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(Domestic) Trade and Investment Policies and Regional Cooperation in East Asia
Production Networks, Trade and Investment Policies, and Regional Cooperation in Asia: A Case Study of Automotive Industry in Thailand
Samart Chiasakul Faculty of Economics Chulalongkorn University, Thailand
Abstract
This paper intend to investigate the production network of automotive industry in Thailand, by connecting up the organizational dimension of MNC network (both internal and external) with the geographical dimension. The periods under analysis, are divided into 3, per-1991 period, liberalization & deregulation period, industrial restructuring for closer regional. The pre-1991 period, the production networks was limited by small domestic market, limited model of vehicle, high tariffs. This led the MNCs auto assemblers to reorganize its networks inside the companies to supply CKD parts to its subsidiary in Thailand. It was only in 1971 when parts and component industry were promoted and overseas operations seen as integral part of complex network of flows of parts and components, products, resources, people information among interdependent units. The liberalization and deregulation policies adopted by the government have provided new environments for automotive industry such as lowering import tariffs, allowing more models of vehicle, and promoting supporting industries, and etc. The policies have strengthened the local production networks in preparation for the changing trend in global sourcing. Complementary products have been exchanged through the networks of auto assemblers under the Aseans AICO programme. The industrial restructuring period started immediately after the eruption of crisis in 1997 when fall-out in demand left the expanded capacity underutilized, and many SMEs parts and component suppliers went out of business. Abolishment of local content requirement have encouraged more production of automobile for export. Intra-trade among members of Asean member countries have enabled the market expansion in the regions, with more types of vehicles traded among leading auto assemblers. It is expected that the tariff rates among member countries will be reduced to 0.5% in 2010. Thailand proposed that the tariff reductions be implemented sooner (in 2005-2007) in order to promote more investments and trade within the Asean region.
Contents
Page I. Introduction II. Structure of Thai Automotive Industry 2.1 2.2 2.3 2.4 Number of Auto Assemblers and their production capacity Parts and Components Industry Locations of Automotive Industrial Networks in Thailand Employment in the Automotive Industry 2 4 6 8 1
III. Changing Production Networks in Automotive Industry 3.1 3.2 3.3 The Creation of the Auto Industry Production Network in Thailand (Pre-1991 period) Liberalization period Industrial Restructuring For Closer Regional Networks (Since 1997) IV. Performance (Production and Export Structure of Thai Automotive Industry) 4.1 4.2 4.3 4.4 4.5 Production and Domestic Demand Thailand As a Production Base of 1 ton Pick-up Capacity utilization Thailand Vehicle and Part Export Prospects of External Trade of Thai Automotive Industry 19 20 22 22 27 12 15 11
V. Industry Trend 5.1 5.2 5.3 5.4 5.5 Consolidation and Strategic Alliances The Module System Approach Persistent price pressures Shifting design capabilities Emphasis on R&D initiatives 29 29 30 30 31
page VI. Governments Roles and Policies 6.1 6.2 6.3 6.4 6.5 6.6 Governments Roles and Production Network in Automotive Industry Changing roles of the government Governments policies on regional Cooperation Comparison of Tax structures in Automotive Industry Free Trade Area Agreement Clustering system 32 35 36 37 37 40 41 31
I. Introduction
The automotive industry in Thailand had started in 1962, and experienced a transformation. Four key influences govern the change. Firstly, the global geography of the industry is being transformed by the rapid growth of automotive production and consumption in emerging markets. Over the next decade, the major auto companies are expecting much of the global industry to come in the large emerging markets namely, China, India and the Asean. Secondly, relationships between assemblers and suppliers are being restructured and globalized. The development of global supplier networks is increasing the centralization of design activities in the core operations of the leading component producers, while decentralizing production activities around the world. Thirdly, liberalization policies have greatly freed up the flow of capital into Thailand, since 1991 when Thai government under the close cooperation with Thai Automobile Industry Association (TAIA) has