Manufacturing in Thailand

One of the advantages of our having published 4,789 blog posts (Our first post, INTRODUCTION TO OUR BLOG, was on January 4, 2006, was 4,879 days ago!) is that we have blog posts on just about everything. This is extremely helpful in responding to client inquiries. If a company writes us about what sort of contract they need for manufacturing their products in Vietnam, I send them Overseas Manufacturing Contracts (OEM, CM and ODM) and then give them a flat fee quote for us to draft just such a manufacturing contract for Vietnam. If a company asks us how best to maneoever away from their existing China factory, I send them Changing Your China Factory? Be Careful, along with an explanation how my law firm’s China lawyers can help with the transition and our estimated legal fees for doing so. When someone asks us for a China contract template, I send them China Contract Templates for $99 Each and a brief explanation of why a template will not work for their particular situation. When someone has a Sinosure problem (which are happening incredibly frequently these days), I send them China Sinosure: What You NEED to Know. I could go on and on.

But with the tariffs and all the changes that have been happening with China these last six months, we are actually struggling to keep up with posts that make sense to send in response. Since President Trump issued his May 5 “tariff tweet” companies that buy products from China for export to the United States have been scrambling to figure out their options for fighting against the tariffs or for having their products their products transhipped in such a way as to legally qualify them as having been made in a country other than China. For fighting against the tariffs I send them Today’s 25% Tariffs Against China Products: A Roadmap on What YOU Should do Now and for what it takes to qualify their products as having been made in a country other than China I send them China Tariffs and What to do Now, Part 3 and Avoiding the New Tariffs on China Products: Watching the Substantial Transformation Sausage Get Made.

But what we are also getting are a whole host of requests/questions regarding manufacturing in other countries. For example, in just the last week, two companies have written to ask us about what it takes to manufacture in Thailand using either contract manufacturers or by setting up their own factories in country. Though we have our own Thailand Business Specialist — John DiDominic, someone we have known and worked with for literally decades before he formally joined our team — we just have not written all that much on here about Thailand. Mostly because before the tariffs there was a lot less call for it. And much of what we have written on Thailand is so out of date as to be of questionable value. The same mostly holds true for Vietnam as well, even though we have our own Vietnam Business Specialist as well, with whom we have been working for close to a decade. We are feeling even farther behind on posting about many other countries with which we have done substantial business over the years and particularly since the trade war began. Mexico, Cambodia, the Phillipines, Malaysia, and Indonesia spring immediately to mind.

Anway, our plan is to start writing more often these other countries because there is clearly a demand for information about them, at least based on the number of inquiries we have been receiving and the legal work our international lawyers have been doing. Our plan will be to write about what we are doing and that is for two reasons. One, this makes things a lot easier for us. Two, this is great evidence of what is timely and relevant. One of the first things we plan to write about on here is what is involved in switching product outsourcing from China to Thailand. These posts will likely deal with what products work best in Thailand, how to find a good Thai manufacturer, and what is different about Thai contract manufacturing as compared to China contract manufacturing. We also will write about what it takes to set up your own factory in Thailand. We will eventually also write about forming companies in Thailand and the basics on doing business in Thailand. We intend to do similar posts for many other countries as well. We also will write about the relevant contracts for these countries, mostly focusing on what makes each of these countries different. Just by way of one example: we plan to write soon, about NNN Agreements for Mexico and how we treat those differently from the China NNN Agreements we draft.

This post was spurred by my wanting to respond to a client who asked me this morning whether we had written anything doing business in Thailand and to send him the links to those posts if we had. I was able to find two. One quite recent one by our Thailand Business Specialist, John DiDominic, entitled, Doing Business Outside China: It’s Thailand’s Time, which serves as an excellent introduction/overview on doing business in Thailand. The other was a guest post by David Dayton that we ran about eleven years ago (almost to the day), entitled China vs. Thailand Outsourcing Smackdown, comparing manufacturing in China to manufacturing in Thailand. I thought it would be fun to re-run David’s post below in the hopes that we will get reader comments on the differences between China manufacturing and Thailand manufacturing and knowing that John will soon be updating it. The below is that post:

David Dayton over at the consistently enlightening Silk Road International Blog did an interesting post comparing China to Thailand for manufacturing, entitled, Thailand vs. China. [link no longer works].

David is eminently qualified to make this comparison because his Master’s Degree focused on “Comparative Chinese and Thai Corporate Cultures,” he is fluent in both Thai and Mandarin, and has spent considerable time doing business in both places.

Dayton starts his post off by quoting a friend saying that “Every thing in Thailand is slow except for the internet.” “Everything in China is fast except for the internet” and he then sets out the following eleven comparisons:

1. Legal requirements for export are not nearly as burdensome in Thailand

2. Thailand’s infrastructure is at least as good as China’s — ports, airports, tollways. Nothing new, I know, but this is one of the major drawbacks of working far inland in China or even close to large cities in Vietnam or Cambodia. The big plus in Thailand is that there are no inter-provincial tariffs or restrictions on the flow of goods like there is in China.”

3. Even with the recent wage increases labor is still more expensive in Thailand than in China. I’m seeing cost differences of about $50 to $75 a month between factory workers in China vs. Thailand.

4. The environment is much more “international” in Bangkok than it is in Shenzhen — more so than even Hong Kong, There isn’t as much English on signs but the exposure to “the West” is certainly as much or more. Bangkok seems to be becoming more western and Hong Kong more Chinese.

5. The advertising is much more sophisticated in Thailand than in China where it’s still a relatively immature industry. I was consciously amazed at the higher quality of both radio and outdoor media advertising in Thailand.

6. Nationalism is alive and well in both countries, but Thailand’s flavor is much less strident. China seems to be a bit more angry, with something to prove, while Thailand is much more comfortable with its unique place in the world.

7. I’m constantly told the same thing when I tell people in Thailand that I live in China: “You know, labor is more expensive here, but you get better quality work too.” Almost to a person, this was the response I heard — more than 10 times in just one day.

8. Thailand has a very well developed export base for automobiles, machinery and electronics, though China has some of this too.

9. Staffing in China is difficult in terms of retaining top-level local employees as well as in finding and retaining low-end factory labor. Thailand has a similarly tight market in top-level employees. The service levels are much higher in Thailand as is education in general. Professional standards seemhigher in Thailand as well.

10. The traffic in both Thailand and China is horrible, but each has its own perils. In China you are literally taking your life in your hands when you get into a car. Thailand is completely different. The traffic in Bangkok is so bad at almost all times of each and every day that it is estimated to lower Thailand’s annual GDP by multiple points!

11. Banking (I can’t believe I’m going to say this), but hands down China has better banks, both in terms of service and accessibility. In China if you need a bank, you can get one open from 8AM to 5PM 7 days a week. Thailand is 9AM to 3:30PM five days a week and off every holiday possible.

What do you think?

Yes, what do you think?