Safe, Reliable, Secure and Cost-Effective Supply Chains Belong in Thailand
By U.S. Ambassador to Thailand Michael George DeSombre
“You only find out who is swimming naked when the tide goes out,” the famous investor Warren Buffett once said. Unfortunately, the tide went out for global companies in early 2020 as they were slammed by the coronavirus-induced lockdowns that spread from China to shut down or limit operations in most countries around the world. This crisis revealed vulnerabilities in the supply chains of many global companies.
Crisis, however, can spur positive change in the corporate world. Many businesses in the United States, Thailand and around the world are looking to a brighter future, and planning to emerge from this crisis stronger and more resilient than they were before. As a key part of that process, companies are reexamining their global business operations, investments and supply chains to ensure they are safe, reliable and secure while also being cost-effective.
Safe supply chains run through countries that are friends and allies who share a commitment to transparency, individual opportunity, and markets free from domination by the state. Reliable supply chains run through countries with a free and robust media and an independent judiciary who share a commitment to the rule of law and the sanctity of contracts. And secure supply chains exist in countries where companies are secure from cyber theft or the theft of intellectual property.
The commitment to freedom, the rule of law, and the independent legal system in the United States make for a strong, attractive investment climate, attracting companies from around the world. However, for companies seeking closer access to overseas markets, there are also clear choices when deciding where else to invest in the region. In the Indo-Pacific region, American companies are looking much more at the countries of ASEAN as cost-effective locations for supply chains. Future prospects look even brighter, as ASEAN will become one of the world’s fastest growing regional markets with over 50 percent of its population under age 30. Right in the middle of ASEAN is mainland Southeast Asia’s largest transportation and logistics hub: Thailand, the oldest treaty ally of the United States in Asia and the only Major Non-NATO Ally of the United States in mainland Southeast Asia.
This year marks the 187th anniversary of the signing of the United States Treaty of Amity and Commerce with the Kingdom of Thailand, which marks the beginning of the U.S.-Thai commercial relationship. That relationship has flourished. Hundreds of U.S. companies, employing tens of thousands of Thai nationals, have invested in Thailand to the mutual economic benefit of both our nations. Many of our companies are recognizable names like Citibank, Chevron and Ford that have been here for decades and continue to believe Thailand is the right place to be.
But many others have come here recently or have recently expanded their operations in Thailand. A US-based advanced materials company recently chose Thailand as the location to establish a new manufacturing complex, after analyzing 24 different options in the region. Guardian Glass, a global leader in energy-efficient glass for buildings, automotive and other sectors, has produced glass in Thailand since 1991; Guardian, which chose to establish its regional Asia-Pacific Headquarters in Bangkok last year, was attracted to Thailand because of its strong reputation for welcoming foreign investors, growing domestic economy, and location as a platform for global exports. Alliance Laundry also opened its latest international factory in Thailand last year, basing its decision on the advanced transportation infrastructure available in the Eastern Economic Corridor (EEC), attractive investment incentives, and competitive edge that Thailand’s record of protecting intellectual property gave it over other countries in the region. Another company, Seagate, with a presence in Thailand for more than 30 years, today works with Thai universities to develop local engineering and technical skills that help the company maintain its position as a global leader in the manufacture of high-tech hard drives and other cutting-edge data storage products.
When I speak to these companies about why they chose Thailand they tell me it is because of the Safe, Reliable and Secure nature of manufacturing in Thailand while also being competitive with other locations in Asia in the cost of land, labor and living. As an example, average monthly manufacturing wages in Thailand are more than 50% lower than in China according to the most recent available data. Also, establishing operations in Thailand is simple. In February, Thailand was ranked Number 1 by U.S. News and World Report’s 2020 survey of the best countries in which to start a business. It based this ranking on five attributes: affordability, bureaucracy, low manufacturing costs, connectivity, and access to capital. Thailand is also renowned for the quality of its health care system, which has performed admirably during the COVID-19 pandemic, as well as its range of world-class international schools. It has some of the most diverse and beautiful cultural and tourist sites in the world. And the food speaks for itself. It is simply a wonderful place to live, both for individuals and for families.
