Machinery and Metalworking

INDUSTRY OVERVIEW Thailand’s machinery and metalworking industries currently employ a labor force of around 400,000 people and are comprised of approximately 50,000 enterprises. The limited supply of domestic high-end machinery and parts has left downstream Thai industries to look for imports. Machinery and parts currently rank in Thailand’s top 5 most imported goods with US$12.57 billion worth imported in 2009. Japan was the primary source with 24.6% of the total, followed by China (21.3%) and the US (9.4%). Electrical machines and apparatus with individual functions (HS 8543) were the leading products with US$ 9.78 million imported in 2009. Opportunities exist for suppliers to capitalize on this growing demand for more sophisticated machinery by providing domestic downstream industries with a local source.

Machinery and Parts: Imports and Exports 2004 – 2010 (Jan-Feb)

Billion Baht

Import Export

2004 385.77 143.34

2005 440.83 179.12

Source: Ministry of Commerce, Thailand

2006 434.36 200.93

2007 426.34 288.41

2008 495.89 303.41

2009 431.77 274.07

2010 (Feb) 77.56 57.18

Top 5 Machinery and Parts Imports, 2009 Code Description 8543 Electrical machines and apparatus, having individual functions 8414 Air or vacuum pumps, air or other gas compressors and fans 8411 Turbo-jets, turbo-propellers and other gas turbines 8443 Printing machinery used for printing by means of the printing type, blocks 8418 Refrigerators, freezers and other refrigerating or freezing equipment

US$ Million 978 932 918 748 721

Top 5 Machinery and Parts Exports, 2009 Code Description 8443 Printing machinery used for printing by means of the printing type, blocks 8418 Refrigerators, freezers and other refrigerating or freezing equipment 8429 Self-propelled bulldozers, angledozers, graders, levellers, scrapers, mechanical shovels, excavators 8414 Air or vacuum pumps, air or other gas compressors and fans 8543 Electrical machines and apparatus, having individual functions

US$ Million 231 223 177 175 145

Thailand’s status as a regional export hub allows local machinery and parts suppliers to benefit from the economic growth of its neighbors. Exports have grown by over 90% since 2004 to over US$8 billion a year. Rapid development in the region coupled with favorable trade relations after the signing of the ASEAN Free Trade Agreement (AFTA) sparked this recent rise in Thai machinery and parts exports. The trend of export growth looks likely to continue as demand from developing nations such as Vietnam, Malaysia and Indonesia grows.

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 floor is in high demand. Major suppliers of agricultural machinery in Thailand currently fall short of meeting this demand. The domestic market instead turned to imports, which increased by over 80% over five years to a level of US$548 million in 2009. While importing more modern equipment for use in its fields, Thailand has also increased its exports of agricultural machinery. The five years leading up to 2009 have seen exports of machinery rapidly increase by 77%, with a considerable portion going to fellow ASEAN members such as Laos and Cambodia. The top export categories of agriculture machinery in 2009 were tractors, and machinery for cleaning, sorting and grading seed and grain.

MACHINE TOOLS Growth in Thailand’s automotive and E&E industries is expected to fuel demand for modern machine tools. Automotive and auto parts firms are the biggest buyers of machine tools, purchasing 35% of the domestic market. The supporting metalworking industry follows with 27% while the E&E industry buys 14%. With a limited number of domestic enterprises specializing in the manufacture of machine tools, most of the demand is met by imports which totaled US$1.20 billion in 2009. In 2009, the top three exported categories of machine tools were parts and accessories for machines; machine tools for the removal of material; and lathes for removing metal.

Industrial Machinery and Parts, Imports and Exports, 2004-2010(Feb)

Import Export

2004 9.36 3.88

2005 10.66 4.88

2006 10.35 5.49

2007 10.43 7.99

2008 11.98 8.38

2009 10.82 7.72

2010 (Feb) 1.94 1.60

Source: Ministry of Commerce Thailand

CNC MACHINE TOOLS

INDUSTRY MACHINERY

Reflecting a growing demand, Thailand’s market for computer numerical controlled (CNC) machine tools remains heavily dependent on imports, half of which come from Japan, and the machinery and metalworking industry is keen to source more of these sophisticated machine tools domestically.

