CONTENTS

May 2014 Volume 24 No. 05

The aircraft industry in Thailand can trace its origins to the early 20th century when a handful of pilots, trained in France, returned in 1913 to the Kingdom and an air unit was established at Sra Pathum Airfield. Two years later, in need of more space, the airfield at Don Muang was opened. It was that same year that Thailand began manufacturing its own aircraft, as spare parts for foreign models were difficult to come by due to insufficient logistics. The Thai aircraft parts industry was born.

Fast forward one hundred years and Thailand has become a regional hub of aircraft maintenance and the manufacturer of parts and components for the aerospace industry, which benefits tremendously from the country’s advanced auto manufacturing and electronics industries.

In more recent years, as aviation activity has grown, Thailand has become a regional service and maintenance center for refueling, repairing, maintaining and refitting aircraft and a major player in aircraft maintenance industry. Cargo and passenger volumes continue to accelerate, investment opportunities in the aircraft maintenance industry are becoming more numerous and more lucrative.

Air passenger movement in Thailand grew at an average annual rate of 14.6% from 2009-2013 as Bangkok became one of the world’s top tourist hubs, while Thais themselves increasingly began to travel both domestically as well as overseas. In 2013, Suvarnabhumi International Airport transported 50.9 million passengers, making it the third busiest airport in ASEAN. It also was ranked 19th in the world for cargo traffic in 2012, with approximately 1.3 million metric tons flowing into and out of the airport.

It is estimated that Thailand’s aviation sector contributes 139 billion baht (1.5%) to the country’s overall GDP. This total comprises 64 billion baht directly contributed through the output of the aviation sector (airlines, airports and ground services); 44 billion baht indirectly contributed through the aviation sector’s supply chain; and 31 billion baht contributed through the spending by the employees of the aviation sector and its supply chain.

Likewise, there is 678 billion baht in ‘catalytic’ benefits through tourism, which then raises the overall contribution to 818 billion baht or 9% of GDP. Moreover, the aviation sector supports 393,000 jobs in Thailand. This total consists of 79,000 jobs directly supported by the aviation sector; 185,000 jobs indirectly supported

Page

Thailand’s Aircraft Industry 1

News Bites / BOI Net Applications 2BOI Applications Continue Strong 3BOI Applications Continue Strong 4Subcon Thailand 2014 5Industry Focus: Automotive Industry 6

Economic Growth in Thailand 8Ducommun LaBarge Technologies 9BOI’s Missions 11Thailand Economy-At-A-Glance 12

Continued on P. 3

Thailand’s Aircraft Industry

ASEAN countries have discussed cooperation in silk development in order to deal with greater competition in the world market. In this regard, Thailand is set to become the ASEAN silk hub, and it will play a vital role in helping develop the silk industry in this region.

NEWS BITES BOI NET APPLICATIONSBright Prospects for Thailand’s Bio-plastics Industry

Thailand is now the top country in ASEAN for bio-plastics production and the industry has great potential for further growth.

According to European Bioplastics, the association representing the interests of Europe’s thriving bio-plastics industry, bio-plastics production capacity in the world is expected to reach 6.2 million tons in 2017, an immense increase from 1.4 million tons in 2012.

Asia is the largest bio-plastics producer, at 45.8 percent of the global production, followed by Latin America, at 44 percent. The United States is a major user of bio-plastics, and it also has advanced technology for this industry. The European Union wants to push for the transformation of the fossil-based economy to the bio-economy by the year 2020. In Asia, Japan has launched the Biotechnology Strategic Scheme and the Biomass Nippon Strategy to promote the use of bio-plastics to replace conventional plastics.

Bio-plastics are now used mainly as a food packaging material. Regarded as one of Thailand’s new wave businesses, the bio-plastics industry has received a major boost. There are currently 31 bio-plastics manufacturers in Thailand. Many of them have produced plastics bags for exports to the European Union and the United States.

The Office of Industrial Economics will organize training in bio-plastics for 100 entrepreneurs to promote bio-plastics manufacturing. This will help retain the country’s status as the top bio-plastics producer in this region. In addition, BOI promotes the manufacture of eco-friendly chemicals, which it classifies as a priority activity of special importance and benefit to the country, enabling the maximum investment incentives.

Demand for Thai Silk in International Market on the Rise

Sericulture in Thailand has continued to grow steadily, as demand for Thai silk in the international market is on the rise.

The market value of Thai silk is now about six billion baht a year. Thai silk exports earned the country more than 600 million baht in 2012. They are likely to increase, especially hand-woven cloth, which is gaining popularity abroad. Major markets include the United States, Japan, Italy, the United Kingdom, and France.

Thai silk is one of Thailand’s best-known handicrafts, found not only in numerous local shops but also throughout the world. It is also among the most popular products under the “One Tambon, One Product,” or OTOP, program. Local silk makers have accumulated knowledge, skills, and expertise, which will help boost Thailand’s economy, thanks to the wisdom that has been passed on from generation to generation.