gradually deregulated the formerly protected and inward focused industries and integrated into broader regional and global networks of production and consumption. Fourthly, the financial assistance extended by the major assemblers to their subsidiaries, as well as to their part-makers in Thailand, in order to keep them in operations during the crisis. Moreover, the capital inflows had enabled the utilizations of expanded production capacity, which integrated them into the Asean regional programs of brand-to-brand exchanging projects under the regional production networks. This paper intends to examine the transformation of automotive industries in Thailand, where roles of government has been closely linked with the privately-run institutions, namely Thailand Automotive Industry Association (TIA) and Thailand Automotive Institute, in promoting the automotive industry. The Thai automotive industry has shown enormous dynamism in 1990s, when the policy of liberalization and deregulations were adopted to comply with the period of global sourcing in the production networks. Economic crisis in 1997, followed by deep recession in 1991 led to major restructuring as some Japanese companies had rescued part and component suppliers in their production networks in Thailand, and also used regional networks to promote capacity utilization and economies of scale of the newlyexpanded production capacity of the Thai automotive industry. The paper is organized to answer the main research problem, with the following objectives: (1) To examine the evolution of production network in Thailand during the periods which are divided into 3 periods, firstly, pre-1990 period (the creation of automotive production-network in Thailand). Secondly, the liberalization and global sourcing period. Thirdly, the industrial restructuring for closer regional networks. (2) To investigate the changing pattern of intra-trade and investment in the Asian region, and Asian countries with China. (3) To analyze the changing trend of global automotive industry, shifts of production base to Thailand, and possibility of achieving the vision of Thailand "Detroit of Asia". (4) To analyze the policy of setting up of "Automotive Clustering" and its
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The production capacity is 1.2 million units per year, of this one-ton pock up, the production champion of Thailand accounted for 54.5% of the total. Details of production capacity in 2004 are given in Table 1. Table 1 Production capacity of Thai Automotive Industry in 2004 PC 1 Ton P/V 1. Toyota 126,000 170,000 2. Mitsubishi 50,000 100,000 3. Isuzu 150,000 4. Auto Alliance 2,700 132,300 5. Honda 120,000 6. Nissan 35,200 66,400 7. General Motors 60,000 40,000 8. Hino 9. Daimlerchrysler 16,300 10. YMC Assembly 12,000 11. BMW 10,000 12. Volvo 10,000 Total 440,200 658,700 Source : Thailand Automotive Industry Association. Note : PC-passenger car CV - commercial vehicle PV - pick-up CV 38,000 20,200 20,000 2,400 28,800 109,400 Total 334,000 170,200 170,000 135,000 120,000 102,000 100,000 28,800 16,300 12,000 10,000 10,000 1,208,300
Foreign
Tier 1 (709 companies) Tier 2, 3 Lowers (1,100 companies)
J/V
Foreign Thai Pure Majority Majority Thai 287 Co. 68 Co. 354 Co. Local suppliers
LSEs SMEs
Fig 1. Structure of Relationship between Auto-Assemblers and Part Component Suppliers Source: Thailand Automotive Industry Association. Structure of Thai auto parts and component industry; (1) First-tier of parts and component industry comprises 709 companies, with 40% of these are owned by the majority of foreign companies, 100% Thai-owned companies constitutes 50%. Moreover, it is interesting to observe that, the value of 1st-tier contract works extended to Thai companies was limited to only 8-10% of the total, reflecting the lower technical capacities possessed by Thai subcontractors. Local subcontractors were also in a commercially disadvantageous position. Subcontractors are commercially controlled, particularly in the case of exclusive subcontracts. It was because of this asymmetric relationship that parent companies of auto assemblers interfered with production cost details and demanded cost cut, and were able to create competition among subcontractors. Many subcontractors claimed that the relationship between sub-contractors and auto-assemblers is an unfair one. (2) The second-tier suppliers are mainly Thai companies, with the total number
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1) Engine parts 33 2) Electrical parts 29 3) Drive, Transmission and 33 steering parts 4) Suspension and Brake part 37 5) Body parts 48 6) Accessories 46 7) Mould & Die 36 Total 1-7 39 8) Other 63 Total 1-8 46 Source: Thailand Automotive Institute.
