Thailand's outdated tech sector casts cloud over economy

[george]

Thailand's outdated tech sector casts cloud over economy

BY ORATHAI SRIRING AND PAIRAT TEMPHAIROJANA
BANGKOK, March 19 Wed Mar 18, 2015 5:00pm EDT

BANGKOK (Reuters): -- Next month the last batch of televisions will roll off the production line at LG Electronics' plant in Thailand's Rayong province, just east of Bangkok.

The company said on Tuesday that it's moving production 1,500 kilometres northeast to the Vietnamese coastal city of Hai Phong, where labour costs are cheaper and China-based suppliers that much closer.

The move is part of a downward trend for Thailand's once-booming electronics industry, that is struggling to find a foothold in the global supply chain for modern technology like smartphones and tablet computers. In January, the country's manufacturing index fell for the 22nd consecutive month, with production of goods like televisions and radios down 38 percent year-on-year.

The decline is raising concerns that Thailand's economic slowdown is not a temporary problem caused by its political upheaval but a structural one caused by the manufacturing industry's failure to adapt and the increasing attractiveness of its lower-cost neighbours.

"It's time for products with high technology but nobody has invested in them here," said Visnu Limwibul, chairman of the Thai Electrical, Electronics, Telecommunication and Allied Industries Club.

Electronics is Thailand's largest export sector, making up about 15 percent of the total, and is crucial for a country where goods sold overseas are equal to over 60 percent of its economic output.

The country is the world's second-biggest maker of hard disk drives (HDDs) after China, with Western Digital and Seagate Technology among the big producers based there. But HDDs, used mainly in PCs, are being displaced by solid state drives (SSDs), which store data in flash memory chips and are used in products like ultra-thin computers and tablets.

Thai exports of HDDs rose 5.8 percent in January year-on-year although those to China slipped 21 percent.

Makers of SSDs and other, more cutting edge technology, are looking to new markets to base their production.

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Samsung Electronics Co. Ltd has opted to site two large smartphone factories in Vietnam, and made around $11 billion worth of investment pledges into the Vietnamese economy in 2014, according to government newspaper Dau Tu.

In 2009, Vietnam's electronics exports were worth $2.8 billion, a tenth of the size of Thailand's. Last year they had reached $37.3 billion, compared with Thailand's $33 billion.

Vietnam's lower wage costs - the minimum wage there is around $6.35 a day compared with $9.14 in Thailand, according to the Kasikorn Research Center - and the government incentives to lure producers are behind its appeal. Microsoft Corp, Canon Inc and Intel Corp have all set up facilities there in recent years.

Thailand's electronics industry has been looking at ways to reinvent itself.

Thai Delta Electronics said in October that it had produced electronic converters for hybrid cars for the first time, complementing Thailand's still relatively strong auto sector.

But economists say this is not enough, and while it is trying, the country is not as nimble as other low-cost economies to adapt to newer types of technology.

Thailand's innovation ranking in the World Economic Forum's Global Competitiveness Index, fell to 67 in 2014 from 33 in 2007.

"When you look at the context of the continuous decline, you see there is a structural competitiveness problem that has been eroding Thailand," said Santitarn Sathirathai, senior economist of Credit Suisse in Singapore.

That means hopes Southeast Asia's second-largest economy can achieve an expected long-term average growth rate of around 4.5 percent to 5 percent a year are likely to be dashed.

"Going forward, the new normal for Thailand growth is probably more around 3.5 percent, that is the signal we take on the continuous decline in the industrial sector," said Santitarn.

(Additional reporting by Mai Nguyen in Hanoi; Editing by Rachel Armstrong)

-- Reuters 2015-03-19

[clockman]

No shocks there, just the same as tourism. They think that it will last forever. Without reinvestment!

[trogers]

No shocks there, just the same as tourism. They think that it will last forever. Without reinvestment!

Reinvestment covers not only capital, but skilled and educated workers, or in another name, labour productivity.

