Both industry and manufacturing in Thailand are currently navigating through stormy waters. Recent data unveils a troubling trend of factory closures, with the gap between openings and closures narrowing alarmingly to under 100 factories per month on average. However, a silver lining exists; larger factory openings are on the rise, marking a notable 25.9% increase in new industrial establishments in the first seven months of 2024 compared to the same period last year. As we move forward, it becomes paramount for all stakeholders to reflect on past experiences and collaborate, ensuring a sustainable trajectory for industrial development.
Against a backdrop of challenging global economic conditions, one of Thailand’s key industrial initiatives, the Free Zone, demonstrates the nation’s potential as a manufacturing hub for global import and export businesses.
Administered by The Customs Department, the Free Zone was designed to offer customs benefits for various industrial activities that bolster the country’s economy. Companies eager to partake in these benefits must apply for a permit.
Leading the charge in Thailand’s Free Zone is Prospect Development (PD), a subsidiary of M.K. Real Estate Development Public Company Limited. PD offers industrial and warehouse rental projects under the moniker of Bangkok Free Trade Zone (BFTZ). Despite the economic downturn, PD’s factory buildings within the Free Zone boast an occupancy rate of over 70%. Some 30% of the space is dedicated to warehouses, with demand remaining persistently high. The Free Zone supports a multitude of industrial operations, from production and storage to transportation and distribution.
Ms. Rachanee Mahatdetkul, Managing Director of Prospect Development Co., Ltd., noted, “The sluggish economic recovery is a lingering effect of Long COVID on businesses. Entrepreneurs need to stay vigilant about potential disruptions to their operations. Consequently, many have had to reduce the number of factories under their supervision. However, factories within the Free Zone, benefiting from government duty exemptions, have seen continuous business growth. This highlights the crucial role of government support in reinforcing Thailand’s reputation as a long-term manufacturing base for global business owners.”
Perceptions that the Free Zone primarily benefitted businesses with substantial import and export activities meant many entrepreneurs, especially foreign investors, overlooked its potential. Prospect Development took note and revised the BFTZ project model, incorporating a General Zone to accommodate a diverse range of business types and sizes. Over the past 15 years, PD has been at the forefront of industrial area development in Thailand, fostering stakeholder understanding and cooperation. Today, both local and international entrepreneurs are confident in establishing and expanding their operations in the Free Zone.
Ms. Mahatdetkul emphasized, “The incentives provided to import-export businesses are pivotal for their decision to set up factories in Thailand. Equally important is the enhancement of these areas to support other businesses that might not yet qualify for Free Zone benefits. Our initiatives have drawn global entrepreneurs to establish and potentially expand their factories into the Free Zone in the future.”
Prospect Development’s approach to factory and warehouse rental reflects a commitment to enhancing Thailand’s industrial strengths, emphasizing government policies and an in-depth understanding of both Thai and international entrepreneurs. “For Thailand’s industrial future, we need to create new opportunities by fostering investment, enhancing workforce skills, and elevating collaboration among entrepreneurs. The Free Zone is a key strategy to support businesses engaged in import-export and long-term manufacturing bases. We must continue to evolve beyond just a rental provider, asking ourselves how we can help entrepreneurs start and grow sustainably,” added Ms. Mahatdetkul.
Currently, PD supports over 200 companies, with top multinational tenants from Thailand, China, Japan, the United States, and Europe. Their offerings include Ready Built, Built-to-Suit, and Ready Built-to-Suit formats designed to meet specific business needs.
Thai Haso Company Limited, a Japanese firm, is a great example of a business committed to growing in Thailand. Established in 2012, Thai Haso manufactures and exports wet and dry-cleaning wipes, disposable pants, and absorbent pads for babies and hospitals, catering to major clients like American P&G and Frida Baby. Mr. Huo Xing, Managing Director, shared, “Our company has thrived in Thailand for over 12 years, weathering significant challenges. We started in a 6,000 sq.m. factory in BFTZ 1 and now occupy 20,000 sq.m. with plans for further expansion in Free Zone areas. The Free Zone benefits expedite processes and support our business focus on innovation and market understanding, aiming for annual sales of around USD 30 million.”
