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FY 1999: Thailand |
CHAPTER V. LEADING PROSPECTS FOR U.S. BUSINESS AND INVESTMENT PART 1. LEADING PROSPECTS FOR NON-AGRICULTURAL GOODS AND SERVICES: Manufactured Goods and Services Sector Best Prospects (In Rank Order): 1. APG -- Airport and Ground Support Equipment 2. ELC -- Electronic Components 3. WRE -- Water Resources Equipment and Services 4. PKG -- Packaging 5. FPP -- Food Processing Equipment and Machines 6. SCV -- Business Services 7. ELP -- Electric Power Systems 8. TEL -- Telecommunications Equipment 9. AIR -- Aircraft and Aircraft Parts 10. POL -- Pollution Control Equipment 11. ACE -- Architecture, Engineering and Construction 12. MED -- Medical Equipment 13. OMS -- Operations, Maintenance Equipment and Services 14. APS -- Automotive Parts/Service Equipment 15. PRT -- Port Equipment 16. FRA -- Franchising 17. EDS -- Educational, Training Services and Supplies 18. CSF -- Computer Software 19. AGC -- Agricultural Chemicals 20. CPT -- Computer and Peripherals 21. LAB -- Lab/Scientific Instruments 22. CSV -- Computer Services MARKET OVERVIEW: Manufacturing, Heavy Industry and High Technology - Preserving the Vitality of the Export-Oriented Sectors Before the economic crisis, Thailand's aspirations to become the ASEAN regional hub for the automotive, electronics and aviation industries were supported by bold national industrial development programs aimed at diversifying the industrial base and transitioning from low technology to higher value-added manufacturing capacity. These aspirations are still attainable as Thailand's strategic position within the region, and its wealth of natural and human resources, has not diminished. As a general observation, companies that made long-term strategic decisions to invest and manufacture in Thailand have not changed their minds about the merit of their strategy -- but they are revising their short and mid-term tactics drastically to cope with the immediate financial reversals. It is universally recognized that the key to Thailand's recovery lies with its export manufacturing industries. Restoration of international investor confidence is vital to bringing the new capital needed to preserve and further develop Thailand's industrial capabilities, and to manufacture competitive products for sale in the regional and global markets. The government, along with Thailand's leading industrial associations, has formed task forces to identify immediate initiatives to support export industries. The government is considering lowering import duties for raw materials for export-oriented operations and expanding incentives offered by the Board of Investment (BOI). A major element of the assistance package the United States has offered Thailand is the extension of one billion dollars in loan guarantees by the U.S. Export-Import Bank. We expect that the Thai Government will direct the funds specifically to businesses that are selling material and products to Thailand that will be used to manufacture goods for export. It is estimated that about sixty percent of the content of Thai's export goods is imported. Some export-oriented industries are expected to be net beneficiaries of the baht devaluation. U.S. companies that have manufacturing export-oriented operations in Thailand could benefit because their products theoretically have become much cheaper on the world market, and their revenue is denominated in U.S. dollars. Some government funded projects are continuing. However, the government has made severe spending cutbacks for most sectors for FY 1998. Areas such as health may benefit from World Bank, Asian Development Bank (ADB) and Overseas Economic Cooperation Fund (OECF) loans to compensate for spending cuts after 1998. Consumer Confidence Shaken - Cut Back Now, Buy Later Psychology Cascades Through the Consumer Industries: Accustomed to the constantly growing prosperity that accompanied two decades of nearly double-digit GDP growth, the effect of the economic crisis on lower and middle income Thai people is traumatic. There are fears that the financial crisis will severely affect real sector companies this year, causing substantial middle class layoffs, both directly and indirectly -- a new situation for a country with chronic skilled labor shortages and almost unknown urban unemployment. Consumer spending patterns are reflecting the psychology of uncertainty being acted out by severe belt tightening. Sales have gone flat. If this trend continues, business and factory closings could cause layoffs of semi-skilled and skilled workers. Migrant laborers from the countryside have the option of returning to their village agrarian life, providing a safety valve to some extent. The baht devaluation and value added tax (VAT) increase has made some imported goods exorbitant. Sales of luxury goods are stagnant. But most people do not need to buy many imported products and promotional campaigns encouraging Thais to use domestic products will curtail sales of imported goods and services further. Research firms report an increase in consumer spending studies as marketing departments re-design their promotional campaigns for survival. There are headlines of "Eat Noodles not Hamburgers" and stories of stores launching "Buy Thai" campaigns. Warehouse-style stores such as Makro are aggressively trying to attract consumers through lowest price guarantee promotions and discounts. Standard retailers are expecting to cut back on the variety of product sizes that they stock on the shelves and focus on fast-moving household products such as shampoo, detergent and baby powder. Major retailers note that the fastest moving products represent only about twenty percent of all products, but about eighty percent of total sales. Unfortunately, price gouging complaints are also arising for locally produced items. This can hurt the urban and rural working people who buy few imported products and who already have frugal spending patterns. BEST PROSPECTS FOR NON-AGRICULTURAL GOODS AND SERVICES 1. Airport and Ground Support Equipment (APG) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 268 159 181 B. Total Local Production: 7 8 9 C. Total Exports: 65 61 61 D. Total Imports: 326 212 233 E. Total Imports from U.S. 90 55 58 The Royal Thai Government (RTG) has decided to return to its original plan of developing the Second Bangkok International Airport (SBIA) as Thailand's primary international airport and aviation hub. The construction of this new airport will follow the original master plan of two runways and one passenger terminal with a capacity to accommodate thirty million passengers per year. The construction cost is estimated at 136 billion Baht (US $3.4 billion), and the airport is scheduled to be completed by 2003. Due to this revised policy, the RTG has scaled down its previously approved budget to expand the existing Bangkok International Airport (BIA) at Don Muang from 12 billion baht to 6 billion baht (US $150 million). The office of the National Economic and Social Development Board (NESDB) has recently suggested that the budget be reduced further to 4.2 billion baht. The implementation of the expansion program will be conducted in two phases. Phase I (1998-2000) will include the following elements: construction of the east aircraft aprons; high speed taxiways; a new aircraft pier (pier No. 5) with six contact gates for wide body aircrafts; improvement of piers 1, 2, 3, and 4; expansion of existing domestic passenger terminals; construction of a new air traffic control tower (Note: the tower building only. Tower equipment will be procured by Aeronautical Radio of Thailand - AEROTHAI), and a new Airport Authority of Thailand office. The construction will be based on the RTG's final approval and can either be on a fast track design-build basis or a full detailed engineering design basis. The tenders for this expansion are scheduled to be released in the last quarter of 1998. Due to the current economic situation and the International Monetary Fund (IMF)'s conditions, the RTG will have to privatize its state