Thailand 4.0 – A Logistics-based Opportunity

Commonly known, Thailand has been classified an Upper-Middle Income Nation by World Bank’s Gross National Income (GNI) Per Capita since 2011. Members in this group have an average (per capita) income range between $3,976 and $12,275 (approx. 118,662 – 366,337 baht). At the time of evaluation, Thailand’s per capita income stood at approx. $4,210 (approx. 125,756 baht), indicating a radical economic growth underlying the categorization – a change which occurred within a mere one generation.

Thailand has gone through three historical phases of economic development to-date.  The first phase focused mainly on development in the agricultural sector.  The second focused on productivity enhancement in light industries that led to an upgrade from low- to middle-income status.  And the third phase, also known as Thailand 3.0, saw production acceleration in heavy industries that enabled continued economic growth.  Despite previous success, the 3.0 model going forward has experienced insurmountable challenges from labor- and heavy-machinery intensive production that lacks the force to advance Thailand beyond the middle- tier criterion.  Thus, came the ‘Thailand 4.0’ model.

What exactly is Thailand 4.0, though?  Thailand Economic 4.0 is an economic development policy based on production restructuring and a shift of focus to technology and innovation as the main channel to drive Added-Value for goods and services.  The objective is to create the foundation for long-term national development through Civil-State operations that liaises operational teams from the three sectors; the government or state, private and public sector, and collaborates with the educational and financial institutions, as well. The approach is designed around inducing greater income generation in the public sector at large and prepare groundwork requirements for the upper-income upgrade. South Korea is a great example of successful implementation of such economic model.

Thailand 4.0 focuses development on value-based economy or value adding (instead of commodity), technology (instead of industry) and service provision (rather than selling goods).  Five Target Industrial Groups are indicated of to where homeland retains experience and expertise through generations, profound knowledge and therefore have well-founded potential for further development, consisting of:

  1. Agro-based, food, agriculture and bio-tech;  
  2. Health, wellness and bio-medical; 
  3. Smart devices, robotics and mechatronics;  
  4. Digital and embedded technology; and 
  5. Creative, culture and high-value-service.

A total of 12 Civil-State Teams comprise over 200 members recruited to act as driving-force committees in carrying out the policies.  As much as 73 percent of the members represent the private sector.  The 12 Teams categorically fall under 2 types of forces: the Value-Driver-7D and Enable Driver-5E. Value-Driver-7D is the driving force behind seven groups: (1) upgrading of innovations and productivity; (2) promotion of SMEs as well as start-up enterprises; (3) promotion of tourism and MICE; (4) promotion of export and foreign investment; (5) development of super clusters and the New S-Curve industries; (6) development of modern agriculture; and (7) income generation and stimulation of national spending. Enable Driver-5E is the responsible provision for the remaining five groups, (1) investor attraction and national infrastructure development; (2) upgrading of the quality of occupations; (3) development at the grassroots level and civil-state; (4) law amendments and mechanisms in the government sector; and (5) basic education and leadership development.  It should be noted that giant conglomerates of Thailand such as the Charoen Pokphan Group, Siam Cement Group and Thai Beverage Plc. are represented in almost every committee to the aforementioned groups.

A considerable number of groups are associated with logistics management as it is a crucial success factor for businesses and developments of all scales.  Preliminary, this article touches on two groups.  With later opportunities, additional material will be presented to keep you informed as feasible.

D5: The Working Group on Super Clusters Development and the New S-Curve Industries  
Due to the continued decline in export coupled with an upward trend to relocate labor-intensive production bases to neighboring nations, various measures has been imposed to enhance Thailand’s competitiveness to attract new investments and restructure the economy by shifting from the reliance on production to modern production requiring a high knowledge-based production where value addition results from capital-intensive development of the quality of goods and services.  The group’s objective is to develop ten key industries considered to be Thailand’s New Growth Engine.  The five New S-Curve Industries consist of robotics industry, integrated medicine, transport and aviation, and biofuel and biochemical industries while the five First S-Curve Industries comprise the next-generation automotive industry; smart electronics industry; affluent, medical and wellness tourism industry; agro- and biotechnology industries; and food processing industry.

