China cluster model pushed in Thailand

Businesses in Thailand should form clusters to reap benefits from lower costs, says Somsak Dararattanarojna, president of the industrial estate developer C.A.S. Asset Co.

Forming industrial clusters or groups of businesses in the same industry is one of the easiest ways to lower production costs, with the benefits of cheap logistics and the ability to pool resources, said Mr. Somsak.

"China is the master of clusters. All of their industries are in clusters including the China City complex [planned for Thailand]," he said. "China accepts that clusters create efficiency. That hasn't happened yet in Thailand."

In China, for instance, there would be 200 factories producing eyeglasses set up near each other with each factory performing different tasks.

"This is very scary because they have upstream to downstream industries in the same place. Unlike our garment industry, for instance, where certain material needs to be imported from other countries," said Mr Somsak.

He said Thais had a misconception about forming clusters, including concerns that being grouped together will create tougher competition.

In fact, factories that have excess orders can easily hire a subcontractor in the same area or industrial estate. This way, there will be no need to increase production capacity. Also, logistics and infrastructure costs will be lower, said Mr Somsak at the Sinsakhon printing industrial estate owned by C.A.S. Asset.

The 1,500-rai industrial estate holds 86 companies, of which 60 are SMEs involved in the printing industry.

Mr Somsak expects revenue this year 1 billion baht, up from around 400 million baht last year, as he expects all of the land to be sold by the end of this year.

Sinsakhon sold 80 rai in the first quarter of this year, and expects to sell 240 rai over the rest of the year.

C.A.S. Asset is also considering setting up industrial estates in provinces such as Kanchanaburi and Ratchaburi to benefit from the construction of Burma's Dawei port.

The initial investment would be at least 2 billion baht, but other factors such as the political situation in Burma would need to be considered, he said,

The company also has plans for a 50-megawatt power plant, which is undergoing an environmental impact assessment.

Mr. Somsak added the earthquake in Japan would cause Japanese businesses to switch investments to other countries.