enterprises, including its airports (SBIA, BIA and five provincial airports). Government funds for these projects are no longer available. To identify financial options, the RTG designated a Privatization Study Committee, headed by the new Bank of Bangkok Governor and former Permanent Secretary of Finance, M.R. Chatumongkol Sonakul, to conduct a study on private sector roles in the development of both airport projects. The Committee concluded that the AAT should set up a holding company to operate SBIA, BIA and the provincial airports. With AAT holding seventy percent in this new equity, the rest will be sold to the private sector. The Committee also recommended that 75 percent of the construction cost be financed by a loan from the Overseas Economic Cooperation Fund (OECF) of Japan. Business opportunities include construction management and airport operations in addition to sales of goods and services. The best sales prospects in this field include: - Ground Service Equipment and Maintenance Facilities - Baggage Handling/Detection Systems - Passenger Bridges - Moving Sidewalks/Escalators - Aircraft Fueling Systems - Aircraft Fueling Rolling Stock - Fire/Rescue Rolling Stock - Fuel Hydrant Network - Meteorological Facility and Equipment - Radar Systems - Navigational Aids 2. Electronic Components (ELC) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 5,357 6,160 7,084 B. Total Local Production: 4,017 4,619 5,312 C. Total Exports: 3,652 4,199 4,829 D. Total Imports: 4,992 5,740 6,601 E. Total Imports from U.S. 1,289 1,482 1,704 Thailand has become one of the largest production bases of consumer and industrial electronics in Southeast Asia for export to the world market and has an annual production capacity of 8.9 million televisions, seven million VCRs, 48 million calculators, 5.5 million monitors, 6.3 million telephones, 19.2 million floppy disk drives, and twenty million hard disk drives. In addition, the baht devaluation has boosted the competitiveness of Thai manufacturers. Exports of electronic components rose 27 percent in the third quarter of 1997, from an estimated US $2.9 billion to US $3.6 billion at the end of 1997. Industrial sources expect imported components used in exported production to benefit from the modest demand in 1998. U.S.-made components account for over twenty percent of the imported electronic components, and U.S. suppliers are expected to play an even greater role as Thailand develops into a more high-technology, higher value-added electronics market. The Thai electronics industry shows excellent signs for growth in the next two to three years and is expected to grow by an average of fifteen to twenty percent annually due to increases in the range and production volume of integrated circuit, diode, transistor, and printed circuit board assemblers. Thailand will continue to import integrated circuit wafers, dice, and chips. Seagate Technology has the largest production base of head gimbal and head stack assembly in Thailand with a total of 41,000 employees. IBM recently opened its higher density disk drives manufacturing plant, and the government approved a project to set up a microelectronics center for wafer fabrication. The best sales prospects in this field include: - Integrated Circuits (chips, dice and wafers) - Microwave Devices - Connectors - Opto-Electronic devices - Electrical Sound or Visual Signaling - Cable Assemblies 3. Water Resources Equipment & Services (WRE) 1997 1998 1999 A. Total Market Size 1060 782 782 B. Total Local Production 848 626 626 C. Total Exports N/A N/A N/A D. Total Imports 212 156 156 E. Imports from U.S. N/A N/A N/A 1) Exchange rate US$1 = Baht 40 2) 1999 Figures are estimated 3) Figures are in $millions Water resources development always has been one of Thailand's development priorities. Water resources conservation and development projects are developed to serve the following purposes: 1) agriculture, domestic consumption, waterworks, industry 2) watershed conservation by construction 3) hydropower generation 4) flood protection and alleviation in cultivated, residential and community areas. 5) drainage of excess water from low-lying areas or irrigated areas 6) water treatment The Royal Irrigation Department, Ministry of Agriculture and Cooperatives, is the principal government agency responsible for water resources developments in Thailand. The Department implements approximately eighty percent of water resources development projects in the country. The Office of Accelerated Rural Development, Ministry of Interior, and the Electricity Generating Authority of Thailand are the other public agencies implementing water resources development projects. Development and conservation of water resources is essential for the agriculture production which has been the country's economic backbone as the Royal Thai Government gears toward agriculture as a way out of the economic crisis. The Royal Irrigation Department, the Office of the National Economic and Social Development Board and related agencies, developed a master plan for water resources development in Thailand from 1997-2006. The ten year master plan includes proposals to develop new irrigation projects and to improve the operating efficiency of existing projects. An investment cost of 126,226 million baht was planned for development of new projects, excluding land price. New projects include 481 large and medium scale projects, and 2,700 small scale projects. An additional investment cost of 8,105 million baht is proposed to include the construction of new rainfall and runoff gauging stations, as well as improvement of existing irrigation systems and reinforcement of dams for safety. 4. Packaging (PKG) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 204 221 250 B. Total Local Production: 40 52 68 C. Total Exports: 20 25 32 D. Total Imports: 184 194 214 E. Total Imports from U.S. 21 24 27 Food packaging supplies and accessories should continue to do well as finished food exports from Thailand are competitively priced in the international market. Supplies and accessories for food packaging include aluminum foil coating sheet, plastic wrap, wrapping sheet, strapping tape, and foil and plastic food containers. However, the baht devaluation has not only made exports cheaper but has forced food manufacturers to limit their capital investment. For example, local manufacturers cannot afford to purchase new food packaging machinery because most of it is imported. The best sales prospects in this field include: - Strapping Tape - Aluminum Foil Coating Paper and Packages - Wrapping Sheet - Plastic Sheet for Outer Sealing 5. Food Processing Equipment and Machines (FPP) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 425 458 497 B. Total Local Production: 125 150 180 C. Total Exports: 46 55 65 D. Total Imports: 346 363 382 E. Total Imports from U.S. 63 102 115 As a result of the Baht devaluation, demand from international markets is growing, and food processors in Thailand are enjoying full production capacity. However, many food processors' plans to expand capacity have been delayed. The cost of new food processing equipment, of which imports account for 80 percent of the market, has doubled. Most food processors are continuing to make do with their existing facilities rather than make new capital investments while they wait and see how the country recovers from the economic crisis. However, because of growth in the sector, plant upgrades are inevitable in the future. Once the economy recovers, the food processing equipment market should offer many opportunities to U.S. manufacturers. Joint ventures between processed food importers and food processors is the recent trend in the industry. The food is processed by the food processor and then sold to the food importer, who has full production capabilities. The best sales prospects in this field include: - Canning Machinery - Bakery Making Equipment - Dairy Processing Equipment - Liquid Food Processing Equipment - Juice Processing Equipment - Alcoholic Beverages Processing Equipment 6. Business Services (SCV) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 