidly as an exporter. In the past six years, industrial machinery exports more than doubled, reaching US$7.7 billion in Industrial Machinery & Parts Imports, Exports (Feb) (Feb) Imports Exports Unit: US$ Billion Source: Ministry of Commerce Food Processing & Packaging Machinery More than 10,000 food processing companies are operating in Thailand, creating healthy demand for processing and packaging equipment, with the domestic market for such growing 20% annually. Imports comprise a large portion of this market at a value of nearly US$263 million in 2009, and most come from Japan (33%), Germany (30%), the United States (22%) and Italy (15%).

3 The leading import category by value comprises machinery for filling, closing, sealing, capsiling and labeling bottles, with shipments exceeding US$100 million in This is also the biggest growth sector at 32% over the past three years. Moulds & Dies Moulds and dies are essential inputs for downstream manufacturing. With Thailand s automotive and E&E industries expected to continue growing robustly, the prospects for the mould and die sector are bright. The government s Mould and Die Industry Development Project aims to reduce dependence on imports by more than 3% and increase the value of exports by 5% through the creation of added value for the sector. The project supports 20 industry-related educational institutes and has invested in the expansion of 225 mould factories. Seven mould excellence centers with public and private funding have already been established. One of the many functions of such centers is to train mould technicians, with 4,426 trained so far. The project is also raising production standards to sharpen Thailand s global competitiveness. According to a Thai Tool and Die Industry Association survey, there are 1,061 mould and die factories in the country. Of these, 90% produce moulds and dies for plastic and metal, while the rest manufacture the products for rubber, glass and ceramics. Stamping, progressive and forming are the most common types of metal moulds, while injection and blow plastic moulds are widely used by auto and E&E makers and the packaging industry. As the automotive industry is expanding output, investment opportunities exist in die casting for the manufacture of engine blocks, crank shafts, front cases, oil pans, gear boxes and auto safety parts. Thailand s Top Import & Export Locations for Moulds & Dies 2009 Import Origins Export Destinations Location US$ Million Location US$ Million 1 Japan Japan Mainland China India Taiwan US South Korea Mainland China Singapore Malaysia Malaysia Vietnam US Indonesia Germany Singapore Hong Kong Germany Canada Canada 3.46 In 2009, Thailand imported US$568 million worth of moulds and dies. Exports totaled US$203.5 million, going mostly to Japan, the US and China. Closing this trade gap presents another investment opportunity in Thailand s mould and die sector. Why Thailand? There are many reasons to choose Thailand as a machinery and metalworking production base. Thailand boasts:

4 Strong Business Climate In its 2010 index, the World Bank ranked Thailand 12 th in the world and 3 rd in East Asia and the Pacific for ease of doing business. Machinery and Mould & Die Clusters To foster greater productivity and efficiency in this sector, the government is encouraging the development of national machinery and mould and die clusters. Proximity between manufacturers and their input suppliers allows for enhanced communication and improved flow of goods. Growing Domestic Demand Thailand s dynamic manufacturing industries are expanding, and urban development and infrastructure projects are fueling construction. Brisk activity in the following industries is spurring demand for machinery and metalworking support. Automotive Industry Thailand is Southeast Asia s largest vehicle producer and the world s No. 2 producer and market of pickup trucks. World s 13th largest automobile manufacturing country. Production of passenger cars and pickups to reach 1.6 million in Electrical Appliances & Electronics Industry World s largest HDD components manufacturing base, with 1.4 million units in World s 4 th largest producer and 9 th largest exporter of air conditioners. Food Processing Industry World s biggest exporter of rice, sugar, cassava, processed chicken, canned and frozen seafood, and processed pineapple products. World s 19 th highest agriculture output. Construction Industry Industry expected to grow at an annual rate of 5.5% through at least Public investment totaling US$14 billion planned for expanding roads and mass transit in and around Bangkok. Access to Markets Thailand has successfully negotiated many free trade agreements (FTAs). This includes FTAs with ASEAN member countries, Australia, New Zealand and Japan. Thailand s prime location in the heart of Southeast Asia and its membership in the ASEAN Free Trade Area (AFTA) provide it with unparalleled access to ASEAN s market of 550 million people. The tariff on machinery exported to ASEAN countries was eliminated at the outset of Great Infrastructure There are many industrial estates that focus on the machinery and metalworking industry, providing state-of-the-art facilities. Thailand s extensive road network, world-class deep sea ports such as Laem Chabang, and new international airport make exporting easy and efficient. Competitive Workforce Thailand not only boasts low labor costs but also a well-educated workforce. There were 111,314 Thai graduates in science-technology and engineering in Investor-Friendly Environment The Thai government imposes no export requirements, no local content requirements, and no foreign equity restrictions on manufacturers. In addition, the Board of Investment offers a host of fiscal and non-fiscal incentives for the manufacture of machinery, equipment and parts, ranging from corporate tax exemption to

5 assistance with work permits and product sourcing. The local industry also has excellent institutional support.