Thailand earning ag investment at the expense of China

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China is losing some of its competitive edge as a low-cost manufacturing and processing base, recently collected data suggests, as makers and processors relocate to cheaper locales in Southeast Asia. Also, confidence in food being safely produced in China seems to be shaken to a degree.

Countries like Thailand are jumping at the chance to have what are classified as agricultural processors locate in the country, and U.S. food companies are taking the steps with the encouragement and assistance of the Thailand Board of Investment (BOI).

I’ve been to Thailand twice on media trips associated with Vance Publishing/AgProfessional and recognize that the country is not about to turn loose of its land assets for foreign investment, but it is establishing the infrastructure and developing industry parks for companies to efficiently operate.

Foreign direct investment into Thailand of all types of businesses surged by about 63 percent in 2012, and Indonesia’s outside investment was up 27 percent in the first nine months of last year, which the Thailand BOI contends shows weakened foreign investment in China.

Total foreign direct investment flowing into China fell 3.7 percent in 2012 to $111.72 billion, the Ministry of Commerce is reported as saying, the first annual decline since the fallout from the global financial crisis in 2009. This percentage doesn’t sound like a lot, but when the economy is the number two economy in the world and is as large as China then it is a big deal.

Economists say the drop in 2012 is also partly cyclical, driven by slowing overall growth in China and the prolonged debt crisis in Europe. But it also is the result of a long-term trend of rising wages and other costs that have made China less attractive, especially for basic manufacturing.

Thailand is proud to have so many “agriculture” investments in the country with the big ones highlighted being processors. The BOI notes Thailand-based operations such as Cargill Meats, which exports 80 percent of its production to Japan, Europe, Canada and Hong Kong; Mars Petcare, which exports to more than 20 countries including Japan, U.S., Canada and Russia; Del Monte having its Asian production base in the country; and Dole exporting canned pineapples to 127 countries, with the U.S. as the largest market. Other brands known in the U.S. are also into production and sales in Thailand, including Nestle, Kellogg’s, Kraft Foods, McCormick, Yum brand restaurant operations, McDonald’s, Coca-Cola, Pepsi-Cola and brands less known but available in the U.S. There also are ingredient companies not familiar to consumers.

A new project for the country is “Thailand Food Valley” supported by the Thai government. In two provinces of the country this project will offer food companies and research institutes developed areas for clusters of business operations. This cluster approach has been used previously for other industrial communities; clusters were developed for early arriving foreign investor companies. Additionally, the government is investing in a central laboratory, a science network linking several university laboratories, a scientific information center and other science centers with a focus on food and food safety.

China will not go away as a competitor for investment in Southeat Asia and specifically Thailand, but a shift seems apparent.

The Thailand BOI reports, “A shift to other countries doesn’t mean companies are abandoning China. In a survey of about 300 members of the American Chamber of Commerce in China, 58 percent said the country remains in the top three investment priorities. But only 20 percent said China was their number one investment priority last year, compared with 31 percent in 2011.”

  


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