Thailand emerges as mightiest of Mighty Five manufacturers

BANGKOK - Amid a global shift in the manufacturing hierarchy, the Mighty Five (MITI-V) cluster – Malaysia, Indonesia, Thailand, India and Vietnam – is seen as assuming an increasingly significant role, according to a Hong Kong Trade Development Council research report.

It says ascendance of the MITI-V cluster comes as India seems the only member of the BRIC nations to be truly fulfilling its potential on that front, with the remainder – Brazil, Russia and China – having either fallen a little by the wayside or shifted their focus.

The most notable instance of the latter is China, which is now moving towards a higher value, more technology-intensive manufacturing model.

Within the Mighty Five, it is Thailand that is emerging as the leading manufacturing destination.

According to Deloitte's 2016 Global Manufacturing Competiveness Index, Thailand's manufacturing exports were worth US$167 billion in 2014. While this puts it slightly behind India, it sees it well ahead of Malaysia, Vietnam and Indonesia.

The report says Thailand's success in achieving this level of output has been primarily attributed to its highly literate, skilled workforce and its high labour productivity.

Overall, these factors are seen as more than compensating for the country's comparatively high labour costs, with the average monthly wage recorded as US$383 as of September 2016.

“Overall, though, the country remains an attractive prospect for foreign investors. Its appeal has been boosted by the adoption of a number of policies designed to foster liberalisation and spur free trade, particularly in areas likely to enhance local skill sets, facilitate technology transfer and promote innovation,” the report says.

In terms of specific incentives, Thailand offers manufacturers tax holidays of up to 10 years, as well as other tax exemptions and preferential import duties. It also has a low duty regime with regard to capital goods and any raw materials used in the production of export-oriented items.
Its manufacturing industry has a particular focus on electronics, canned goods, plastics, jewellery, electric appliances, furniture, toys, computers and parts. It has also made increasing inroads into the integrated circuits, machinery, automobiles and automotive parts sectors.

The report says that, in general, Thailand’s investor-friendly policies are seen as making it particularly easy for foreign investors to do business in Thailand. Thailand's corporate tax rate of 20% is lower than that of Vietnam, India, Malaysia or Indonesia.

Thailand's Board of Investment (BOI) offers a range of tax incentives, support, services and import duty exemptions/reductions across a wide range of industries. More specifically, any manufacturing company in receipt of investment promotion privileges from the BOI is exempt from all foreign equity restrictions, with no local content export requirements in place. www.research.hktdc.com/ (ATI).