Fanucchi Dairy Company Limited, renowned for high-quality Italian cheese production, has also established its factory in Thailand, leveraging the Free Zone’s advantages. Mr. Nicola Fanucchi, Managing Director, stated, “Thailand’s geographical benefits and economic growth opportunities drew us to establish here. The proximity to key ports and Bangkok, along with Free Zone benefits, significantly reduce costs and enhance competitiveness. Despite potential challenges, we remain optimistic about the future of Thailand’s cheese market and continue to innovate and expand our offerings.”
Fanucchi Dairy’s experience underscores the importance of having a knowledgeable local partner to navigate the Free Zone benefits effectively. “The swift process of setting up equipment and obtaining permits, along with renting a Stand Alone building ideal for food production, has been instrumental,” added Mr. Fanucchi.
The key to thriving in Thailand’s industrial sector lies in perpetual innovation, adaptability, and forging strategic partnerships. This approach not only benefits current operations but paves the way for a robust future for Thailand’s industrial landscape.
Is anyone else worried about the environmental impact of these factory expansions?
Absolutely! Industrial expansion often comes at a huge environmental cost. Thailand needs stricter regulations.
Environmental concerns can be mitigated with proper planning. These new factories bring jobs and economic growth.
While economic growth is important, it shouldn’t come at the cost of our planet. We need a balance.
Well said, John. Sustainable planning should be a priority.
The Free Zone model is brilliant! It’s a great way to attract international businesses.
As someone who’s benefited from the Free Zone, I couldn’t agree more. It has really streamlined my operations.
That’s encouraging to hear! Hopefully, more local businesses can take advantage of these benefits too.
But what about small businesses that can’t afford to enter the Free Zone? Aren’t they being left behind?
That’s a valid point. Maybe there should be more initiatives to support smaller businesses as well.
Thailand’s shift towards larger industrial establishments is a risky move. What happens if the global economy falters again?
Long-term investments can weather economic downturns better. Also, diversification within the Free Zone helps mitigate risks.
True, but let’s not forget the crisis of 2008. Diversification doesn’t guarantee immunity.
Curious to see how these new factories incorporate Industry 4.0 tech for smarter manufacturing. Anyone have insights?
From my experience, some facilities are definitely adopting AI and IoT to optimize production. It’s a slow process but happening.
Yeah, AI and automation are the future. It’ll be interesting to see how quickly Thailand adapts.
Most companies are still lagging behind. Without government incentives, widespread adoption will be slow.
Does anyone else think that the article is too optimistic about Prospect Development’s role here?
I don’t think so. It’s highlighting real growth and opportunities. Why be cynical?
It’s not cynicism, it’s caution. Let’s see some long-term results before the lavish praise.
I hope they take labor conditions seriously. Factory jobs can be tough and often underpaid.
Totally agree. Worker rights and fair wages should be at the forefront as these expansions occur.
Exactly. Economic growth shouldn’t mean exploitation of the workforce.
The Free Zone is Thailand’s strategic advantage. Leveraging it wisely can make the country a manufacturing powerhouse in Asia.
Does anyone else see a potential problem with over-reliance on foreign companies?
Yes! It’s important to foster local businesses too, or we risk losing economic sovereignty.
Global collaboration is the future. Local businesses can also thrive by integrating into global supply chains.
What kind of government incentives are available for these factories? Are they enough to attract more investors?
There are tax exemptions, reduced customs duties, and streamlined processes. It’s quite attractive for large enterprises.
That sounds good. Hopefully, it brings in more sustainable and ethical businesses as well.
Can someone explain what ‘Built-to-Suit’ really means in this context?
Excited to see how this strategy impacts Thailand’s economy in the next decade!
Prospect Development seems like it’s doing everything right. Kudos to them for adapting and thriving in this environment.
International tenants are great, but what’s being done to ensure local suppliers benefit too?
That’s a good question. Ideally, these big companies create opportunities for local businesses through supply chain integration.
The Free Zone is a key strategy to support businesses. It’s innovative and essential for long-term growth.
Call me skeptical, but these kinds of expansions often come with hidden downsides we aren’t seeing yet.
We need more transparency on how the Free Zone benefits are actually applied. Are all businesses able to access them equally?
Not really. Smaller companies often struggle with the bureaucracy, whereas larger ones can navigate it more easily.
That’s concerning. There should be more support for SMEs to access these opportunities.