Vietnam has caught up with Thailand on education and skill. Thailand just jacked up min. wage to win votes. Now, these workers suffer job losses. What's the point in having a high min. wage but with no job?

[Briggsy]

Thailand got the biggest headstart of the century in comparison to its SE Asian neighbours when the U.S. poured money into infrastructure projects in the 50's, 60's and 70's whilst its natural competitors', Burma and Vietnam ( and you could include China ), economies languished under economic mismanagement and war.

Thailand has enjoyed the benefits for over half a century. It can certainly expect stiffer competition in the future and growth and per capita GDP may suffer corrections as a result.

[mike324]

Just came back from a finance outlook seminar, Thailands biggest problem is the lack of skilled labor to move onto high tech skilled production. Thai students test scores has been on a decline, while the neighbors are increasing. Hence even with the already shortage of labor, there are not enough qualified labors to use if they want to hire at higher salary. The society is moving at a much faster pace than the citizens itself.

Thailand is quickly falling behind in terms, all the glitz and glam you see with the infrastructure are misleading.

Only solution is to dump money into education and training at vocational level so kids graduate having enough skills to jump into the high tech sector. Long term wise, its the same everyones been preaching about, overhaul education.

Not only that, the birth rate in Thailand is also one of the lowest in the region. While at the same time salaries are very low compare to living costs which is similar to Malaysia and some developed Asian countries.

[sojourner007]

I was talking with my hairstylist a few weeks ago and he told me that he had gone to Vietnam to teach at a technical college there for a month. He was really surprised how different Vietnamese students were from Thai ones that he also teaches from time to time. His Vietnamese students all came to classes earlier than the official start time and were happy to study overtime. They asked lots of pertinent questions and were very keen to learn beyond the minimum program. Thai students were usually late to classes and tended to slip off at any opportunity before classes ended, and of course rarely asked any serious questions about the study topic. I think this illustrates some of the cultural advantages that Vietnam has over Thailand. Also, one of my recent posts here was about how much faster tourism from Russia to Vietnam is growing in comparison with that to Thailand.

[clockman]

Feudal patronage system, Does not work in this hightec world! Big shocks are coming.

[DLock]

"In 2009, Vietnam's electronics exports were worth $2.8 billion, a tenth of the size of Thailand's. Last year they had reached $37.3 billion, compared with Thailand's $33 billion."

That was very surprising to me. Vietnam overtook Thailand in electronics exports within 5 years. That is astounding and proof that Vietnam is really moving ahead and focussing in all the right areas.

I wonder what the results will be at the end of 2015?

[trainman34014]

"In 2009, Vietnam's electronics exports were worth $2.8 billion, a tenth of the size of Thailand's. Last year they had reached $37.3 billion, compared with Thailand's $33 billion."

That was very surprising to me. Vietnam overtook Thailand in electronics exports within 5 years. That is astounding and proof that Vietnam is really moving ahead and focussing in all the right areas.

I wonder what the results will be at the end of 2015?

Numbers like this should be a massive wake up call to any Thai Government but the truth is the people at the top just don't understand what is happening, and even if they did they wouldn't know how to fix it !

[trogers]

Feudal patronage system, Does not work in this hightec world! Big shocks are coming.

Take off those blinkers!

Being late and sneaking off early has nothing to do with patronage system. Such behaviours indicate a lack of discipline and mental laziness, couple with a lack of desire to learn.

Common cause is lack of parental supervision and much gang activities outside of school and home.

Edited March 19, 2015 by trogers

[thhMan]

I just put it down to simple laziness from Govt, teachers, parents and students.

To change that... Students must be more attentive, because the parents care and so do the teachers who are getting more support from the Govt.

[SoFarAndNear]

If Thailand would have had more open to foreign investors and especially young online business start-ups there would be a lot more Thai Limits in imprints of online services. I know a bunch of guys who do live here but had to fund business overseas because there is simply no possibility to legally do it here.