Thailand’s world class downstream manufacturing industries have boosted imports of industrial machinery, while the industrial machinery industry itself has rapidly developed as an exporter.

Imports in 2009 totaled US$10.82 billion, marking a 16% increase since 2004. Printing machinery (HS 8433) saw the biggest In 2009, total imports of CNC machine tools increase in the same year with a 108% rise were worth US$87.45 million. Total exports from US$1.8 billion in 2008 to US$3.6 billion. that year were worth US$10.55 million, with the top-exported categories of CNC machine In the five years leading up to 2009, Thailand’s tools being lathes and horizontal lathes exports of industrial machinery more than (including turning centers) for removing doubled to a level of US$7.7 billion. The metal. main exports of industrial machinery were printing machinery, refrigerating & freezing equipment, and air or vacuum pumps, gas compressors and fans. Printing machinery was the greatest export gainer in 2009 with an increase of 33.8% from US$0.97 billion to US$1.3 billion.

MOULD AND DIE

FOOD PROCESSING AND PACKAGING MACHINERY

Moulds and Dies are essential inputs for downstream manufacturing. With Thailand’s automotive and electronics/electrical appliances (E&E) industries expected to grow, the prospects for the mould and die industry are just as bright. The Mould and Die Industry Development Project aims to reduce dependence on imports by more than 3% and increase the value of exports by about 5% by creating added value for the industry.

According to a Thai Tool and Die Industry Association (TDIA) survey, there are approximately 1,061 mould and die factories in Thailand. Of these factories, 90% produce More than 10,000 food processing companies moulds and dies for plastic and metal, while currently exist in Thailand to create a healthy the rest produce those for rubber, glass and demand for processing and packaging ceramics. A majority of moulds and dies equipment, with the domestic market for are utilized by Thailand’s automotive and such equipment having grown 20% annually E&E industries. Stamping, progressive and for the past several years. Imports comprise forming are the most common types of metal a large portion of this market – with a total mould, while injection and blow are plastic value of nearly US$263 million in 2009 – and moulds widely used by the auto and E&E most come from advanced economies such makers as well as the packaging industry. The as Japan (33%), Germany (30%), US (22%) and automotive industry is expected to expand output of vehicles in 2010, and accordingly Italy (15%). die casting used in the manufacturing of The most imported food processing and such items as engine blocks, crank shafts, packaging machinery by value was machinery front cases, oil pans, gear boxes and auto for filling, closing, sealing, capsiling, or safety parts present particularly attractive labeling bottles, worth over US$100 million in opportunities. 2009, the biggest increase in imports over the last three years with a growth value of 32%. Local mould and die manufacturers are only partly able to meet the increasingly Import categories that rose in 2009 included sophisticated demands of Thailand’s machinery and apparatus for filtering or downstream industries, leaving a significant purifying water (8.6%) and machinery for the opportunity in the market to higher quality mould and die imports from foreign preparation of meat and poultry (3.7%). manufacturers. Japan is the source of around

understanding and improving procedures and management; since the project began, 39 enterprises have received ISO 9001:2000 certification and 81 enterprises have developed programs for compliance with ISO 9001:2000 standards.

Major Mould & Die Clusters in Thailand

half of the total mould and die imports, with China a distant second followed by Taiwan 1. Mould & Die Cluster of Thailand (MDCT): most members are located around and Korea. In 2009, Thailand imported US$568 Bangkok, Samutprakan, Chachoensao million worth of moulds and dies and exported and Rayong. US$203.5 million mainly to Japan, US and China. Closing this trade deficit presents an 2. Thai Mould and Parts Cluster (TMPC): most members are located around investment opportunity in Thailand’s mould Bangkok, Samutsongkram and and die industry, which is made even more Samutsakorn. attractive by growing downstream sectors 3. Thai Mould and Die Industry Assiciation and a supportive government. (TDIA): most members are located around Bangkok. In order to advance the sector, the Thai government has initiated the Mould and Die 4. Nano Global Precision Cluster (NGPC): most members are located around Industry Development Project for 2010-1014. Bangkok, Phatumtani and Ayutthaya. This project supports 20 industry related educational institutes and has invested in the expansion of 225 mould factories. It has Thailand’s Top Import and Export locations for surpassed its original Moulds and Dies, 2009 aim of establishing 5 mould excellence Import Origins Export Destinations centers with public and Country Value Country Value private funding, having US$ Million US$ Million established 7 as of June 2008. One of the 1 Japan 343.48 1 Japan 64.40 many functions of the 59.59 2 India 27.33 excellence centers is to 2 China train mould technicians 3 Taiwan 47.69 3 USA 19.19 and since the opening 36.96 4 China 11.76 of the centers 4,426 4 Korea t e c h n i c i a n s h a v e 5 Singapore 19.88 5 Malaysia 11.64 been successfully 15.82 6 Vietnam 11.45 trained. The project 6 Malaysia als o a i ms to r ai s e 7 USA 7.37 7 Indonesia 10.97 production standards 5.54 8 Singapore 3.94 to make Thailand more 8 Germany c o m p e t i t i v e i n t h e 9 Hong Kong 4.99 9 Germany 3.61 world market both by 4.50 10 Canada 3.46 enhancing technical 10 Canada

