1The industrialization that has taken place since the 1960s has produced major changes in the economic structure and society of Thailand which, until that time, had all the characteristics of an agricultural country. Industry was in an embryonic form, based around the state, which controlled some emerging sectors, and the mainly merchant capitalists who were established in Bangkok in the middle of the 19^th century.

2From 1958, state policy favored industrialization through import substitution and private investment (national and foreign), and provided a stimulus for entrepreneurial industrial activity. Industry’s contribution to the Gross Domestic Product (GDP) increased and, in particular, cooperation between bankers and local industrialists established the economic basis for the expansion that was to take place over the next two decades. At the beginning of the 1980s, with the country in full recession, industrial strategy turned firmly towards exports, though without abandoning import substitution. The value of the industrial product (extractive and manufacturing production) increased steadily, though with wide variations from one province to another (plate 40 Industrial product), thus supplanting in the GDP the value of the agricultural sector on whose dynamism industrialization was based (see also chapter 4 Agriculture). From 1985, manufactured products were diversified, with impetus from domestic demand and the world market, and became the leading export sector, accounting today for over 70 % of the value of exports. The effects of the 1997 crisis and the economic slowdown which then affected Thailand’s major commercial partners have had uneven repercussions, according to the sector of activity and the enterprises (fall in demand, rise in the cost of imported products, financial burden) and have given rise to recovery rates that are just as variable.

3The economic regime is based on a liberal approach which draws on a partnership between the public and private sectors, combining their interests. Three types of enterprise coexist: public and military, transnational and private. Enterprises controlled by the state are mainly in the service sector (see also chapter 3 The state and the construction of the territory) and are limited in the industrial sector (oil, sugar processing, textiles, tobacco). Some private enterprises, where the Sino-Thais predominate, have seen large-scale development; they belong to powerful family-based groups who have an oligopoly over the financial, commercial, real estate markets, are present in world markets and invest abroad. Small and Medium-sized Enterprises nevertheless make up the major part of industrial enterprises, extraction of natural resources included (plate 41 Size of estab-lishments). The influence of the capitalist elite has continued to grow, especially through their alliances with high ranking officials, their ability to be organized (powerful business associations) and to make demands. They also take part in directing public policies through their presence in the administration, on the executive committees of public bodies (including planning and investment boards) and by achieving political power (Parliament, Senate, Govern-ment). Recent movements towards decentralization and democratization have provided the provincial entrepreneurial base, whose numbers have swelled with the economic growth of the last twenty years, with access to local executive bodies.

4Since industrial development strategy is export-oriented and labor-intensive, factories are able to absorb a population of rural origin at a fairly rapid pace, though the scale of this transition is tempered some-what by the ability of the agricultural sector to retain its work force (see also plate 30 Agricultural house-holds and product). Despite some areas of progress, legal protection for salaried workers is limited, and social protection is still provided by the workers’ families; apart from a few more liberal periods, the unions have been weak, divided and gagged by the authoritarian governments who politicized workers’ claims on the pretext that they threatened internal security. Although state policies have actively helped maintain the system of low salaries (which have tended to increase faster than productivity, thus eroding one of Thailand’s comparative advantages), they have, on the other hand, done little to help train the work force, which remains very poorly qualified, with a majority of employees having no secondary education whatsoever (see also chapter 9 Social imbalances and spatial organization).

5Estimates of the numbers of industrial employees (approximately 4.5 million in 1996 or 15 % of the working population) are difficult to make as they have several types of status and work in a multitude of small enterprises, though there is a concentration in the center of the country (plate 42 Employment in establishments). The source used here (and for the 2^nd plate in the chapter) from the Ministry of Labour and Social Welfare does not systematically ignore small establishments whereas the industrial census carried out by the National Statistical Office considers only enterprises with more than 10 employees.

6Public investment incentives managed by the Board of Investment (BOI) are aimed both at Thai and foreign enterprises, and try to influence decision-making relating to their localization (plate 43 Enterprises under the Board of Investment). Criticism of the very complex nature of its procedures and admission criteria that has been leveled at the BOI, and measures taken to liberalize customs in the context of the general policy have limited the importance of the incentive package and encouraged foreign firms to operate outside the scope of the BOI programs. Although these investments have been very important for the expansion of the industrial structure and for exports, it is the mobilization of national capital that has been the determining factor in launching growth. Thailand has greatly benefited from the strategy of relocating enterprises from Japan and the new industrialized Asian economies (see also chapter 1 Situations of the territory): between 1986 and 1996, while quadrupling in number compared with the previous 25 years, wholly foreign-owned plants represented one quarter of BOI promoted enterprises in operation. Joint-ventures with local entrepreneurs, however, have not produced the hoped for results in terms of technological autonomy and innovation which are indispensable if Thai competitivity is to be maintained. The orientations of the BOI are determi-ned today, more than ever, by external constraints: bilateral and multilateral agreements on trade and investment, competition to attract foreign investment.

7The scale of the need for labor force in the industrial sector (and the social repercussions that this represents for the country) justifies the choice of this variable to assess the spatial distribution of the sectors. At province level, the divergence of the different sources for the evaluation of industrial employment (from one source to another and when comparing them with estimates at national level, from the National Statistical Office or the Ministry of Labour and Social Welfare) is due to the fact that small, and even micro-establishments (especially textiles and wearing apparel, agricultural and agro-food industries) have not been taken into account uniformly, and also to the use of a different method to record seasonal and temporary employment, and home-based workers. Other factors can also handicap the perspective on changes: it is estimated that at the beginning of the 1980s, 30 % of textile factories were not registered, in order to escape the limitations being placed on the capacity permitted, as a result of overproduction. The available source at province level and by industrial sector (Ministry of Industry) may reflect the threshold (7 employees) below which enterprises are not obliged to be registered; one may also wonder whether enterprises that cease all activity are systematically withdrawn from the database. It is likely, however, that these statistical inadequacies are evenly spread throughout the provinces and do not therefore distort any comparison.

