Machineryand Metalworking

2004 2005 2006 2007 2008 2009 2010 (Feb)

Import 385.77 440.83 434.36 426.34 495.89 431.77 77.56

Export 143.34 179.12 200.93 288.41 303.41 274.07 57.18

Billion Baht

Machinery and Parts: Imports and Exports2004 – 2010 (Jan-Feb)

Source: Ministry of Commerce, Thailand

INDUSTRY OVERVIEWThailand’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.

Top 5 Machinery and Parts Imports, 2009Code Description US$ Million

8543 Electrical machines and apparatus, having individual functions

978

8414 Air or vacuum pumps, air or other gas compressors and fans

932

8411 Turbo-jets, turbo-propellers and other gas turbines

918

8443 Printing machinery used for printing by means of the printing type, blocks

748

8418 Refrigerators, freezers and other refrigerating or freezing equipment

721

Top 5 Machinery and Parts Exports, 2009Code Description US$ Million

8443 Printing machinery used for printing by means of the printing type, blocks

231

8418 Refrigerators, freezers and other refrigerating or freezing equipment

223

8429 Self-propelled bulldozers, angledozers, graders, levellers, scrapers, mechanical shovels, excavators

177

8414 Air or vacuum pumps, air or other gas compressors and fans

175

8543 Electrical machines and apparatus, having individual functions

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 MACHINERYThailand 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 TOOLSGrowth 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.

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

In 2009, total imports of CNC machine tools were worth US$87.45 million. Total exports that year were worth US$10.55 million, with the top-exported categories of CNC machine tools being lathes and horizontal lathes (including turning centers) for removing metal.

2004 2005 2006 2007 2008 2009 2010 (Feb)

Import 9.36 10.66 10.35 10.43 11.98 10.82 1.94

Export 3.88 4.88 5.49 7.99 8.38 7.72 1.60

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

Source: Ministry of Commerce Thailand

INDUSTRY MACHINERYThai land ’s wor ld c lass downst ream 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 increase in the same year with a 108% rise from US$1.8 billion in 2008 to US$3.6 billion.

In the five years leading up to 2009, Thailand’s exports of industrial machinery more than doubled to a level of US$7.7 billion. The 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.

FOOD PROCESSING AND PACKAGING MACHINERYMore than 10,000 food processing companies currently exist in Thailand to create a healthy demand for processing and packaging equipment, with the domestic market for such equipment having grown 20% annually for the past several years. Imports comprise a large portion of this market – with a total value of nearly US$263 million in 2009 – and most come from advanced economies such as Japan (33%), Germany (30%), US (22%) and Italy (15%).

The most imported food processing and packaging machinery by value was machinery for filling, closing, sealing, capsiling, or labeling bottles, worth over US$100 million in 2009, the biggest increase in imports over the last three years with a growth value of 32%.

Import categories that rose in 2009 included machinery and apparatus for filtering or purifying water (8.6%) and machinery for the preparation of meat and poultry (3.7%).

MOULD AND DIEMoulds 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 Associat ion (TDIA) survey, there are approximately 1,061 mould and die factories in Thailand. Of these factories, 90% produce moulds and dies for plastic and metal, while the rest produce those for rubber, glass and ceramics. A majority of moulds and dies are utilized by Thailand’s automotive and E&E industries. Stamping, progressive and forming are the most common types of metal mould, while injection and blow are plastic moulds widely used by the auto and E&E makers as well as the packaging industry. The automotive industry is expected to expand output of vehicles in 2010, and accordingly die casting used in the manufacturing of such items as engine blocks, crank shafts, front cases, oil pans, gear boxes and auto safety parts present particularly attractive opportunities.

Local mould and die manufacturers are only partly able to meet the increasingly sophist icated demands of Thai land’s downstream industries, leaving a significant opportunity in the market to higher quality mould and die imports f rom fore ign manufacturers. Japan is the source of around

half of the total mould and die imports, with China a distant second followed by Taiwan and Korea. In 2009, Thailand imported US$568 million worth of moulds and dies and exported US$203.5 million mainly to Japan, US and China. Closing this trade deficit presents an investment opportunity in Thailand’s mould and die industry, which is made even more attractive by growing downstream sectors and a supportive government.

