Thailand: Thinking Big

Lower manufacturing costs; government-sponsored tax incentives; and a reliable, hard-working labor pool may have been the winning combination in luring the first textile, industrial. and high-tech manufacturers a few decades ago. But that's not what will keep Thailand attractive to future investors, nor is it something that fits into Thailand's big-picture plans for the coming decades.

Following the footsteps of developed countries and other more mature manufacturing hubs, Thailand wants to move up the chain. Most of the executives, government officials, and research heads I'm talking to here bring this up in every meeting: Thailand is moving toward higher value production of more technically-advanced products; greater automation in the factories; and up-training factory technicians with skills needed to move away from labor-intensive workloads towards complex, precision-based manufacturing that has more of service slant (i.e., moving toward a model that supports more ODM line setups).

While the Southeast Asian country is a few years away from achieving that goal, it is well-positioned to do this and has several factors going in its favor.

One advantage is the engrained work ethic of the Thai people. Thailand does not have a formal social welfare system like the ones you would see in the North American or Europe, where the government pays extended unemployment or welfare benefits. So, this idea that "everyone works" -- whether it's in a factory or driving a tuk-tuk -- lends itself to a collective entrepreneurial, can-do workforce mentality. It certainly has contributed to the country's extremely low unemployment rate of less than one percent (yes, less than one percent) these last few years running.

There's also an increasing focus on upping the skills needed to compete on a global basis, whether that's via shifting university curriculum, company-sponsored training, or other program-based initiatives.

Hard-disk drive maker Western Digital, which has extensive operations in Bangpa-in in the Ayuthaya province, for instance, several years ago began to get more involved with local university and post-graduate engineering coursework and student training.

While the university level skills have come a long way these last 10 to 15 years, the company noticed that some of the engineering know-how needed immediately after graduation was lacking, said Joe Bunya, senior vice president of hard-disk drive operations for Western Digital (Thailand) Co. They worked with the university to shift some of the coursework so students got the in-school technical knowledge they needed by the end of the second year (instead of in the third or fourth years), and hired on students to work.

The company also hires on third- and fourth-year students for a few months, giving the students hands-on, in-field training not readily available in the classrooms while allowing WD to observe and develop relationships with the potential longer-term employees. Also since Thailand is the leading producer of hard-disk drives in the world, WD is also working with universities to shape post-graduate HDD-specific coursework, said Bunya.

Even researchers already in the field recognize that Thailand wants to move toward design-for-manufacturing operations, and maybe in a decade, towards having Thai-based or Thai-owned companies being more original brand manufacturers (OBMs).

Amport Poyai, principle researcher and director of the Thai Microelectronics Center, told reporters he was taking business classes so that he could explain MTEC's R&D projects' ROIs to financial people or international businesses that may want to partner with the incubator and research center.

There are some downsides companies are also contending with. Despite having many loyal workers and technicians who stay with one company for years, there is high turnover, generally among people who have been with the company less than a year. Several executives acknowledged that after the one-year mark workers who relocated from other regions return home or they look for other jobs. Also, given the low unemployment rate, skilled workers become valuable commodities and poaching between companies is not uncommon, executives said.

While migrant workers from neighboring countries many fill in workforce gaps -- and executives said they are considering some of those options -- many agreed that employee retention (through more training and better benefits) is a main goal. Looking for ways to keep the talent they developed in-house will also help move businesses toward the big picture of a less labor intensive manufacturing scenario.