2.3 Locations of Automotive Industrial Networks in Thailand Investment promotional privileges and relocation incentives provided by the government, coupled with their production and procurement system had put the automotive networks at the existing locations. These areas are sometimes car production base, or cluster of automotive industry. One area (in Samutprakarn) which is the production network of the leading Japanese auto-assemblers and called by some logistic expert as the Automotive Industry cluster of Thailand. According to the mapping of locations, automotive assembly plants, parts and components are highly concentrated in the provincial areas, within the 70 kilometrs radius of the Bangkok. After 1997, the newly promoted automotive assemblers had invested in the new industrial estates in the Eastern provinces of Thailand which are around 230-250 kms from Bangkok.
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Concurrent Session: Regional Production Networks and Implications for (Domestic) Trade and Investment Policies and Regional
Cooperation in East Asia Table 4 Location of Automotive Part and Component Suppliers
Chonburi Total Supply = 55 Body part = 25% Engine parts = 22% Drive Transmission & Steering part = 15% Electrical parts = 9% Accessories = 5% Suspension & brake parts=4% Mould & Die = 4% Other = 16% Bangkok Total Supplier = 232 Body part = 9% Engine parts = 6% Electrical Parts = 6% Drive Transmission = 6% Steering part = 6% Accessories = 6% Rayong Total Supplier = 41 Body parts = 24% Engine parts = 15% Drive Transmission & Steering Part = 15% Suspension & brake part =12% Electrical parts = 10% Accessories = 7% Mould & Die = 2% Other = 15% Samutprakarn Total supplier = 158 Body parts = 22% Electrical parts = 15% Engine parts = 8% Drive Transmission & Steering parts = 8% Suspension & brake Parts = 5% Mould & Die = 4% Accessories = 3% Other = 3% Pathumthani Total supplier = 39 Body parts = 18% Engine parts = 13% Electrical parts = 13% Suspension parts & brake parts =10% Drive, Transmission and steering parts = 8% Accessories = 8% Other = 31%
(1)Large-scaled factories - Auto-assembly plants - Auto parts and components - Motor-cycle assembly plants - Modify-plants (2) Small-to-medium factories - Auto-parts and components - Other factories (3) Plastic-parts for automobile (4) Inner-tube for auto-tyre (5) Mould and Die makers Total Employment Source: Thai Automotive Institute
52,319 workers 17,119 21,668 8,402 7,297 41,606 workers 11,344 20,262 2,663 workers 5,986 workers 10,938 workers = 113,512 workers
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End Products SONY, NEC, TOSHIBA, IBM, SEAGATE, DELL Suppliers Wires, plastics, Semiconductors Metal stamping etc.
R&D
Enabling Technologies
Exports
Fig 2 Networking in Electronics Industry Source: Yoichi Koiki [1998] Note: Line of supply and information.
