The industrial machinery and manufacturing sector employs 16% of the labor force in Thailand. This translates to 9.3 million jobs and is only second to the agriculture sector, which employs 31% of the labor force. In 2021, the industry accounted for 34% of the country’s GDP.
Unique Trends
The pandemic affected Thailand greatly, just like other countries. However, the government is taking measures to ensure that the economy is back on track in many sectors, including industrial machinery. Currently, Thailand is one of the leading ASEAN countries to vaccinate its population, with 23% of its population already vaccinated. Consequently, companies in the industrial machinery sector are ensuring that their employees are being vaccinated. World data forecasts that the economy will grow by 3% when 0.6% of its population receives the second dose. The production index of the industry has increased by 35% along with demand for electronics and medical equipment.
Key factors for sourcing industrial machinery in Thailand
Here are the essential factors encouraging businesses to source industrial machinery in Thailand.
Established U.S. brands
The presence of U.S. and other global brands in Thailand shows that Thailand is a globally recognized destination and should be considered in the industrial machinery sector. In 2019, goods and services trade between the U.S. and Thailand totaled $52.7 billion.
Exporting and geography of the Thai market
Thailand’s economic geography is immense and robust, making it a good hub for sourcing industrial machinery. Apart from being the 15th largest country in Asia, it is the 20th largest trading partner to the U.S. and the 26th largest trading partner for the European Union. 15% of its exports go to the U.S. alone. This serves to prove its ability to produce machinery that is accepted on a global scale.
Thailand 4.0 initiative
The Thailand 4.0 initiative aims to provide more finished products in the industrial machinery sector and embrace current eCommerce trends. The government-led initiatives focus on upcoming industrial machinery business trends to open up global opportunities using platforms such as Walmart, Amazon, and the like. The country seeks to pull away from previous models, which focused on different aspects. Thai 1.0 was purely an agricultural model, while Thai 2.0 involved the light industry. Thai 4.0 is supposed to pursue an advanced industry as 3.0 did.
Well-established city
Bangkok, the capital of Thailand, is not just a well-established city but a commercial hub recognized globally. The metropolitan city provides the much-needed impetus gained mainly from using tourism as its primary revenue earner. Because it is one of the most significant seaports in Southeast, it is also a strategic city transporting industrial machinery across the globe. The city already has a well-established ecosystem comprising factories, logistics services, and warehouses, which are essential for an industrial economy.
Local construction market
Thailand’s local construction market is thriving and is expected to grow even further. As a significant contributor to the economy of Thailand, it made around 425 billion Thai Baht in 2021. Local construction is divided into public and private sectors, with the public sector expected to expand more. Around 100,000 construction companies are registered in Thailand, a ripe market for the industrial machinery sector. The forecast to increase construction services in the country also means that the local market can consume industrial products as well as an increase in the external demand for Thai products.
Automotive market
The automotive industry in Thailand is the largest in Southeast Asia. Most producers are foreign, such as Japanese, American, and Chinese. It is also the 10th largest in the world, producing 2 million cars annually. Many foreign companies have chosen to set up their global headquarters in Thailand, which relies on the ASEAN Free Trade Area to find a market for its products.
Challenges for sourcing industrial machinery in Thailand
Language and aging population
As of 2021, the population of Thailand was just under 70 million. It comprises many languages, such as Malays, Cambodian, Vietnamese and Chinese. However, the official language is Thai. English is also used in business and major cities such as Bangkok and Chonburi. There is, however, some language barrier—a challenge investors may face.
Also, it is expected that Thai’s population growth will stagnate in 2028 due to its slow growth. Since the 1970s, population growth has been declining partly due to economic development. The median age of Thailand in 2022 is 40.1, well above that of Indonesia (29.7), the Philippines (25.7), and Vietnam (32.5). It means that the population is much older in Thailand, which could affect the availability of labor in the coming years.
Connectivity
Bangkok is a major globale city. However, its connectivity to other industrial towns may not be as good. There is no well-developed road or rail system that could aid the ease of movement of industrial goods. This makes the movement of goods more expensive and increases the risk of damage to industrial goods while in transit.
Slow economic growth
Compared to the 80s and 90s, Thai’s economic growth is much slower. Thailand was the fastest-growing economy between 1985 and 1997. However, the Asian financial crisis, triggered after the Baht was unpegged from the U.S. dollar, halted this period of economic progression. Thailand’s growth in 2019 was 2.27%, which is slower compared to that of Vietnam and the Philippines—6% and 7%, respectively. This economic growth can slow down the development of the industrial machinery sector.
Final thoughts
The language barrier may seem a serious challenge when doing business in Thailand. With it come cultural norms that may differ significantly from other countries. At the same time, however, companies can benefit from the diversity of the difference in culture. What’s more, diversity could lead to the invention of new products or businesses introducing unique solutions. For a list of machinery available in Thailand, visit Alibaba.com.
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