The survey conducted by the Federation of Thai Industries found that Thai entrepreneurs are getting ready to move some of the manufacturing bases to low-cost countries or places that receive less severe impacts from the weak dollars, such as Vietnam, Laos, and Cambodia. At present, there are 680 Thai companies and 1,332 Thai affiliated firms and joint-venture branches that operate overseas. The Ministry of Commerce set a target that, within five years from now, 3,000 new Thai subsidiaries and joint-venture branches will crop up overseas.

           I am of the view that the public sector should push the relocation of investment and manufacturing bases within medium and long-term frameworks and should not rush the move without first having in place supportive strategies. Careful analysis and planning of overall manufacturing sector development need to be systematized. This is because these manufacturing sectors are inter-connected as one another’s production factors or upstream-downstream industries with shared elementary production factors. A change in one industry naturally affects other industries like a chain reaction. Therefore, the implementation of development policy for one production sector needs to take into account the possible impacts on other sectors. It is also important that policy to develop the production sector should aim at finding the right strategy for each field of production. Outcomes of the studies should then be used to rank different manufacturing sectors, and to make industrial restructuring strategy that dovetails into national employment conditions and competitiveness.

           Another point is that Thailand enjoys relatively little trade surplus, which means that the flow of capital remains low on both trade and investment fronts. In 2004, Thailand’s share of investment in the world market is only 0.003%. Such a scenario suggests that relocation of investment and manufacturing bases may not yield effective results. As Thailand still face limitations in making a transition to value-creation industries, encouraging Thai entrepreneurs to relocate overseas without restructuring domestic industry or making the transition to value-creation industries will result in an unbalanced development and possible impacts on Thai labor. This is because unskilled labor will face unemployment as entrepreneurs relocate to countries with even cheaper labor. Hence, the two areas of development; that is, relocation of manufacturing bases and transition to value-creation industries, cannot proceed hand in hand without causing problems to the manufacturing sector to the point that might destabilize the economy. 

           Therefore, relocation of investment and manufacturing bases overseas should link to Thailand’s industrial restructuring strategy, particularly in relation to business sector development, transition to value-added manufacturing and services, and the change from the current industrial, value-added economy to value-creation economy. Thai entrepreneurs, in other words, must change into innovators and proprietors of intellectual rights.

After Thailand already has clear and appropriate supportive plans, we should then push for relocation to places with supply management advantages to increase the effectiveness of cost management. These places are characterized by low wages, abundant and cheap raw materials, readiness of infrastructure, enforceable rules of law, and economic stability. Manufacturing bases should be relocated to places with strong present and future demand base when considered against the number and age of the populations along with the labor force and the purchasing power of the people in the host country. Economic development policy of the host country is also an important factor. Having strong and expanding demand base usually means good market security for investors, which in turn facilitates efficient marketing management and creates opportunities to export the goods to third countries. Such a picture suggests stability for investment and development of the service sector, as supply-side factors accommodate employment opportunities and absorption of remaining labor from industries facing comparative disadvantages.