790 742 752 B. Total Local Production: 593 534 511 C. Total Exports: 0 0 0 D. Total Imports: 197 208 241 E. Total Imports from U.S. 99 104 120 Business services including accounting, legal, advertising, employment and general management consulting services are expected to turn in a mixed performance over the next few years. Advertising revenue has been hit badly by the recession; however, demand for legal and accounting services has remained firm. In most of the professional business services areas big international consulting companies are already well established in Thailand. For example, Baker & McKenzie is the largest law firm in Thailand with 300 lawyers, the big five accounting firms all have offices in Thailand, and Andersen Consulting opened its Bangkok office in 1978 with Booz Allen and Boston Consulting Group not far behind. Demand is expected to be particularly high for expertise in financial restructuring related activities, mergers and acquisitions, debt collection, and due diligence work. Firms with access to international expertise, and capital, are likely to gain market share over the medium term. Much of the demand is likely to come from the Royal Thai Government (RTG). In line with International Monetary Fund (IMF) guidelines, the RTG will undertake the recapitalization of the financial sector and privatization of many state enterprises. Standard & Poors estimates that the financial sector alone needs over $30 billion in new capital. In addition, potential privatization candidates for divestiture are state-held transportation, telecommunications, and energy enterprises. Privatization of state enterprises has already begun in an attempt to continue and complete the necessary infrastructure projects that the government cannot pay for in the current economic conditions. The best sales prospects in this field include: - Legal Advisory Services (GEV) - Management Consulting (MCS) - Financial Restructuring (FNS) - Accounting Services (ACT) 7. Electric Power Systems (ELP) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 3,500 3,150 3,500 B. Total Local Production: 1,800 1,700 1,900 C. Total Exports: 1,200 1,300 1,400 D. Total Imports: 2,900 2,750 3,000 E. Total Imports from U.S. 390 370 400 Thailand's economic plunge has sparked a sharp decline in the demand for electric power systems. Consequently, the Electricity Generating Authority of Thailand (EGAT) has announced cuts in its own investment program and has suspended new Independent Power Producer (IPP) bid solicitations. Although EGAT has signed Power Purchase Agreements (PPA) with seven IPP consortia, some IPP's are expected to face an uphill struggle in arranging foreign financing. Four of the seven IPP consortia include U.S. investors (Unocal, Westinghouse, Texaco, Edison Mission Energy, InterGen, and Bechtel). According to EGAT's latest forecast, demand for electricity in Thailand during 1997-2001 will increase at an annual average rate of 7.29 percent, representing about 1,200 megawatts, compared to the previous estimate of eight to nine percent. Currently, EGAT has a total installed capacity of nearly 17,000 megawatts. EGAT has already deferred the commissions of Ratchaburi Units 3 and 4 combined cycle plants and of Krabi Unit 2 thermal plant and canceled its Petchburi oil storage facility project. In addition, EGAT is planning to reduce the electricity purchased from Small Power Producers (SPP) from 3,200 megawatts to 2,000 megawatts by the end of 2003. However, opportunities still exist in SPP projects, especially cogeneration plants using biomass as fuel. Some U.S. companies are now investing in these projects, and local project owners are looking for new U.S. partners with expertise in this field in the hope of offsetting their cash flow problems. Although EGAT is still facing opposition from the EGAT Employees Association, EGAT will have to sell its thermal power plants to meet new government-mandated privatization goals. As a result, several subsidiaries will have to be set up to run these power plants and undertake engineering and maintenance services. Eventually, EGAT is expected to be listed in the Thai securities market as a public company. The best sales prospects in this field include: - Steam and Gas Turbines - Boilers - Burner Retrofits - Compression Connectors - Pole and Transmission Line Hardware - Noncurrent-Carrying Wiring Devices - Instrumentation and Control Equipment - Construction and Engineering Consulting Services - 69 kV and 230 kV Substation Equipment - 50 MVA and 22 kV Portable Switching Equipment - 115 kV and 230 kV Power Transformers - 12.5 MVA, 50 MVA, and 200 MVA Power Transformers - 230 kV Circuit Breakers 8. Telecommunications Equipment (TEL) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 3,000 2,500 2,600 B. Total Local Production: 2,000 1,800 1,800 C. Total Exports: 1,000 1,100 1,200 D. Total Imports: 2,000 1,800 2,000 E. Total Imports from U.S. 490 460 500 Thailand's economic plunge has sparked a sharp decline in the demand for telecommunications services, including land line telephones, cellular phones, radio communications, paging and VSAT services. Consequently, providers of these services have reduced or deferred investments in expansion projects. The reduced demand, coupled with the baht devaluation, caused the market size to shrink significantly in comparison to our May 1997 and December 1997 estimates. Sources in the local telecommunications industry forecast that the market will have a zero growth rate in 1998. Therefore, the trend will be to seek foreign strategic partners to offset cash flow problems or to reduce investments in new projects. Despite high profits, some state enterprises have been affected by the decline in revenue and are negotiating with their existing concessionaires to convert the concession contracts into equity participation, becoming joint venture partners. The Telephone Organization of Thailand (TOT), the Communications Authority of Thailand (CAT), and the Mass Communications Organization of Thailand are preparing themselves for privatization or corporatization and will seek foreign strategic partners. On November 4, 1997, the Cabinet of the former Prime Minister Chavalit Yongchaiyudh approved the telecommunications business development master plan. The plan calls for the reorganization of the existing state monopoly operators into stock companies prior to privatization, the establishment of a telecommunications regulator, and the gradual liberalization of the telecommunications sector. According to the plan, TOT (the local telephone service provider) and CAT (the international long distance telephone service provider), will be reorganized from state enterprises into stock companies to be called TOT Company Limited and CAT Telecom Limited, respectively. TOT and CAT will seek strategic partners (presumably foreign telecommunications companies), who will be allowed to hold up to 25 percent of the total equity. The companies will also be authorized to sell shares through private placements up to 22 percent of the total equity but limited to a five percent stake per individual owner. A third company, the CAT and Postal Company Limited, will be formed to handle postal operations and initially will remain in the hands of the Royal Thai Government (RTG). The Ministry of Transport and Communications will form a fourth company to hold RTG's shares in the first three companies. The present government under Chuan administration has targeted to amend all laws relating to the telecommunications industry by mid-1998. Radio and television broadcasting and VSAT services are still making high profits, but the operators' revenues have been greatly reduced. This is because commercial firms and property developers are spending less on their promotional campaigns. It is likely that local radio and television broadcasting and VSAT services operators will be interested in finding strategic partners in the near future. The present economic situation has not affected the installation of rural public long distance telephone lines and