“Further factory closures possible if Thai government fails to take action against dumping.”

According to data from the Department of Industrial Plants and KKP Research, the Thai manufacturing sector is facing a serious crisis. A total of 488 factories closed in the first five months of this year.

Average closures of over 97 per month compare unfavorably to the average of 57 factories closing each month in 2021.

Department data shows that from January 2022 to March 2023, a total of 1,704 factories ceased operations in the wake of Covid, representing an average of 113 closures per month.

In total, it is estimated that over 3,500 factories were closed from 2021 to May 2024.

Most of these closures occur in the sectors of plastic products, leather products, rubber and rubber products, food, machinery and mechanical products, metal products, wood processing and wood products.

Experts believe that more Thai factories will close in the near future.

Kriengkrai Thiennukul, president of the Federation of Thai Industries (FTI), attributed several key factors to the trend of industrial factory closures.

He said domestic producers faced fierce competition from cheap imports, especially from China, which flooded the market through both legal and illegal channels, undercutting Thai products. This influx has affected both the retail and online markets.

Currently, China is facing massive liquidity problems in its real estate sector, which accounts for almost 30% of the country’s GDP, forcing the country to increasingly rely on exports to sustain its economy.
As a result, China increased production for export to compensate for the loss of GDP in the real estate sector.

“Recently, the United States announced tariffs of 25-100% on hundreds of Chinese goods, while increasing the tariff on electric vehicles from 27% to 102%. Several European countries are also preparing to raise tariffs on Chinese goods. Thanks to these restrictions and reduced market access, China is overproducing and turning to Asian and ASEAN markets, including Thailand, which still has purchasing power,” said the head of FTI.

“This scenario is forcing many Thai SMEs to close down their operations, while others, while still operating, have had to close their production lines but retained their sales or marketing departments, shifting from production to importing goods for resale,” Kriengkrai explained.

Last year, the effects of dumping in the market for low-cost imported goods affected more than 20 of FTI’s 45 industrial groups. He warned that if no effective action is taken this year, it is expected that more than 30 industrial groups could be affected.

Kriengkrai also noted that most of Thailand’s industries are still traditional and do not match modern global trends. They often act as original equipment manufacturers, producing products similar to those from neighboring countries such as Vietnam, Indonesia and Malaysia. However, Thailand faces disadvantages in terms of costs such as electricity, labor and a shortage of manufacturing support labor due to an aging population, leading to dependence on foreign labor and thus reducing competitiveness.

Labor-intensive industries such as clothing have moved to neighboring countries where more labor is available.

Meanwhile, high-value and high-tech industries have not made significant investments in Thailand, with most investments going to Singapore or Malaysia. Currently, only a few FTI members – less than half – have managed to shift to higher value-added products, while the majority, mainly SMEs, have not been able to make the transition, he said.

He said all industrial sectors were at risk of further closure because Thailand’s measures to protect domestic industries, compared with those in neighboring countries such as Indonesia, were not stringent or sufficient enough to slow the flow of cheap and low-value imported goods. standard to Thailand, Kriengkrai added.

Foreign investors in Thailand are also affected. Recently, Suzuki Motor (Thailand) Co Ltd announced the closure of its manufacturing plant in Thailand by the end of 2025 due to declining sales and competition from Chinese electric vehicles. Earlier, Tan Chong Subaru Automotive (Thailand) Co Ltd announced it would cease car production in Thailand by 2024 due to ongoing losses affecting suppliers of internal combustion engine parts and components, some of which may also be forced to close down activities.

Kriengkrai’s views are consistent with those of Wirote Rotewatanachai, director of the Iron and Steel Institute of Thailand, who revealed that as of April 2024, capacity utilization of the Thai steel industry in the first four months of this year was approximately 29.3% compared to the same period last year by 32.4%.

Wanchai Panomchai, secretary general of the Thai Industrial Standards Institute (TISI), said that to protect Thai manufacturers from substandard and cheap imports from China, TISI inspected Chinese goods sold in marketplaces and online to eliminate low-quality products within six months. Urgent measures have been implemented, including the ‘3R’ strategy – rapid inspection, rapid surveillance and rapid enforcement.

“We are increasing the frequency of inspections across various online platforms and expanding these findings to identify storage locations and online advertising channels to comprehensively address the issue,” he said.

“From September 2023 to April 2024, TISI seized non-standard Chinese goods worth over 76.2 million baht, accounting for 38% of the total value of 199.4 million baht. From September 2022 to April 2023, TISI seized custom goods worth 47.7 million baht, with Chinese products accounting for 13.8 million baht or 29% of the total,” Wanchai concluded.

Asia News Network (ANN)/The Nation (Thailand)