The Eastern Seaboard Development Project is one of the country’s New S-Curve industries that not only was successful in the past but also gave rise to next-generation industries, creates jobs, generates income and incentivized investments from upstream industries downward.  In the initial stage, the eastern seaboard should serve as key area for development promotion given its potential as the AEC’s future industrial hub and be expanded to create a cluster of businesses and institutes related to industries in the vicinity as a means to alleviate obstacles and enhance the value chain while the law should be amended in support of investment, innovations and start-up enterprises.  Implementation should be supervised and accelerated in the special economic zone covering three provinces, namely Rayong, Chon Buri and Chachoengsao (each having relevant objective, e.g. Chachoengsao is to be a cozy city to support Bangkok’s expansion on the eastern side while Sriracha – Laem Chabang area is envisaged as the next-generation production industry town linking up with regional production in Mekong River basin and ASEAN) with central organization/organizations preparing related policies as well as facilitating investments.  The scope of work specified by the working group covers five industrial groups, namely (1) extended industries located in the existing area in the eastern seaboard; (2) bio-economy with emphasis on agriculture-based economic development; (3) digital economy focusing on pushing forward e-Commerce, reviewing related laws and mechanisms and empowering e-Commerce operators while also providing them with sources of knowledge; (4) robotics industry by means of upgrading the country’s industry leading to the Industry 4.0 model; and (5) logistics system industry with emphasis on the enhancement of the overall transport system leading to the status as logistics business hub and the capacity of linking up with the regional e-Commerce system.  This means a future development of logistics infrastructure and, in turn, smooth progression of the industrial sector.

Without delving in to further details, we wish to present the following rough summary.  The New S-Curve model aims to create a base for ten industrial targets mainly through the use of the eastern seaboard, otherwise called Thailand’s Eastern Corridor, to realize a leap forward in economic development and avoid being trapped in the middle-income group while aiming for income distribution to all sectors of the country, to further strengthen the country’s agriculture and industry through science, technology, research and innovation, create new added values while enhancing value addition through the existing cash crops, i.e. sugarcane and cassava, leading to sustainable agriculture and using the eastern seaboard model as prototype in pushing forward bio-economy concurrently with civil-state administration.

D2: The Working Group on the Promotion of SMEs as well as Start-up Enterprises 
The objectives are to increase SMEs’ revenue proportion in GDP to 50 per cent of National GDP by 2020 and export value by 5 per cent per year and to see at least 50,000 SMEs in the system per year.  The group has defined a guideline for development, appointed three sub-groups, namely the group concentrating on SMEs development; the group concentrating on start-up enterprises development (Integrated Development Environment – IDE) and the one on social enterprises (SE) development.  Furthermore, it signed an MOU on ‘The Synergy of Civilians and the State to Empower SMEs and Start-up and Social Enterprises’ with an allied network of more than 67 offices/agencies to render support to SMEs under the Big Brother Project which ensures that they can have access to the sources of fund while promoting e-Commerce market channel to benefit e-Commerce operators and to additionally support and improve the eco-system for the benefit of IDE start-up enterprises.  In the meantime, the Big Brother Project has been designed to have conglomerates such as SCG and BJC look after SMEs as if they were big brothers, give them advice and strengthen them in the areas of overseas export market expansion and overseas investment through various activities along with organizing business matching with foreign distributors starting with Vietnamese and Cambodian markets.

An example of the working group’s accomplishments is the Start-up Thailand Fair held toward the end of last April at the Queen Sirikit National Convention Center – the first step toward responding to start-up enterprises’ needs as well as to SMEs trying to locate business channels.  The lively atmosphere of the fair reflected a new approach for an event of its kind.

We are bound to see more concrete implementations in the future as logistics management is compelled to be prepared for the potential business growth through an effective cross border logistics development plan, a provision of export/import services and warehouses, which could eventually become a fulfillment center similar to what was mentioned in our previous article (entitled “Start-up Enterprise – The Next-generation Business and Future Logistics”) to enhance SMEs and start-up groups so that they can access larger markets and experience a leap forward in growth as targeted.

In addition, to give impetus to the above-mentioned model, Thailand will have to undergo an economic restructuring involving a shift from labor-, machinery- and resource-intensive production to knowledge- and technology-based production, development of the service sector, a research and development reform which includes the establishment of world-class research institutes in Thailand, and educational system reform with emphasis on workers knowledgeable about technology in line with the future industrial development concept.  It remains to be seen whether and to what extent the national development plan – one of the major goals within the 20-year national strategic plan – will be successful.  One thing we should keep in mind, though.  National unity is what unites all of us physically and spiritually if we want to see continued and sustainable national growth and prosperity.  Let us not be divided or safeguard our own interests to the extent that we forget that we are all fellow-countrymen, the citizens of Thailand.

Compiled by  BLOG.SCGLogistics
Reference and picture credits:  worldbank.org, bangkokbiznews.com , facebook.com (account tbiothai.net) , pixabay.com (account : gracelynn, JRjr1, eak_kkk, Peggy_Marco), thailandstartup.org

Share this post