3.1 The Creation of the Auto Industry Production Network in Thailand (Pre-1991 period)
Thai automotive industry emerged under the import substitution policy, when the government had enacted the 1960 Industrial Promotion Act to provide incentives for investment. This led to the setting up the first automotive assembly in Thailand in 1961. During the first decade, the government had adopted high tariff rates on CBU, and CKD passenger which were aimed at earning revenue to improve the balance of payment deficit. After a decade of development in automotive industry, the domestic assembled passenger cars increased to 9017 representing 50% of the domestic passenger car market in 1971. However, the beginning of local content requirement had started in 1971, after the Automobile Industry Development Committee (AIDC) was set up to play active role in promoting industry. In 1971, it set the minimum local content requirements at 25% for the assembly industry. However, the local content requirements became effective three years later, on December 31, 1973. Due to an increasing trade deficit, the government had increased tariffs on CBU passenger cars from 80 to 150 percent, and CKD passenger cars from 50 to 80 percent, and imposed an import ban on small CBU passenger car (with engine size 2300 CC and smaller) in 1978. During the early period of development in auto parts and components, the production of peripheral autoparts, such as starters, attertors, filters, exhaust pipes, radiator and safety glass increased rapidly. In addition, the production of auto parts based on casting process such as brake drums crankshaft pulleys and flywheels also increased (IFCT, 1993). The production of small-pressed body parts also increased significantly in early 1970, which was really the beginning of auto part industry in Thailand-Large-scaled part makers were established to produce pressed parts, diesel engine pistons, ball joints, plastic parts, rubber parts (BOI 1995). Production networks during the period was organized to develop technical capabilities of Thai counterparts and local worker in operative technology, production management and etc. Local content requirements are the important factors which support the creation of production networks in Thailand.
Japan
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Fig 3 Production and Procurement Networks by Japanese Auto Assemblers 3.2 Liberalization period (1992-1996) The Thai automotive industry enjoyed high growth rate, averaging 12% during the period of 1992-1996, which was considered as one of the highest among all the countries in the region. This liberalization period had been characterized by liberalization of auto industry, with tax restructuring program to allow more competition, after a long period of protection for local industry. Price levels of automobile, both passenger vehicle (PV) and commercial vehicles (CV) had dropped to attractive levels which spurred higher demand for automobile during the periods. Production and domestic sales in 1996 had reached the historic level, but dropped to the lowest level in 1998 when Thailand experienced the economic crisis. High growths experienced during this period, coupled with the global sourcing of parts and components implemented by major auto assemblers, global sourcing has become more important, especially for the complex parts or the module approach, which have a direct impact on the performance of the vehicle. Production network will classify part components into 2 groups. For complex parts or module components a contract will be given for the life of the part, although the price will have to match the world price. In the case of parts which are less complex and have a lower technological content, contracts are shorter and price continues to be a critical factor. In these cases, the contract is frequently allocated on the basis of a "price auction". The FOB price for the component is taken as the starting point for negotiations. With these practices, the part-components are being integrated into sub-assemblies, forcing first tier and second or third tier to work together in the supply network.
Part and component suppliers have been clearly defined by leading autoassemblers in Thailand, reflecting the technical capabilities and ownership structures
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Fig 4: Assembler-Supplier Relations (2nd period Liberalization) Source: Survey 3.3 Industrial Restructuring for closer regional networks (since 1997) After the eruption of economic crisis in 1997, the automobile market had shrinked and capacity glut was clearly observed in this industry. Demand dropped to 140,000 units in 1998, only one-fourth the number sold in the peak year of 1996. Local part & component suppliers had laid of their workers and adopted every measures at cost-saving, while waiting for the economic recovery. Billions of baht were poured in during the peak period by auto assemblers to grab a higher share of the domestic and produce for the entire region. The country has a capacity glut, that will last well into the next century. Major new factories by late-comers, General Motors Corp and Ford Motor Co. increased the total capacity up to 1.2 million cars and trucks. During the crisis, the government had to adopt the fiscal policies mandated by the International Monetary Fund, and increased value-added taxes, excise taxes and import duties on goods including cars. Weakened market and excess capacity forced major auto assemblers to increase export in order to compensate for weak local demand. Some auto assemblers have adopted strategies of moving their production line to Thailand, in order to utilize the newly-installed capacity and gain economies of scale in production. Longer term they were looking forward to 2003, when tariffs on car traded with the Asean were expected to drop to 5% and intra-trade within the region would increase. Any delay in implementing the tariff reduction, the leading auto assemblers would continue to trade of CBU automobile under the Brand to Brand Complement scheme (BBC) which started in 1992. During the crisis, Thai automobile business had been hardest affected, and many of them (part and component suppliers, dealers) had to go out of the business. Japanese auto companies had joined together and supplied loans, advance payments and other forms of assistance to financially toubled suppliers. Toyota Motors Corporations had to inject more than 4 billion baht to keep its operation, without laying off a single workers. The bankruptcy of almost all of Thailands finance companies because of the crisis poses another problem, customers can not get financing to buy cars. Some 10% of purchasers now pay cash compared with just one-third before the downturn.