2012(US$ = 31.57 THB)

2013 (Jan - Mar)(US$ = 29.51 THB)

2014 (Jan - Mar)(US$ = 32.39 THB)

Number of projects Value Number of

projects Value Number of projects Value

Total Investment 2,237 34,335 564 8,864 291 7,224

Total Foreign Investment 1,132 16,622 338 5,343 197 6,235

By Sector

Agricultural Products 6 101 32 621 5 21

Minerals / Ceramics 1 19 12 306 5 60

Light Industries / Textiles 6 20 16 51 7 12

Automotive / Metal Processing 17 159 109 2,170 64 4,805

Electrical / Electronics 19 167 57 497 31 334

Chemicals / Paper 16 169 41 306 19 707

Services 15 157 71 1,390 66 295

By Economy

Japan 562 8,959 176 2,964 96 1,887

Europe 132 679 36 364 30 1,938

Taiwan 53 221 14 126 7 24

USA 55 368 24 147 9 1,268

Hong Kong 39 639 10 516 10 67

Singapore 93 722 20 182 14 83

By Zone

Zone 1 23 139 102 790 53 291

Zone 2 39 451 165 2,970 110 5,455

Zone 3 18 203 71 1,582 34 489

Unit: US$ MillionNote: Investment projects with foreign equity participation from more than one country are reported in the figures for both countries.

May 2014

Page 2

Continued from P. 1

Continued on P. 4

through the aviation sector’s supply chain; and 130,000 jobs supported through the spending by the employees of the aviation sector and its supply chain.

There are a further 1,802,000 people employed through the ‘catalytic’ effects of aviation, meaning tourism. Likewise, the average air transport services employee generates 1,321,883 baht in GVA (gross value added) annually, which is over 5.5 times more productive than the average in Thailand. There is no denying that the economic footprint of the Thai aviation industry is significant.

Additionally, over 60 public and private engineering institutes across the country are accredited by the Council of Engineers. In 2013, approximately 180,000 tertiary students (vocational and university) graduated in engineering and 200,000 tertiary students completed their studies in the field of science and technology. Furthermore, there are many curricula in aerospace engineering and technology in Thailand, such as Kasetsart University, King Mongkut University of Technology North Bangkok, Thammasat University’s Sirindhorn International Institute of Technology, and Suranaree University of Technology.

Thailand’s Civil Aviation Training Center (CATC) undertakes training for personnel supporting the industry. In cooperation with international airlines, CATC has supplied Thai aviation with a qualified workforce for the ground support, repair and maintenance of aircraft as well as a pilot training program for airplanes and helicopters.

In order to strengthen the Thai aviation industry and better contest in a competitive marketplace, the Government of Thailand intends to establish an aerospace industrial estate and repair center in-country to service the region. The aviation repair center is aimed to support the opening of ASEAN Economic Community in 2015. Such a course of action should meet the trend of growing demand for service in this sector.

Of equal importance, Thailand’s aircraft and aircraft parts and equipment market has grown over the past few years, with the value of aircraft parts and equipment imports increasing by approximately 47% in 2012, year on year. Aircraft, spacecraft, and parts was Thailand’s largest aircraft import sector.

In support of the aircraft repair and maintenance sector, several companies already have opened a facility in Thailand, such as Ducommun Incorporated, which produces high-performance and high-reliability commercial microwave switches; Weston SEA Limited, a manufacturer of complex precision components and sub-assemblies, predominantly for the aerospace market, and Primus International Bangkok Company Limited, a Tier II integrator of composites, metallic parts, and assemblies for the commercial, regional, and business aircraft industries; and Driessen Aircraft Interior Systems (Thailand) Limited, a world leader in galley and air cargo equipment for the commercial aviation industry; MRAS Asia, which manufactures aircraft engine parts; and Leistriz (Thailand) Limited, which produces blades for aircraft.

Thai Airways International Public Company (THAI), one of the leading transportation maintenance centers in Asia, operates

three maintenance centers that service Thai Airways and others.

At Suvarnabhumi airport, the THAI maintenance center covers an area of 190,400 m2, including a 24,300 m2 hangar, making it the largest hangar in Southeast Asia. It simultaneously can accommodate three extra-wide-body aircraft such as the Airbus A380. The aircraft maintenance center strictly follows the rules and regulations required by international organizations, including the Department of Civil Aviation of Thailand.

This location can provide technical support for small aircraft, the Boeing B747 and Airbus A380 series, landing gear changes, wheel and brake maintenance, sheet metal work, painting, non-destructive testing (NDT) services, welding, emergency facilities, tools and equipment repair, ground support equipment (GSE) service, and A-checks and C-checks for A380 and maintenance control center (MCC) to handle all problems in line maintenance. Its facilities include:

• 3 bays for A380 size aircraft hangar • Size: 270m (length) by 90m (width) by 45m (height)• 26,100 m2 of maintenance apron • 21,450 m2 of office & building • 19,872 m2 of aircraft spare parts store • 5,315 m2 of workshop • 4,833 m2 of ground support equipment

May 2014

Page 3

Continued from P. 3

Thailand continues to attract foreign investment, despite all the talk and noise surrounding the ongoing political impasse. In the first quarter of 2014, the Board of Investment received 197 applications to promote foreign investment projects, for a total value of about 202 billion baht THB; 140,498 million baht in expansion applications and 61,468 million baht in new applications.

Of that amount, 129 project applications were for expansion of existing projects and 68 new projects. While the number of projects has gone down from the same period last year, the value has increased by about 22%.

No doubt some of this increase can be attributed to the overwhelming success of BOI’s incentives offered for phase 2 of the Eco-car project, which gave incentives for projects submitted from August 2013 till the end of March 2014. This incentive scheme received applications from 10 auto manufacturers, five of which had not applied under Phase I, for a total investment value of 138,889 million baht.

The Phase 2 incentives exceeded expectations and provide a clear statement of confidence among investors in Thailand’s continuing attractiveness as a location for business. “We believe that Eco-car Phase II will drive the Thai automotive industry to meet the production target of 3 million units by 2017,” said Mr.Udom Wongviwatchai, secretary general of BOI. A complete breakdown of investment applications received, and their value, is shown in the chart below.