submarine fiber optic cables. In addition, there are still plans for the installation of additional telephone land lines and the possible licensing of new cellular phone services in the radio frequency ranges of 1500 and 1900 megahertz. The best sales prospects in this field include: - Telephone Switching Equipment - Optical Fiber Cable - Mobile Telephone Equipment - Private Automatic Branch Exchanges (PABX) 9. Aircraft and Aircraft Parts (AIR) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 1,206 1,630 670 B. Total Local Production: N/A N/A N/A C. Total Exports: 645 600 700 D. Total Imports: 1,851 2,236 1,370 E. Total Imports from U.S. 1,087* 570 250 * Boeing delivered eight aircrafts. The Royal Thai Government (RTG) has reinstated its plan to develop Thailand as the regional hub for air transportation and has implemented a number of programs to attract international aviation service providers. The Second Bangkok International Airport (SBIA) will be Thailand's primary airport with its completion scheduled by the end of 2003, the existing Bangkok International Airport (BIA) at Don Muang will be expanded to cope with increasing passenger demand, and Thai Airways International Heavy Maintenance Center at U-Tapao Air Base will be established. On June 9, 1997, the RTG granted a license to a consortium, led by JVK Holding Company, to operate the second Thai national airline. Thai Airways International Limited (THAI)'s Board of Directors recently approved the purchase of ten new aircraft in this fiscal year and another two aircraft in fiscal year 1999. The aircraft approved for 1998 are: five Airbus A300- 600, three Airbus A330-300, one Boeing 747-400, and one Boeing 777-300. The aircraft to be procured in 1999 are: one Boeing 777-300 and one Boeing 747-400. The Royal Thai Air Force, due to the current economy and severe budget cuts in military spending, has set up a program to recycle its aging equipment and to postpone the procurement of new weapons for another four years. The Royal Thai Navy also has a plan to recommission two CL-215 aircraft under the patrol and anti-forest fire missions. Although the market demand for military aircraft and aircraft parts is slowing down, the market demand for commercial aircraft and aircraft parts is still growing. Presently, commercial market demand is met entirely by imports, which is valued at US $300 to US $400 million per year. The best sales prospects in this field include: - Chinook Helicopter Parts - Sikorsky Helicopter Parts - Bell Helicopter Parts - P-3, A-7, and CL-215 Aircraft Parts 10. Pollution Control Equipment (POL) 1997 1998 1999 (Million U.S. Dollars) A. Total market size 1200 1500 1200 B. Total local production 45 45 40 C. Total exports 20 23 18 D. Total imports 1000 1370 750 E. Imports from the U.S. 530 700 300 The economic crisis has caused the suspension of most government funded environmental projects for FY 1998 and 1999. Budgets for 1999 have been frozen at 1998 levels. The private sector will become increasingly involved in funding environmental infrastructure projects on a "privatized" basis in the future since the government can no longer fund many projects. Industry sectors to concentrate on include food processing, electronics, textile, pulp and paper and petrochemical industry, since these are major exporters and are earning foreign currency. Market competition is strong with Japan, Finland, Denmark, Germany, England and France being the leading competitors. The Royal Thai Government has promulgated tough environmental regulations and standards. Increased enforcement of the environmental laws is being demonstrated by warnings, fines and plant closures, creating support for the environmental market in Thailand. The government shows support of the pollution control equipment market by lowering tariffs to five percent or less on assembled imports; providing tax incentives to new overseas industrial investors; and, by providing low cost, affordable loans to local manufacturers to purchase equipment through a Green Fund administered by the Industrial Finance Corporation of Thailand (IFCT). The RTG also supports ISO 14000 series of international standards and has initiated the "Polluter Pays Principle" for the support of environmental remediation. The most promising subsectors are: -- Wastewater Treatment Equipment and Services -- Industrial Wastewater Treatment Equipment and Services -- Municipal Solid Waste Equipment and Services -- Hazardous Waste Equipment and Services -- Automotive Air Pollution Control Equipment and Services -- Industrial Air Pollution Control Equipment and Services -- Energy Conservation Equipment and Services -- Soil Remediation Products and Services -- Environmental Privatization Consulting Services -- Recycling Product and Services -- Medical Waste Disposal/Treatment -- Waste Minimization Products and Services -- Water Leakage Detection Products and Services 11. Architecture, Engineering and Construction (ACE) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 407 200 220 B. Total Local Production: 244 140 154 C. Total Exports: N/A N/A N/A D. Total Imports: 163 60 60 E. Total Imports from U.S. 24 12 13 The drastic decline of Thailand's economy and the closure of 56 finance companies have strongly impacted architecture, construction and engineering services. The Royal Thai Government (RTG) has implemented a belt- tightening policy for new expenditures in infrastructure projects. The private sector, due to the uncertainty of the baht value, the lack of financial support from financial institutions, and the high interest rate for commercial loans, has slowed down its investment too. However, some infrastructure projects are going forward and will present opportunities in architecture, engineering and construction services. The RTG reaffirmed its policy to develop the Second Bangkok International Airport (SBIA) as Thailand's primary international airport and regional aviation hub. The construction of this new airport will follow its original master plan of two runways and one passenger terminal with a capacity to accommodate thirty million passengers per year. The RTG has also decided to go ahead with its plan to expand the existing Bangkok International Airport (BIA) at Don Muang. The Petroleum Authority of Thailand (PTT) is committed to the construction of additional gas pipelines within the next nine years (1997-2005). Six main projects, with gas transmission capacities totaling 7,700 MMcfd, have been established. Another six alternate pipeline projects have been set up with gas transmission capacities totaling 1,825 MMcfd. The total budget for these projects is about 78,052 billion baht (US $1.95 billion). The National Economic and Social Development Board (NESDB) has made policy decisions with its planned Global Transpark at U-Tapao airbase, the second phase development plan for the Eastern Seaboard, and the development of Southern Seaboard Ports Projects. However, no funds have been appropriated. The State Railway of Thailand, with the support of a U.S. Trade and Development Agency (TDA) grant, is studying a US $120 million second Inland Container Depot (ICD) along its eastern rail line to Laem Chabang Deep Seaport. Under the International Monetary Fund (IMF)'s conditions, the RTG has to privatize state enterprises, such as the Electricity Generating Authority of Thailand (EGAT), Telephone Organization (TOT), the Communications of Thailand (CAT), and the Thai Airways International Ltd. (THAI). This privatization will also generate business opportunities for ACE service, especially in the fields of technical evaluation/inspection, project management and improvement services. The best sales prospects in this field include: - Oil/Gas/Petroleum Services - Power Generation and Transmission Services - Telecommunications Networks - Airport Design and General Management 12. Medical Equipment (MED) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 297 323 346 B. Total Local Production: 160 192 230 C. Total Exports: 125 144 172 D. Total Imports: 262 275 288 E. Total Imports from U.S. 74 77 80 The