In order to advance the sector, the Thai government has initiated the Mould and Die Industry Development Project for 2010-1014. This project supports 20 industry related educational institutes and has invested in the expansion of 225 mould factories. It has surpassed its original a im of establ ishing 5 mould excel lence centers with public and private funding, having establ ished 7 as of June 2008. One of the many functions of the excellence centers is to train mould technicians and since the opening of the centers 4,426 t e c h n i c i a n s h a v e b e e n s u c c e s s f u l l y trained. The project a l so a ims to r a i se production standards to make Thailand more compe t i t i ve i n t he world market both by enhancing technical

Thailand’s Top Import and Export locations for Moulds and Dies, 2009

Import Origins Export Destinations

Country Value US$ Million

Country Value US$ Million

1 Japan 343.48 1 Japan 64.40

2 China 59.59 2 India 27.33

3 Taiwan 47.69 3 USA 19.19

4 Korea 36.96 4 China 11.76

5 Singapore 19.88 5 Malaysia 11.64

6 Malaysia 15.82 6 Vietnam 11.45

7 USA 7.37 7 Indonesia 10.97

8 Germany 5.54 8 Singapore 3.94

9 Hong Kong 4.99 9 Germany 3.61

10 Canada 4.50 10 Canada 3.46

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

Major Mould & Die Clusters in Thailand

1. Mould & Die Cluster of Thailand (MDCT): most members are located around Bangkok, Samutprakan, Chachoensao and Rayong.

2. Thai Mould and Parts Cluster (TMPC): most members are located around B a n g k o k , S a m u t s o n g k r a m a n d Samutsakorn.

3. Thai Mould and Die Industry Assiciation (TDIA): most members are located around Bangkok.

4. Nano Global Precision Cluster (NGPC): most members are located around Bangkok, Phatumtani and Ayutthaya.

WHY THAILANDThere 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

- Southeast Asia’s largest vehicle producer and world’s 2nd largest producer and market of pick-up trucks

- Thailand is the world’s 13 largest automobile manufacturing country

- Production of vehicles to reach 1.4 million in 2010

- Electronics/Electrical Appliances Industry- World’s #1 HDD components

manufacturing base (1.4 million in 2010)

- World’s 4th largest producer and 9th largest exporter of air conditioning units

- Food Processing Industry- World’s largest exporter of rice,

sugar, cassava, processed chicken, canned and frozen seafood and processed pineapple products

- World’s 19th largest agriculture output

- Construction Industry- Construction industry is expected to

grow at an annual rate of 5.5% from 2008-2012

- Public investments totaling up to US$14 billion planned for expanding roads and mass transit (MRT, Skytrain) in and around Bangkok

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 restr ict ions on manufacturers.

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

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.

BOI INCENTIVES FOR THE MANUFACTURE OF MACHINERY AND MACHINE TOOLSThe 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

BEIJINGThailand Board of Investment, Beijing OfficeRoyal Thai Embassy, No.40 Guang Hua Road,Beijing 100600, P.R.C.Tel: +86 10 6532 4510Fax: +86 10 6532 1620E-mail: beijing@boi.go.th

FRANKFURTThailand Board of Investment, Frankfurt OfficeRoyal Thai Embassy, Bethmannstr. 58, 5.OG 60311Frankfurt am Main Federal Republic of GermanyTel: +49 (0) 69 9291 230Fax: +49 (0) 69 9291 2320E-mail: fra@boi.go.th

GUANGZHOUThailand Board of Investment, Guangzhou OfficeInvestment 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 7770Fax: +86 20 8387 2700E-mail: guangzhou@boi.go.th

LOS ANGELESThailand 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 1199Fax: +1 (0) 323 960 1190E-mail: boila@boi.go.th

NEW YORKThailand Board of Investment, New York Office61 Broadway, Suite 2810, New York N.Y. 10006, U.S.A.Tel: +1 (0) 212 422 9009Fax: +1 (0) 212 422 9119E-mail: nyc@boi.go.th

OSAKAThailand Board of Investment, Osaka OfficeRoyal Thai Consulate-General, Bangkok Bank Building, 5th Floor, 1-9-16 Kyutaro Machi, Chuo-Ku, Osaka 541-0056, JapanTel: +81 (0) 6 6271 1395Fax: +81 (0) 6 6271 1394E-mail: osaka@boi.go.th

PARISThailand Board of Investment, Paris OfficeAmbassade Royale de Thailande, 8, Rue Greuze, 75116 Paris, FranceTel: +33 (0) 1 5690 2600-1Fax: +33 (0) 1 5690 2602E-mail: par@boi.go.th

SEOULThailand 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) 319-9998Fax: (822) 319-9997E-mail: seoul@boi.go.th