8Agricultural and agro-food industries remain the main sector of industrial employment (plate 44 Agro-based industries); the incorporation of agricultural products into industrial transformation, and Thailand’s export strength, make this a key sector. The expansion of the textiles and wearing apparel sector has been considerable, but it is cyclical (plate 45 Textiles and wearing apparel); this sector which benefited so much from foreign investments at the beginning of the 1970s, climbed to first place in exports before being toppled by electrical machinery and electronics. The dynamism of these last, subject as they are to the hazards of the world market, cannot detract from that of non-electrical machinery (plate 46 Electrical and non-electrical machinery). The activities of the chemical and plastics sectors, developed from the oil and gas transformation industries, illustrate the diversification of the industrial structure with impetus from Thai firms (plate 47 Chemistry and plastic). The last sector-based plate considers sectors with differing dynamisms and perspectives (plate 48 Other industries). Industrial development varies throughout the country as can be seen from the differing intensities of employment specialization that have been created (plate 49 Industrial specialization).

Contrats in the industrial structure

Village rice mill

In most villages, rice mills employing 1 to 2 people often represent the sole source of "industrial" activity, where the owners are also middlemen. The first rice mills were established at the beginning of the 19^th century and the largest have diversified their products (different rice-based preparations).

JVC factory in the Suranaree industrial park (Nakhon Ratchasima province)

The Suranaree industrial park, one of only a few in the peripheral regions, contains production units of this type, employing a large work force, mostly young females. Completed in 1989, it is under private management and has had the advantage of major support from local politicians, including the then Prime Minister. It is able to offer entrepreneurs a variety of infrastructures and facilities.

Wide contrasts in the distribution of industrial product

9The proportion of the industrial product in the Gross Domestic Product rose from less than 25 % in 1980 to almost 40 % in 2000 thanks to an annual growth of 8 %. This growth was greatest between 1986 and 1993 (almost 14 %), reflecting an acceleration in production levels and in value added. The contribution of extracted natural resources (mining and quarrying) increased (especially natural gas). In manufacturing, the relative value of agro-industrial products decreased despite the regular increase in their value added that was possible through a diversification of productions (see plate 44 Agro-based industries). Textiles and wearing apparel, the sector with the highest value added at the beginning of the 1980s, gave way ten years later to electrical and electronic goods, and to non-electrical machinery and transport equipment: their respective contribution amounted in 1986 to 25 % and 13 %, and in 1996 to 15 % and 28 %. At slightly more than 1,000 billion Baht in 1996, the industrial product registered a 9 % decrease in 1998. After this fall-off, growth resumed, but at a slower rate (2 %).

10The values produced and their contribution to the Gross Provincial Product highlight the industrial importance of a center encompassed by Rayong, Saraburi, Ayutthaya and Ratchaburi: 12 provinces created almost 85 % of the national industrial product. The contribution of Bangkok remained large despite a decline after 1989 (see plate 58 Urban and industrial development around Bangkok). There is a notable dissymmetry between, on the one hand, the eastern and northern provinces and on the other, the western provinces where, apart from Samut Sakhon, products and the contributions of industry to the provincial product are less. Industry is the chief source of value added in all these provinces, with the exception of Bangkok, Nonthaburi and Ratchaburi. This concen-tration of value produced underlines, in contrast, the weak state of the peripheral regions, with the exception of some poles which stand out as a result of the importance of value added (Nakhon Ratchasima, Khon Kaen, Chiang Mai, and for oil and mineral resources Lampang and Kamphaeng Phet), and by the place of the industrial sector in the provincial product (Lamphun).

11The distribution of industrial product is a result of differing levels of production, of a combination of industrial transformation value added and, as far as the industrial product share is concerned, of the value added from the tertiary and agricultural sectors. The contrast observed expresses much higher densities of activity in the center and a diversification in the industrial fabric, with incorporation of those sectors said to be modern, which generate a higher value added (see plate 49 Industrial specialization). This diversification has spread to a few provinces in the peripheral regions while the others specialize in the transformation of primary resources of which the value added varies according to the products.

12Provincial differences from the national growth rate of the industrial product (11 % from 1989 to 1996) reflect the diffusion of growth to provinces both close to and distant from the capital, based on the industrial poles already established: Bangkok-Samut Prakan registers a level lower than the national average, whereas the Eastern Seaboard has a lower rate of growth than in previous years but still remains either higher than average (Chon Buri, Rayong) or the same (Chachoengsao). On the western and northern sides of the capital, Ayutthaya stands out, with a particularly high rate of growth, mirroring Lamphun in the North. In the North-East corridor growth tails off as one moves away from Bangkok and the Eastern Sea-board. In the South the western provinces have rates that are clearly less than average, contrary to the eastern part, where the panorama is more highly contrasted.

13The distribution per capita of the industrial product highlights different levels within the central industrial area: nevertheless, all the provinces, except Ratchaburi, are clearly above the national average. The western and eastern sides as well as Nakhon Ratchasima and Khon Kaen in the North-East corridor confirm the dynamics of diffusion already observed. In the North, the ratio in Chiang Mai and Lampang is considerably less than in Lamphun. In the South, Phuket stands out with a ratio markedly higher than the regional average.

14The 1997 crisis, which affected the industrial sector, did not produce any particular changes in the spatial distribution of industrial value added. Trends were confirmed: the decline of Bangkok, growth in the provinces bordering the center (Ang Thong, Suphanburi to the north-west, Prachinburi to the north-east) or in the peripheral regions (Lamphun, Khon Kaen). In the Eastern Seaboard, Rayong is particularly dynamic.