market for medical equipment and services in Thailand will be very slow for the next few years due to the economic downturn and the current oversupply of hospital beds in Bangkok and other major Thai cities (Chonburi, Chiangmai and Songkhla). Public hospitals, which account for sixty percent of the total hospital market, rely heavily on the Royal Thai Government (RTG). Until the RTG solves its liquidity problem, public hospitals will not have budget to procure new medical devices. Private hospitals are facing similar a cash flow situation because more and more Thais are visiting public hospitals instead of the more expensive private ones. Because of these problems coupled with the baht devaluation, which has also caused the initial cost of new imported medical equipment to double, hospitals have had to put some of their orders on hold or have had to cancel them altogether. Medical device manufacturers should expect poor market growth in 1998 and 1999. Until the economy picks up, medical device importers and distributors should use their time preparing regulatory affairs, testing the market and maintaining good relationships with buyers. The best sales prospects in this field include: - Chemical Agents for Testing - Non-Invasive Operating Device Accessories - Vaccine Products - Electromedical Equipment - Analyzers and Monitoring Equipment - CT Scanners - Diagnostic Apparatus - Test Kits 13. Operations and Maintenance Equipment and Services (OMS) 1997 1998 1999 A. Total Market Size 343 336 346 B. In-house 240 235 156 C. Subcontract 103 101 190 1) Exchange rate US$1 = Baht 40 2) Figures are estimated 3) Figures are in $millions Despite Thailand's gloomy economic outlook, the market for operations and maintenance equipment and services still offers opportunities. The impact of the country's economic downturn is less severe on markets for imported products and services that have no local substitute. Large scale industries involving sophisticated technology continue to need imported expertise in the area of maintenance equipment and services. Contracting outside maintenance services enables companies to attain the required standard of services, at a predetermined cost level. Contracting outside professional services is a worldwide trend as a means to increase operation efficiency, and major industries in Thailand are fast adopting the practice. Industry experts foresee a declining number of operations doing in-house maintenance as industries increasingly employ outside professional engineering services for their maintenance work. Companies are attempting to maintain fewer number of employees to control costs, and improve competitiveness. Maintenance divisions of new industrial operations are being downsized, and the maintenance work is being given to outside service providers. The privatization of state enterprises, particularly public utilities, will offer increasing opportunities for private companies offering operations and maintenance equipment and services. Market potential exists in most large scale industrial operations and public utilities companies. The best sales prospect are in the following industries: Power Generation Petroleum refineries Petrochemical Metal manufacturing 14. Automotive Parts/Service Equipment (APS) 1997 1998 1999 A. Total Market Size 5203 2138 2221 B. Total Local Production 3562 1782 1924 C. Total Exports 518 724 869 D. Total Imports 2159 1080 1166 E. Imports from U.S. 129 76 116 1) Exchange rate US$1 = Baht 40 2) 1998, 1999 Figures are estimated 3) Figures are in $millions Thailand's vehicle market has expanded at an average annual growth of 23.8 percent in the past decade, reaching its peak in 1996 with total sales of 589,126 units. Thailand has fifteen assemblers with overall annual assembling capacity 754,200 units. The local parts industry supplies up to eighty percent of the pick-up trucks and sixty percent of the passenger cars assembled in the country. The market in Thailand is highly competitive, hosting at least forty makes from around the world. One-ton pickup trucks make up 55 percent of the market, while passenger cars and commercial vehicles make up thirty percent and fifteen percent respectively. The one-ton pickup truck segment is dominated by Isuzu 38 percent, Toyota 28 percent, Nissan fifteen percent, Mitsubishi twelve percent. Ford and Honda each have less than five percent market share. Toyota leads the passenger car sales with 36 percent share of the market, followed by Honda 26 percent, Nissan nine percent, Mitsubishi seven percent, Mercedes Benz four percent, Hyundai 2.4 percent, Volvo 2.1 percent, Volkswagen two percent, BMW two percent, and Mazda two percent. The country's economic crisis, which began with the floatation of the Thai baht in July 1997, has had a severe impact on the automotive industry. Vehicle sales in 1997 contracted 38.4 percent from 1996 sales to 363,156 units in 1997. The decline is expected to continue with 1998 sales forecasted under 180,000 units. Industry experts anticipate a gradual recovery over the next three years. The market is expected to regain its half a million unit annual sales in the year 2001 or 2002. The current recession will not impact Thailand's fundamental strengths to become an export hub and regional vehicles manufacturing center for the ASEAN region. In fact, the severe contraction of domestic market accelerates the industry to become export oriented. Thus, opportunities in the Thai automotive industry will expand beyond the local demand in Thailand to include potential demand of all ASEAN markets. The American Big Three participation in the Thai auto industry, which has long been Japanese dominated, offers significant opportunities for U.S. parts suppliers. Ford, in joint venture with Mazda, started assembling one-ton pickup trucks in July, 1998. The plant, having an annual capacity of 135,000 units, will serve as a regional manufacturing center for trucks, serving both the domestic and export markets. General Motors has recently announced that it is changing its business plan and will now manufacture minivans for world wide export. Operations have been postponed until 2000. Chrysler has been assembling Jeep Cherokees locallly since 1994, and was the leader in the sport-utility market before the current slump. The automotive after-sales service sector is expected to remain healthy, despite the severe market decline. Vehicle owners have put off buying new cars and will keep their old cars in good repair. Demand for machinery and equipment used in service stations also will increase, creating market opportunities for foreign suppliers of automotive equipment and machinery. Similarly, demand for after-market parts will be on the rise. Increased imported parts prices will encourage customers to switch to locally- produced parts when possible. However, imported parts, with no local substitute, will continue to do well. The most promising subsectors are: - Original Equipment Manufacturer (OEM) Parts and Components Supplied to Japanese Assemblers Elsewhere - OEM Parts and Component Supplied to Ford, Chrysler and General Motors - OEM High Technology Parts and Components - REM (Replacement Equipment Manufacturer) Parts, Components and Accessories with Specifications Designed for Models of Vehicles Marketed in Thailand. - Audio Systems - Wheels - Gauges - Turbo Chargers - Intercoolers - Engine Parts The most promising service/diagnostic subsectors are: - Equipment for Tire and Brake Centers - Emission Control Testing Equipment - Pumps of all Kinds 15. Port Equipment (PRT) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size 154 168 192 B. Total Local Production: 15 16 17 C. Total Exports: 16 18 21 D. Total Imports: 154 170 195 E. Total Imports from U.S. 15 16 18 There are two state enterprises, the Port Authority of Thailand (PAT) and the Industrial Estate Authority of Thailand, and one government agency, the Harbor Department, responsible for ports operation and development in Thailand. PAT operates one river port at Bangkok, the Bangkok Port, and one deep seaport, the Laem Chabang Port (LCP). In