WHY THAILAND There are many reasons to choose Thailand as your machinery and metalworking production base. Among other things, Thailand boasts:

Strong Business Climate – In Doing Business 2010, the World Bank ranked Thailand 12th in the world and 3rd in East Asia and Pacific for ease of doing business. Machinery and Mould & Die Clusters - In order to foster greater

productivity and efficiency in the industry, the government has encouraged the development of national machinery and mould & die clusters. Proximity between firms and their input suppliers allows for not only enhanced communication, but also improved flow of goods.

Growing Domestic Demand

– Thailand’s dynamic manufacturing industries have established a presence in world markets and are expected to expand even further, while urban development and infrastructure projects fuel a growing construction industry. All of these increases in economic activity rely on the machinery and metalworking industries for support, making prospects for these industries very bright indeed. - Automotive Industry - Food Processing Industry - Southeast Asia’s largest vehicle - World’s largest exporter of rice, producer and world’s 2nd largest sugar, cassava, processed chicken, producer and market of pick-up canned and frozen seafood and trucks processed pineapple products - Thailand is the world’s 13 largest - World’s 19th largest agriculture automobile manufacturing country output - Production of vehicles to reach 1.4 - Construction Industry million in 2010 - Construction industry is expected to - Electronics/Electrical Appliances Industry grow at an annual rate of 5.5% from - World’s #1 HDD components 2008-2012 manufacturing base (1.4 million in - Public investments totaling up to 2010) US$14 billion planned for expanding - World’s 4th largest producer and 9th roads and mass transit (MRT, largest exporter of air conditioning Skytrain) in and around Bangkok units

Thailand’s extensive road networks, world class deep sea ports, such as Laem Chabang Deep Sea Port, and a new international airport make exporting easy and efficient.

Competitive Workforce – Thailand

not only boasts relatively low labor costs, but also has an exceptionally well-educated workforce. Literacy rates are uncommonly high at 96%. Currently, 56 public and private engineering institutes in Thailand are accredited by the Council of Engineers. There were 111,314 Thai graduates in science technology and engineering in 2009.

Investor-friendly Environment – In

addition to the many incentives provided by the BOI, the Thai government imposes no export requirements, no local content requirements, no location requirements, and no foreign equity restrictions on manufacturers.

Access to Markets – Thailand has

successfully negotiated many free trade agreements (FTAs). These FTAs include those with ASEAN member nations, 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) allow Thailand unparalleled access to ASEAN’s market of 550 million people. The tariff on machinery exported to ASEAN nations was eliminated at the outset of 2010.

Great Infrastructure

– There are many industrial estates which focus on the metalworking and machinery industries and provide them with state-of-art facilities.