BOI Applications Continue Strong

Thai Aviation Industries (TAI), an aircraft repair and maintenance service center, was established in 2003. It currently has facilities that include:

• an aircraft repair services center• two maintenance service centers for light planes and flight

training• a tool and measurement testing and calibration center• a piston engine repairing division• a propeller repairing facility• an aviation electronics repairing center

The Office of the Board of Investment of Thailand (BOI) offers a wide range of fiscal and non-tax incentives for investments in a variety of activities. Tax-based incentives include exemption or reduction of import duties on machinery and raw materials, and corporate income tax exemptions and reductions. Non-tax incentives include permission to bring in foreign workers, own land and take or remit foreign currency abroad. Additionally, foreign businesses are entitled to 100% ownership.

Recognizing the potential of the aviation industry in Thailand’s future technological development, the BOI has classified the

manufacture, repair or conversion of aircraft, including aircraft parts and equipment or onboard equipment as a priority activity of special importance and benefit to the country. As such, projects receive an uncapped eight-year corporate income tax holiday and are exempt from import duties on machinery, regardless of location. Projects in these activities also are eligible to receive location-based incentives.

Thailand’s integration into the global air transport network will enable long-term economic growth for the country by opening up foreign markets to Thai exports, lowering transportation costs thereby allowing suppliers to service a wider area and potentially reduce average costs through increased economies of scale, and stimulating the adoption of new business practices, such as just-in-time-inventory management, which relies on quick and reliable delivery of essential supplies. Make no mistake that Thailand is aiming to become a centre for aviation in the Asia-Pacific, which will provide full-service for aircraft repair and maintenance, as well as training centre for regional pilots and air crew. Strategically located within the region along with strong supporting industries on aviation, the opportunities for growth and improvement are very high.

Applications by SectorSectors Projects Application

Value(million baht)

Agriculture and Agriculture Productsv 5 688Mining, Ceramics and Basic Metals 5 1,949Light Industry 7 390Metal Products, Machinery and Transport Equipment

64 155,640

Electronic Industry and Electrical Appliance

31 10,825

Chemicals, Paper and Plastics 19 22,904Service and Public Utilities 66 9,570

Source: BOI

Looking closer at the country of origin of Q1 applications, reported in million baht, there was a value of 62,774 from the European Union; 61,135 in applications received from Japan; 41,065 from the US; 9,403 from China; South Korea, 9,368, and ASEAN 4,929, among others . Investment applications from the EU increased dramatically over this period, from 10,755 in Q1 2013, and more striking from the US, which rose from a mere 4,334 million baht Q1 2013. Likewise, South Korea and China saw increased applications from 4,568 and 1,751 in the same period.

Adding in domestic application, 2013 was one of the most productive years for the Thailand Board of Investment, surpassing

May 2014

Page 4

Continued on P. 6

In the last few years, SUBCON Thailand has continued to help businesses expand and grow. Today, the event is recognized as ASEAN’s most important and largest industrial subcontracting event, specializing in the procurement of industrial parts. The exhibition is unique from other events due to its facilitation of business negotiations and business matching that take place during the fair.

every other year except for 2012, during which time applications spiked upwards following the floods the previous year.

The Office of the Board of Investment has also recently announced that with the new Board seated all of the pending applications are expected to be reviewed within the next 3 to 4 months. There are approximately 400 large-scale investment applications with a total investment value over 600 billion baht.

Investors continue to view Thailand as the place to invest in Asia, and with the ASEAN Economic Community on the horizon, Thailand will only get better.

Subcon Thailand 2014: Asia’s Leading International Industrial Subcontracting Eventt

In addition, this trade show has secured a reputation as the place to showcase products and services, and for executives from the region and overseas to build relationships that will prove to be mutually beneficial.

Recently, the fair was held once again at the Bangkok International Trade and Convention Center, BITEC, from 16 to 18 May. The event had an accumulated attendance of about 20,000 people for all three days.

With an increase in the number of companies attending and the number of booths displaying products, this year’s edition had 300 booths for various sized parts manufacturers, which was a 6% increase from last year. Besides the exhibitors from ASEAN countries, Japanese companies from various prefectures joined the event including Kanagawa,

Shimane, Kitakyushu, Osaka and Yamanashi.

World-class manufacturers and parts buyers from over 14 countries representing the automotive, machinery, electrical and electronic industries participated in order to meet with quality suppliers like Mercedes-Benz, Toyota, Sony, Denso, Samsung, Whirlpool, Haier and Hino.

May 2014

Page 5

Continued from P. 5

Automotive IndustryThailand: Partnership for Growth in AsiaThe success story of Thailand’s automotive industry is not an accident; its history began since 1960 with a small domestic consumption. However, after years of contributions from related government agencies and the private sector, Thailand gradually built a very strong market and become more and more successful.

INDUSTRY FOCUS

In 2013, Thailand is now ranked the 9th largest car producer in the world and the largest in Southeast Asia, with approximately 2.5 million vehicles being produced. The government expects the number of automotive production will increase to 3 million units by 2017.

What really made SubCon 2014 shine were the 3,800 business matching events that were held, with a potential transaction value of 7,000 million baht. This figure slightly increased from the 6,814 million baht, which was recorded in 2013.

Of the many interesting and informative things that were present at Subcon were the Buyer’s Village and the Buyer’s Showcase. These events offered insights on industry standards and requirements. Additionally, various seminars were conducted to provide investors a wide array of information on Thailand’s strengths and leadership as a global and regional sourcing center.