[Squeegee]

"The decline is raising concerns that Thailand's economic slowdown is not a temporary problem caused by its political upheaval but a structural one caused by the manufacturing industry's failure to adapt and the increasing attractiveness of its lower-cost neighbours."

Thailand's protectionism within its borders can give the 51% pass grade to its business community but eventually the Thais have to face the outside world where real life happens.

I've been convinced for some time now that Thailand is going to get a wake up call from Vietnam.

This is a very good OP.

[spidermike007]

Cambodia, Malaysia, the Philippines, and Indonesia have significant 4G networks in place. Where is Thailand? Lost in the dust. Not exactly encouraging, when it comes to their dreams of being the shining ASEAN example. The army made a monumental error, when they decided to shelve the 4G licensing for another year. A monumental miscalculation of historic proportions.

[Thai at Heart]

The heart of the Thai economy is esconsed into the hands of maybe 30 or 40 massively wealthy and powerful Thai Chinese families who get the policies they want to keep them in the gravy to the detriment of the rest of the economy.

Until this hegemony is broken, Thailand will not move forward.

And everyone thinks what is going on at the moment is about squishing the Shinwatras. It is about keeping these families in their dominant position preventing a changing of the guard. I mean honestly. The richest man in Thailand farms chicken and pork, whilst the consumers pay prices akin to the west. Hardly ground breaking innovation is it.

[MaiChai]

Now you see the impact of Peua Thais high minimum wage. I am all for people getting a decent wage, but Thailand continues to remain 3rd world, especially with the mindset, which is partly due to not raising education standards. Thus you have a high wage expectation with a low skill level; thus go figure...

Thailand never got colonised due to giving away land to colonial powers; it seems to me that the countries that did get colonised seem to be able to modernise more quickly and adopt a more international mindset?

The LCD TV business is getting more cut throat all the time; I can see the need to drive production costs down.

Edited March 19, 2015 by MaiChai

[selftaopath]

Thailand got the biggest headstart of the century in comparison to its SE Asian neighbours when the U.S. poured money into infrastructure projects in the 50's, 60's and 70's whilst its natural competitors', Burma and Vietnam ( and you could include China ), economies languished under economic mismanagement and war.

Thailand has enjoyed the benefits for over half a century. It can certainly expect stiffer competition in the future and growth and per capita GDP may suffer corrections as a result.

Yea..... but.... Thailand doesn't do well with competition. Thailand often seems like "monopolies r us." Again another example of inept/lazy and ignorant outlooks/approach to business and life.

[DrTuner]

The start-up scene is small and mostly domestic. Even if they open up to foreigners, it'll be at least two decades to see any results.

[useronthenet]

The heart of the Thai economy is esconsed into the hands of maybe 30 or 40 massively wealthy and powerful Thai Chinese families who get the policies they want to keep them in the gravy to the detriment of the rest of the economy.

Until this hegemony is broken, Thailand will not move forward.

And everyone thinks what is going on at the moment is about squishing the Shinwatras. It is about keeping these families in their dominant position preventing a changing of the guard. I mean honestly. The richest man in Thailand farms chicken and pork, whilst the consumers pay prices akin to the west. Hardly ground breaking innovation is it.

This is very true, the rich keep on getting richer, and the poor languish in poverty. The internet is however changing all that, and the poor Thais are realising they have been conned by those controlling them. The old way was keeping them dumb, by adopting poor standards in school (if you could afford to go). Then brainwashing them will outdated propaganda, and subjects which are of little use in a modern-day society. One of the reasons why Thais are so ignorant (not their fault of course). But the tide is changing, and people are waking up to the truth, that no longer can they be repressed in the same manner, and inevitably things will change.

[dominique355]

The problems with Thai education are at every level: MoE, OBEC, district supervisors, school principals and teachers.

