Japanese model 'the way forward'

The Ota City Industrial Promotion Organisation in Japan should be used as a model for Thailand's SME development promotion plan, it has been suggested.

The organisation could be used as prototype for cluster-

ing and managing SMEs to become more competitive with advanced technology, research and development and value-added production, Mukda Phongsombat, a secretary to Industry Minister Suwit Khunkitti, said last week.

Considered as one-stop service point for SMEs, the organisation provides convention and trade centres situated in the same building.

Founded in 1995, the organisation aims to respond flexibly and speedily for the further development of industry in Ota, a district packed with sophisticated technology.

It also provides support such as information services and mutual-exchange bases to enterprises interested in production in response to changing market needs and new methods of doing business.

Ota is one of 23 cities that is important to Japan's industry. The city has now more than 3,300 SMEs using advanced technology for their parts production to supply large manufacturers.

An official at the Ota City Industrial Organisation told the visiting Thai delegation led by Mukda that the organisation uses its annual cash flow of Bt500 million to help its SME members develop their products and distribution channels.

About 90 per cent of the budget comes from government assistance and the rest from membership fees.

However, Nobuaki Yamada, executive director of the Ota City Industrial Promotion Organisation, said the number of SMEs in Ota had dropped from more than 9,000 factories in 2003 to 3,300 now as many had relocated to countries with a sharper competitive edge in production costs.

Japan's automobile industry has hollowed out as factories have been leaving for Thailand under the support of the Ota City Industrial Promotion Organisation since 2005.

"Thailand has been selected as one of the potential candidates in the region for Japan's centre of parts production," Yamada said. Other destinations are Malaysia and Indonesia.

Chokedee Kaewsang, economics and investment minister at the Thai Embassy, said Thailand recorded 164 foreign direct investment proposals worth Bt29 billion from Japan in the first half of this year, down from 161 worth Bt60 billion in the first half last year. About 60 per cent were in the three main industries of auto parts, electronics and metal parts.

Five Japanese carmakers have already been granted tax incentives to produce eco-cars in Thailand from the Thai Board of Investment.

"The next factories to move out from Japan to Thailand should be in the auto-parts industry as they are part of the supply chain for eco-car manufacturing," he said.

Mukda said Thai companies were not only suffering from higher costs of production, transport and raw materials, but also from the lack of business clustering.

The Industry Ministry should speed up its drive to increase the competitiveness of Thai companies, especially in logistics management in factories, which is part of the industry's supply chain, she said.

Atchaka Brimble, director-general of the Industrial Economics Office, recently said it would spend Bt230 million on a five-part strategy to boost manufacturing productivity and improve industrial logistics, covering the food, auto-parts, electric and electronics, textile and garment, and steel industries.

The budget is part of the industrial productivity model scheme running from 2008 to 2012.