Some 46 different seminar topics were covered at SubCon2014, which were offered by 40 different organizations and attended by 2,500 people. Seminar themes included the Aerospace and Medical Device Industries – Prospects for Expanding the Thai and ASEAN Support Industry, Business Opportunities in Myanmar, Mechanical Design in Agricultural Machines, Strategies for the ASEAN Single Market 2015: Thailand+1, the Automotive Conference and Thailand Competitiveness in ASEAN and Investment Promotion Policy.

With another successful SubCon year, Thailand is recognized as the logistics investment hub within the region, with strong industries in the parts and components sectors.

We are now looking forward to Subcon Thailand 2015, which will be held from 13 to 16 May 2015, to further expand the region’s manufacturing industries ahead of the looming commencement of the AEC. For more information, please contact BOI Unit for Industrial Linkage Development or BUILD Unit.

Additional good news for investors is that BOI’s BUILD Unit is available throughout the year to assist investors with subcontracting and sourcing needs, and can easily be reached at BUILD@boi.go.th.

May 2014

Page 6

Continued on P. 8

With the AEC approaching in 2015, ASEAN will play more vital role as an increasingly important market and a major global production base. Thailand will continue to promote the nation’s appeal as an investment location within Asia and as a gateway to ASEAN for automakers.

In order to ensure the sustainable development of Thailand’s automotive industry, the government will focus on development strategies such as offering a favorable government policy to promote investment and domestic market expansion through systematic integration. Also, Thailand will aim to accommodate technology changes by enhancing the capacity of green technology development and increased domestic value creation through productivity improvement for parts manufacturers.

Along with the government’s plan, the Thailand Board of Investment regards the automotive industry as a priority sector. This is the reason why BOI, together with our overseas partners, organized the seminar “Automotive Industry - Thailand: Partnership for Growth in Asia” in 3 European cities — Munich, Paris and Gothenburg — themajor centers for automotive companies in each country, from 8-10 April 2014. The BOI mission was led by Ms. Duangjai Asawachintachit, deputy secretary general of Thailand Board of Investment (BOI), together with Ms. Piengjai Kaewsuwan, president of The Thai Automotive Industry Association (TAIA) and other BOI officers.

The seminar began in Munich, the largest city in the state of Bavaria, Germany, on 8 April at PwC Haus Munchen with participants from automotive or related-automotive companies in Germany and neighboring countries. This event was organized by PricewaterhouseCoopers, German Asia-Pacific Business Association and the German Chamber of Commerce and Industry. It began with greetings from Mr. Felix Kuhnert, Automotive Industry Leader of PricewaterhouseCoopers followed by H.E. Nongnuth Phetcharatana, ambassador of Thailand to Germany, who gave welcoming remarks.

The next to speak was Deputy Secretary General Duangjai from the BOI, speaking on the subject of “Thailand - An Asian Hub, A World of Opportunity”. She began her presentation with reasons why Thailand is such a great ‘partner for growth in Asia’. Firstly, she said it was because Thailand is the perfect location at the center of ASEAN and can be used as a gateway into the larger Asia market.

In its Ease of Doing Business report 2013, the World Bank continued to move Thailand towards the top by ranking the kingdom 18th of 186 countries and among the top-20 for several years now. In the UNCTAD survey, Thailand is ranked among the top 10 Prospective Host Economies for 2013-2015, one of only two countries in Southeast Asia.

Apart from a supportive business environment, not many countries can combine attractiveness as an investment site and demonstrated ability to produce for the global marketplace with a low cost attractive lifestyle like Thailand can. The office space in Bangkok is among the most affordable in Asia and our corporate tax rate was cut to 20%, lower than Indonesia, Malaysia and Vietnam. Furthermore, Thailand was ranked No.2 in the world in the HSBC expat lifestyle survey of 2012 in terms of overall expat experience, based on expat’s lifestyle, especially the ease with which expats can set up in their new country, how well they integrate into the local community, and their overall quality of life.

Later, DSG Duangjai gave information on incentives and policies of the BOI in for Automotive Industry. Manufacture of passenger

cars, given that the conditions listed are met, will get exemption of import duties on machinery regardless of zone and a 5-year exemption of corporate income tax regardless of zone.

For the manufacture of vehicle parts (general parts), incentives include an exemption of import duties on machinery and an exemption of corporate income tax depending on zone, with cap. Further, for certain parts with high technology such as ABS, substrate for catalytic converters, electronic fuel injection systems, automobile transmission, battery for electric-powered vehicles, traction motor for automobile such as hybrid or fuel cell cars, electronic stability control (ESC), regenerative braking system, electric air conditioning system for automobile, rubber tires for vehicles, aircraft tread tires and electronic parts for vehicles, an 8-year exemption of corporate income tax as well as an exemption on import duty on machinery for all zones will be given.

Lastly, Ms. Duangjai presented some statistics from the JETRO Survey of Japanese-Affiliated Companies in Asia and Oceania. In the motor vehicle/motorcycles industry, over 80% of firms in Thailand expected to be profitable while in China and India was at 70% and 40% respectively.

Following the BOI presentation were Ms. Piengjai Keawsuwan, president of the Thai Automotive Industry Association (TAIA) and representatives from PricewaterhouseCoopers and German Asia-Pacific Business Association providing useful details on trends and latest developments within the Automotive Sector in Thailand-ASEAN.

