Development strategies for electronics sector

The industry's trade surplus has been frozen at Bt400 billion since it stopped producing television cathode-ray tubes three years ago, following the trend of LCD televisions.

"This is not a good sign. Our trade surplus accounted for 26-27 per cent of our exports for 30 years, but it has dropped to 24 per cent and there has been no sign of growth," said Thai Association of Electrical and Electronics Industries' president Katiya Greigarn.

With the sector under economic pressure domestically and internationally, he has been pursuing development strategies since 2006 in a bid to enhance competitiveness and get the export side growing again.

First, he has called on the government to exempt exporting companies from import duties on materials, after the industry lost competitiveness to its regional rivals due to the effectiveness of the Asean Free Trade Agreement.

Currently, local manufacturers have to pay import duty of between 1 per cent and 20 per cent for the materials they need, while importers pay no tax for bringing in finished goods from other countries.

"If the government refuses to help us, it is obvious we cannot compete with cheap products, particularly from China and Vietnam," he said.

Second, there is a focus on improving human-resource skills at the technician and engineer levels by collaborating with academic institutions and the Electrical and Electronics Institute.

Katiya said the industry normally required an additional 10,000 workers per year, on the assumption of annual growth of 10 per cent.

Third, local manufacturers are encouraged to upgrade themselves from original-equipment manufacturers to original-design manufacturers (ODMs) by developing their technologies.

"We need to be ODMs by creating value-added products in order to avoid competing in common products. We also think about being original-brand manufacturers in the long run, after we succeed in becoming high-value manufacturers," he said.

Fourth, the association has paid attention to improving productivity and reducing logistics costs by providing training courses to 20 companies per year. This has been funded by the Toshiba International Foundation over the past nine years.

Fifth, it cooperates with the Thai Industrial Standards Institute to establish new standards in order to prevent the dumping of low-quality good into the country, as well as to encourage local makers to improve their products with higher awareness of environmental conservation.

Lastly, it has sought to conduct aggressive marketing to promote locally made products. Katiya said the Cabinet had a resolution saying that public agencies must give priority to purchasing local goods in all projects.

Moreover, the association has boosted cooperation with the Department of Export Promotion to penetrate "new" markets in India, the Middle East and Australia.

It is also attempting to create Thai "champion products" to increase the value of the trade surplus.

"We are considering telecommunications equipment and electrical power equipment, because they entail import costs to serve domestic demand and future power projects under the Asean Grid Development scheme," he said.

Apart from the six strategies, the Science Technology Innovation Association has asked the Cabinet for an annual budget of Bt1 billion for three years to develop the electronics industry. If approved, the funding will cover product design, the supply chain, human resources and infrastructure.

The industry's exports this year are forecast to drop by 20-25 per cent from Bt1.65 trillion in 2008. In the first quarter, exports fell 30 per cent year on year, but Katiya is optimistic the situation will improve in the coming quarters following a more stable global economy. He said foreign direct investment (FDI) in the industry had been postponed, due mainly to the domestic political chaos.

"Our industry normally expands by more than 10 per cent, which includes investment. Therefore, we may see growth spiral down to below 10 per cent until FDI returns," he said.