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Toys and
Games
Toy
manufacturing in Thailand has developed from a low-quality, low
price industry producing goods for primarily the domestic market,
to one that turns out quality products and plays an important role
in the country's export sector. The industry emerged in the late
1980's and early 1990's when foreign investment from large Asian
toy manufacturers began to enter Thailand, allowing the sector to
register significant growth export volumes. The industry has leveled
off since the growth spurt unable to live up to lofty government
expectations, with export figures contracting since the financial
crisis in 1997 when measured in U.S. dollars.
The
toy industry in Thailand has been dominated by foreign investments,
which poured into the country during the 1980's. Board of Investment
(BOI) promotional incentives persuaded toy-makers, amongst many
other manufacturers, to relocate or expand their production facilities
to the Kingdom to capitalize on reduced corporate taxes and import
duties. Asian toy-makers quickly set up production facilities, benefiting
from low labor costs in Thailand and GSP privileges available for
Thai based toy exporters to the leading markets in the U.S. and
Europe. Exports volumes grew quickly, tripling between 1988 and
1991.
Thailand's
toy industry is still dominated by foreign investment with the bulk
of factories operating as joint ventures between Thais and investors
from Hong Kong, Taiwan, South Korea and Japan. Over 450 factories
are currently operating in Thailand with a combined total production
capacity exceeding 1,000 million pieces per year. The bulk of toy
factories in the Kingdom employ the practice of original equipment
manufacturing (OEM), finding them producing toys for customers who
control the goods design, name and trademark.
Toy exports totaled US$ 229 million in 1999, registering slight
growth over 1998, but down 36% over export shipments in 1995. Sales
over the first eight months of 2000 remain steady with the volume
achieved in the 1999. Approximately 80% of the toys produced in
Thailand are made from plastic and metallic materials. The five
largest export markets for Thai toys are the United States, Japan,
the United Kingdom, Germany and France.
The
performance of the toy industry in Thailand of the past decade has
been sluggish at best. The export figures had leveled off in the
years leading up to the economic crisis, and have declined significantly
since 1997 when measured in U.S. dollars. Fierce competition from
regional rivals have contributed largely to this situation, with
China establishing itself as the center of the global toy production
exporting over US$ 18 billion per year and cornering over 60% of
the global market. Rising labor expenses in Thailand during the
1990's raised production costs resulting in the relocation of manufacturing
facilities to lower cost countries including Vietnam, China, Pakistan,
Sri Lanka and Indonesia.
The
cost structure of toy production in Thailand also suffers from disadvantages
related to raw materials, as producers pay higher than world prices
for plastic pellets, due to the government protection of the local
petrochemical industry. High-end toy producers in Thailand must
typically import costly plastic pellets, paint, springs, motors,
woolen cloth and plastic moulds as local raw materials are not of
the highest world standards.
The
nature of the OEM production that Thailand's toy manufacturers have
often participated in, has found local companies dependant upon
on foreign operators as a source of technology. The agreements and
joint ventures with foreign companies have lead to some transferring
of technology, but not in sufficient quantities to allow Thai producers
to be leaders in the development of products and in their design.
Thailand
does exhibit some strength in toy production, as it currently ranks
as a world leader in the production of wooden toys. The country's
production and sale of wooden toys benefits from the abundance of
raw material, especially rubber wood, as well as strong products
design. Thailand's competitors in this category tend to be European
countries rather than regional low wage nations.
The
future of Thailand's toy industry is cloudy at best. The cost advantages
held by China and other low cost countries are not likely to disappear
any time soon. BOI incentives and import duty restructurings cannot
compensate for the large discrepancies in labor costs between Thailand
and low cost countries, nor remove the critical mass of technology
and component suppliers that China has accumulated in its close
partnership with Hong Kong for toy production.
Analysts
believe that Thailand's toy manufacturers can stay competitive by
developing their own capabilities to make use of higher technology
to produce good quality toys in keeping with the requirements and
specifications of importing countries while expanding emphasis on
product variety and unique design. The Department of Export Promotion
(DEP) has been active in promoting Thai toy exports boosting, awareness
of Thai toys through representations in trade fairs throughout the
world. Emphasis has also been placed on promoting toys with unique
regional styling and goods that are designed for the fast growing
educational toy market.
While
Thailand's toy industry is unlikely to develop into an export powerhouse,
or even rank among the countries top ten export products, the country
remains a competitive country and a fine place for toy companies
to base their production.
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