addition, there are another 78 private wharfs along the Chao Phraya River. A key factor in Thailand's economic development of Thailand is its export industry, and the cost- competitiveness of its export products in the world market. Due to draft limitations, Bangkok Port cannot accommodate today's large container vessels so Thailand has had to rely on trans-shipment to ports of neighboring countries, e.g. Singapore, with resulting cost disadvantages. Thus, the Royal Thai Government (RTG) decided to develop a deep seaport at Laem Chabang in Cholburi, 130 kilometers south of Bangkok. The LCP, under its Phase I development, operates nine terminals to accommodate different types of vessels, such as container ships, bulk carriers, pure care carriers and passenger lines. Out of these nine terminals, eight of them are operated under the LCP's privatization program's Built- Operate-Transfer contracts. In 1997, the LCP finalized its master plan for the LCP Phase II development. Phase II will be implemented in seven stages through 2007. In Stage I of Phase II, there will be six additional container facilities to accommodate post- panamax container and feeder vessels, a passenger terminal for 100,000 GRT vessels, and a tug boat service facility. The Southern Seaboard Development Committee of the Office of the National Economic and Social Development Board (NESDB), with the support of the U.S. Trade and Development Agency (TDA), conducted a feasibility study on the Southern Seaboard Ports and Industrial Complex development in Thailand's Southern Peninsula. The study identified two new ports, Thai Mauny Port on the west coast and Sichon Port on the east coast, as part of this development plan. In addition, there will be a single point mooring (SPM) for the import of crude oil on the west coast and two SPM's on the east coast for the export of crude oil in this development package. The best sales prospects in this field include: - Portal Cranes - Shore Side Granty Cranes - Container Stackers - Side Loaders - Forklift Trucks 16. Franchising (FRA) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 354 395 425 B. Total Local Production: 95 105 115 C. Total Exports: 25 30 36 D. Total Imports: 284 315 346 E. Total Imports from U.S. 255 280 310 An industry source predicts that the local franchise operations market will experience growth from 1998 to 2000 because local franchises require a lower initial investment and offer lower prices than international franchises. International franchises, especially those that require a high initial investment or are not flexible with their terms and conditions, will have a difficult time entering the market. Those international franchises, who are already in the Thai market, will be faced with diminished revenues as the down turned economy forces Thais to alter their spending habits. Most Thais will limit their expenses by eliminating the purchase of luxury goods, which is mostly represented by famous international brand name franchises. Because there are many unemployed young Thai entrepreneurs willing to invest their savings in a franchise, there is still sales potential for food and service franchise operations that require a low initial investment. The best sales prospects in this field include: - Cheap Snacks and Breakfast Fast Food Restaurants - Low Franchise Fee Fast Food Restaurants - Low Franchise Fee Compact Size Convenient Stores - Low Franchise Fee Cleaning Services - Low Franchise Fee Maintenance Services - Business Aid Services - Language Schools and Centers - Computer Repair Services 17. Education, Training Services and Educational Supplies (EDS) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 264 277 290 B. Total Local Production: 32 37 43 C. Total Exports: 15 19 25 D. Total Imports: 247 259 272 E. Total Imports from U.S. 50 58 72 The current economic turmoil and the baht devaluation have severely impacted the educational services, supplies, and equipment industry in Thailand because most of the equipment is imported. Although there is high demand for the imported equipment, which ranges from glassware to sophisticated engineering and technical training equipment, the Royal Thai Government (RTG) cannot fund the procurements. There are at least five RTG-sponsored projects, designed to upgrade the science and technical colleges in Thailand, that have been put on hold because of the crisis. The market for educational services is experiencing a downward trend. Outbound tour operators, who normally send thousands of Thai students to summer camp abroad, have complained of a very low turnout this year. In fact, some camps did not receive any students and had to close down their summer program. In addition, Thai students, who might have attended school or college in the U.S., the U.K., Canada, New Zealand, and Australia before the economic crisis, are now staying in Thailand for their education. When the economy turns around, there will be sales potential for U.S. manufacturers of high-quality educational training equipment, especially in the science and technology fields. The best sales prospects in this field include: - Education and Training in Engineering, Science, Petroleum Refinery, and Other Technical Fields - Laboratory Instruments - Educational Games and Toys - Computer Schools - English Language Schools 18. Computer Software (CSF) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 196 148 148 B. Total Local Production: 20 15 29 C. Total Exports: 0 0 0 D. Total Imports: 176 133 119 E. Total Imports from U.S. 141 106 95 Computer Software, including systems software, utilities, application tools, and application solutions, accounts for about eighteen percent of the total information technology (IT) market, which is estimated at 32 billion baht (US $805 million ) for 1998. Similar to the hardware market, the market for computer software has been weakened by the current economic crisis. According to the Association of Thai Computer Industry, the computer software market will fall from 6.8 billion baht in 1997 to 5.9 billion baht in 1998. The Royal Thai Government (RTG)'s IT budget for fiscal year 1998 was slashed from 7.8 billion baht (US $220 million) to a 3.7 billion baht (US $105 million). The corporate market is expected to rise because the economic crisis will force many companies to merge, and these new operations will need software and services, such as system management applications. The baht devaluation and reduced purchasing power of users have brought smugglers of software and CD-ROMS back into the home user market. Low- priced software applications will become a trend when the economy picks up in the near future. The total value of application solutions is forecast at 3.4 billion baht: 58 million baht from large scale systems, 300 million baht from medium scale systems, 780 million baht from small scale systems, 620 million baht from workstation software, and 1,650 million baht from PC-based systems. The trend of using network servers and data services will generate sale opportunities of application software for servers. In addition, an increase in Internet nodes in the next few years will contribute to the growth of the computer software market and investment. If the exchange rate stays around 35-40 baht to US $1, local software developers will be given the chance to compete with imported software and foreign consulting companies. The changing economic structure will allow sales opportunities of large scale systems software to support multinational firms, who will invest when the economy begins to show signs of recovery. The Thai computer software market has good growth potential and will be gaining a higher share in the overall IT market in the next few years. The best sales prospects in this field include: - Business and Accounting Software - Database Management Software - Internet and Multimedia Software - Industry-Specific Software - Networking Software - Operating System and Utilities Software 19. Agricultural Chemicals (AGC) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 648 715 780 B. Total Local Production: 34 85 90 