Plate 40 – Industrial Product

Industrial base dominated by small and medium-sized enterprises

15Despite an increase in the average size of establishments since the beginning of the 1980s, more than 90 % of the country’s industrial base consists of enterprises with less than 100 employees, with a predominance of micro-establishments of 1 to 9 employees. These small and medium industrial enterprises, a category unanimously defined twenty years ago according to the employment criterion (fewer than 200 employees), have long been penalized by banking policies and investment incentives, and were also severely affected in their finances and export capacity by the 1997 crisis, but some of them have recently received considerable government attention. Recognition of their importance in the real economy (half of the total value of manufactured goods and exports) and their role in the country’s industrial structure has led to the drafting of financial and tax measures to encourage more technologically effective subcontracting in export sectors which, although vigorous, depend on imports of intermediate products and services (processed foods, textile goods, electrical and electronic parts, automobile parts). The rapid industrial expansion is indeed characterized by a wide diversification of productions yet with no real intensification or strong development of intra- and inter-sectoral linkages which could have led to a greater growth in value added.

16The dominance of Bangkok, which by itself accounts for about 50 % of all establishments, declines as the size of the establishments increases (48 % of establishments with fewer than 100 employees, under 30 % of those with between 100 and 499, 25 % of those with 500 to 1000 and over). The city’s industrial supremacy dates back to the 19^th century when the growth in international trade led to the development of transformation activities (processing of agricultural products, saw mills). The growth in exports, the expansion in infrastructure and advances in mechanization (production, shipbuilding) gave local capital based in Bangkok the opportunity to expand: from controlling certain specific activities (rice milling), it turned from the end of the 19^th century to the consumption sector and import substitution.

17After the introduction of incentive policies for the private sector and following the boost to industrialization through the import substitution policy introduced in 1958, investment in Bangkok continued and also extended out to the immediate periphery. In this it mirrored public investment in infrastructure, and was responding to the metropolitan market, which at that time was more or less exclusive in Thailand, and adopting entrepreneurial dynamics that were firmly based in the metropolitan region. At the end of the 1970s, the increase in land prices and the traffic congestion in the Bangkok-Samut Prakan pole were the key reasons behind the spatial diffusion of large establishments out into the four neighboring provin-ces. Although the five provinces adjacent to the capital, with which they make up the Bangkok Metropolitan Region (BMR), contain only 10 % of all establishments with fewer than 100 employees, their share in the national industrial fabric rises to 36 % of establishments with 100 to 499 employees and 40 % of the larger establishments.

18Fewer and fewer establishments of 100 to 499 employees are to be found as we move north beyond Ayutthaya and Saraburi provinces and there are also fewer in the western provinces of Kanchanaburi and Ratchaburi than in the Eastern Seaboard and certain poles in the peripheral regions. The spatial organization of these poles varies according to the area: in the South there are, in particular, the eastern coastal provinces from Surat Thani to Songkhla, in the North the Chiang Mai-Lamphun-Lampang triangle and in the North-East the north-south corridor. At the end of this corridor Nakhon Ratchasima links up with the dynamics of the Bangkok metropolitan region and the Eastern Seaboard, thanks to its proximity to Bangkok and the Eastern Seaboard provinces, with which it has good road links (see plate 24 Transportation networks). This structure is echoed in the distribution of establishments of 500 employees and over, whereas in the Center the east/west imbalance, matching that of the distribution of the industrial parks (see plate 26 Investment promotion incentives), favors not only Bangkok but also the provinces of Samut Prakan, Pathum Thani and in the Eastern Seaboard Chon Buri, with some regional poles also emerging. The scattering of large establishments, even though they are few in number, in the more distant provinces, is one of the consequences of the investment promotion incentives launched by the Board of Investment and of the search by industrialists for labor pools; it also testifies to the dynamism of entrepreneurs in the provinces (see plate 43 Enterprises under the Board of Investment).

Plate 41 – Size of establishments

Pre-eminence of the Bangkok Metropolitan Region and complex nature of industrial labor force

19Bangkok and its five adjacent provinces share pre-eminence in industrial employment (65 % of national employment). Their respective share, however, is in inverse proportion to the size of establishments, with the capital’s main share being primarily in the fewer than 100 employees category (a little over 40 % of industrial employment in the province). Because there is an imbalance between the two areas in the internal composition of this category, it still represents more than 20 % of industrial employment created in the five adjacent provinces, mainly in establishments of between 50 and 99 employees. Establishments of this size also play an important role in the Eastern Seaboard and in certain provinces in the peripheral regions (Nakhon Ratchasima, Chiang Mai, Songkhla). In more than half the provinces, establishments of fewer than 100 employees have a decisive role and provide at least 60 % of industrial employment.

20Establishments of 100 to 499 employees are just as important at national level for job creation as those with fewer than 100 employees (a little over 30 % of total employment). Spatial distribution is mirrored in the size of establishments: an east/west imbalance from Bangkok, the triangle in the North, imbalance between the two peninsula coasts, the central corridor in the North-East. Ayutthaya and Saraburi benefit from the negative factors which affect the Bangkok Metropolitan Region (BMR) (cost of land, traffic congestion and difficulty of land transport, pressure on the infrastructure and work force), and together they have 6 % of national industrial employment created by establishments of more than 100 employees, with establishments of over 500 employees predominating. Despite the expansion of this type of establishment in these two provinces, and also in Chon Buri and Chachoengsao or in certain provinces in the peripheral regions, 65 % of employment generated by these larger establishments is concentrated in the BMR.

