Thailandia, for a possible coupling with the far east

Thailand has been reporting in recent years economic growth to boost the country to the ranks of the Asian Tigers. Italy's presence there is still marginal but there are favorable conditions for the development of relations and Thailand could become a bridge to other SouthEast Asian countries

The number of Italian enterprises in Thailand is growing. The phenomenon was reported by the president of the Italian Manufacturers Federation, Confindustria’s Giorgio Squinzi, at the end of a forum on cooperation between Italy and Thailand held in Rome in 2013. This growth was accompanied by an increase of Italian exports to the country. In the opening months of 2013 these exports rose 7.8% to a value of $ 954 million to take Italy to rank as Thailand’s twenty-fourth supplier in the world and the fourth in Europe. According to Nomisma data, a specific look at the tractor and agricultural machinery market disclosing an overall surge of Thailand’s imports of agricultural machinery manufactured abroad, including tractors and other machinery, from 2011 to 2012 to give the country the largest percentage gain and take it to fourth place in the classification of countries importing agricultural machinery.

 

The rice country: an economy heavy in agriculture

There are numerous sectors of interest for Thailand. Other than manufacturing and the luxury industry, agro-food and agricultural mechanization play a priority role in the country. This is due especially to the configuration of the soil and climatic factors. In detail, the central region features terrain under crops and the valley of the Chao Phraya, is especially suitable for cultivations. The climate, which can be divided into various microclimates, is known for three distinct types of monsoons and though the rainy season extending from May to November can cause trouble for farmers, temperatures in the rest of the year alternate from cool to hot but the weather remains dry to facilitate production. What must be remembered is that the population is still concentrated in rural areas where 60% of the country’s inhabitants live. It follows that a large share of the population is at work in the primary sector but rapid economic growth points to the speedy introduction of technologies which will convey a sector of manpower toward industry and services. At present, 40% of the land area is devoted to agricultural production, equal to twenty-one million hectares of crops led by cereal grains, 60%, followed by rice, the most significant product at nearly 50%, field cereals at some 21%, and then vegetable and other types of crops. On the strength of this production, Thailand is now one of the world’s major rice exporters.

Though the country is striving to develop its own agricultural mechanization industry focused on specific requirements, concentrated mainly on machinery and equipment for rice harvesting, it cannot be denied that for mechanization, Thailand still depends mostly on imports. With a look at the economy in general terms, it appears that Thailand’s growth is certain to move ahead thanks especially to exports and the development of industry. The country, recently spoken of as the Asian Detroit due to industrial production gains and the fact that Thailand is the leading manufacturer of automobiles in the SouthEast Asian area and assembles cars for a number of the Japanese, German and American majors. This factor makes the component market here especially appealing.

 

Small and medium

size enterprises, new lymph for exports

Italy’s availability to move into the Thailand market is therefore a strategic issue. Though Italy is still in the grip of the consequences of the 2008 financial and economic crisis, the nation’s industries have continued their work in a number of strategic sectors such as machinery and cutting-edge technologies, while Thailand apparently intends to play its full role as an Asian tiger craving investments in know-how.

The task of Italy’s small and medium size industries is therefore to clear an opening into this new market. Some of the majors have been able to affirm standings in the country but now it’s up to the small enterprises exporting products of excellence to these latitudes to follow suit. In this connection, 2013 agreements between the Italian Trade Agency, ICE, and the Thailand Board of Investment aimed at encouraging investments must be given a reading, along with the pact between Confindustria and the Joint Standing Committee, also dating back to 2013, for identifying areas of industrial and trade cooperation to favor the meeting of the business communities. There are also negotiations conducted by the Thai government and the European Union on Partnership and Cooperation (PCA) and Free Trade Agreement (FTA) aimed at increasing trade and collaboration between Thailand the the European countries. In this setting, Italy is presented with a great number of opportunities which the country must learn how to handle to return to a front rank role in the global economy.  

 

Problems and opportunities

in SouthEast Asia

This said, it must not be forgotten that for European and American exporters their entry in this region is complicated in that trade within the area is still dominant. Economic globalization and lowering trade barriers in these countries appears, in part, to be a utopian effort where governments have worked to defend local prerogatives and attract foreign capital rather than implement straight forward trade. As a result, partnerships with local distributors have often turned out to be the only resource for gaining access. For this reason, preference has often landed on the direct relocation of production in these countries when faced with costly initial investments and larger business risks as opposed to the more simple direct management of plant without the need for maintaining ongoing relations with institutions and local producers.

These analyses point to a method for approaching not only Thailand but also all of SouthEast Asia but one which must be improved and integrated. It will be necessary to interpret dynamics not only throughout the entire area but in the conditions of the individual nations, to take account of specific characteristics and thus create strategies for differentiated approaches. 

In keeping with this point of view, Italian Deputy Minister of the Ministry for Economic Development Carlo Calenda declared in 2013 that Thailand is a strategic partner and can become essential as a port of access for Italian enterprises in the Far East. The Italian presence in Bangkok is still limited due especially to bureaucratic and tariff troubles, problems not only in Thailand but typical throughout SouthEast Asia and, in general, the entire continent. These are problems which must be dealt with as soon as possible if Italian industry is to be given real opportunities for expanding on the Made in Italy frontier. In any case, this will require promotion work and occasions for direct meetings with the Asian countries. An important step in this direction was the participation of an Italian collective in the SIMA ASEAN agricultural and food-procession trade show in Bangkok from September 17th to 19th, organized by ICE and FederUnacoma, the Italian Agricultural Machinery Manufacturers Federation. Of equal importance is the arrival of Thai business people in Italy to take part in reviews and other event organized by Italian manufacturers for showing off the wide and complete ranges of their products at occasions such as the EIMA Agrimach arriving in New Delhi next December and EIMA International in Bologna coming up in November 2016.