I was involved in a project trying to improve the English language skills of Thai teachers, a project that would have involved Distant Learning, on site teaching and home work. OBEC was just yawning and school principals asked why we wanted to do that, their teachers were already perfect and the teachers didn't want to spend any additional time learning.

After 2 years trying the project was abandoned. Nobody was interested.

It's not the money, which is missing in Thai education, it's the will to improve, at all levels.

[SoFarAndNear]

Now you see the impact of Peua Thais high minimum wage. I am all for people getting a decent wage, but Thailand continues to remain 3rd world, especially with the mindset, which is partly due to not raising education standards. Thus you have a high wage expectation with a low skill level; thus go figure...

Thailand never got colonised due to giving away land to colonial powers; it seems to me that the countries that did get colonised seem to be able to modernise more quickly and adopt a more international mindset?

The LCD TV business is getting more cut throat all the time; I can see the need to drive production costs down.

High wage expectations? You mean the 300 baht daily minimum? Lesser then 300 Baht per day is defacto starvation...

[Briggsy]

Thailand got the biggest headstart of the century in comparison to its SE Asian neighbours when the U.S. poured money into infrastructure projects in the 50's, 60's and 70's whilst its natural competitors', Burma and Vietnam ( and you could include China ), economies languished under economic mismanagement and war.

Thailand has enjoyed the benefits for over half a century. It can certainly expect stiffer competition in the future and growth and per capita GDP may suffer corrections as a result.

Yea..... but.... Thailand doesn't do well with competition. Thailand often seems like "monopolies r us." Again another example of inept/lazy and ignorant outlooks/approach to business and life.

I think we agree actually.

By competition, I meant competition to attract inward manufacturing investment (for this topic in the electronics industry). So, Dell or Siemens, etc. are faced with the choice of Malaysia, Indonesia, Thailand, Vietnam, Taiwan or mainland China. Where do they put their production? Will it be 0% in Thailand or 60%? I think we agree Thailand will fare worse in the future than in the past.

You mentioned monopolies. Thailand is certainly a fan of monopolies, I agree. I am not sure it is so relevant here if you are talking about in-country monopolies since the majority of electronics products made in S.E.Asia are for export around the world.

[Ned]

You're right about the richest man being in charge of the pig industry here. The northern hills have been cleared to plant the corn needed to fatten the filthy swine. Now the hills are ablaze or smoldering as the corn stubs are burned to prepare for more of the same next year. Untouchable. Even 4G wouldn't help that......or tech savvy Thai engineers for that matter.

I see the future for Thailand in the chemical industry producing dangerous chemicals that no one else wants to touch. It's no coincidence that the planned Chinese train terminates at Ma Tha Phut, the epicentre of the Thai chemical industry and the most polluted part of the country. I met some nurses from there recently and they all want to relocate due to the astronomical cancer rates there.

Me a pessimist??!! Why do you say that?

[billphillips]

Cambodia, Malaysia, the Philippines, and Indonesia have significant 4G networks in place. Where is Thailand? Lost in the dust. Not exactly encouraging, when it comes to their dreams of being the shining ASEAN example. The army made a monumental error, when they decided to shelve the 4G licensing for another year. A monumental miscalculation of historic proportions.

Strange that licences for 4g are not issued yet ... but look in any phone shop ... all the companies are offering a 4g service with True claiming 80% coverage.

Thailand's inability to move with the times and adopt to situations will be its downfall. Tourism, manufacturing and the strength of the ฿ are problems that have been around for some time with no apparent attempt at a remedy. With ASEAN looming, together with a flood of low cost labour when the borders open, the situation can only worsen.

[TheAppletons]

Numbers like this should be a massive wake up call to any Thai Government but the truth is the people at the top just don't understand what is happening, and even if they did they wouldn't know how to fix it !

This pretty much says it all.

[toybits]

The Irony here is that Thailand is bringing happiness to its neighbors - Vietnam.