SHANGHAIThailand Board of Investment, Shanghai OfficeRoyal Thai Consulate-General, 15th Floor, Crystal Century Tower, 567 Weihai Road, Shanghai 200041, P.R.C.Tel: +86 21 6288 9728-9Fax: +86 21 6288 9730E-mail: shanghai@boi.go.th

SYDNEYThailand Board of Investment, Sydney OfficeSuite 101, Level 1, 234 George Street, Sydney,New South Wales 2000, Australia Tel: +61 2 9252 4884Fax: +61 2 9252 2883E-mail: sydney@boi.go.th

STOCKHOLMThailand Board of Investment, Stockholm OfficeStureplan 4C 4th Floor, 114 35 Stockholm, SwedenTel: +46 (0) 8 463 11 58, +46 (0) 8 463 11 72, +46 (0) 8 463 11 74-75Fax: +46 (0) 8 463 11 60E-mail: stockholm@boi.go.th

TAIPEIThailand Board of Investment, Taipei OfficeTaipei 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 6663Fax: +886 2 2345 9223E-mail: taipei@boi.go.th

TOKYOThailand Board of Investment, Tokyo OfficeRoyal Thai Embassy, 8th Floor, Fukuda Building, West2-11-3 Akasaka, Minato-ku, Tokyo 107-0052, Japan Tel: +81 (0) 3 3582 1806Fax: +81 (0) 3 3589 5176E-mail: tyo@boi.go.th

OFFICE OF THE BOARD OF INVESTMENT 555 Vibhavadi-Rangsit Road, Chatuchak, Bangkok 10900, Thailand Tel: +66 (0) 2553 8111Fax: +66 (0) 2553 8222 E-mail: head@boi.go.thWebsite: www.boi.go.th

ONE START ONE STOP INVESTMENT CENTER 18th Floor, Chamchuri Square BuildingPhayathai Road, Pathumwan,Bangkok 10330, Thailand Tel: +66 (0) 2209 1100Fax: +66 (0) 2209 1199 E-mail: osos@boi.go.th Website: osos.boi.go.th

ONE STOP SERVICE CENTER FOR VISAS AND WORK PERMITS 18th Floor, Chamchuri Square BuildingPhayathai Road, Pathumwan,Bangkok 10330, Thailand Tel: +66 (0) 2209 1100Fax: +66 (0) 2209 1194E-mail: visawork@boi.go.th

CHIANG MAIRegional Investment and Economic Center 1Airport Business Park 108-110, 90 Mahidol Road, Amphur Muang, Chiang Mai 50100Tel: +66 (0) 5320 3397-400Fax: +66 (0) 5320 3404E-mail: chmai@boi.go.th

NAKHON RATCHASIMARegional Investment and Economic Center 22112/22 Mitraphab Road, Amphur Muang, Nakhon Ratchasima 30000Tel: +66 (0) 4421 3184-6Fax: +66 (0) 4421 3182 E-mail: korat@boi.go.th

KHONKAENRegional Investment and Economic Center 3177/54 Moo 17, Mitraphab Road, Amphur Muang, Khonkaen 40000 Tel: +66 (0) 4327 1300-2Fax: +66 (0) 4327 1303 E-mail: khonkaen@boi.go.th

CHONBURIRegional Investment and Economic Center 446 Moo 5 Laem Chabang Industrial Estate, Sukhumvit Road, Toongsukhla, Sriracha,Chonburi 20230Tel: +66 (0) 3840 4900Fax: +66 (0) 3840 4999E-mail: chonburi@boi.go.th

SONGKHLARegional Investment and Economic Center 57-15 Chaiyong Building Juti Uthit 1 Road, Hadd Yai, Songkhla 90110Tel: +66 (0) 7434 7161-5Fax: +66 (0) 7434 7160E-mail: songkhla@boi.go.th

SURAT THANI Regional Investment and Economic Center 649/21-22 Sriwichai Road, Makhamtia, Amphur Muang, Surat Thani 84000Tel: +66 (0) 7728 4637, +66 (0) 7728 4435Fax: +66 (0) 7728 4638E-mail: surat@boi.go.th

PHITSANULOKRegional Investment and Economic Center 7Thai Sivarat Building 3rd Floor, 59/15 Boromtrilokkanat 2 Road, Naimuang District, Amphur Muang, Phitsanulok 65000Tel: +66 (0) 5524 8111Fax: +66 (0) 5524 8777E-mail: phitsanulok@boi.go.th

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