23 Mar, 2012

As Thai-India Transport, Trade & Industry Links Grow, So Will the MICE Sector

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Keynote Address By M.R. Pongsvas Svasti, Minister of Industry, at the India-Thai Business Association, 29 February 2012

Topic: “Industrial Policy: Road to a Better Future”

[Editor’s Note: The following speech clearly outlines the huge potential for increased trade and transport contacts between Thailand and India, which over time will also benefit the two geographically intermediate countries, Myanmar and Bangladesh. It also shows the huge promise for growth in the MICE sector that will clearly follow].

During the past decade, Thailand and India have witnessed growing warmth in bilateral relations and increased economic and commercial links. This is because we have many things to complement each other. One example that I could come up with now is the bold policy and wisdom of the two countries’ leaders of the India’s Look East policy since 1993 and Thailand’s Look West policy since 1996.

These policies have set the stage for a substantial consolidation of bilateral relations, and become the foundation of Thai-India Free Trade Agreement in 2003. This bilateral agreement was routed to ASEAN-INDIA FTA later, in which it expands our relationship frontier and prosperity opportunity to farther horizon.

Please allow me to say a few key points about my trip to India (between Jan 24-26, 2012).

Starting by underlining the importance of the Thai-India trade relationship which has spanned for centuries when the first Indian traders visited this opportunity land. Many have settled their lives here and made Thailand as their beloved home. Along the periods of time, they have become a main bridge for linking both countries together via many activities, including trade and investment.

During the past five years, India is ranked 10th largest export partner of Thailand. An overall export from Thailand to India was US$5,188 million in 2011, increasing from US$2,663 million in 2007 or increasing by 24.6 % annually. Moreover, India becomes more and more important destination for Thai exported products as their export share to India increased from 1.7 in 2007 to 2.6 in 2011. The major exported products are Chemical products, Plastics, Jewelry, engines and Rubbers.

As for an import side, India is now 16th largest supplier for Thailand. Regarding to the import market share which declined from 1.48 in 2007 to 1.32 in 2011, overall import value from India has a tendency to increase over 17% a year over the last five years. Last year, the total import value from India was US$3,013 million. The import list was dominated by jewelry, gemstone, silver and gold bars, chemical products, machinery and parts, agricultural products and minerals.

There is a growing trend in bilateral trade and investments. Bilateral trade has multiplied around six times over past decade. Having reached US$6.6 billion in 2010, it was poised to touch US$8 billion in 2011. During the visit of the Thai PM to India, both sides had set a target of doubling trade by 2014. A Joint Working Plan had been agreed indicating timeline for concluding the negotiations by March 2012.

However, on the investment front, India has a total investment of approximately US$430 million during 2000 – 2011 while Thai has been investing in India around US$85 million over the last 10 years. It can be seen that there are significant potential to increase investment between the two countries.

Thailand Board of Investment or BOI will establish its first office in Mumbai in the third quarter of this year. The office will provide service to both Indian investors looking for investment opportunities in Thailand, and also Thai investors who want to expand business in India.

I proposed to set up an Investment Forum which can be jointly organized in cooperation with CEO Forum that the Prime Minister of Thailand has raised during her visit in which Thailand Board of Investment and FICCI had a roundtable discussion on the idea of setting up Thailand – India Investment Forum which has been agreed. The forum will definitely be one of the key mechanisms to address and fulfill the issue of investment since its main objectives would be to discuss, plan, and execute a rational and effective program to strengthen investment and trade collaboration between the two countries.

Both government keeping in mind the importance of enhancing connectivity, the two sides reviewed progress made on connectivity projects such as the India-Myanmar-Thailand Trilateral Highway project. Both sides apprised the other of work undertaken by them on the project and considered ways to regularly monitor progress. Thai side also provided details on its proposal to establish sea link between Thailand and India and on the project of constructing deep sea port in Dawei connecting Thailand with Bay of Bengal and India.