21Labor force management strategies range through a wide spectrum, from paternalism to a style which resembles that of western capitalistic enterprises. As they are under constraints both to keep wages as low as possible and to fulfill their labor requirement, entrepreneurs have been obliged to multiply both the types of employment available and the methods of payment. The work force therefore contains a complex multitude of internal divisions which vary according to numerous criteria, such as location (rural, urban, metropolitan) and type of establishment (size, production sector, public or private sector), also qualifications and status within the establishment (monthly worker, daily worker, contract employee, seasonal worker, employed on site or at home). On top of the basic wage, which is barely over the legal minimum, there may be extras such as social advantages (transport, housing) or cash incentives (overtime, year-end bonuses) which before the crisis could represent more than 30 % of the pay packet and still leave the entrepreneur the flexibility to be able to make adjustments according to the business profits.

22This fragmentation in the world of industrial workers, combined with its youth, low level of education and mainly rural origins are among the factors that are constantly identified as obstacles to the emergence of a more intensely felt class consciousness and a more powerful trade unionism. The creation of in-house unions was largely encouraged by the state which, from 1975 onwards, established its employment policies on tripartite institutions (representatives of the state, employers and employ-ees) such as the Wage Committee, given responsi-bility in 1972 for adjustments to the recently introduced minimum legal wage, or the Labour Court, established in 1980 to resolve disputes in enterprises. With the creation in 1993 of the Ministry of Labour and Social Welfare, the state asserted its mediatory role in capital-work relations, while the banning of trade unions in state enterprises in 1991 to pave the way to privatization had considerably weakened the organized workers’ movement, even though the demands of public sector employees were very different from those of employees in the private sector.

23It is estimated that 5-6 % of private sector workers belong to a trade union. Until the 1997 crisis, discontent over working conditions or pay could be expressed in other ways than direct confrontation: the flexibility of the employment market, as a result of the high demand for workers in all economic sectors and non-agricultural establishments, enabled the dissatisfied worker to withdraw from the factory rather than put in his claim. The reduction, or even the loss, of monetary incentives as early as 1997 and the layoffs that followed have demonstrated how little power there is in collective action.

Plate 42 – Employment in establishments

Spatial imbalance despite adjusted investment incentives

24Public investment incentives have been adjusted since the 1970s according to a division of the country into several zones (see plate 26 Investment promotion incentives). 85 % of employment created by promoted enterprises are in industry. The opening up of the Board of Investment (BOI) in the 1980s to services and real estate was felt especial-ly in Bangkok and the South.

25In 1996, the promoted establishments in operation are concentrated in a center which became differentiated during the previous decade. In the ring which benefited between the 1970s and 1980s from spatial diffusion, Pathum Thani continues to register a large increase in numbers of units, unlike the other three provinces (Nonthaburi, Nakhon Pathom, Samut Sakhon). The relative position of Bangkok-Samut Prakan weakens, while a hundred kilometers away, a second ring gains in strength. There is an imbalance of growth between the west on the one hand (Ratchaburi, Phetchaburi) and the north and east on the other due to the dynamism of Ayutthaya and also to the Eastern Seaboard which up until 2000 received incentives that were as great as those enjoyed by the peripheral regions. These incentives complement other factors when the localization of enterprises is decided on: the attractive factors of distant provinces (infrastructure and other externalities) and the repulsive factors of the capital (congestion and operating costs). The peripheral regions are affected to varying degrees by the increase in the number of units which in 1986 were mainly established in the South where the intra-regional imbalance is less marked. In the other two peripheral regions, the North-East corridor as far as Nong Khai, and the northern triangle, marked by the growth of Nakhon Ratchasima and Lamphun, are set apart from new or more firmly established localizations.

26Employment has grown steadily in the Rayong-Chachoengsao-Ayutthaya ring. This produced a dissymmetry in employment per promoted unit between the Eastern Seaboard (Rayong, Chon Buri, Chachoengsao) and Saraburi, Ayutthaya, where the higher ratio puts them into the same class as Nakhon Pathom and Samut Sakhon. One third of employment is in these seven provinces. The great increase in employment at the beginning of the 1990s scattered enterprises where average employment figures can be significant out to the peripheral provinces (Nong Khai, Buri Ram, Kamphaeng Phet). These dynamics reflect an industrial strategy that is turned towards exports and the search for pools of cheap labor. Nevertheless, the general configuration mirrors that of the spatial distribution of the units, demonstrating their propensity to settle close to the regional poles (availability of infrastructure, ability of entrepreneurs to invest or to enter partnership with foreign companies).

27The distribution of investment capital displays the same spatial configurations as employment, though with the relative positions reversed. In the second ring of the Bangkok-Samut Prakan pole, the eastern provinces can be distinguished by the scale of the total capital and average capital: the position of Rayong can be accounted for by the weight of the petrochemical units. In the North-East and the South, Khon Kaen and Nakhon Si Thammarat have supplan-ted the other provinces. The declared aims of increasing exports, especially for their role in employment, and of encouraging the use of intermediary technologies led the BOI to promote large-sized enterprises. Since the crisis of 1997, however, they have tended to give priority to small and medium-sized enterprises, to support their recovery and assist their integration into world networks.

28The sector-based distribution of employment is available by statistical regions defined by the BOI. In those regions that received 80 % of employment created between 1989 and 1996, subsidies have strengthened the traditional sectors (agro-based, textiles) and promoted new sectors, some of which are concentrated into specific areas: metal industries in the East and Samut Prakan, non-electrical machinery construction (with car manufacturing benefiting from special conditions) in the East. While the North and the North-East have seen a degree of diversification, agro-based specialization in the South has been reinforced (see also plate 65 Industry in North-East and South). Japan is the main investor to benefit from BOI incentives, followed by the European Union (Germany especially). The criteria linking the level of incentives, sectors of activity and location have recently been relaxed to facilitate intra-sectoral linkages and the development of more efficient subcontracting. The regulations governing access for foreign investors have also been relaxed, this is because of increased competition from other Asian countries to attract foreign investors (China and Vietnam).