Thailand has demonstrated its business-friendly regulation through its handling of the COVID-19 pandemic. U.S. businesses in Thailand have been uniform in their praise of the Royal Thai Government’s flexibility in allowing manufacturing facilities to continue uninterrupted while Thailand implemented otherwise stringent public health limitations to flatten the curve of infections. U.S. businesses have similarly appreciated the efforts of the Royal Thai Government to provide advance notice of restrictions which permitted appropriate contingency planning. In these areas, the Kingdom of Thailand has been a stand-out among countries in Asia.
I also want to commend the Royal Thai Government for assistance and support of Thailand’s Board of Investment and the incentives available in the Eastern Economic Corridor (EEC) which have been critical in attracting companies to locate their manufacturing activities in Thailand. Companies in the EEC have taken advantage of its proximity to Laem Chabang, the fourth largest port on the Asian continent, to export goods to the ASEAN regional market and beyond.
Since I was chosen as the first United States Ambassador to the Kingdom of Thailand to come from the private sector, I have engaged extensively with American and Thai businesses on how we can strengthen the U.S.-Thai economic partnership. At this pivotal moment in history, as the world grapples with the outcomes of the COVID-19 pandemic, the United States wants to ensure that Thailand seizes the share of global supply chains that it deserves.
Thailand can help achieve this by broadcasting to the international business community its continued commitment to free enterprise, fair trade, open markets, transparency, and honest business practices. It can also bolster the attractiveness of its labor force by doing many of the things we are trying to do in the United States: Strengthen vocational schools programs; reform curricula to focus on science, technology, engineering and math (STEM) skills; offer job retraining and “lifelong learning” to improve the skills of those already in the workforce.
For those jobs that require special expertise that might not be in adequate supply locally, Thailand should allow companies to hire foreign nationals with special expertise. Doing so will facilitate transfers of advanced knowledge to Thai citizens and broaden the pool of Thais with skills in high demand, enabling Thais, rather than foreigners, to fill such jobs in the future.
Thailand can take advantage of the necessary pivot to telework and digital business that occurred during the coronavirus response. Thailand should support and enable greater digital business across all sectors of the economy, from finance to agriculture, and secure that business with strong cyber security protocols. Protecting companies from cyber theft will also highlight Thailand’s advantages over countries that are the source of such attacks. Thailand can also demonstrate its commitment to facilitating digital business by joining the APEC Cross Border Privacy Rules System to enable the free flow of data and ensure protection of personal information.
Finally, Thailand can maintain and further develop diversified sources of energy and ensure cost-effective and full utilization of transmission capacity to supply reliable, affordable energy domestically. Thailand has a great opportunity with one of the largest undeveloped natural gas fields in the Gulf of Thailand to provide very inexpensive natural gas for many generations to come. Also, in the short term, efforts to develop Thailand into a hub for the trading and transport of energy in the region would contribute substantially to the long term stability and affordability of energy supply to Thailand’s economy.
“The business of America is business” said President Calvin Coolidge. In this day when free enterprise is once again pitted against state-dominated economies, it is important to remember the power of American free enterprise. I would close by quoting the first U.S. President to visit Thailand. President Ulysses S. Grant commented on his visit to Thailand in 1879; “I have never seen anything that interested me more than [Thailand].” I echo the words of President Grant and emphasize that the Kingdom of Thailand remains open for business during these challenging times and Thailand is a safe, reliable and secure place to locate a company’s supply chain. I look forward to collaborating with the Royal Thai Government and Thai companies to further strengthen the U.S.-Thai economic and commercial relationship that has flourished so well since its beginnings in the 1800s.
(The Thai version of this Op-Ed was originally published in Prachachart Turakij newspaper on May 23, 2020.)