3 New S-Curve Industrial Grew 30% to 172% from 2019 to 2021, With A Total Investment Of Over 98 Billion
Over the past three years, almost every business sector experienced the impacts of an economic slowdown, as well as the spread of Covid-19. Also, the current war between Russia and Ukraine acts as a catalyst for disruption to the overall economy. On the whole, business recovery remains slow, but it is well accepted that the main drivers of economic recovery in the country include the industrial and export sectors, which offer investment opportunities during these times of crises. The industrial sector itself has improved due to the picking up of demand for imports and exports, which signals the economic recovery of the country’s trade partners. In terms of investment capital in the Thai industrial sector, there has been an increase in many areas, especially in the petrochemical, food and medical sectors. Domestic transportation activities continue to meet the demand from e-commerce and work from home policies, which enables people to order more products online. In addition, the electric vehicle group is another interesting sector; given the foreign investment to set up factories and production lines in Thailand, this sector will likely lead to an increase in demand for real estate, such as warehouses for rent, in the future.
In 2021, the application for investments by foreigners totalled more than 642.68 billion baht, a figure that is close to the total investment in 2019, before the Covid-19 crisis, of 691.386 billion baht. In addition, the proportion of foreign direct investment (FDI) in 2021 was as high as 76.73 percent, higher than in 2019 during the Covid-19 crisis where FDI was 66.95 percent. These figures reflect upcoming future trends in the next 1 to 2 years, when investment projects that are in the application process start to gradually be approved.
Application for Investment in Target Industries in 2021 Increased by 80 Percent
In 2021, 790 investment projects were submitted in the targeted industries with a total value of 340.49 billion baht, reflecting an increase of 80 percent from the previous year and an increase of 37 percent from 2019 before the Covid-19 crisis hit. Existing industries that are in an uptrend include electrical and electronic appliances, petrochemicals and chemicals (on the merits of e-commerce growth), and agriculture and food processing. The new industry groups or the New S-Curve that are on an upward trajectory most prominently include the medical group, followed by the biotechnology and digital groups.
4 Popular Industrial Groups for Foreign Investment
In 2021, the current investment of foreigners in Thailand concentrated around four popular industry groups, with a total investment value of more than 262.73 billion baht, accounting for 77 percent of the total foreign investment. The number one group was electrical and electronic appliances at 31 percent (104.49 billion baht), followed by the medical group at 18 percent (62.17 billion baht), the petrochemical group at 14 percent (48.41 billion baht), and the agriculture and food processing group at 14 percent (47.66 billion baht).
Medical Industry is Most Prominent (New S–Curve)
Investment capital in the medical industry grew rapidly. From being in the seventh place in 2019, it moved up to fourth place in 2020 and rose to second place in 2021with an investment of 62.17 billion baht. This represented an average CAGR of 172 percent from 2019 to 2021, driven by three main factors: 1. Treatment standards and quality of service; 2. Medical hub policy announced by the government since 2003; and 3. Thailand’s goal of becoming the centre of medical device exports to neighbouring countries (CLMV). Most of the popular sites for medical industry factories or warehouses are located in the Eastern Economic Corridor (EEC). This is an area where the government supports investment with the aim of becoming a medical hub and expanding the medical device export market to CLMV countries.
Market for Warehouses and Industrial Factories Expanded Well
The Research and Project Development Consultancy of Knight Frank Chartered (Thailand) Co., Ltd., a specialist in real estate investment analysis and investment trust establishment, surveyed and assessed the overall industrial and warehouse market in 2021, and saw significant and positive signs from the expansion of the market for warehouses and ready-made factories for rent. A summary of the findings is as follows:
Market for Ready–Made Warehouses for Rent in Chachoengsao, Chonburi and Rayong
At the end of 2021, ready-made warehouse space for rent in Chachoengsao, Chonburi and Rayong amounted to 2.3 million square metres. In 2021, there was a slight increase in the new supply of warehouses, amounting to 135,000 square metres. Most of this space is in Chonburi at 60 percent, followed by Chachoengsao at 30 percent and Rayong at 10 percent. Chachoengsao, Chonburi and Rayong are three provinces located in the Special Economic Zone (EEC) that receives support from the government. This has helped draw developers to engage in project development in this area. We believe that there will be investment in setting up factories in such areas as well as corresponding demand. It is thus expected that this area will need more warehousing space in the future.
On the demand side, a total of 1.9 million square metres of warehouse space were leased from a total of 2.3 million square metres, accounting for an occupancy rate of 81.7 percent. The occupancy rate increased from 2020, which was 79.3 percent, and the rented warehouse space increased from 2020 by approximately 160,000 square metres. The average annual take-up of warehouse space rentals in this area for the past 5 years is approximately 140,000 square metres per year.
Market for Ready–Made Factories for Rent in Chonburi and Rayong
At the end of 2021, the total area of ready-built factories for rent in Chonburi and Rayong amounted to 1.5 million square metres. The new supply was up to 30,000 square metres (in 2019, no new supply was added, and in 2020, the new supply was around 50,000 square metres). Most of the prefabricated factories are located in Chonburi province at 62 percent of the supply, while Rayong province housed 38 percent. Such factories in this area increased a lot because Chonburi and Rayong are two provinces in the Special Economic Zone (EEC) that receive tax incentives from the government. Also, this area is an important production base for growing industries such as medical devices. Main products include rubber gloves, catheters, syringes and wound dressings, which have expanded the market during the Covid-19 outbreak. On the demand side, at the end of 2021, a total of 1.2 million square metres of ready-built factories were leased from a total factory space of 1.4 million square metres. This marks an occupancy rate of 86.5 percent, which slightly increased from the 86.3 percent rate in 2020 (the average occupancy rate of prefabricated factories in this area has an annual take-up of roughly 40,000 square metres per year).
Industry trends in 2022
Thailand’s industrial sector and exports are likely to continue to expand due to the easing of the Covid-19 situation, the gradual recovery of the global economy and the re-opening of countries. Also, the government has measures to promote investment via the Office of the Board of Investment (BOI), which will attract more foreign investors to the country. The main industrial and export sectors, such as electrical appliances and electronics, petrochemicals, and agriculture and food processing, will continue their prominence. The new targeted industries that have been expanding well are expected to be in business groups that align with the government’s investment promotion policy related to new target industries (New S-Curve). Moreover, the public sector will continue to support business operations in other industries that will be a driving force of the Thai economy in the future, such as services related to the high-speed rail project connecting three airports; engineering design services; business services related to advanced international distribution centre and warehouse projects; digital platform design and development services; international business centre (IBC) services for overseas affiliates; control of production, packaging, storage, inspection, and quality assurance services of chemicals; wastewater treatment; licensing and sub-licensing services of software and applications related to medical procedures; installation, repair and maintenance services for solar photovoltaic power generation systems and related products; and EV charging station services for electric vehicles and services for the use of management systems in such stations.