Plate 43 – Enterprises under the board of investment

Wide diversification of agro-based industries

29Agro-based industries remain the mainstay of industrialization in Thailand, with 30 % of employment in the industrial sector overall, and rates of 60 % and over in half the provinces. In the South, the percentage is homogeneous, with 70 % of industrial employment. In the North and North-East (50 % and 40 %) percentages are still high, and contrast with those in the Chiang Mai-Lamphun-Lampang triangle, the Nakhon Sawan-Sukhothai axis or the Nakhon Ratchasima-Udon Thani corridor. With about one third of agro-based industry employment, rates in Bangkok and the neighboring provinces are amongst the lowest: the east/west imbalance continues with a proportion of less than 50 % in the Eastern Seaboard provinces (Chachoengsao, Chon Buri, Rayong) whereas in the west levels reach 60 % and over, with the exception only of Ratchaburi.

30The wide diversification in food production which began in the 1970s reduced the role of rice mills in employment. It has thus benefited from the expansion in the food packaging sector (fruits and vegetables, produce from the sea and aquaculture, meat from poultry and pig farming), government support policies (sugar), entrepreneurial initiatives (cassava) and an increase in domestic consumption (beverages) and in demand for intermediate products (animal feed). This development led to the growth of transnational firms which at first carried out the simple processing of agricultural produce (rice, cassava), but then diversified their activities into agro-based industries and have now invested in other sectors. The Bangkok Metropolitan Region contains a very diversified pattern of medium-sized units, the eastern provinces too, with a major canning industry and sugar and cassava processing (Chon Buri, Chachoengsao). The North-East is still marked by the processing of cassava, as are Kanchanaburi and Ratchaburi by the transformation of sugar cane (see Chapter Agriculture) and the Chiang Mai-Lamphun-Lampang triangle by the canning of fruit and vegetables. The South, with the Songkhla pole, specializes in the packaging of fruit, produce from the sea and from aquaculture.

31Employment in the wood and wood by-products sector differentiates groups of provinces according to the type of activity that predominates: paper manufacture from Samut Prakan to Ayutthaya in large factories, furniture production in Bangkok and the Eastern Seaboard provinces, timber workshops in the South, or smaller units for the production of handicrafts in the North (except for Chiang Mai, Lampang and Songkhla where furniture manufacture has developed). A reduction in national resources has forced industries to resort more to imports and to use local species which are not considered noble (see plates Forest and Inter-regional trade). The distribution of units in the leather and tobacco/ natural rubber sectors is in clearly defined areas. Leather production is concentrated in the center and the eastern provinces: in these provinces, and also Ayutthaya (important collection center for hides), the most polluting operations of the process are now located, rejected by Bangkok and Samut Prakan. 60 % of employment in the tobacco sector is concentrated in the North and more than 30 % is in Bangkok, in the state-owned company. The South contains almost 50 % of employment in natural rubber processing, the Bangkok Metropolitan Region with Ayutthaya has about 40 % and the eastern provinces more than 10 %. The units in the South which have succeeded in diversifying rubber-based products are, on average, larger than those in Rayong and Chon Buri.

32By classifying employment into three sectors, areas that form specific groups or are limited to a single province (North-East) can be defined. Almost half the provinces belong to class 1 where the food sector predominates, with the importance of rice mills varying considerably. Class 2 (predominantly wood) concerns a scattering of provinces, except in the South and the extreme East. Class 3, where tobacco/rubber is on the increase, forms larger areas, notably the South, while class 4, where these sectors predominate, covers three isolated provinces. The importance of wood in class 5 brings the North to the fore.

33Through diversification at the production stage, exports have now become products of higher added value: the food sector with its key products (fruit and vegetable packaging, frozen shrimps and broilers), wood and leather, rubber products that are more sophisticated than before, and a decline in primary exports (see Chapter Agriculture). The strength of the country’s agro-based industries and the corresponding exports (25-30 % of manufactured goods value), combined with the dynamism of its firms have resulted in Thailand becoming a “Newly Agro-Industrializing Economy” (NAIE).

Plate 44 – Agro-based Industries

Greater growth in wearing apparel than in textile manufacture

34The development of the wearing apparel sector between 1986 and 1996 has been much more marked than textiles, as can be seen by the multiplying coefficients of the number of units (8.8 and 3.8) and of employment (4.6 and 2.2). Precise analysis of this evolution is nevertheless hampered as there are specific statistical difficulties for this sector (home-based workers, unregistered small workshops, sensitive period during the 1980s).

35The increase in the number of textile units (spinning, weaving) highlights the provinces of Chon Buri and Chachoengsao and some regional poles (Nakhon Ratchasima, Chiang Mai). The net creation of units in thirty or so provinces has had a minimal effect on employment, with the exception of Prachin Buri. The share of Bangkok, overwhelming in terms of number of units (more than 40 %), is more modest in terms of employment (one quarter), barely more than in Samut Prakan, notably because the enter-prises are smaller in size. In the distribution of employ-ment, apart from the mass of the Bangkok Metro-politan Region (BMR), there is a clearly distinguishable North-East corridor with poles that have been able to develop new market segments (synthetic fibers, fishing nets) while still relying on traditional products (silk). In other peripheral provinces there still exist large units associated with a traditional raw material (cotton in Phitsanulok and Nong Bua Lam Phu) or with downstream activities (packaging for the cement works at Saraburi). In the South the number of units is minimal, and this region does not appear as registered employment is under 356 employees per province.

