Sectoral Competitiveness and Industrial Restructuring: PLASTICS (as related to the petrochemical industry) SECTOR Final Presentation by The Petroleum Institute of Thailand for The Board of Investment - PowerPoint PPT Presentation

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Sectoral Competitiveness and Industrial Restructuring: PLASTICS (as related to the petrochemical industry) SECTOR Final Presentation by The Petroleum Institute of Thailand for The Board of Investment

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Title: Sectoral Competitiveness and Industrial Restructuring: PLASTICS (as related to the petrochemical industry) SECTOR Final Presentation by The Petroleum Institute of Thailand for The Board of Investment


1
Sectoral Competitiveness and Industrial
Restructuring PLASTICS (as related to the
petrochemical industry) SECTORFinal
PresentationbyThe Petroleum Institute of
ThailandforThe Board of InvestmentThe World
Bank 17 August 2001
The Petroleum Institute of Thailand 18th Fl.,
PTT Bldg. 555 Vibhavadi-Rangsit Road, Chatuchak
Bangkok 10900 Tel (662) 537-3592-8 Fax
(662) 537-3591 E-mail ptit_at_ksc15.th.com
Website www.ptit.org
2
Presentation Agenda
  • Study Objective
  • Study Content
  • The Three Link Industries
  • Was the Development Systematic and Holistic?
  • Role of Plastics Conversion Industry in the
    Countrys Economic Growth
  • Structure and Restructuring
  • Structure Location, Growth, Process,
    Employment, Registered Capital
  • Restructuring Impacts to Date
  • Competitiveness A Holistic View
  • What can be Done The Main Actors
  • The Ultimate Action Plan Do or Die

3
Study Objective
  • To develop strategies and action plans for
    enhancing the competitiveness of the Plastics (as
    related to the petrochemical) Industry

4
Content
  • Executive Summary i
  • Preface to the Study ii
  • Part 1 The Development of Three
    Closely-Linked Industries
  • Was the Development Systematic
    and Holistic?
  • Chapter 1 The Three Link Industries Looking
    Back I
  • 1.1 How It all Began? Nature of
    Development I-3
  • 1.2 Role of Plastics Conversion
    Industry in the Countrys Economic Growth
    I-41
  • Chapter 2 Structure and
    Restructuring The Development Trend
    II
  • 2.1 Structure Location, Growth,
    Process, Employment, Registered Capital II-3
  • 2.2 Restructuring Impact to Date
    Operational Features, Employment, External Trade
    II-36
  • 2.3 Financial Performance Overview,
    Sales, Profitability, Asset and Capital Base
    II-46
  • Performance Ratios, Impact of
    Financial Crisis

5
Content (contd)
  • Chapter 3 Competitiveness A Holistic
    View III
  • 3.1 Competitiveness Direct and Support
    Elements III-3
  • 3.2 Direct Elements Market, Production
    Cost, Productivity Performance
    III-15
  • Supply Chain Management
  • 3.3 Support Elements Finance,
    Infrastructure, Trade Information, Policy/
    Regulation III-152
  • Environmental Pressure
  • 3.4 Where is Thai Plastics Conversion
    Industry in the World?
    III-238
  • Part 2 Identify the Problematic Culprits
  • Chapter 4 Problems and Needs of the
    Three Link Industries IV
  • 4.1 Problems of the Missing Link
    IV-3
  • 4.2 Individual Link Industry
    Problems IV-8
  • 4.3 Common Problems of the Three Link
    Industries IV-26
  • 4.4 Supply Chain Management

    IV-37

6
Content (contd)
  • Part 3 Strategic Decision Making
  • Chapter 5 SWOT Analysis
    V
  • Part 4 What can be Done
  • Chapter 6 The Main Actors
    VI
  • 6.1 Role of Government
    VI-4
  • 6.2 Role of Associations
    VI-17
  • 6.3 Role of Academic Institutions
    VI-20
  • 6.4 Role of Individual Industry
    Players VI-23
  • Chapter 7 The Ultimate Action Plan
    Do or Die VII
  • 7.1 Virtual Plastics Institute (VPI)
    VII-3
  • 7.2 The Plastics Clusters
    VII-13
    7.3 The Ministry of Industry and Trade
    (MIT)
    VII-15
  • 7.4 Plastics Industry Policy Office
    (PIPO)
    VII-19

7
Content (contd)
  • Part 5 The Important Database
  • Import Statistics
    im-1
  • Export Statistics
    ex-1
  • Major Polymers Demand/ Supply Balance
    bl-1
  • Petrochemical Groups Related Companies
    and Their Capacities
    gr-1
  • Appendix
  • Appendix I Methodology
    AI-1
  • Appendix II Plastics Related Organizations
    AII-1
  • Appendix III Bibliography
    AIII-1
  • Appendix IV Organizations Contacted/
    Interviewed AIV-1
  • Appendix V Abbreviations
    AV-1

8
The Three Link Industries
  • Was the Development Systematic and Holistic?
  • Role of Plastics Conversion Industry in the
    Countrys Economic Growth