Excellent Institutional Support – the Thai government is aware of the need to support the continued development of the machinery and metalworking industries, as well as the technological capabilities of its workforce. Thailand offers many resources for research and development (R&D), technical training and industrial organization, including: - Thai-German Institute (TGI) - National metal and Materials Center (MTEC) - Bureau of Supporting Industries Development (BSID) - Metal-working and Machinery Industry Development Institute (MIDI) - Thai Tool and Die Industry Association (TDIA) - Thailand’s Institute of Scientific and Technology Research - Thailand-Japan Technology Promotion Association (TJTPA) - Metals and Materials Research Center – Kasetsart University

BOI INCENTIVES FOR THE MANUFACTURE OF MACHINERY AND MACHINE TOOLS The Board of Investment offers a host of fiscal and non-fiscal incentives and investment services that range from corporate tax exemptions to assistance with work permits and product sourcing for the manufacture of a wide range of machinery, equipment and parts. Manufacture of machinery, equipment or parts that have engineering design; manufacture of farm machinery or equipment and food processing machinery or equipment; and manufacture of energy-conserving; machinery or equipment and machinery or equipment which uses alternative energy are classified as priority activities of special importance and benefits to the country. As such, they receive an eight-year corporate income tax holiday and are exempt from import duties on machinery, regardless of location, as well as other location-based incentives, and are not subject to the corporate income tax exemption cap. Manufacture or repair of moulds and dies and manufacture of other machinery, equipment and parts are classified as priority activities and receive an eight-year corporate income tax holiday and are exempt from import duties on machinery, regardless of location, as well as other location-based incentives. The BOI also offers location-based incentives for the manufacture of hand tools and measuring tools, manufacture of metal products, including metal parts, while the manufacture of sintered products and the manufacture of steel products or parts that contain metal casting process using induction furnace or forging process in the project are treated as priority activities.

BOI ZONING MAP

BOI OFFICE ADDRESS OFFICE OF THE BOARD OF INVESTMENT 555 Vibhavadi-Rangsit Road, Chatuchak, Bangkok 10900, Thailand Tel: +66 (0) 2553 8111 Fax: +66 (0) 2553 8222 E-mail: [email protected] Website: www.boi.go.th

Regional Offices

ONE STOP SERVICE CENTER FOR VISAS AND WORK PERMITS

18th Floor, Chamchuri Square Building Phayathai Road, Pathumwan, Bangkok 10330, Thailand Tel: +66 (0) 2209 1100 Fax: +66 (0) 2209 1194 E-mail: [email protected]

ONE START ONE STOP INVESTMENT CENTER

18th Floor, Chamchuri Square Building Phayathai Road, Pathumwan, Bangkok 10330, Thailand Tel: +66 (0) 2209 1100 Fax: +66 (0) 2209 1199 E-mail: [email protected] Website: osos.boi.go.th

CHIANG MAI Regional Investment and Economic Center 1 Airport Business Park 108-110, 90 Mahidol Road, Amphur Muang, Chiang Mai 50100 Tel: +66 (0) 5320 3397-400 Fax: +66 (0) 5320 3404 E-mail: [email protected]

SONGKHLA Regional Investment and Economic Center 5 7-15 Chaiyong Building Juti Uthit 1 Road, Hadd Yai, Songkhla 90110 Tel: +66 (0) 7434 7161-5 Fax: +66 (0) 7434 7160 E-mail: [email protected]

NAKHON RATCHASIMA Regional Investment and Economic Center 2 2112/22 Mitraphab Road, Amphur Muang, Nakhon Ratchasima 30000 Tel: +66 (0) 4421 3184-6 Fax: +66 (0) 4421 3182 E-mail: [email protected]

SURAT THANI Regional Investment and Economic Center 6 49/21-22 Sriwichai Road, Makhamtia, Amphur Muang, Surat Thani 84000 Tel: +66 (0) 7728 4637, +66 (0) 7728 4435 Fax: +66 (0) 7728 4638 E-mail: [email protected]

KHONKAEN Regional Investment and Economic Center 3 177/54 Moo 17, Mitraphab Road, Amphur Muang, Khonkaen 40000 Tel: +66 (0) 4327 1300-2 Fax: +66 (0) 4327 1303 E-mail: [email protected]

PHITSANULOK Regional Investment and Economic Center 7 Thai Sivarat Building 3rd Floor, 59/15 Boromtrilokkanat 2 Road, Naimuang District, Amphur Muang, Phitsanulok 65000 Tel: +66 (0) 5524 8111 Fax: +66 (0) 5524 8777 E-mail: [email protected]