Distinguished Guests,

Allow me to share you with an overview of the contribution of industrial sector to Thai economy and what we are now doing.

Most recent data reveal that industrial sector account for nearly 40% of Thailand GDP, valued around 4 trillion baht, and account for 78% of total exports. It is a home of 6 million jobs. Our major industries in term production value and GDP contribution are Electronics, Automotives, Jewelry, Chemical, Textiles, and Food. These sectors also occupied the top place of the country’s export list for many years.

It indicates our competitiveness on these sectors, and it does happen, not by naturally, but by intentionally built. Over the last 5 decades, Thailand has open country to Foreign Direct Investment and set incentives and privileges and more liberal economic policies, relatively to neighboring countries in this region.

As the result, we have seen a flux of new investment in modern industries coming into Thailand. With no national car policy and the establishment of Eastern Seaboard, I would say that those policies combining with other policies such as tariff and tax restructure and human resource development have made Thailand becoming a Hub of production of automotives and its supporting industry. We are also the world largest hard Disk Drive exporter and the home of almost all main business players in many industries.

Over the past 30 years, Thailand has leaped herself from agricultural based economy to industrial based economy, as the share of manufacturing in GDP and exports surpassed that of agriculture. However, Ministry of Industry has fully recognized the comparative advantage of agricultural sector, in which we have securely chained it with industrial sector in order to improve value added to our primary sector. Our success indicator could be seen from a share of agro-industry in the country’s export. It is now about 8% of total exports and made Thailand is a Kitchen of the world.

Ladies and gentlemen;

As for the future, by taking into accounts all challenges we are facing and will face on the road ahead, starting from a more liberal economic environment, a greater concern of people over environmental and social issues, and a tighter regional political, social and economic integration. I do believe that Thai industrial sector has to be able to overcome the following three folds.

First, the industrial sector must be able response to dynamic market demand. The advancement of Communication technology helps customers can access to all information that they need about products,much easier, faster and cheaper.

They today become more demanding and more selective than ever before. By being fed by new information more often and faster, the consumers’ taste seems to be more dynamic and becomes unpredictable. The global market liberalization also makes them having ever more bargaining power in market.

To be able to follow and catch up and deal with this frighten demanding of customers, the market intelligence information and customers’ taste knowledge become crucial for the survive of industry. We, producers, might have to keep on the toes all the time for being flexible enough for responding to fast changing customers’ demand and preferences. It could be in the future that the one who produce product without identity or not being differentiation will be in the tough position for being eliminated from the market. It could be tragedy of being common.

Second, they must have competitive edge over competitors in global arena. To response the new global landscape where global and regional economic environment become more liberal, we must be able to enhance our product competitiveness where no one can top it.

Ministry of Industry aims to restructure the existing industrial structure into knowledge-based enterprises by utilizing the technologies for future, creating value by focusing on “Creative and cultural Industries” and using local wisdom to add value to our products. Special privileges are applied to encourage for those who produce creative products with high value-add and innovative content.

We also encourage industry to make use of AEC privileges to set up their production network with other counterparts in ASEAN for creating economies of scale and economies of scope. By division of labor via specialization spirit, all parties will be able to enhance efficiency of their production both quality improvement and cost effectiveness. This might include the improvement of Transport networks and all logistic cross-border connections, as well as the removal of all barriers for production factors movement among all members. I do believe that it would be beneficial and level up competitiveness to industrial sector for the whole region in which we intend to share with our ASEAN friends.

And last, the industry must be able to co-exist with community. People and communities today have exercised their rights over environment protection more often than in the past. Many industrial investment projects were protested and rejected by local communities in many areas. This is the price in which we pay for what we have done and neglected in the past. We cannot deny that in the last decades, industrial sectors created negative externalities to society and people. Their impacts are in various forms such as hazardous waste, noise, dust particles and polluted water etc. These are costs to society and have been transferred by polluters to people.

From now and toward, the process industrial development has to implement their activities with great social responsibility.

These are increasingly essential to sustainable growth and jobs creation.

