Industry Horizon (July 2021)

Industry Horizon (July 2021)

16 กรกฎาคม 2564
 

Thailand’s Industrial Strategy in the Midst of Global Value Chain Transformation

 
  • Global value chains (GVCs) and trade have stagnated for the past 10 years under the twin impacts of reshoring in the major economies and increasing trends to regionalization. Looking forward, competition has worsened. These force countries that are not prominent manufacturers (including Thailand) to raise their competitiveness if they want to stay in the GVC.
  • Understanding Thai competitiveness in the global venue and how this is shaped would help industries enhancing their competitiveness. Thus, Krungsri Research has constructed the Sectoral Potential Index (SPI), which reflects the ability of players within an industry to supply goods and services that satisfy global demand, and it could generate profits for the country.
  • The results show that, Thai industrial potential ranked 35th out of the 64 countries and 2nd among ASEAN. with the country’s strongest industries. Although Thailand has well participated in the world markets, they are not able to add value to the extent that might be expected. It results in diminishing capital accumulation, which will limit the future growth potential of both sectors and Thai economy.                                                                                         
    • Over the next 5 years, industries where Thailand will see an improving outlook and greater potential are generally in services, including recreation, telecommunications, accommodation, healthcare, and transportation, all of which will benefit from high levels of labor productivity and the entrepreneurial skills of existing players. On the other hand, sectors where Thailand’s potential will likely decline are concentrated in high-tech manufacturing, such as computer and electronics, motor vehicles, chemical products and electrical equipment, because although these are important export industries, Thailand is generally in a mid-stream position in these supply chains, and this restricts manufacturers’ ability to add value.
    • Although Thailand is in a better position than its neighbors with regard to advanced manufacturing and services, this gap will narrow as other countries in the region carry out ambitious development plans. In light of this, Thailand should seize the opportunity to develop GVCs that cement stronger trade links with other countries, and through this build value and secure the country’s position within supply chains.                         
  • Our study has also revealed factors shaping sectoral potential include supply chain structure, technology, transportation infrastructure, ease of doing business, market size, capital, and access to inputs. The supply chain structure (refers to the position, participation and a length of supply chain) is most important factors, which accounts for 30.7% of sectoral potential. These factors would help to suggest strategies for enhancing sectoral potential that can be divided in two broad approaches: (1) internal development and (2) partnership with external players.
  • According to industry’s ability and influenced factors for each sector’s potential, Krungsri Research recommend strategies to develop Thailand’s sectoral potential including internal development (developing new products, accessing to raw materials), partnership (seeking for technology, and moving along the GVC), government supports (easing regulations, investing in infrastructure), depending on how the potential of each may best be improved.


Global perspective: The decline in GVCs and global trade is increasing competitive pressures and forcing industries to look for more secure positions on the world stage


 

Major economies are increasingly turning to regionalization, and this is shortening global value chains


 

Developing the national industrial potential of the different countries that participate in GVCs is feeding into a rise in competitive pressures


 

On the world stage, the potential of Thai industry came 35th out of the 64 countries and 2nd among ASEAN


 

Thai industry might benefit from countries’ differences of GVC participation. This leads to partnership strategy which helps enhancing potential


 

Thai industry potential: Industries where Thailand shows high levels of potential are those where the sector has access to significant export markets


 

Over the next 5 years, the Thai service sector is expected to show greater potential, while in high-tech manufacturing, potential will weaken


 

Supply chain structure, technology and transportation infrastructure are most important factors shaping industrial potential


 

Changing the position in the GVC is an important strategy for improving competitiveness and increasing the amount of value added to industrial processes


 

Strategy priority recommendation for developing Thailand’s sectoral potential


 
 

Macroeconomic environments: The world economy will gradually recover but at a different pace


 

Thailand: Overall economic recovery will be delayed amid extreme uncertainty


 

Structural factors affecting Thai business and industry in the period ahead

 
 

Oil Palm: Yields are expected to rise steadily, limiting the room for price increases


 

Rice: Competition will be strong from Vietnam and India


 

Rubber: Growth will come from heavier demand for latex gloves and tires


 

Cassava: Exports would grow healthily  thanks to  stronger demand from China


 

Power Generation: The pace of investment will pick up in solar, biomass, biogas and waste-to-energy power production


 

To sustain continuing rates of growth, large players plan to expand their investments both at home and abroad


 

Biofuels: Demand will be supported by government measures


 

Petrochemicals: Downstream industries would revive but players may have to contend with higher oil prices and a supply glut



 
 

Pharmaceuticals: Domestic sales should see continuing growth thanks to rising concerns over personal health

 
 

In longer term, the investment prospect remains sound


 

Automobile: Demand gradually recovers due mainly to improving major export markets


 

HDD: Exports are likely to grow further due to increasing demand for cloud computing services and data center applications


 

IC: Accelerated demand for electronics will boost IC exports, supply shortage may dissipate in 2H22


 

Medical Devices: Increased awareness of personal well-being triggered by pandemic will stoke greater demand


 

Contractors & Construction Materials: Growth will be driven primarily by spending on government megaprojects


 

Housing in BMR: Gradually recover in accordance with economic conditions


 

Office Buildings: Demand recovers at a slow pace amid huge supply, leading to a fall in the occupancy rate to multi-year lows


 

Retail Space: Occupancy rates expected to slip to 88-91% given the large extension in supply that is occurring alongside a slowing of demand


 

Industrial Estate: Investment tends to escalate, especially in the EEC


 

Hotels: Foreign tourist arrivals are expected to number just 20 million by the end of 2023, compared to 39 million arrivals in 2019


 

Private Hospitals: Revenue rebounds after mass vaccination program


 

Modern Trade: Sales should see improvement through 2022 and 2023


 

Warehouse Space for Rent: Demand expected to be lifted by a recovery of  economic activity and growth in e-commerce


 

Road Freight Transportation Service: The market sees an improvement, encouraged by spending on infrastructure and growth in e-commerce


 

Sea freight services: Income should grow strongly with increased freight rates coupled with global economic recovery


 

Digital: Income would continue to grow propelled by technological advances and changes in consumer lifestyles that increasingly favor online business


 

 
 
ประกาศวันที่ :16 กรกฎาคม 2564
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