9
Value Chain Industry Drivers
10
Development of Plastics and Related Industries
1 MIDI - Metal-Working and Machinery Industries
Development Institute 2 BSID - Bureau of
Supporting Industries Development 3 TPC - Thai
Plastic and Chemical Co., Ltd. 4 TPI - Thai
Petrochemical Industry Co., Ltd.
11
Role of Plastics Industry in the Countrys
Economic Growth
  • A major sector contributing to the economy -
    Plastics conversion industry is a significant
    part of the Thai economy accounting for
  • Turnover exceeding US4.1 billion in 1999, or 5
    of the total Thai manufacturing. Plastics
    conversion industry is, therefore, a significant
    supporting sector of the Thai economy.
  • 8 percent of manufacturing employment -- plastics
    products manufacturing, has been one of the
    fastest employment generating industries over the
    past decade.
  • Major source of new fixed capital expenditure by
    private manufacturing enterprises, totalling
    almost US0.4 billion in 1999, compared to
    US0.65 billion in 1996.
  • The value-added portion of plastics conversion
    conservatively contributed around US1.3 billion
    to the Thai economy in 1999.

12
Role of Plastics Industry in the Countrys
Economic Growth (contd)
  • A major export influence, adding US2.4 billion
    to international reserves in 1999, after reaching
    a record US3.5 billion in 1995. The net balance
    after allowing for direct imports of polymer
    products less direct exports of plastic products
    had been declining with a rapid rise in imports
    of plastic products, with imports at US2.0
    billion as a compelling indication of the
    potential for import replacement in this industry
    sector.
  • Plastics conversion is very much an integral
    part of the industrial and consumer microeconomic
    framework of Thailand, with considerable
    influence over the competitiveness and
    performance of downstream sectors.

13
Processing Link - Output Value Chain1999 (1996)
US 160m (406)
Petrochemical Manufacturing (including plastic
compounds)
Machinery Supplier
US 224m (243)
Mould, Die, Tooling Supplier
US 2,797m (3,715)
Value Added US1,308m
(1,831)
Plastics Converter
US 4,105m (5,546)
Industrial Market Assembly
Consumer Market Product
Industrial Component Use
Specifically for plastics conversion
14
Economic Multiplier Impacts on the Total Thai
Economy
15
Socio-Economic Contribution of the Thai Plastics
Industry
16
Structure and Restructuring
  • Structure Location, Growth, Process,
    Employment,
  • Registered capital
  • Restructuring Impacts to Date

17
Structure of the Three Links Industry
18
Physical Distribution of Plastics Conversion Sites
  • Concentrated in Bangkok and peripheral areas --
    82 of total converters are in Bangkok and
    peripheral areas, taking advantage of the
    proximity to the downstream industrial purchasers
    and consumers.

Source Department of Industrial Works (DIW), as
of 1st quarter, 2000
19
Investment in Plastics Conversion Industry
  • Foreign investment in Thailand rose dramatically
    since 1996. In particular, in Asias Economic
    Crisis year (1997), a large number of foreign
    investors took advantage of low acquisition and
    investment cost in Thailand.
  • Foreign capital investment in 1997 shot up to
    3,162 million baht compared with 951 million Baht
    in 1994.

Source Board of Investment (BOI) Note
Including allocation of joint-venture investment
20
Growth of Plastics Conversion Industry
Source Department of Industrial Works (DIW)
Note This graph only shows those plastics
converters that are still registered with DIW as
of July 2000. However, it may include companies
that have been dissolved but did not report their
dissolution to DIW.
21
Major Plastics Conversion Processes
  • Injection moulding and film sheet extrusion are
    the two major conversion processes employed in
    Thailand. They account for 40 and 24 of total
    plastics conversion, respectively.

Source Department of Industrial Works (DIW), as
of 1st quarter 2000
Other processes include compression moulding,
rotomoulding, etc.
22
Registered Capital in Plastics Conversion
Industry
  • Medium-scale plastics converters, if classified
    by their size of registered capital investment,
    account for 25 of Thailands total plastics
    converters if classified by their size of
    employment, the figure is only 12.
  • This indicates that Plastics Conversion Industry
    requires a higher level of capital investment but
    a lower number of labour than some other SME
    industries.

Source Department of Industrial Works (DIW), as
of 1st quarter 2000
23
Physical Distribution of Toolmaking Sites
  • Concentrated in Bangkok and peripheral areas --
    80 of total toolmakers are located in Bangkok
    and peripheral inner areas.

