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Thailand Manufacturing
Manufacturing was the most important industrial subsector in
Thailand, comprising on average 25 percent of each addition to
GDP (incremental GDP), or 70 percent of all industrial value
added during the 1970s and mid-1980s. Manufacturing was
characterized by a high reliance on agricultural products,
including rubber products, textile products, food processing,
beverages, and tobacco. Thailand's food and agriculture share of
manufacturing value added was about 36 percent by the mid-1980s,
compared with 20 percent for South Korea and 22 percent for
Malaysia. The next most important area of manufacturing was
textiles, clothing, and leather products, produced mainly for
export, with 23 percent of manufacturing value added. Machinery
and transport equipment, which consisted mostly of repair and
assembly of motor vehicles, accounted for 11 percent, and
chemicals accounted for 7 percent. The remaining 23 percent
included processed minerals, wood, rubber, carpets, batteries,
rope, gunnysacks, plastic goods, tires, footwear, and an
expanding domestic small arms production.
The composition of Thai foreign trade reflected the
manufacturing sector of the Thai economy. Exports of processed
food, leather, wood, rubber, and basic metals represented a
considerable share of manufacturing output. The capital and
intermediate goods industries were less developed, however,
necessitating high levels of imports of those products. Exports
of manufactured goods grew from 5.5 percent of total exports in
the 1970s to about 30 percent by the mid-1980s. Textiles and
garments were the most important contributors in the 1970s,
accounting for almost half of the total manufactured exports, but
by the mid-1980s they had dropped to about 13 percent because of
rising foreign protectionism of textiles. Exports of manufactured
goods that grew rapidly during this period were wood products,
nonmetallic minerals, electronics, electrical machinery, jewelry,
and precious stones.
Employment in the manufacturing subsector accounted for 7.9
percent of total employment by the mid-1980s and had absorbed
over 16 percent of labor force growth during the 1970s. Textile,
apparel, and leather firms had the highest share of manufacturing
employment, with 25.8 percent in the early 1980s, followed by
processed food, beverage, and tobacco firms, which accounted for
19.9 percent. Furniture and other wood products firms accounted
for 15.8 percent of manufacturing employment; minerals, metals,
and metal products, 12.6 percent; transportation equipment, 8.5
percent; and other manufacturing firms accounted for the
remaining 17.4 percent. The growth in manufacturing employment
resulted both from the absolute growth of the subsector itself
and from the labor intensiveness of such industries as textiles.
Small-scale firms with fewer than 10 workers employed 50 percent
more workers at the beginning of the 1980s than all larger firms.
However, both groups had the same average annual growth rate of
around 10 percent in the 1970s.
Manufacturing was heavily concentrated in the Bangkok
metropolitan area, as indicated by its share of 35.3 percent of
total manufacturing employment. The next highest area of
concentration was in the Center. Industries outside Bangkok were
based primarily on the processing of agricultural products, such
as rubber, sugar, cassava, and rice, or on the repair of
agricultural implements. Bangkok's role as the manufacturing
center resulted from its position as the leading port, the
largest market, and the transportation, communications, and
financial center of the country.
State-owned manufacturing firms produced tobacco, playing
cards, liquor, marble, jute, sugar, paper, textiles, leather
goods, glass, batteries, and pharmaceutical products. Each state
enterprise was required to submit an annual operational and
investment budget to be approved by its board of directors, its
parent ministry, the Bureau of the Budget, and the National
Economic and Social Development Board under the Office of the
Prime Minister. Each firm had on its board of directors between
nine and eleven members, all of whom were appointed by the parent
ministry. The board was responsible for setting prices with the
approval of the parent ministry. State enterprises were more
unionized and more powerful than private firms and often had
salaries 50 percent higher than those in the civil service and in
some private firms. They also offered higher fringe benefits,
bonuses, and overtime pay. Planning for privatization of some
unprofitable state-owned manufacturing firms was under way in the
mid-1980s, but the government faced labor opposition and other
difficulties in selling these firms.
Foreign enterprises accounted for about 30 percent of capital
investment in the form of joint ventures with some twenty foreign
countries. Japan provided more than one-third of total foreign
investment, the United States more than one-seventh, and Taiwan
less than one-eighth. The general attitude of the people toward
foreign firms was favorable until the early 1970s. At that time,
world commodities prices collapsed, causing hardship in the
country. This collapse was popularly perceived as resulting from
foreign involvement in the economy. Students and liberal elements
demanded that contracts with foreign enterprises be reexamined
and renegotiated. To placate these groups, the government revoked
the extensive offshore concession of the foreign-owned Thailand
Exploration and Mining Company (TEMCO).
In the late 1980s, Thailand was considering large-scale
industrial development plans, such as the Eastern Seaboard
Development Program, which included deep-sea port facilities, a
natural gas-based petrochemical complex, a soda ash project, a
fertilizer plant, and an integrated steel complex. The
petrochemical industries complex was to be developed southeast of
Bangkok and was to include a plant to process ethane and propane
into ethylene and propylene. It was to be a public and private
joint-venture project costing an estimated US$600 million.
The site of the Eastern Seaboard Development Program was to
be a major center for industrial development that would extend
from east of Bangkok toward the Cambodian border. The site was
chosen because of its proximity to Bangkok, access to raw
materials and labor supplies from the Northeast, availability of
an existing deep-sea port on the Gulf of Thailand, and excellent
road and communications infrastructure. One objective of the
program was to decentralize economic activities away from
Bangkok. The other goals were the development of a wide range of
industries, including agro-industries, around Si Racha-Laem
Chabang and the development of tourism in and around Pattaya, a
popular beach resort area. The total capital requirement for the
project was estimated at US$4.5 billion: about 66 percent for
heavy industrial development; about 20 percent for
infrastructure; 7 percent for housing, industrial estates, and
urban services; and the remainder for light industries.
Data as of September 1987
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