http://www.nytimes.com/2010/06/30/bu..._r=1&src=busln


Special Report: Doing Business in Asia

Thailand Attracts Investment Despite Turmoil

By THOMAS FULLER

Published: June 29, 2010


PLUAK DAENG, THAILAND — About the time grenades were exploding in Bangkok during the recent tumultuous street protests, workers contracted by Ford Motor here were also setting off explosives. But these were controlled detonations to clear away large chunks of granite. For the Thai government, the blasting in this industrial zone three hours east of the capital was the welcome echo of investment coming into the country, even as many foreign executives and tourists hesitated to set foot in central Bangkok.


Enlarge This Image

Thomas Fuller/International Herald Tribune

Workers building a Ford car manufacturing facility in Rayong province, Thailand.


Ford began laying the foundations for a large manufacturing plant here in February. Soon thereafter, red-shirted protesters swarmed Bangkok’s streets in a prelude to weeks of strife that left about 90 people dead. Yet the American carmaker continued with its expansion plans.

The story of its persistence — it had to postpone the announcement of the new facility at least three times before finally making the project public last week — tells a broader tale of Thailand’s economic resilience and the continued loyalty that many companies, especially car manufacturers, have shown.

In a large plot next to Ford’s future factory, which will be completed in 2012, Suzuki, of Japan, is building its first Thai car manufacturing plant.
Over the past decade, pineapple orchards in the hills and valleys east of the capital have given way to auto assembly plants and their suppliers. Toyota, Mitsubishi, General Motors, Nissan and Honda all have major operations there.

“The automotive industry in Thailand is upbeat,” said Hajime Yamamoto, Thailand director for CSM Worldwide, an automotive market forecasting company based in Detroit. “Many suppliers have already reached 100 percent capacity.”

Car production in Thailand this year is expected to jump a stunning 60 percent, according to Vallop Tiasiri, the president of Thailand Automotive Institute, a government research organization. The increase reflects the resurgent demand for automobiles after the financial turmoil of the past year. The industry is speeding past the political disruption like a car on cruise control.

Thailand, which Mr. Vallop expects to produce 1.6 million vehicles this year, will maintain its place as the third-largest car exporter in Asia, after Japan and South Korea.

“This industry is a long-term investment,” Mr. Vallop said. “Everyone is thinking that Asia is going to be a big car market, and Thailand is one of the best manufacturing centers for cars.”

Ford says about 85 percent of the cars to be produced in its new factory will be exported. It describes Thailand as “a global production and export hub.”

Over the past four and a half years, Thai politics have been a public relations nightmare for those in the government who are trying to burnish the country’s image as an investment destination. Rising hostility between supporters and opponents of the then prime minister, Thaksin Shinawatra, led to a military coup in September 2006. It was followed by intermittent turmoil that included the takeover of Bangkok’s two international airports; the raiding by protesters of a major international conference in April 2009, which sent Asian leaders scurrying for safety; and the street protests in Bangkok that ended with the military crackdown last month.

Amid the turmoil, foreign governments and their embassies have expressed concern about the country’s stability. The tourism industry has ridden through peaks and troughs as foreigners have canceled or postponed their trips to Thailand.

Yet the economy, driven largely by exports, has performed well.
Exports in May were 42 percent up from a year earlier — when the U.S. financial crisis depressed sales — after a 35 percent jump in April. The government forecasts total economic growth this year at 4.5 percent to 6 percent.

Cars and electronics are two of the main export industries. More than half of the cars produced here will be sold abroad this year, mainly to Southeast Asia, Australia and the Middle East.

Although some political analysts have suggested that skittish investors might flock to other countries, Ford is doing exactly the opposite. It will transfer production of its popular Focus model from the Philippines to Thailand, once the factory here is completed. Ford already has large Thai production facilities that it owns jointly with Mazda.

More than anything else, the political troubles of recent months have been a public relations headache for Ford. The company initially planned to announce its new facility in October. But a court injunction related to an environmental lawsuit at the nearby Map Ta Phut petrochemical complex obliged the company to move the factory site. Two other planned announcement events were canceled because of the Bangkok protests, and Alan R. Mulally, president and chief executive of Ford, canceled a visit to Bangkok because of the turmoil.

But Thailand’s location at the heart of mainland Southeast Asia, its reliable electricity supply and, perhaps most important, the economies of scale for component supplies resulting from a decade and a half of auto industry investment and growth appear to have sealed the loyalty of Ford and its competitors.

It has also helped that the Thai government facilitated a loan package for Ford from local banks at a time when car companies faced high borrowing costs.

Ford says the new factory will cost $450 million and will create 11,000 jobs at the plant and its suppliers.

Mr. Yamamoto, the automotive analyst, said auto companies were drawn to Thailand by the diligent work force and relatively low cost. Compared with China, “there is less pressure on wages,” he said.

Foreign carmakers in Thailand also have fewer fears about intellectual property than those in China. “They like Thailand because they don’t fear the technology will be stolen,” Mr. Yamamoto said.