Source Department of Industrial Works (DIW), as
of 1st quarter 2000 Tooling for metals and
plastics work
24
Tooling Industry Growth
Source Department of Industrial Works (DIW)
Note This graph only shows those toolmakers
that are still registered with DIW as of 1st
quarter 2000. However, it may include companies
that have been dissolved but did not report their
dissolution to DIW.
25
Restructuring Impacts to Date
  • Very lean survivors
  • Minimal increase in labour cost
  • Growth in owner-operated business on a smaller
    scale
  • Generally slow restructuring actions
  • Renewed emphasis on export markets
  • Focus on import replacement opportunities through
    foreign investment, therefore increased foreign
    ownership
  • Restructuring of workforce shifting from
    houseware industry to electrical moulding and
    assembly facilities

26
Plastics Processing Sales ComparisonUS Billion
Various Nations 1999
Source Derived from national government
statistics agencies, industry associations and
polymer use. as of 1998 as of 1998/99
financial year
27
Plastics Conversion Industry by OwnershipShare
of Enterprises by Sector Thailand 1996/97
(not elsewhere classified)
Source National Statistics Office
28
Competitiveness A Holistic View
29
Competitiveness Direct and Support Elements
30
Moulds Dies Import and Export
  • A huge imbalance between import and export of
    moulds dies prevailed during 1990-1999. In
    1995, while moulds dies import value was
    enormous at US 222 million, export value only
    recorded a mere US 45 million -- 4.5 times less
    than import. This disparity is due to the lack of
    development in the Thai tooling industry.
  • Besides, a portion of moulds dies exported
    during 1990-1999 was of a second-hand condition.

31
Import vs Domestic Supply of Moulds Dies in
Thailand
  • The Thai tooling industry relies heavily on
    imports. Domestic supply of moulds and dies
    accounts for less than 20 of total supply.
  • In 1996, 90 of total tooling supply in Thailand
    were imported -- though the circumstance improved
    a little with 82 import in 1999.

32
Thailands Import Value of Plastics Products
33
Reasons for Plastics Product Import
34
Import Replacement Export Opportunity by Sector
35
Plastics Product Import of ASEAN Countries
  • Thailand is the biggest importer in the region,
    accounting for 41 of total import value. This
    means that Thailand has the highest opportunity
    for Plastics production being the largest market
    in the region. Thus, investment in Thailand is
    viable.

US Million
1997 Total Plastics Product Import Value US
4,591 Million
36
Physical Supply Chain Management
Customers Proprietary plastics component
production
OEM Contracted plastics
component production
37
Supply Chain Management
38
Thai Plastics Industry SWOT Analysis Direct
Elements
39
Thai Plastics Industry SWOT Analysis Direct
Elements (contd)
40
Thai Plastics Industry SWOT Analysis Support
Elements
41
Thai Plastics Industry SWOT Analysis Support
Elements (contd)
42
Thai Plastics Industry SWOT Analysis Support
Elements (contd)
43
Future Prospects
  • Thailand is well placed to benefit from global
    trends in plastics conversion technologies,
    product demand and international trade patterns.
  • Installed and projected investment by Original
    Equipment Manufacturers is focused on limited
    number of regional base production locations,
    with Thailand being increasingly the site for
    ASEAN in electrical, electronics, automotive and
    houseware items.
  • Domestic demand will emerge as a major driving
    force in lifting domestic consumption of Plastics
    within Thailand to higher levels. This will
    particularly assist the construction and
    packaging industries to regain much of their
    pre-1997 strength.
  • New polymer blends and compounds will be required
    to supply suitable raw materials to the industry.
    There is a risk that these will be imported
    unless local production capacity can be further
    expanded as has been occurring during the past 2
    years.
  • Labour productivity will need to improve in line
    with rising Thai affluence, in order to maintain
    the overall competitiveness of local plastics
    conversion and associated assembly activities.
  • More coordinated development and training in
    labour and toolmaking will be required to provide
    competitive processing capabilities apart from
    machinery investment.

44
What can be Done The Main Actors
45
The Ultimate Action Plan Do or Die
46
The Ultimate Action Plan Do or Die
  • Virtual Plastics Institute (VPI)
  • The Plastics Clusters
  • The Ministry of Industry and Trade (MIT)
  • Plastics Industry Policy Office (PIPO)

47
Concept of Virtual Plastics Institute (VPI)
48
The Plastics Clusters
  • Three recommended areas for the Plastics Clusters
    are
  • Eastern Area Chonburi-Rayong-Chacherngsao
    Province, to be a cluster for automobile
    industry
  • Southern Area Samutsakorn-Rama
    II-Petchakasem-Ekachai, to be a cluster for
    plastic bags and films. The majority of
    the manufacturers in this area are Thai-owned and
  • controlled.
  • Northern Area Ayutthaya-Pathumtani, to be a
    cluster for electronic industry.

49
The Ministry of Industry and Trade (MIT)
  • An integration of two existing ministries, or at
    least the aggregation of relevant units in those
    ministries.
  • Two core units are essential in the new ministry
  • Industry Development Division
  • to spearhead and to strengthen competitiveness of
    the Thai economy
  • to study and identify key sectors and clusters in
    Thailand
  • to assess impacts of policy initiated by MIT and
    other governmental agencies
  • Trade Division
  • to protect Thailands trading interests by
    enhancing access to global markets for goods,
    services and investment
  • to oversee Thailands participation in
    international and regional fora

50
Plastics Industry Policy Office (PIPO)
  • Roles of the Plastics Industry Policy Office
    (PIPO) are to set up and monitor government
    policy to enhance a well-structured development
    of the whole value chain of the
    petrochemicals-plastics industry.
  • By and large, the first priority of PIPO now is
    to set up a policy to strengthen the support
    industry, which has been long left unattended.
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