Crisis in Thai industry: Are major collapses on the horizon?

Thailand’s industrial sector is teetering on the brink of a crisis as rapid technological advancements, fierce competition from China, and a planned hike in the daily minimum wage threaten to trigger a massive collapse.

With two Japanese car giants, Subaru and Suzuki, set to shut down their manufacturing operations in Thailand, the situation is dire.

KKP Research reports that 1,700 factories have closed since early last year, leading to significant job losses. The average monthly factory closures surged from 57 in 2021 to 159 in late 2023. This alarming trend underscores the economic fragility facing Thai industries.

Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade and Industry, warns that the closure of large firms will impact thousands of suppliers. The Manufacturing Production Index (MPI) reflects a prolonged contraction from December 2022 to March 2024, further evidencing the industrial downturn.

Economic recovery remains sluggish post-pandemic, with local businesses still grappling with bad debts and limited access to new loans. Despite government efforts to support small and medium-sized enterprises (SMEs) through credit guarantees, many remain in financial distress.

Adding to the woes, the government’s plan to increase the daily minimum wage to 400 baht in October has sparked concern among business leaders. Poj Aramwattananont, vice-chairman of the Thai Chamber of Commerce argues that SMEs may not withstand the wage hike, risking closures and layoffs.

However, economist Lae Dilokvidhyarat advocates for the wage increase, citing the rising cost of living.

“Economic development should focus on people, ensuring workers are adequately compensated.”

KKP Research highlights structural issues, such as the shift from internal combustion engine cars to electric vehicles, further exacerbating the decline in traditional manufacturing sectors. The influx of affordable Chinese EVs and other consumer goods has deepened Thailand’s trade deficit with China, undermining local industries.

As global trade tensions between the US and China escalate, Thailand faces additional export challenges, potentially further destabilising its manufacturing sector. With the MPI showing only a single month of growth in over a year, the future of Thai industry remains precarious, reported Thai PBS World.