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4 Jun 2008

Industry

Opportunities for Thai Machinery Industry: Tapping SMEs Amid High Oil Prices (Business Breif No.2189)

KASIKORN RESEARCH CENTER (KResearch) takes the view that the machinery industry in Thailand may experience a recovery this year. Investment in machinery is expected to total some THB577.50 billion, with growth of some 5.0 percent at constant prices, up from the value of THB550 billion in 2007, but shrinking by 1.0 percent at constant prices. This growth can be attributed to high capacity utilization, a strong Baht, the government's economic stimulus programs including financial support programs for upgrades of machinery, an incentive which is expected to attract more investment in machinery installations or improvements to increase productivity.
On the contrary, there are also risk factors that may hinder the growth of the machinery industry. They include rising costs of production that may prompt businessmen to limit their investments or adopt a wait-and-see attitude instead, as well as the problem of domestic political stability. On the export front, a bright outlook seems to lie ahead. During the first four months of this year, exports of machinery totaled some THB40.951 billion, up 19.0 percent, year-on-year.
Notably, local manufacturers of machinery have played a minor role in the Thai market where the majority of machinery is imported. Likewise, the export market is also dominated by large multi-national companies. From KResearch's perspective, however, local machinery manufacturers should place their emphasis on niche markets, especially the SME market where the demand is mainly for moderate-priced machinery with versatility that can adapt to product market variances. Among the SMEs with potential are food, agro-industrial products, alternative energy, OTOP product, etc. Amid soaring costs of production, this may be the right choice for Thai manufacturers who want to upgrade their production efficiency. At the same time, local machinery manufacturers may have to be flexible in their production to better serve customers' needs. Their focus should also be on forming alliances, setting up an information center to share industry-related information that can also serve as business matching forumbetween producers and buyers. Among the machinery with bright prospects are those for agro-industrial and bio-fuel production as well as basic machinery tools, etc.

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