According to the Thai Automotive Industry Association, the total car production volume from 6 countries in ASEAN in 2013 is 4.4 million units. Thailand is the largest production base in ASEAN, with production of 2.5 million units (1.2 million units are for the domestic market and 1.3 million are exported), followed by Indonesia with 1.2 million units.

A sample of major multinational automotive companies in Thailand includes Toyota Motors, Mitsubishi Motors, Isuzu, Honda Automobile, Nissan Motors, General Motors, Suzuki Motors, BMW Manufacturing, Ford Motor and Mazda. Total car sales in 2013 remained at an impressive record in Thailand, with a total of 1.3 million units, which is the largest market among ASEAN countries. The product champions of Thailand are pickup trucks and eco-cars. The next step is to become the hub of research and development.

May 2014

Page 7

Continued from P. 7

Economic Growth in ThailandIn the Asian Development Outlook 2014, Fiscal Policy for Inclusive Growth, the Asian Development Bank notes that growth momentum is building in major industrial economies, although growth in the ASEAN-5 will be steady as the expected rise in demand is offset by other factors. Nevertheless, as pointed out in the World Bank’s East Asia Pacific Update 2014, the East Asia Pacific region remained the “most important driver of global growth in 2013.”

The outlook for Southeast Asia improves next year, writes ADB, with growth picking up in Indonesia and an expected rebound in Thailand’s economy. Moreover, exports are slowly beginning to increase in some countries. ADB writes “In Southeast Asia, net exports of goods and services declined in Malaysia and the Philippines, subtracting on average 1.7 percentage points from growth, while net exports recovered in Indonesia, Singapore, and Thailand after dipping in 2012.”

Mr. Christoph Stürmer from PWC said the production in Thailand was dominated by Japanese companies, of which Toyota ranked 1st at 33% of total light vehicle production. However, until 2020 alliance groups are set to make significant entries while Toyota is merely sustaining production volume – based on current information. (See graph 2)

As stated in the Master Plan for the Automotive Industry of the Thai Ministry of Industry 2012-2016, both government and private sectors have generated the vision to develop the Thailand Automotive Industry as “a global green automotive production base with strong domestic supply chains, which create high value added for the country”

Thailand represents itself as a place where OEMs can invest

with the intention to tap into rapidly-growing markets, and where suppliers of all types can move to better serve their OEM partners. At the moment, there are over 20 companies for manufacturing (car and motorcycle), approximately 690 Tier 1 auto parts suppliers and 1,700 Tier 2 and 3 suppliers, all locating their factories in Thailand. This accomplishment clearly reflects a

strong supply chain structure to support this industry.

The next station on the seminar tour was Paris. The event was organised by BOI and Fédération des Industries des Equipements pour Véhicules (FIEV) on 9 April. The seminar followed the same pattern as the event in Munich, this time beginning wi th a welcome speech by Mr. Bernard Babo, chairman of ASEAN-India Club, FIEV and opening remarks by H.E. Mr. Apichart Chinwanno, Ambassador of Thailand to France, following by BOI and a testimonial from auto-part makers.

On 10 April, BOI concluded its journey in Gothenburg, a

major automotive city in Sweden, and with the largest harbor in Scandinavia. The seminar was co-organised by Business Sweden at the Scandic Opalen hotel.

With a location at the heart of Asia, strong supporting industries, an efficient workforce and liberal investment regime and investment incentives from the BOI, Thailand certainly is an excellent place for automakers and related industries.

May 2014

Page 8

Continued on P. 10

Looking specifically at Thailand, ADB projects growth in 2014 of 2.9%, accelerating to 4.5% in 2015. With all of the negative influences on the economy seemingly factored into the equation, the ADB does write that “On the upside, GDP growth in 2014 could be significantly above the forecast if a stable government is formed sooner than expected.” This sentiment is shared in the World Bank report, which writes that stabilization of the political situation could bring stronger growth this year.

In addition to improvements in exports, which are also being aided by a weaker currency, consumption and investment are also forecast to rebound in 2015. ADB notes that Thailand has low interest rates that should help a revival in investment, which will also be assisted by the improving global economy. External demand is seen to get stronger both this year and next. Likewise, the World Bank reports that tourist arrivals in 2013 were at a record high of 26.6 million.

Despite the political deadlock in Thailand that has created an obstacle to spending this year on infrastructure projects, and a

potential delay in the FY2015 budget, ADB writes the formation of a new government “should allow investment in infrastructure to step up in 2015, bolstering the economy next year.”

In similar fashion, the ADB writes that inflation and domestic credit expansion are under control in both Thailand and South Korea. Inflation in Thailand is forecast to be 2.4% this year and stronger in 2015 as domestic demand increases.

“Over the past 6 years, Thailand has suffered bouts of political unrest on top of the global financial crisis and severe flooding. Nevertheless, the economy maintains solid economic fundamentals that support its resilience, with high international reserves, relatively low inflation, a moderate amount of government and external debt, and a strong manufacturing base.”

This sentiment was also shared by Hoe Ee Khor, Deputy Director, Asia and Pacific Department, International Monetary Fund, who speaking at an IMF press briefing on the Asia Pacific Regional Outlook said “Thailand unfortunately is going through political difficulties, and that has affected the growth rate, so the growth rate is much lower this year. But we expect that once the government is in place by the second half of this year, growth will rebound very strongly.

I think one of the remarkable things about Thailand is that it is very resilient to shocks, and we think that once the political situation is clearer, the economy will rebound very strongly.”