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Supported by
Affiliated system 1) Information Technology System 2) Labour 3) Data system 4) Promotion system 5) R&D
Procurement System
Strategies (1) Partnership (Strategic alliances) (2) Taking equity participation (M&A)
Fig. 5 : Supporting Activities Extended by Japanese Auto-Assemblers in strengthening the production networking in Thailand Source: Samart (Study on Industrial Networks in Asia) [2000] During the periods immediately after the crisis, the Thai government had in 1998 adopted the industrial restructuring program for 13 industries. As for automotive industry, many part and component suppliers have joined the program, and concepts of global production and sourcing in industrial networks are explained to them, as clearly indicated in Table.
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Stagnated technological differentiation innovation Varied demands mega-competition Source: Y. Koike (2000)
Production networks in Asia have been strengthened since the end of crisis and will continue in the automobile industry as overseas output by Japanese carmakers are expected to exceed production in Japan. In 2003, overseas output of Japanese carmakers reached 8.5 million, and this number would increase to 10 million units as early as 2005, and surpass their output in Japan. In the early 1990s, output capacity in Japan totaled around 14 million units, and the industry has experienced excess capacity due to the economic slow down. With the on-going restructuring of production network in Thailand, and improving economic conditions in the Asean countries, the new foreign direct investment especially in automotive industry will strengthen economic cooperations between the countries. During the past few years, Japanese investments have contributed 40% of the total, with some projects would contribute to more trade among Asean member countries. Table 7: Example of Projects in Automotive Industry in Asean during the last 2-3 years Project Market 1-1.3 litre-MPV Toyota Thailand, Indonesia Avanza 1.5 litre-passenger vehicle Thailand, Japan, Indonesia in Thailand (Jazz) - Plastic fuel tank Minivan (Grandic) Thailand Export to Europe
Companys Name 1. Toyota and Daihatsu plan for production in Indonesia 2. Hondas investment plan for production base in Thailand 3. Mitsubishis production plan for Thailand 4. Toyotas global production base
Pick-ups and Multi- 150 countries worldwide purpose vehicles or IMV project Source: Toyota Motors Thailand (TMT).
Thammavit (1997) attributed the high percentage share of production in commercial vehicles (CV) to the governments policies and strong demand for multipurpose uses. See table 9, for the percentage share of type of vehicle in production of automotive industry in Thailand. After the financial crisis in 1997, the production networks have immediately adjusted their production structure to commercial vehicle, 72.9% during the period of 1998-2003. Approximately 25-30% of the production of commercial vehicles were made for exports, mainly to Australia and many countries in Europe.
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Fall-out from the crisis had forced the leading car companies namely Mitsubishi, Isuzu and Toyota shifted their production base to Thailand, especially production of commercial vehicles for exports. Production networks have gradually diversified export structure of Thai automotive industry, as more OEM parts and component continued to increase during the recent periods. Exports of OEM parts and components increased from only 976 million baht ($36 million) in 1996 to 22 billion baht ($556 million) a fifteen-fold. Automotive Resource Asia (ARA) predicted the 4 Asean countries would ship 600,000 vehicles abroad in 2006, more than twice their combined exports of 250,000 units in 2001. Thailand will contribute 500,000 units out of this 600,000.