36With the exception of the South, the evolution in the number of units producing wearing apparel has meant net creation in many provinces, a very large increase in Chon Buri and Nakhon Pathom and it has strengthened traditional poles of activity (Bangkok-Samut Prakan, Chiang Mai). However, it is possible that the registration between 1986 and 1996 of units already in production beforehand is in part responsible for this dynamism. It is also due to the setting up in regional capitals or peripheral provinces of units that have been created or established from partial or full relocation from the Center: the key elements in this relocation are the search for a work force supposed to be abundant and covered by a lower legal minimum wage (see plate 26 Investment promotion incentives), and the possibility of developing flexible working methods (subcontracting, homework). Employment distribution shows the predominance of Bangkok (almost 70 %) in small units, a much more restrained situation in the North-East, while the North is distinguished by its larger size units.

37The heterogeneity of the industrial structure is considerable: it can be seen in the size of the enter-prises, the quality of the products, labor force manage-ment methods and also access to markets. The most capital-intensive are the spinning mills working synthetic fibers, in partnership with firms from Japan and Hong Kong. At the other extreme, the garment factories have a low investment/worker ratio and use mainly simple technology: these factories can range in size from 10 sewing machines or less to several thousand workstations. Because of the erosion of competitivity on the world market, contractual employment has been developed to contain the costs of the labor force (homework), or to increase producti-vity (piecework). Outdated technology and the medio-cre quality of goods would appear to be factors that will limit growth in this sector, even though improve-ments have been made in some companies to meet the requirements of foreign buyers.

38Exports have increased greatly since 1985. Garments have been the segment leader since 1975, with more than half of production being sent abroad (not counting the non-recorded items that pass across into bordering countries): since 1994 they have achieved on average 60 % of the export value for this sector. Although fairly severely affected in 1996 and 1997, exports rallied with the devaluation of the Baht, but their share in the total exported manufactured goods is decreasing. For garments, the United States and the European Union make up the most important markets in the context of the Multi-Fiber Arrangement (MFA), despite the efforts made by exporters to win markets in countries outside the quota in Eastern Europe and the Middle East. The sector is faced with the prospect of increased liberalization of world exchanges. The dismantling of the MFA, the establishment of the AFTA (Asean Free Trade Area), the decrease in the country’s tariff protection are all factors which tend to make it more vulnerable to competition from Latin American and Asian countries.

Plate 45 – Textiles and wearing apparel

Dynamic electrical and non-electrical machinery sectors

39The growth in the electrical and non-electrical machinery sectors recorded between 1986 and 1996, more vigorous in the case of the former, reveals a high multiplying coefficient for implantations (4.5 and 3.4) but especially high for employment (5.4 and 4.5), which represents an increase in the average employment per factory.

40There has been a large increase in the number of electrical machinery units in Chon Buri and Chachoengsao in the Eastern Seaboard. In the Center, only Pathum Thani has experienced a similar rise, higher than that of Nakhon Pathom, Samut Sakhon and Ayutthaya. Nakhon Ratchasima has benefited greatly from the spatial diffusion of this sector, characterized by the net creation of small units in more than twenty provinces, though their impact on employment totals is negligible (less than 200). In 1986, the Bangkok Metropolitan Region (BMR) and Ayutthaya accounted for almost 95 % of employment in this sector, but this has fallen to barely 70 % in 1996 with the emergence of Pathum Thani as the second important pole for employment. A third of all employment is still concentrated in Bangkok in smaller units whereas in Ayutthaya and to a lesser extent Pathum Thani the units tend to be larger. Larger units are also to be found in the provinces of Chon Buri, Chachoengsao and Nakhon Ratchasima, which group together a total of almost 25 % of employment in this sector.

41The units involved in non-electrical machinery, on the contrary, covered the entire territory in 1996 with a greater and less unbalanced spatial effect on employment. Apart from the provinces that had a very small number of units in 1986, the largest increases have been in Nakhon Pathom, Samut Sakhon and Nakhon Ratchasima with a varying effect in terms of total employment and of average employment per unit: Nakhon Ratchasima has shown a considerable increase in employment, bringing it almost to the level of Pathum Thani and above Ayutthaya in terms of establishments that are considerably smaller in size. The proportion of employment in the Bangkok-Samut Prakan-Pathum Thani-Ayutthaya group has decreased from over 70 % to 55 % of total employment. Although it has a similar volume of employment to that created in Chon Buri and Chachoengsao, Prachin Buri differs in that the average size of units is much larger even than those in Samut Sakhon.

42Apart from the production of consumer goods, the growth in electrical machinery has in fact centered on the electronics sector. This in turn has given the impetus to other sectors, such as non-electrical machinery, also stimulated by the manufacture of agricultural and industrial equipment in response to domestic demand. The rapid expansion in electronics is closely linked with the presence of foreign companies. The sector was first developed in 1961 when Japanese firms joined with Thai enterprises to supply the national market. In 1971-1972 it turned to exports and diversified production with the arrival of subsidiaries of multinationals from the United States and Europe, from Japan and Taiwan (these were large in scope and in number from 1986), and from new industrialized Asian economics (Singapore, Hong Kong). The foreign subsidiaries concentrate for the most part on foreign markets, while the Thai enterprises are aiming at a well protected domestic market.

43Progress has been made in producing parts and components with a higher value added: these have been mainly due to Japanese subcontractors based in Thailand in the wake of the multinationals. Manufacture is dominated by assembling and is dependent on imported intermediate products: these occupy between 60 and 90 % of production in the electronics sector, thus reducing the true export values. Exports of electrical and electronic goods represented almost 30 % in 1996, 40 % in 2001 of the total value of exports of manufactured goods. The flow of integrated circuits, the major production item, reveals the intra-company exchanges that characterize the electronics industry. The main sources of imported components are the United States (more than 50 % in 1996) and Japan (about 30 %): the assembled integrated circuits are exported for the most part to the countries of Asia (about 60 %) where Singapore emerges as the hub. Exports to multinationals in the United States represent about 30 % while the Netherlands remains the main destination for goods into the European Union. The cyclical nature of the electronics industry was evident during the 1997 crisis: the sharp deterioration in prices in 1996 was a factor that severely weakened the economy, and their rise in 1999 played an important part in the recovery.