Overall, Thailand has gone through a difficult period, but has remained on course due to the strength of its economy and its resiliency. As other countries grapple with economic challenges of a more structural nature, Thailand will quickly rebound with a resolution of its political situation and the formation of a new government. It remains the place to invest in Asia, and an economic powerhouse in ASEAN.

Ducommun LaBarge Technologies

I n t h e m i d d l e o f 2 0 0 3 , t h e Government of Thailand announced a novel policy to promote the Kingdom to be an aviation hub in the Asia Pacific. Since that time, aviation/aerospace activities have been expanded aggress ive ly and set into place to contribute substantially more to the Thai economy. As a result, aircraft repair and maintenance work has increased. Still, over the past

decade, the Government of Thailand has been committed to accelerating the growth and development of the aviation/

COMPANY INTERVIEW

aerospace industry by opening the Kingdom to investment projects that aim to establish an advanced technological platform for the future. Industrial sectors related to aviation/aerospace activities require more sophisticated and technical inputs that will spur forward the country’s economic modernization. Indeed, there are many examples of this new trend in motion and none better than Ducommun LaBarge Technologies.

Founded in 1849, Ducommun Incorporated provides engineering and manufacturing services to the aerospace, defense, and other industries through a wide spectrum of electronic and structural applications. The company is an established supplier of critical components and assemblies for commercial aircraft and military and space vehicles as well as for the energy market,

May 2014

Page 9

Continued from P. 9

medical field, and industrial automation. It operates through two primary business units – Ducommun AeroStructures (DAS) and Ducommun LaBarge Technologies (DLT). Furthermore, this American firm is powered by the full commitment of its team members in generating innovative solutions and services for the aerospace, defense and high-technology markets. Such a feature makes the company a competitive, global player.

In order to gain an insider’s perspective of the vision, mission, strategy and work of Ducommun LaBarge Technologies, the Thailand Investment Review newsletter team interviewed at length Mr. Boworn Chunsaereechai, General Manager of Ducommun Technologies (Thailand) Limited. A number of questions were posed that not only dealt with Ducommun (Thailand) specifically, but also with the overall aviation/aerospace field in the Kingdom.

From the beginning, it was mentioned that Ducommun (Thailand) is a subsidiary of Ducommun LaBarge Technologies and that its principal function is to assist the parent company with design, development, manufacturing, integration, and test capabilities in the areas of missiles, space, sensor, simulations, complex electronic/mechanical assemblies, illuminated cockpit displays, RF systems and space qualified motion control devices. Yet, perhaps more importantly, Ducommun (Thailand) specializes in solutions and in providing smart, innovative and reliable answers to its growing customer base in the Asia Pacific.

Mr. Chunsaereechai pointed out that the full-service approach of Ducommun (Thailand) combines broad-based manufacturing capabilities and extensive value-added services, including professional engineering support and program management, to help its customers achieve their corporate goals. The company draws upon best-in-class processes, its culture of continuous improvement and a commitment to excellence to deliver quality in everything Ducommun (Thailand) produces. Moreover, the company’s niche in the broad Electronics Manufacturing Services (EMS) industry is low-to-medium volume production of highly complex, high-rate-of-change electronic and electromechanical products and systems. The EMS capabilities of Ducommun (Thailand) include cable assemblies and interconnect systems, printed circuit board assemblies, higher-level electronic and electromechanical assemblies, and system integration, along with engineering and design support, and program management.

Ducommun LaBarge Technologies established its Thailand facility in 2005 and commenced operations in 2006 Initial production was in support of Ducommun’s commercial microwave coaxial switches to serve a growing demand from the cable modem, telecommunications and test equipment market segments. In rapid order the manufacturing capability of the Thailand facility quickly expanded to consist of millimeter wave oscillators and Doppler sensor heads (for speed detectors) and then into cable harness assemblies (for aircraft, like the Boeing 787). Plus, Ducommun (Thailand) delivers a broad range of microwave products that are used in test equipment and commercial applications. Similarly, the Thailand facility holds an extensive product catalog that includes design and fabrication of illuminated keyboards, panels and push button switches, RF/microwave coaxial switches and filters (for telecommunications). Many of these items are available in stock. The facility also manufactures custom-designed products to meet the needs of Ducommun’s customers, both in the Asia Pacific and around the world. Ducommun (Thailand) is located in Saraburi, approximately two hours north of Bangkok.

When discussing the work of Ducommun LaBarge Technologies, Mr. Chunsaereechai observed that the company serves markets that are highly competitive, and that products and services are affected by varying degrees of competition. Ducommun competes worldwide with domestic and international companies in most markets, some of which are substantially larger and have greater financial, sales, technical and personnel resources. Nonetheless, the ability of Ducommun to compete depends principally upon the quality of the company’s goods and services, competitive pricing, product performance, design and engineering capabilities, new product innovation and the ability to solve specific customer problems. Equally important, Ducommun has a strong commitment to quality and is registered to ISO-9001 and AS-9100 standards.

Regarding Ducommun (Thailand) specifically, Mr. Chunsaereechai commented that the subsidiary’s success depends in part upon its ability to attract and retain key engineering, technical and managerial personnel (both at the executive and at the plant level). It confronts regularly competition for management, engineering and technical personnel from other companies and organizations. This a real challenge. Accordingly, the continued growth and expansion of the contract manufacturing business of Ducommun (Thailand) has required the subsidiary to identify, hire, train and retain additional skilled and experienced personnel. Currently, there are 70 full-time employees, of which 20 are categorized as “professional” staff and 50 as “operators”. The term “professional” refers to team members who are engineers, managers, purchasers, administrators, or sales. These individuals also possess a university degree (undergraduate or graduate) and a good command of the English language, which permits them to communicate with the parent company. Furthermore, engineers at Ducommun (Thailand) have a specialization in the fields of mechanical, electrical or electronics engineering.

