The decoupling of global supply chains following trade conflicts between the US and China could benefit Thailand in the automotive, electrical appliances, and electronics industries.
Thailand needs to ramp up in-depth research and data analysis at provincial and regional levels to identify target markets for exports or investment in order to formulate appropriate promotion policies, according to the latest study by the Trade Planning and Strategy Office (TPSO).
The planning unit advised Thailand to accelerate building a skilled workforce ready for targeted and high-tech industries such as chip design and chip manufacturing. This is essential in order to facilitate the entry of foreign workers into Thailand who possess quality and expertise, said Poonpong Naiyanapakorn, director-general of the TPSO.
"Thailand has a comparative advantage in terms of labour force, particularly in the automotive industry, where Thai labour is known for having high safety and quality standards, as evidenced by the low recall rate of cars manufactured in Thailand. This is an important factor that automobile manufacturers must consider," he said.
In terms of investment, several countries in Asean have increased incentives to attract investment. These include tax benefits and non-tax privileges, particularly in Indonesia, with the aim of promoting the automotive and battery industries, and Malaysia, with the aim of promoting the electronics industry. In this regard, the office recommends stepping up the promotion of investment in Thailand, such as supporting research and development funding, expediting investment promotion in the country's targeted industries, such as electric vehicles, electrical appliances, and electronics (including chip production in the field of power electronics), and adjusting the conditions for technology transfer suitable for investment.
Additionally, a platform for dialogue between Thailand and leading multinational companies worldwide should be established on an annual basis to facilitate the exchange of opinions on crucial factors for investment or business operations. Furthermore, Thailand should take the opportunity to attract investment from China as investors there are expected to relocate production outside the country to maintain access to Western markets, so it should encourage them to invest in Thailand.
To enhance competitiveness, the TPSO also proposed regular meetings and brainstorming between the government and relevant private sectors be held. Clear responsibilities should be assigned to hosting agencies to formulate policies and promote relevant measures.
Additionally, institutes and/or funds to drive the targeted industries should be established. Furthermore, Thailand needs to expedite the development of upstream industries within Thailand, especially in the production of Internet of Things-related equipment, to promote comprehensive production along the supply chain, according to Mr Poonpong.
Preparation should be made in terms of software and hardware, such as AI, robotics, automation systems, along with the country's infrastructure, including land, electricity, roads, testing laboratories, and linkages with neighbouring countries in the region. Import duties on raw materials should be reduced since Thailand still relies heavily on importing raw materials for production. The government should facilitate convenience and reduce obstacles for the private sector, according to the TPSO.
"Based on the brainstorming sessions organised involving government agencies, trade associations and relevant company representatives, the decoupling of supply chains between the US and China is intensifying. Both superpowers aim to reduce their interdependence," he said.
"The US considers the importance of security and flexibility in supply chain resilience, especially after the disruptions caused by the Covid-19 crisis. Similarly, China is aware of the risks involved and is attempting to mitigate them. As a result, there have been movements in trade and investment."