[bill1369]

No shocks there, just the same as tourism. They think that it will last forever. Without reinvestment!

Reinvestment covers not only capital, but skilled and educated workers, or in another name, labour productivity.

Vietnam has caught up with Thailand on education and skill. Thailand just jacked up min. wage to win votes. Now, these workers suffer job losses. What's the point in having a high min. wage but with no job?

Nonsense! 300B/day is about $10/day or $1/hour(10-hour work days). Don't try and tell me hi-tech companies (or, say, automotive) cannot pay a work force a dollar an hour.

Now, if you want to talk about Thai workers' productivity and innovative skills, you are on to something. Such as the piss poor education provided to Thais.

[trogers]

You're right about the richest man being in charge of the pig industry here. The northern hills have been cleared to plant the corn needed to fatten the filthy swine. Now the hills are ablaze or smoldering as the corn stubs are burned to prepare for more of the same next year. Untouchable. Even 4G wouldn't help that......or tech savvy Thai engineers for that matter.

I see the future for Thailand in the chemical industry producing dangerous chemicals that no one else wants to touch. It's no coincidence that the planned Chinese train terminates at Ma Tha Phut, the epicentre of the Thai chemical industry and the most polluted part of the country. I met some nurses from there recently and they all want to relocate due to the astronomical cancer rates there.

Me a pessimist??!! Why do you say that?

Force relocation of the homes of these owners to the vicinity of their plants and businesses. Problems would be automatically solved.

[Asiantravel]

Now you see the impact of Peua Thais high minimum wage. I am all for people getting a decent wage, but Thailand continues to remain 3rd world, especially with the mindset, which is partly due to not raising education standards. Thus you have a high wage expectation with a low skill level; thus go figure...

Thailand never got colonised due to giving away land to colonial powers; it seems to me that the countries that did get colonised seem to be able to modernise more quickly and adopt a more international mindset?

The LCD TV business is getting more cut throat all the time; I can see the need to drive production costs down.

High wage expectations? You mean the 300 baht daily minimum? Lesser then 300 Baht per day is defacto starvation...

There is nothing inaccurate about MaiChai’s reference to “ High wage expectations “ ?

In fact, in a television address to the nation just before Christmas General Prayuth said to the people even though they may feel like they need more money, if they compared their wages now to other parts of the Asian region, in some cases they are already receiving much more than some of their neighbours and he told them there is no room for more increase at the moment.

And when you add in the difference in standards regarding eagerness to work and desire to improve themselves (such as learning English) shown by young people in Cambodia, Vietnam, Myanmar to many of those here it’s easy to see how Thailand has now become uncompetitive.

Edited March 20, 2015 by Asiantravel

[Thai at Heart]

The heart of the Thai economy is esconsed into the hands of maybe 30 or 40 massively wealthy and powerful Thai Chinese families who get the policies they want to keep them in the gravy to the detriment of the rest of the economy.

Until this hegemony is broken, Thailand will not move forward.

And everyone thinks what is going on at the moment is about squishing the Shinwatras. It is about keeping these families in their dominant position preventing a changing of the guard. I mean honestly. The richest man in Thailand farms chicken and pork, whilst the consumers pay prices akin to the west. Hardly ground breaking innovation is it.

This is very true, the rich keep on getting richer, and the poor languish in poverty. The internet is however changing all that, and the poor Thais are realising they have been conned by those controlling them. The old way was keeping them dumb, by adopting poor standards in school (if you could afford to go). Then brainwashing them will outdated propaganda, and subjects which are of little use in a modern-day society. One of the reasons why Thais are so ignorant (not their fault of course). But the tide is changing, and people are waking up to the truth, that no longer can they be repressed in the same manner, and inevitably things will change.

They can rent an army to hold a coup anytime they don't get what they want. Just look how giving Land and House Bank a banking license ended up for Thaksin........

And people think on here this is about saving Thailand.........How much for that kilo of pork?