With an all Thai workforce engaged in a competitive marketplace, it is a priority for Mr. Chunsaereechai, as general manager of Ducommun (Thailand), to find ways that will improve and enhance the facility’s most valuable asset – its human resources. He highlighted that the Thai subsidiary provides its employees with online training that is available for all Ducommun team members wherever they may be in the world. This exercise – known as eLearning – is not compulsory but staff at the Saraburi facility are encouraged to enroll and to take the courses on offer. What’s more, eLearning is Ducommun’s online learning environment that can be accessed 24/7 by any network connection. Ducommun’s partnership with BizLibrary provides the user with over 4,000 professional and technical courses. In fact, eLearning is for professional development based on the employee’s job requirements and/or personal growth desires. Training can be recommended by a supervisor, human resources officer, and/or self-identified by the employee.

The continuous development of an employee’s “soft” skills through Ducommun’s eLearning program is a necessity for staff involved in the aviation/aerospace industry of today. Mr. Chunsaereechai also underscored that engineers from Ducommun (Thailand) are sent to the US for a period of one or two months for applied training. Such measures are imperative, for the Saraburi facility functions as an integral part of Ducommun’s global operations and its human resource development facilitates greater collaboration with the parent company concerning R&D.

Globalization has obligated companies to expand their corporate horizons, broaden their customer base, and spread out both their

May 2014

Page 10

BOI’S MISSIONS

. Mr. Boonrux Saphyakhajon, Executive Director of Investment Promotion Bureau 2, led a BOI team to Denver and Los Angeles, USA, from 27 April to 4 May 2014. The delegation visited manufacturers in the automotive, electronics and aerospace industries, and discussed opportunities to invest in Thailand.

On 24 April 2014, Secretary General, Udom Wongviwatchai signed the Memorandum of Understanding (MOU) on cooperation with Raifeisenlandesbank Oberösterreich Aktiengesellschaft (RLB) in Linz, Republic of Austria committed to promoting direct investment between Thailand and Austria.

Mrs. Suwaree Phatanavitayakul, Director of BOI Guangzhou Office, and Mr. Pittaya Lertmaharit, Director, Regional Investment and Economic Center 5, visited exhibition booths at the “2014 Zhongshan Trade, Investment and Top Talent Fair, The First Top Talent Networking Zhongshan, and Zhongshan – Chaozhou Industrial Cooperation Seminar”, where BOI organized a Thai investment seminar on 28 March 2014.

Miss Bussarakum Sriratana, Acting Director of Investment Service Center, together with BOI Taipei Office meeting with Taiwan Association of Machinery Industry on 2 April 2014 .

production and supply lines. Ducommun LaBarge Technologies made the decision to set up shop in Thailand because the country provides low labor costs for the parent company, a good human resource base that is skilled and adaptable, an excellent source for affordable raw materials, and a base to the large Asia Pacific marketplace. Additionally, the tax incentives offered by the Office of the Board of Investment (BOI) highlighted the advantage of establishing a presence in Thailand. Mr. Chunsaereechai stressed that the BOI has been supportive since the beginning and that the relationship has been and continues to be excellent. He praised the expeditious and efficient nature of the BOI project approval process.

Ducommun LaBarge Technologies is a California-based company. Yet it is multinational in character as it conducts business worldwide and its production centers are located in

several countries. In the United States Ducommun LaBarge Technologies concentrates exclusively on the aerospace sector, but the Thailand facility has a broad and general industrial focus. This capacity to make various precision items for different commercial products and usages is a testament to one of the strengths of Ducommun (Thailand). Furthermore, Ducommun’s Saraburi plant is an export-oriented site with 75% of its manufactured wares headed to the United States (head office in California) and the remainder to China, Japan, South Korea, Malaysia, and Singapore.

Ducommun LaBarge Technologies is engaged in a very technical and specialized trade; in short, it is cutting-edge. Indeed, Ducommun (Thailand) is the type of outfit that can push forward the Kingdom’s embryonic aviation/aerospace industry and this is a step in the right direction.

May 2014

Page 11

THAILAND ECONOMY-AT-A-GLANCE

Source: Stock Exchange of Thailand

Source: Bank of ThailandSET Monthly Closing Values

International Reserves / Short-term Debt (%)

Exchange Rate Trends

Industrial Capacity Utilization (%)

Head Office, Office of the Board of Investment 555 Vibhavadi-Rangsit Road, Chatuchak, Bangkok 10900, ThailandTel: +66 (0) 2553 8111 Fax: +66 (0) 2553 8222 Website: www.boi.go.th E-mail: head@boi.go.thBEIJINGThailand Board of Investment, Beijing Office Royal Thai Embassy No.40 Guang Hua Road, Beijing, 100600, P.R.China Tel: (86-10) 6532-4510 Fax: (86-10) 6532-1620 E-mail: beijing@boi.go.th

FRANKFURTThailand Board of Investment, Frankfurt OfficeBethmannstr. 58, 5.OG60311 Frankfurt am Main Federal Republic of Germany Tel: (49 69) 92 91 230Fax: (49 69) 92 91 2320E-mail: fra@boi.go.th

