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Thai processors urged to look to ASEAN for growth

By: Steve Toloken

October 19, 2012

BANGKOK (Oct. 19, 3:45 a.m. ET) — Thailand's plastics processing industry, the largest in Southeast Asia, should look for closer economic integration with its neighbors as a "new model of sustained growth" to broaden beyond traditional export markets and cope with a slower world economy, industry officials said at a recent conference.

Speaking at the Flexpo Bangkok conference, held Sept. 17-19 in Bangkok, Thai industry officials said that overall the country's plastics product sector grew last year to 255 billion Baht (US$8.3 billion), up from about 225 billion Baht ($7.3 billion) in 2010.

But that was still below the roughly 280 billion Baht (US$ 9.1 billion) in revenues the sector had in 2007, before the global financial crisis, according to figures from the Petroleum Institute of Thailand given at the conference.

That prompted some officials to suggest that a full recovery should look more to the 10-member Association of Southeast Asian Nations and its rapid urbanization and expanding middle class.

By 2015, those 10 countries expect to launch the ASEAN Economic Community and create a single market among their 600 million people.

"In 2015, we think ASEAN will be a very solid framework for a new model of sustained growth for the ASEAN countries," said Siri Jirapongphan, executive director of the Bangkok-based Petroleum Institute of Thailand. "Our industrial members are focusing their further development and growth in this region."

The top four export markets for Thailand’s plastics processing industry in 2011 were Japan, the United States, China, and Australia, and they will remain important, Jiripongphan and others said.

But with the middle class in ASEAN expected to grow from 24 percent of the population now to 65 percent by 2030, and an urbanization rate that is projected to grow from 42 percent ASEAN-wide now to 50 percent by 2025, regional opportunities are rising, said Petch Niyomsen, polyolefins strategy and planning manager with Bangkok-based SCG Chemicals.

"There's a huge potential for us to capture, if we can develop the right strategy in those countries," said Chaya Chandavasu, vice president, science and innovation department, PTT Global Chemical Ltd.  "It will be very useful to build a stronger plastics industry in the region."

He said the AEC will make it easier for both labor and production to flow across the 10 member countries and create a single market.

Still, Thai manufacturing is overwhelmingly export focused, with just 22 percent of its output going to its domestic market, Niyomsen said. Thailand is ASEAN’s largest maker of both autos and electronics, with large assembly plants for American and Japanese car makers.

In spite of that industrial base, figures from the Petroleum Institute suggest that Thailand's plastics processing sector has lost some ground to neighboring Malaysia, which edged past Thailand in 2011 to be ASEAN‘s top plastic products exporter.

Part of that slip in ranking was from disruptions to supply chains caused by court rulings delaying expansion of the Map Ta Phut Industrial Estate, the country’s largest petrochemical park, said Khunying Thongtip Ratanarat, a board member of the Bangkok-based Petroleum Institute of Thailand Foundation. Those court rulings came after environmental lawsuits against pollution halted the expansions.

"The growth in the last five years or so in the conversion industry has slowed down a bit because of political instability," she said, referring to the court cases. "It's nothing much that serious but certainly while we were stagnating, Malaysia was taking that opportunity."

Jirapongphan and other PIT officials at Flexpo said the industry faces other challenges, such as not spending enough on research and development and sometimes lacking scale to be more competitive globally.

He said that many Thai companies generally spend less than 0.5 percent of revenues on R&D, when they should be spending 2-3 percent.

"We used to think we have cheap labor," he said. "We are now focusing more on building local manpower competencies."