Plate 46 – Electrical and non-electrical machinery

Limited spatial deconcentration of the chemical and plastic industries

44The plastic sector has seen the greatest multiplying coefficient both in terms of the number of units and in employment (5.2 and 4.3 respectively), ahead of the chemical industry (2.5 and 2.2).

45The increase in the number of chemical units has been greatest in Rayong and Chachoengsao while the modest rate of growth in Bangkok and Samut Prakan coupled with the large number of existing units confirms the importance of this sector here since 1986. The semi-ring running from Pathum Thani to Samut Sakhon has consolidated its strong base. Almost 70 % of employment in this sector is concen-trated in Bangkok, Samut Prakan and Pathum Thani, and the units in these last two provinces are markedly larger than those in Bangkok. In a wider semi-ring, employment in Saraburi, Ayutthaya and Ratchaburi results partly from the transfer from the Bangkok Metropolitan Region (BMR) of factories producing agricultural inputs, while it has been boosted in the Eastern Seaboard provinces by the petrochemical industry that has developed from the natural gas fields in the Gulf of Thailand. Rayong has most of the upstream factories, including gas separation plants (see also plate 25 Energy infrastructure and net-works), far outnumbering those in Chon Buri. Since 1994 it has been compulsory for these units to set up in industrial estates, and this has strengthened the position of Rayong, which now has a wider range of downstream transformation industries and the greatest average number of employees per enterprise. The amount of employment created in the peripheral provinces (Chiang Mai, Khon Kaen, Songkhla) in small packaging units, mainly fertilizers to supply the rural areas, remains limited.

46The plastic sector has experienced the greatest spatial expansion. In 1996 it was present in all the provinces due to the creation of micro-units using simple technology and a modest amount of investment, with varying effects in terms of job creation. Whereas Chiang Mai has a very high multiplying coefficient, in Nakhon Ratchasima, where many enterprises have relocated from the center, there has been a large increase in employment in much bigger factories. In the provinces, where the creation of enterprises has been greatest, Chachoengsao, thanks to its proximity to the oil and gas industries in Chon Buri, has received more enterprises than Rayong and of similar size. There has also been a large increase in the number of units in these last two Eastern Seaboard provinces and in Samut Sakhon, Nakhon Pathom and Pathum Thani: not far from the petroleum transformation industry and the port facilities in Bangkok, the amount of employment created in medium-sized factories is 25 % of the total for the sector, whereas in Bangkok and Samut Prakan it still represents 50 %.

47The petrochemical industry has relied heavily on the government’s highly protectionist policies in this sector and on investment promotion in order to reduce the country’s dependence (see plate 26 Investment promotion incentives). The sector has developed considerably since 1989 when the first specialized industrial estate was completed in the Eastern Seaboard, the result of a public/private partnership (National Petrochemical Complex-NPC I). The sector was further strengthened in 1994 with a clear diversification of upstream products in NPC II, which was also established in Map Ta Phut (Rayong). Some of the largest Thai companies have formed major conglomerates. The great names of the petrochemical industry, from South Korea, Japan, United States and Germany, are operating in Thailand through licensing and engineering. Although severely affected by a fall in demand during the 1997 crisis, exports began to take off again in 1999 mainly to China, Indonesia and the Philippines.

48The development of the petrochemical industry in Thailand has had an important role in the growth of the plastic industry, just as progress in the local machinery industry affected the transformation of plastics. The demand from other industrial sectors (electronics) and from domestic consumption encouraged this sector which, though only just beginning to develop in the 1970s, has been considerably moder-nized since the 1980s. Production, however, is still not sufficient to supply the demands of downstream industries and there are major imports of some intermediate products. Some of the largest Thai companies in the petrochemical sector are also major plastics manufacturers: they produce a wide variety of products (toys, household goods, filaments) generating a stream of exports, 70 % of which are destined for the Asian market. After a collapse in 1996, the value of exports returned to its pre-crisis level by 1998.

Plate 47 – Chemistry and plastic

The metal, mineral and transport equiment industries

49Two intra-sector segments determine employment distribution in the metal sector. Manufacturing of metal products has been established in micro-units in all the provinces and regional poles can be clearly distinguished (Chiang Mai, Nakhon Ratchasima, Songkhla) where units are larger. The processing of basic materials is carried out in a few provinces, with the recycling of metals (Nakhon Ratchasima, Khon Kaen) or the treating of local metal resources generally realized in small or medium-sized units: tin (especially Songkhla and Phangnga), lead (Kanchanaburi), iron (Prachuap Khiri Khan), zinc (Tak). These two segments are closely associated in the Eastern Seaboard and the metropolitan region (except Bangkok and Nonthaburi) with the largest units, especially on the eastern side of the capital: the proximity of the port facilities strengthens the close links with the user industries. The steel industry expanded considerably at the beginning of the 1990s with the establishment of production for import substitution, a boom in the construction sector and in the demand for capital goods and consumer goods. The industry is still reliant on imports of raw materials and scrap metal. As a result of the difficulties the sector has experienced from 1998 (fall in domestic demand, decrease in the world market, dumping by Eastern European countries) a few enterprises have been able to strengthen their hold.

50About thirty non-metallic mineral resources are exploited throughout the country. Saraburi has the largest units with almost 15 % of jobs concentrated here, ahead of Bangkok, in producing building materials. This sector predominates in Bangkok and in four neighboring provinces (cement, glassware) while Ratchaburi specialises in ceramics. In the North, where a variety of mineral resources are to be found (excluding lignite), half the employment of the entire region for the sector is grouped in Lampang and Tak, and in Chiang Mai the production of traditional handcrafted pottery has developed. The size of the units in Nakhon Ratchasima (marble, granite) contrasts with the very basic saltworks in the rest of the North-East. Production of non-metallic mineral resources is constantly declining, with the exception of building materials where in some cases Thailand appears to be competitive (largest cement producer in South-East Asia). This sector has been affected particularly badly since 1997 as a result of the drop in demand from the domestic market and the shrinking of the ASEAN market.