CHONBURI Regional Investment and Economic Center 4 46 Moo 5 Laem Chabang Industrial Estate, Sukhumvit Road, Toongsukhla, Sriracha,Chonburi 20230 Tel: +66 (0) 3840 4900 Fax: +66 (0) 3840 4999 E-mail: [email protected]

Overseas Offices BEIJING Thailand Board of Investment, Beijing Office Royal Thai Embassy, No.40 Guang Hua Road,Beijing 100600, P.R.C. Tel: +86 10 6532 4510 Fax: +86 10 6532 1620 E-mail: [email protected] FRANKFURT Thailand Board of Investment, Frankfurt Office Royal Thai Embassy, Bethmannstr. 58, 5.OG 60311 Frankfurt am Main Federal Republic of Germany Tel: +49 (0) 69 9291 230 Fax: +49 (0) 69 9291 2320 E-mail: [email protected] GUANGZHOU Thailand Board of Investment, Guangzhou Office Investment Promotion Section, Royal Thai Consulate-General, Room 1216-1218, Garden Tower, 368 Huanshi Dong Road, Guangzhou 510064, P.R.C. Tel: +86 20 8333 8999 Ext.1216-8, +86 20 8387 7770 Fax: +86 20 8387 2700 E-mail: [email protected] LOS ANGELES Thailand Board of Investment, Los Angeles Office Royal Thai Consulate-General, 611 North Larchmont Boulevard, 3rd Floor, Los Angeles CA 90004, U.S.A. Tel: +1 (0) 323 960 1199 Fax: +1 (0) 323 960 1190 E-mail: [email protected]

SEOUL Thailand Board of Investment, Seoul Office #1804, 18 th Floor, Coryo Daeyungak Tower, 25-5, Chungmuro 1-ga, Jung-gu, Seoul, 100-706, Korea Tel: (822) 319-9998 Fax: (822) 319-9997 E-mail: [email protected] SHANGHAI Thailand Board of Investment, Shanghai Office Royal Thai Consulate-General, 15th Floor, Crystal Century Tower, 567 Weihai Road, Shanghai 200041, P.R.C. Tel: +86 21 6288 9728-9 Fax: +86 21 6288 9730 E-mail: [email protected] SYDNEY Thailand Board of Investment, Sydney Office Suite 101, Level 1, 234 George Street, Sydney, New South Wales 2000, Australia Tel: +61 2 9252 4884 Fax: +61 2 9252 2883 E-mail: [email protected] STOCKHOLM Thailand Board of Investment, Stockholm Office Stureplan 4C 4th Floor, 114 35 Stockholm, Sweden Tel: +46 (0) 8 463 11 58, +46 (0) 8 463 11 72, +46 (0) 8 463 11 74-75 Fax: +46 (0) 8 463 11 60 E-mail: [email protected]

NEW YORK Thailand Board of Investment, New York Office 61 Broadway, Suite 2810, New York N.Y. 10006, U.S.A. Tel: +1 (0) 212 422 9009 Fax: +1 (0) 212 422 9119 E-mail: [email protected]

TAIPEI Thailand Board of Investment, Taipei Office Taipei World Trade Center, 3rd Floor, Room 3E 39-40 No.5, Xin-Yi Road, Sec.5 Taipei 110, Taiwan R.O.C. Tel: +886 2 2345 6663 Fax: +886 2 2345 9223 E-mail: [email protected]

OSAKA Thailand Board of Investment, Osaka Office Royal Thai Consulate-General, Bangkok Bank Building, 5th Floor, 1-9-16 Kyutaro Machi, Chuo-Ku, Osaka 541-0056, Japan Tel: +81 (0) 6 6271 1395 Fax: +81 (0) 6 6271 1394 E-mail: [email protected]

TOKYO Thailand Board of Investment, Tokyo Office Royal Thai Embassy, 8th Floor, Fukuda Building, West 2-11-3 Akasaka, Minato-ku, Tokyo 107-0052, Japan Tel: +81 (0) 3 3582 1806 Fax: +81 (0) 3 3589 5176 E-mail: [email protected]

PARIS Thailand Board of Investment, Paris Office Ambassade Royale de Thailande, 8, Rue Greuze, 75116 Paris, France Tel: +33 (0) 1 5690 2600-1 Fax: +33 (0) 1 5690 2602 E-mail: [email protected]

BOI Fair 2011