GUANGZHOUThailand Board of Investment, Guangzhou Office Royal Thai Consulate-General, Guangzhou, Room 1216-1218, Garden Tower, 368 Huanshi Dong Road, Guangzhou, 510064 P.R.C. Tel: (86-20) 833-38999 Ext: 1216 to 18 (86-20) 838-77770Fax: (86-20) 838-72700 E-mail: guangzhou@boi.go.th

LOS ANGELES Thailand Board of Investment, Los Angeles Office Royal Thai Consulate-General 611 North Larchmont Boulevard, 3rd Floor, Los Angeles, CA 90004 USA Tel: (1-323) 960 1199Fax: (1-323) 960 1190E-mail: boila@boi.go.th

MUMBAIThailand Board of Investment, Mumbai OfficeRoyal Thai Consulate-General, 1st Floor, Dalalmal House, Jamnalal Bajaj Marg, Nariman Point, Mumbai400 021 Republic of India Tel: (9122) 2204 1589-90 Fax: (9122) 2282 1071E-mail: mumbai@boi.go.th

NEW YORKThailand Board of Investment, New York Office 7 World Trade Center, 34th Floor, Suite F, 250 Greenwich Street, New York, NY 10007Tel: (1-212) 422 9009Fax: (1-212) 422 9119E-mail: nyc@boi.go.th

OSAKAThailand Board of Investment, Osaka Office Royal Thai Consulate-General, Osaka, Bangkok Bank Bldg. 7th Floor , 1-9-16 Kyutaro-Machi, Chuo-Ku, Osaka 541-0056 Japan Tel: (81-6) 6271-1395 Fax: (81-6) 6271-1394E-mail: osaka@boi.go.th

PARISThailand Board of Investment, Paris Office Ambassade Royale de Thailande, 8, Rue Greuze75116 Paris, FranceTel: (33 1) 5690 2600 (33 1) 5690 2601Fax: (33 1) 5690 2602E-mail: par@boi.go.th

SEOULThailand Board of Investment, Seoul Office#1804, 18th Floor, Koryo Daeyeongak Center,97 Toegye-ro, Jung-gu, Seoul, 100-706, Korea Tel: (822) 319-9998 Fax: (822) 319-9997E-mail: seoul@boi.go.th

SHANGHAIThailand Board of Investment, Shanghai OfficeRoyal Thai Consulate-General15 F., Crystal Century Tower, 567 Weihai Road, Shanghai, 200041, P.R.China Tel: (86-21) 6288-9728, (86-21) 6288-9729 Fax: (86-21) 6288-9730E-mail: shanghai@boi.go.th

STOCKHOLMThailand Board of Investment, Stockholm OfficeStureplan 4C 4th Floor 114 35 Stockholm, Sweden Tel: +46 (0)8 463 1158 +46 (0)8 463 1172 +46 (0)8 463 1174 to 75 Fax: +46 (0)8 463 1160 E-mail: stockholm@boi.go.th

SYDNEYThailand Board of Investment, Sydney Office Suite 101, Level 1, 234 George Street, NSW 2000, Australia Tel: (+61) 2 9252 4884 Fax: (+61) 2 9252 2883 E-mail: sydney@boi.go.th

TAIPEIThailand Board of Investment, Taipei Office Taipei World Trade Center 3rd Floor, Room 3E39-40, No.5, Xin-Yi Road, Sec.5Taipei 110, Taiwan, R.O.C. Tel: (886) 2-23456663Fax: (886) 2-23459223 E-mail: taipei@boi.go.th

TOKYOThailand Board of Investment, Tokyo Office Royal Thai Embassy8th Fl., Fukuda Building West,2-11-3 Akasaka, Minato-ku, Tokyo 107-0052 JapanTel: (81 3) 3582 1806Fax: (81 3) 3589 5176E-mail: tyo@boi.go.th

Facts about ThailandPopulation (2010) 66 millionASEAN Population 600 millionLiteracy Rate 96%Minimum Wage 300 Baht/day

GDP (2013) US$ 385 billionGDP per Capita (2013) US$5,647GDP Growth (2013) 2.9%GDP Growth (2014, projected) 3.0-4.0%Export Growth (2013) -0.2%Export Growth (2014, projected) 5.0-7.0%

Trade Balance (2013) US$ 6.4 billionCurrent Account Balance (2013) US$ -2.8 billionInternational Reserves (2013) US$ 167.23 billionCapacity Utilization (2013) 64.36%Manufacturing Production Index (2013) 175.80Core Inflation (2014, projected) 0.7-1.7Headline Inflation (2014, projected) 1.9-2.9Consumer Price Index (Mar 2014) 106.94 (2011=100)

Corporate Income Tax 10-20%Withholding Tax 0-15%Value Added Tax 7%

Mar Average Exchange RatesUS$1 = 32.39 baht€1 = 44.77 baht£1 = 53.83 baht100 ¥ = 31.68 bahtCNY1 = 5.26 baht

Top 10 Exports 2014 (Jan-Mar)

Product ShareValue

(US$ bn)1 Motor cars, parts and accessories 11.06 6.22 2 Automatic data processing machines

and parts thereof7.86 4.42

3 Precious stones and jewellery 5.40 3.03 4 Refine fuels 4.52 2.54 5 Polymers of ethylene, propylene, etc

in primary forms4.27 2.40

6 Chemical products 3.85 2.16 7 Rubber products 3.65 2.05 8 Rubber 3.62 2.03 9 Electronic integrated circuits 3.04 1.71

10 Machinery and parts thereof 2.96 1.66 Total 56.21

Source: Ministry of Commerce

Source: Bank of Thailand

Source: Bank of Thailand BOI

May 2014

Page 12