C. Total Exports: 26 70 80 D. Total Imports: 640 700 770 E. Total Imports from U.S. 85 170 185 One of the measures to improve the current economic situation in Thailand is to export more Thai products. The Royal Thai Government (RTG) has encouraged Thai nationals to pay more attention to agricultural production. Because of the weak baht, Thai agricultural products, one of its strongest export sectors, have become cheaper and, therefore, more competitive in the international market. Exports of agricultural products, such as rice, rubber, sugar, tapioca, vegetables, and tobacco leaves, have become increasingly significant. Consequently, the demand for chemical fertilizer is expected to grow. The present demand is estimated at US $700 million per year. Most of the raw materials and ingredients for chemical fertilizers are imported. Thailand imports approximately US $80 million worth of herbicides, US $50 million worth of insecticide, and US $20 million worth of fungicides. The RTG has instructed officials, concerned with the fertilizer sector, to study the possibility and the economic viability of producing some of the ingredients locally. The U.S. Trade and Development Agency (TDA) has been requested to consider offering a grant to support the study. Only one manufacturer and a couple of major chemical fertilizer mixers exist in Thailand. The National Fertilizer Public Company (NFC) is the only manufacturer that produces NP and nitrogen, phosphorous, and potassium (NPK) formula fertilizers with a capacity of one million tons per year. Forty percent of the ingredients NFC uses are from local sources, and sixty percent are imported. NFC is building a sulphuric acid plant and is planning to produce purified phosphoric acid, ammonium, sulphate, and ammonia in the near future (probably in the next three or four years). These new chemical fertilizer products will have to be registered in Thailand. In addition, contents of NPK must be more than twenty percent, and each NPK ingredient must be more than three percent. The best sales prospects in this field include: - Mixed Fertilizers - Granular Fertilizers - Liquid Fertilizers - Crop Fertilizers - Crop Nutrients - Soil Additives - Herbicides - Insecticides - Fungicides - Ammonium Sulphate - Potassium - Heterocyclic Compounds 20. Computer and Peripherals (CPT) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 788 458 435 B. Total Local Production: 4,360 4,086 4,556 C. Total Exports: 6,294 6,239 6,863 D. Total Imports: 2,722 2,611 2,742 E. Total Imports from U.S. 656 600 630 This sector includes assembled computers, accessories, and components. The Thai computer and peripherals market grew at twelve percent in 1997 compared to a growth rate of thirteen percent in 1996 and accounts for approximately 57 percent of the current information technology market, dropping from a market share of 65 percent in 1997. Industrial sources commented that in 1998 the market will decline from 28 billion baht to eighteen billion baht. Home use and government markets will slow even more. Even though growth in the computer and peripherals market decreased, demand for computer parts imports which are related to export categories increased by 63 percent in the third quarter of 1997. The computer and peripherals sector has significantly contributed to the Thai economy in terms of production, exports, and employment. By using imported and locally made parts, Thailand has become the production base for the export of computer hard disks, monitors, keyboards, parts, and accessories. Regional sales were estimated to fall from double digits to 5.2 percent in the fourth quarter of 1997. Sales in Japan will actually decline by 5.9 percent, but demand in 1998 from North America and Europe should be supported by the more competitive prices in Thailand following the baht depreciation. Decreasing purchasing power has made entry into the market more difficult for U.S. companies. It is forecasted that the information technology industry will slow down in the next few years due to the Royal Thai Government's budget constraints, the closing of financial institutions, and the banking sector's delay of IT investment projects. However, demand for computers and peripherals will come from manufacturers and exporters, who need to boost their competitiveness in the world market. The best sales prospects in this field include: - Electronic Commerce - High Speed Networking Technology - Web Technology - Mobile Computing - Computer Networking Products - Multimedia Products - Mass Storage Systems - Peripheral Devices - Client Server Systems 21. Laboratory and Scientific Instruments (LAB) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 237 239 240 B. Total Local Production: 35 40 42 C. Total Exports: 29 35 40 D. Total Imports: 231 234 238 E. Total Imports from U.S. 58 59 60 The laboratory and scientific instruments market in Thailand has enjoyed very good growth in the past five years. The growing concern of ISO certification in most industrial plants, and the requirement by the Ministry of Public Health of Good Manufacturing Practice (GMP) in the food processing, medical equipment, and pharmaceutical production factories, raises the needs for the instruments. The devaluation of the baht currency of almost fifty percent hurts the laboratory and scientific instrument imports. The industry should expect a near zero growth rate of import from the private sector within the next few years (1998 to 2000). There are still demands in the public sector, especially the Ministry of Education and Ministry of University Affairs. The Ministry of Education has a project to improve the laboratory in its engineering department at the teachers' colleges throughout the country. The Ministry of University Affairs also has a project to improve its science and engineering laboratory equipment at its 36 colleges. Both projects are in the bidding process now and they are originally planned to finish by the year 2000. But because of the current economic downturn, the currency devaluation, and the government cash-flow problem, these bids will be delayed and the project time will be extended. The laboratory instruments from the United States command approximately 25 percent of the total market. They are very well received in Thailand and enjoy a very good name in the high-end markets. The disposable scientific and laboratory instruments have also very good potential, especially in the food processing industry. Thailand is a major producer and exporter of food products, both frozen and canned. Spot checks of the quality of the materials is a basic requirement to guard against any infectious of the bacteria and virus. The best sales prospects are: - Disposable Fungicide Testing Apparatus - Spectrometers - Gas and Smoke Analyzers - Environmental and Pollution Analyzers 22. Computer Services (CSV) 1997 1998 1999 (Million U.S. Dollars) A. Total Market Size: 234 200 200 B. Total Local Production: 156 133 133 C. Total Exports: 0 0 0 D. Total Imports: 78 67 67 E. Total Imports from U.S. 26 22 22 Because information technology is a key tool in helping businesses improve efficiency and productivity during an economic crisis, outsourcing services, productivity management systems, and leasing services will become increasingly important. Regular customers, such as banking and financial institutions, telecommunication providers, Internet service providers, and other 24-hour operation agencies continue to require these services. More government and private organizations will require service to support the Year 2000 problem. In addition, both sectors require maintenance of existing computer systems until the financial situation allows the purchase of new computer systems. The Association of Thai Computer Industry has predicted that value of the professional service market in 1998 will be 5,662 million baht: 390 million baht for large scale; 650 million baht for medium scale; 1,926 million baht for workstations and 2,309 million baht for PC-based systems. Given that a high falling-off in the overall IT market value is anticipated, the