51The geographical distribution of employment and the average size of firms supplying the transport equipment sector (excluding repair workshops) reveal two clearly contrasting groups of provinces. The first covers over three-quarters of the provinces, with small-sized units creating little employment and producing generally in a rather unsophisticated way (boats in the South, rural utility vehicles in the North and North-East): in a few provinces, slightly larger units can be seen to supply a mainly local demand (in the Central Plain, Khon Kaen). The group of provinces formed by the Bangkok metropolitan region (Ayutthaya and Ratchaburi included), the Eastern Seaboard and Nakhon Ratchasima contains 90 % of employment in larger size firms, with a notable imbalance between the west and the east. In Samut Prakan and Ayutthaya the largest automobile assembly units can be found. The position of Rayong has been strengthened since 1996 with the establishment of European and American manufacturers which have tended to erode Japanese domination (90 % of the market).

52In the automotive sector, the production of parts and components and also vehicle assembly have developed, heavily protected by favourable import duty regulations. The local content requirement, of which the share was reinforced constantly between 1972 and 2000, has resulted in a strengthening of links between local and Japanese parts manufacturers: nevertheless, the latter play a key role through their parts suppliers and assembly plants. Thailand is the leading ASEAN market and has become the main production center for Japanese manufacturers, and the regional hub for the production of parts and components. Between 1996 and 2000, while the domestic market was in total stagnation, the value of exports increased almost 5-fold, thanks to vehicle assembly and automobile component manufacture. Exports to Cambodia, Vietnam and Myanmar have been stable, while those to the European Union (Portugal), Australia, Japan or New Zealand have expanded considerably: some are integrated into the supply networks for Japanese firms. The recent liberalization measures and the proposed reduction in import tariffs in the context of the regional free-trade area (AFTA) represent important stakes for this sector.

Plate 48 – Other industries

Marked specializations in industrial employment

53For the last two decades, the country’s industrial structure has become more diversified. The movement has particularly affected the sectors of electrical and non-electrical machinery (with the rise of the electronics sector), plastic and transport equipment. The more traditional branches have also continued to develop (textiles and wearing apparel), diversify their products and increase the value added of their finished products (agro-food and agricultural industries). In conjunction with this dynamic, the process of rapid growth has weakened the traditional centralizing role of Bangkok with firms and branches of activities more scattered throughout some provinces. The imbalances in the scale and sector orientation of this expansion have nevertheless given rise to varying degrees of regional employment specializations.

54The principal component analysis is based on the distribution in relative value of employment at national level in 12 sectors. The classification of each province in relation to this average gives 11 types of employment specialization. Their geographical layout gives rise to groups and is very rarely limited to two provinces (type 4): unlike the North, the South is relatively homogeneous, the North-East is organized around a few types of specialization, and in the provinces bordering Bangkok east and west are clearly differentiated. The sector specialization of a zone of employment reveals a differentiation in its structure especially since wide variations from the average national profile can be seen in most types (the most extreme in types 1, 4, 7 and 9). The model that is closest to the average is type 6 (five provinces, of which Bangkok and its three neighboring provinces to the west). The degree of specialization of one zone of employment reveals its dependence on one or a few sectors: a high degree of specialization is characterized by the over-representation of a single branch (types 2, 3, 4 and 7) which may lead to situations close to mono-industry (type 1).

55Type 1 covers peripheral provinces, three-quarters of them in the North-East: 60 % of employment for this group is concentrated in the agro-food industries and this generates local intra-sector specializations, according to the produce processed. Although weaker in types 2 and 3, which form adjacent geographical groups, this sector still predominates (almost half of employment): the role of other primary resources can be seen (minerals, wood). Their impor-tance is clearly shown in type 4 with the over-represen-tation of wood, wood furniture and paper: this covers only two outlying provinces. The degree of specia-lization decreases slightly in type 7 which brings together three provinces close to the capital and where the exploitation and transformation of non-metallic minerals predominate over the agro-food and the wood sectors. Types 8 and 9 correspond to less specialized structures where the same branches of industry are to the fore, but in a different order of importance: wood, agro-food (contributing to the subdivision of the South) and agriculture (rubber in the South, tobacco in the North, leather in Ubon Ratchathani).

56The other profiles correspond to structures that are specialized to only a modest degree, with the presence of several activities in proportions slightly above the national averages. Type 5 combines agro-food with the wood industry and non-metallic minerals and is concentrated in the North-East. In type 6, a dual pole of activities in Bangkok and along its western side associates a low level of specialization in the textile and wearing apparel sector and in non-metallic mineral industries. The last two types combine a modest degree of specialization in durable goods (electrical machinery for type 10 and non-electrical machinery for type 11) with several other branches: other durable goods industries in provinces in the Bangkok metropolitan region and the Eastern Seaboard; agro-food and agricultural industries in a group of provinces in the north and north-east of the capital.

57The spatial organization clearly shows a higher degree of specialization as one moves further out from a center formed by the Bangkok metropolitan region and the Eastern Seaboard. However, the regularity of the whole is disrupted: there is a semi-ring which has only a modest degree of specialization from Ayutthaya to Prachin Buri, groups that are only slightly more specialized around Chiang Mai and Khon Kaen, and the South is less specialized than other groups of provinces in the peripheral regions. Here, the high degree of specialization is not exclusive: these groups have been able to benefit to a certain extent from the diversification of the industrial structure.

Plate 49– Industrial specialization