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Concurrent Session: Regional Production Networks and Implications for (Domestic) Trade and Investment Policies and Regional
Cooperation in East Asia Table 11 Thailand Vehicle and Part Export (1996-2003) Total CBU Engine Amount Unit Amount Amount 1996 6,295.55 14,020 4,253.36 801.98 1997 20,722.84 42,218 16,226.99 2,023.89 1998 34,110.33 67,857 28,125.55 1,536.77 1999 60,105.53 125,702 50,187.21 3,731.81 2000 83,245.46 152,835 63,349.15 7,106.22 2001 107,110.60 175,299 83,894.70 7,481.38 2002 107,729.72 180,554 82,474.66 6,087.28 2003 114,737.54 196,800 85,393.48 4,552.28 Amount: Million Baht Source: The Thai Automotive Industry Association Year Spare Part Amount 215.44 505.28 722.79 883.42 1,245.65 1,758.56 1,796.41 1,796.63 Jig & Die O.E.M. Part Other Unit amount Body Part Compo.Part amount 43.66 373.62 602.16 5.33 17 56.34 1,037.60 845.16 27.58 6,013 63.70 1,347.27 2,288.36 25.89 177 141.35 1,424.40 3,678.86 58.48 119.96 1,556.45 9,531.17 336.86 5 141.19 1,989.49 11,748.57 96.71 18 145.26 2,879.77 14,196.28 150.06 2 148.36 3,348.01 18,928.13 570.65 Remarks
(Jan.-Oct)
Source: Custom Department, Ministry of Finance 4.4.2 Export Markets for Automotive Parts and Components Export statistical data for 10 major items which constitute for 80% of the total, show that intra-trade among AFTA member countries accounted for one-fourth (26%) of the total exports in parts and components.
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V. Industry Trend
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Mergers, acquisitions and alliances in the component parts are the strategies adopted by leading part and components to expedite the excess capacity, to have a global presence sharing a complementary product line. Asean based manufacturers are slow to adapt to this trend in trade integration. The reason is that the fragmented vehicle type in Asean results in few parts that complement each other in the region. Thailand, Indonesia and Philippines part suppliers concentrate on van and truck parts while Malaysian parts makers focus on car parts. However, it is expected that strategic alliances among Asean manufacturers to gradually increase once AFTA comes into full force in 2008. 5.2 The Module system approach
A module system is a group of components that are linked by function and are supplied to the automotive assemblers. Complex modules which incorporate multiple functions are still in its early stage in Asean. But big auto assemblers in Thailand, and Malaysia are currently applying this module system with groups of supplier working closely together. Asean manufacturers need extensive R&D initiatives and high investment to devise ways to take core parts and show them into highly efficient assemblies. Moreover, a large number of Asean factories are not flexible enough to produce integrated system which demand a frequent shift in manufacturing capabilities. The present system is not designed to cater to various models set up but targeted to mostly limited parts models.
Cost cutting is the essential part in keeping the growth of this industry. However, cost reductions and price pressures have been intensified since 2001, as a result of intense competition in the global automotive market. Leading vehicle makers are pushing for price reduction in the range of 5% per year for major component parts supplied to the OEMs. This similar scenario is happening at the Asean level. As pricing becomes a key determinant in attracting buyers of cars in Asean, vehicle manufacturers are passing cost reduction to the component part suppliers. The cost reduction method is applicable to every supplier in the OEM parts supply chain from tier 1 to tier 3 level suppliers. 5.4 Shifting design capabilities
Large OEMs like Ford, GM, and Daimler Chrysler, not to mention Toyota, have transferred design responsibility to tier1 suppliers without relinquishing control over the design and quality aspects. Their main reasons are to concentrate on the core task of marketing and selling the vehilces and other related activities. Global tier one suppliers like Visteon, Delphi and Johnson Controls are taking an increasing share of risk from the OEMs to meet their tough requirements. The idea of outsourcing design aspects is gaining grounds in Asean automotive market mainly in Thailand and Malaysia. It is expected that regional outsourcing to escalate as most Asean countries join AFTA scheme in promoting trade within the region. The reason why many Japanese and European OEMs are pushing for greater local involvement in parts design and manufacturing is to arrive with models that suit the local demand. However, most of the design projects are undertaken by companies that are subsidiaries of large part manufacturers that are based in Asean region. The level of participation of purely domestic companies in the design is very limited. 