total service market, including maintenance and professional services, is expected to decrease by 2.5 percent from 8.2 billion baht to 7.99 billion baht in 1998. The closing of 56 financial companies and the general slowdown of businesses have led to a drop in the growth rate. The maintenance service is expected to increase by 19 percent to 2.33 billion baht this year while the professional service market will decrease by 9 percent to 5.66 billion baht. However, the Year 2000 problem will generate an additional 250 million baht in the professional sector. The best sales prospects in this field include: - Computer Systems Integration - Custom Programming - Data Processing Management/Maintenance - Outsourcing Services - Data Entry PART 2: LEADING SECTORS FOR U.S. AGRICULTURAL EXPORTS TO THAILAND MARKET OVERVIEW Thailand ranks in the top twenty countries worldwide as an importer of U.S. agricultural and food products. From 1993 to 1997, U.S. agricultural exports to Thailand grew from $304.5 million to $537.7 million. Fish and forestry products annually add $30 to $40 million to these figures. Bulk items, like soybeans, soybean meal, wheat and cotton presently make up the majority of U.S. agricultural exports to Thailand, but the nation's rapid economic growth in the last fifteen years meant that a wide variety of U.S. consumer-ready food products also reached Thai supermarket shelves and restaurants. Led by fresh fruits, processed fruits and vegetables, and dairy products, Thailand's imports of these value-added food items from the United States were a record $73.6 million in 1997. The current economic situation is dampening demand for U.S. agricultural and food products and it is likely that the value of U.S. exports to Thailand in 1998 will be down by twenty percent compared to 1997. Hardest hit are the consumer-ready food products. The picture for other American agricultural products, like soybeans, soybean meal, and cotton that are critical inputs for Thailand's export- oriented manufacturing sector continue to be promising. Thailand's imports of these products is facilitated by USDA's Export Credit Guarantee Program, which was implemented in October 1997. BEST PROSPECTS FOR U.S. AGRICULTURAL EXPORTS TO THAILAND 1. Soybeans 2. Soybean Meal 3. Wheat 4. Forest Products (Temperate Hardwood Lumber) 5. Dairy Products 1.SOYBEANS (Thousand Metric Tons) 1996/7 1997/8 1998/9 Estimate Forecast Beginning Stocks 32 94 74 Production 360 325 350 Total Imports 672 620 620 U.S. Imports 367 450 450 Total Consumption 970 965 965 Ending Stocks 94 74 74 * Market Year Sept - Aug * Total Market Size = total consumption Over the next five years, Thailand's soybean import market is expected to continue to grow due primarily to growing demand for feed by the livestock sector. The depreciation of the Thai baht is already leading to significant additional exports of poultry meat. Thailand's struggling economy, however, is dampening domestic demand for meat products, which were becoming an increasingly important component of overall demand for soybeans. Economic recovery in Thailand will lead to renewed growth in domestic demand for these products. The United States has been the primary beneficiary of Thailand's recent dismantling of the soybean import tariff-rate quota and is expected to maintain its role as the dominant supplier. 2. SOYBEAN MEAL (Thousand Metric Tons) 1996/7 1997/8 1998/9 Estimate Forecast Beginning Stocks 0 100 0 Production 593 702 702 Total Imports 983 700 700 U.S. Imports 130 150 150 Total Consumption 1476 1502 1402 Ending Stocks 100 0 0 * Market Year Sept - Aug * Total Market Size = total consumption As with soybeans, there is likely to be an increase in Thailand's import of soybean meal during the next five years. Domestic soybean production cannot keep pace with demand from the feed sector, especially from the poultry export industry. The size of the increase in soy meal imports will be partially a function of the degree to which crushers can handle the flow of domestic and imported beans, as well as the degree to which growers curb imports by urging the government to impose a tariff of anywhere from five to fifteen percent. The current economic problems are also keeping a lid on growth, but that will turn around with economic recovery. 3. WHEAT (Thousand Metric Tons) 1996/7 1997/8 1998/9 Estimate Forecast Beginning Stocks 75 69 59 Production 0 0 0 Total Imports 624 530 570 U.S. Imports 254 210 220 Total Consumption 630 540 580 Ending Stocks 69 59 49 * Market Year Jul - Jun * Total Market Size = total consumption Thailand's wheat imports will likely track population growth over the next five years as the current economic problems will limit consumer demand growth. The United States has always been the major supplier of wheat to Thailand, usually with around fifty percent of the market. In addition to Thailand's eventual economic recovery, convincing the authorities to remove the specific duty of 1,000 baht/ton will stimulate additional demand for wheat. 4. TEMPERATE HARDWOOD LUMBER (Thousand Cubic Meters) 1997 1998 1999 Estimate Forecast Total market size 1450 800 1000 Total local production 0 0 0 Total exports 0 0 0 Total imports 1450 800 1000 Total imports from U.S. 125 70 80 * Market Year is the Calendar Year * Total Market Size = total consumption Thailand's demand for imported hardwood lumber has been driven by the depletion of domestic forest resources and the growth of a wood manufacturing industry, largely for the export of flooring, other interior products and furniture. Although the near-term outlook is pessimistic due to slack domestic demand and lack of financing for export-oriented manufacturers, the long-term outlook remains promising provided Thailand's economy recovers. Thailand's imports of U.S. forest products, mainly temperate hardwood lumber, reached nearly $29 million in 1997, down slightly from the year before. Hardwood veneer is another leading U.S. product sold to Thailand. U.S. forest products compete with tropical hardwoods from other Asian countries, as well as temperate hardwood products from Europe. While tropical hardwoods have traditionally been the wood of preference in Thailand, diminished supplies have created tremendous potential for temperate hardwoods. 5. DAIRY PRODUCTS (US$ Millions) 1997 1998 1999 Estimate Forecast Total market size 637 600 610 Total local production 309 330 340 Total exports 0 0 0 Total imports 328 270 270 Total imports from U.S. 12 11 12 U.S. dairy products, especially non-fat dry milk and whey, are relatively new to Southeast Asia and Thailand. Competition with traditional exporters is very intense. The Thai government is very interested in increasing consumption of milk, especially by children, and has a major school milk program. The country will not be able to produce enough fluid milk, and demand for imported powder will remain high and will increase. Moreover, the food processing sector is also increasing its use of U.S. dairy products, particularly whey. The United States faces stiff competition from Australia and New Zealand, but supplied $18 million worth of dairy products in 1997. PART 3. SIGNIFICANT INVESTMENT OPPORTUNITIES Because of the economic crisis, Thailand's investment picture has changed, with some opportunities disappearing and others emerging. Government infrastructure spending is curtailed, but privatization is accelerating with international investment being sought vigorously. Many Thai corporations, or multilateral organizations operating in Thailand are cash-poor but real asset rich. Many are seeking foreign partners, not only to bring capital, but also technology and management and technical skills. To encourage investment, the Royal Thai Government is revising many of its laws and regulations and is examining its investment incentives programs. Investment opportunities are discussed sector-by-sector throughout this Country Commercial Guide. Contact the U.S. and Foreign Commercial Service in Bangkok for more specific information.[end of document]
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