I cannot end this without telling you the progress of the government’s flood protection programmes.

I am optimistic that we have put in place several measures which are necessary and sufficient to invigorate Thai firms that suffered from the flood and even further enhance our competitiveness. In fact, we have emerged from the impact of the severe natural disaster, despite the daunting challenges over the past several months.

The recovery rate has been an increasing rate fashion. The recovery rate of factories in industrial estates jumps from 23% in the beginning of January to 29% in the end of January, and 39% in Mid-February. For the rest, many are in the process of re-installation their production facilities, or in the process of insurance evaluation. Ministry of Industry expected that most of affected factories will be able to resume their operation by the end of this first quarter.

To prevent the unpleasant history to repeat it again, the government has prepared a Flood prevention macro plan, in which there are series of policies. Among major policies, the government plan to drain water from all major dams as earlier as late May, in order to prevent the dams’ over-capacity during the peak of rainwater volume. The water storage levels in the Bhumibol and Sirikit dams will be slashed down to 45% of their capacities, which should give enough capacity for new inflows of water during the coming rainy season. However, this targeted level could be adjusted according to the water situation. Additionally, the government would make use of land covering Phitsanulok to Suphan Buri, about 2 million rai to hold up floodwater.

As far as, the Flooding prevention for the Industrial Estates in Flooding areas is concerned, the Government set aside 15,000 million baht soft loan with 0.01% interest to industrial estate developers to establish flood protection system, and encourages all industrial estates in flooding risk areas to improve their water protection dikes. The Ministry of Industry with closed cooperation with all Industrial Estate Developers and JICA have already designed flood protection system for all 7 flooding affected estates, and expected to be in place in up-coming August. All dikes will be approved by JICA and the MOI to ensure their flood-protection capabilities are up to standard.

Earth dike with concrete floodwall, Concrete sheet pile dike and Double concrete sheet pile dike are adopted by 6 industrial estates, except the smallest estate, the Factory Land due to limitation of area for dike construction. They will use another appropriate flooding protection approach. As a result, temporary dikes are improved and reinforced with 0.5 – 1.4 meters higher than the maximum flood level last year and expected to complete by August 2012, while the proposed permanent protection systems are under constructed and expected to complete by next year.

From our experience in the last flooding, the logistic system was crucial for industries, as well as for people. We plan to improve logistic and system chain system between industrial estates in order to ensure operation continuity of factories during flooding. This also includes the connection between production place, Distribution Centre and markets to ensure that people will be well supplied consumer products and foods during flooding.

Ladies and Gentlemen,

Finally, may I share you with some figures which make me to be confident that the government policies are well in place and well respond to the needs of industrial sector and investors.

Firstly, Thai Industries Sentiment Index (TISI), announced by Federation of Thai Industry (FTI), in January was up from 93.7 in December 2011 to stand at 99.6. This figure shows an increase for two consecutive months, and it is the highest level in the last 5 months. This confirms an increasing of confidence level among manufacturers and companies.

Secondly, BOI announced recently that the trend of foreign direct investment in Thailand continues to rise. Comparing to January last year, the applications for investment privilege in January 2012 were up in both number of projects and total investment value.

It increased from 67 projects, investment value of 15,300 million baht in the last January, to be 80 projects and total investment of 25,027 million baht, or increasing by 19.4% in term of project number, and 63.58% in term of investment value. More interestingly, about 50% of the new applied projects are the new foreign direct investment.

I am confident that with all policies put in place and working together between government and business communities, not only help Thailand to regain its confidence from investors, but also to sustain its competitiveness in the global marketplace.

Ladies and gentlemen,

India is an important trade partner with Thailand. India is a leading nation in Asia.

I would like to reiterate that the opportunities for Thai-India economic link are endless. For those who are looking place for setting up your business, Thailand will be the best for your choices. I would like to assure you that it is the Government’s commitment to carrying out any necessary action to ensure that all foreign businesses are able to operate in Thailand in the simplest and most convenient manner.