5.5 Emphasis on R&D initiatives Well-established parts and component manufacturers would incorporate a host of technologies both materials and of manufacturing process in order to create cost efficient product differentiation and high value added components. This is not the case for Asean manufacturers, as they have low level of technology infusion. A large number of parts and components suppliers are still producing low value added parts for many years. The low priority of modern technology among Asean manufacturers comes from inadequate engineering capabilities, high R&D costs, and lack of awareness among manufacturers and consumers alike. However, with proper assessment of the industry trends might lead to more competitive, technology driven and efficient Asean component parts industry. It is then important that Asean parts and components industry give closer cooperation in promoting the objective of AFTA, an integrated free trade region. Greater collaboration among parts manufacturers, common parts sourcing, more integrated component system approach, and sharing of R&D initiatives can increase cross border alliance. Then a strong and unified Asean components industry would be able
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Concurrent Session: Regional Production Networks and Implications for (Domestic) Trade and Investment Policies and Regional
Cooperation in East Asia Table 17: Government's Policies and Automotive Production Networks Period 1. Pre-1991 General Characteristic Driving forces - From small market to the - Domestic emerging networks. demand - Diseconomies of scales - Baht devaluation (1984) - High economicgrowth (86-89) - Lower taxes pushed the price of automobile down - Economy showed signs of weakness - Upward trend in domestic sales - FDI - Strong domestic demand Policy measures - Import substitution - Industrial Promotion Acts - High import tariffs - Local content requirement (1971) - Limit model of car assembly - Revised local content - Partial liberalization - Lift ban on import of CBU - Lower tariffs and business taxes on imported CBU - Promote SMEs in automotive industry - Revise promotional privileges for new assembly plants - Abolish local content requirement (2000) - Create trade through regional cooperation and FTA Networking Development - Establishment of parts and component (1974) - Cooperation between auto assemblers and part makers - Investment in supporting industry - Expansion of production capacity. - Establishment production network with more local supporting industries - Promotion of cooperation through AFTA program - Global sourcing - Relocation of production base to Thailand (pick-up) - New trend in global part and component industry - New technology in automotive industry
- Financial crisis led to drop - Intra-regions in demand. trade - Business in trouble (lack - Exports of cash flow) - Industrial restructuring
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Source: Automotive Industry Development Master Plan. (prepared by Thai Automotive Institute)
India
USA China
: :
6.6 Clustering system The government has revised industrial development plan and adopted the M. Portors clustering concept in promoting the efficiency of entrepreneurs in SMEs and overall competitiveness of Thai industries. The geographical concentration of the 5 targeted industries are planned by the Committee on Competitiveness Promotion of National Economic and Social Development Board (NESDB), the central planning agency in Thailand. The five targeted industries include, Food, Fashion industry (garment, leather, jewellery) electrical appliances and electronics, tourism, and automotive industry. The automotive clusters are planned in the eastern parts of Bangkok, where major car assemblers are located. Main locations are Samutprakarn. The newly established locations are Rayong, Chacheongsao, Chonburi in the eastern part and Ayudhaya in the central part of Thailand. Thai Automotive Institutes has recently drafted the Master Plan for development of Thai Automotive industry and proposed the groups of related activities to be included in this clustering system. Moreover, the supply chain management and/or logistic system is now being studied by the Japanese consulting firms, and should be ready soon. It is important that the logistic providers will support the development of supply chain in Thailand, because there has been increased integration within the supply chain. Outsource logistics, a major driver for car makers because, it helps reduce costs and allows concentration on the core business of making cars. At the same time, the skills and competencies of a professional partners allows economies of scale to ensure a proper logistics process.
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Main Activities Motorcycle Passenger commercial Makers car makers car makers
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