The Thailand 4.0 plan now getting under way is pulling away like a high-speed development train. Finding a way to climb aboard will be crucial to many companies’ survival. (photo by Jimmy Lin)
 

Taiwanese business investment in Thailand dates back to when Taiwan was under Japanese rule (1895‡1945), but surged when Taiwan’s economy boomed in the 1990s. Taiwanese businesses currently employ some 150,000 Taiwanese in Thailand, and are the third-leading inward investors in the country behind only American and Japanese companies. Most of these Taiwanese own or work for small or medium-sized enterprises in the OEM business.

Transforming traditional industries

Established in Taiwan in 1972, First Enamel Industrial Corporation opened its Thai subsidiary, Thai First Enamel, in 1988, and is in many ways representative of Taiwanese manufacturers in the country.

Thai First Enamel primarily produces teapots and ­cookware. Unrivaled for its seamless teapot manufacturing technology, its clients include the internationally renowned kitchenware brand Le Creuset. Company president Liu Shu-tien says that he moved his factory to Thailand to take advantage of its lower land and labor costs, and its more advantageous terms of trade, but labor costs in the country have quintupled since he arrived. While wage growth has been stable in recent years, the company’s old strategy of profiting from low costs is no longer viable.

Liu worked his fingers to the bone for more than 40 years building his business abroad, and has now turned its operations over to the next generation. Market conditions aren’t what they used to be, so the company has partnered with two Taiwan-based research groups, the Industrial Technology Research Institute (ITRI) and the China Productivity Center, in hopes of providing efficient production and value-added products to smart-device makers. It is also developing enameled construction materials, home furnishings, and gifts as a means of transitioning away from its original OEM business model and building its own enterprise brand.

Crises and turning points

First Enamel’s story is emblematic of the changes taking place in the global marketplace.

Rapid technological progress has driven an evolution in lifestyles, and in global markets. Stanley Kang, chairman of the Joint Foreign Chambers of Commerce in Thailand, says that the transportation revolution has not only accelerated the movement of goods, but also of people and capital. The fact that people can now easily relocate in pursuit of salaries means that businesses no longer have access to cheap labor. This lack of manpower is compelling companies to shift quickly to smart manufacturing. With the concurrent arrival of big data and advanced information and communications technologies, we are entering an age in which the successful application of data technology is becoming essential to business success.

“The international market is becoming more and more unified,” says Kang. “The liberalization and equalization of trade is turning it into a single market. As a result, competition is stiff and everyone’s business models are in flux.” These days, Taiwan’s SMEs not only have to take the global market into consideration when planning and deploying resources, but must also adapt to the data-­tech age in the same way that larger corporations do: by actively pursuing innovative R&D.

4.0 and 5+2

The Thailand 4.0 plan now getting under way is pulling away like a high-speed development train. Finding a way to climb aboard will be crucial to many companies’ survival.

Unlike the much talked about “Industry 4.0” model, the Thai plan focuses on more than just industrial develop­ment. Thailand has decided that technological innovation should be an important driver of its overall develop­ment as it seeks to escape the “middle income trap.” But its national development plan also aims to grow its manufacturing, agricultural, service and tourism industries over the next 20 years.

This development strategy provides Taiwan with opportunities for bilateral exchange and cooperation, and accords with our own government’s promotion of its 5+2 Industrial Innovation Plan and its New Southbound Policy.

Finding areas in which Thailand 4.0 aligns with the 5+2 Industrial Innovation Plan will be a key focus of future Thai‡Taiwan trade cooperation. Tung Chen-yuan, who serves as Taiwan’s representative at the Taipei Economic & Cultural Office (TECO) in Thailand, says that this focus led ITRI to sign a memorandum of understanding with Thailand’s National Science and Technology Development Agency in June of 2017, and the Institute for Information Industry to send a specialist on regular visits to Thailand to share technological expertise.

Taiwanese businesses in urgent need of transformation established the “Taiwan Hi-Tech Center in Thailand” in September 2017 with assistance from the Thai‡Taiwan Business Association and TECO. The center then recruited some 210 experts in country analysis, smart manufacturing, data economics and other fields to give lectures and create an international research chain bringing together industry, government and academia, in order to help Taiwanese firms upgrade.

A key ASEAN hub

Thailand 4.0 could take off very quickly, and Taiwanese businesses aren’t the only ones eager to become involved. Business leaders from around the world are rubbing their hands in anticipation. Stanley Kang, a second­-generation Taiwanese businessperson who has been in Thailand for 38 years, says that most of the Taiwanese firms that invested in Thailand in the past were doing so to take advantage of low production costs, but the big international corporations investing nowadays are focused on ASEAN’s huge ten-nation market and Thailand’s diverse economy, especially its highly developed travel services, medical tourism, and creative and ­cultural industries. He argues that Taiwanese firms might as well put their own unique knowhow to use in finding business opportunities.

Kang notes that Thailand’s customs, history and location provide advantages to Taiwanese companies hoping to use the nation as a base of operations from which they can develop ASEAN’s market of 640 million consumers. 

First, Thailand is a largely Hina­yana Buddhist nation with a gentle and tolerant people. Second, Thailand is the only Southeast-Asian nation not to have been colonized by the Great Powers and was also relatively unscathed by World War II. Moreover, the country’s political stance is moderate.

In addition, unlike its neighbors Laos, Cambodia and Myanmar, it doesn’t face border pressure from China or India. It is also central to ASEAN as an important transshipment hub for Europe and Asia. Finally, ships traveling the Maritime Silk Road portion of China’s “One Belt, One Road Initiative” will certainly pass through its harbors.

Expanding beyond Taiwan

The fact that Taiwan is a small nation in terms of both land area and population limits the size of our domestic market, which can pose problems for domestic businesses—if they wish to grow, they have to look beyond our island. Kang says that Taiwan’s unique history, which includes a period of Japanese rule, a period of material support from the United States, and the era of the two Presidents ­Chiang, has made us very flexible in our approach to dealing with challenges.

He argues, “We are highly tolerant and adaptable. We’re like amoebas: we can live with anybody.” This trait gives Taiwanese a key advantage when mediating between larger nations such as the US, Japan and mainland China, one that generates many business opportunities. The fact that more than 70% of the components used by Toyota Motor Thailand are jointly manufactured by Taiwanese companies in partnership with Japanese firms is a case in point.

Reflecting on this period of transformation in the industrial chain, Kang says: “We used the ‘Made in Taiwan’ label to make the world aware of us. Now, we need to create value. We don’t want the world to think of us merely as ‘Taiwanese labor.’ We need to make it see us as producers of value.”