Economic data reflects Thailand’s resilience amidst a looming global slowdown. Manufacturing industry executives are rightfully exercising caution. Hiring activity is subdued, but strong demand exists for specific skillsets.
The latest macroeconomic figures show an expected slowdown in Thailand’s industrial output, as slackening global demand continues to put downward pressure on exports. The good news is the drop in production activity is not as severe as predicted.
Industrial production declined 2.71% in February, year-on-year. This is a slightly better performance than the 2.8% drop that market analysts had predicted (at one point a 4.81% drop was forecast). It’s the fifth straight month of decline in industrial output, but the pace of decline is less.
Reduced consumption in belt-tightening Western countries, along with a weakened global demand for exports, may not necessarily indicate a recession, but we are watching these metrics closely. In Thailand, plastics and throw-away consumables, computers & peripherals (down 35% year-on-year), and garment manufacturing sectors are feeling the pain.
Thailand’s Factories Continue To Show Resilience
The Purchasing Managers’ Index March number was 53.1, a slight slowdown from February, but this is the fifth consecutive month we’ve seen improvement in this bellwether, which measures the volume of raw materials companies are purchasing.
Thailand has one of most resilient global PMI figures. Domestic production rates are being maintained; I attribute this mainly to clearing a backlog of demand. Rising prices for raw materials and energy are having a negative effect on margins, and labour costs are going up.
Petroleum, oil refining and automotive sectors are performing strongly. The auto industry registering nearly 7% year-on-year growth. We have seen a significant increase in foreign direct investment in Thailand’s EV supply chain infrastructure, specifically from Chinese brands such as BYD and Changan.
Overall factory output is expected to increase by 1.5-to-2.5% this year in Thailand, down from a previous forecast of 2.5-to-3.5%.
Food product output is also growing steadily.
The executive leadership I have spoken to are feeling generally cautious. Some planned hiring and CAPEX decisions have been delayed. General hiring expansion is muted for many established businesses, with a few exceptions: as ever, we are seeing strong demand for certain technical expertise and niche subject-matter experts.
Despite this, I am seeing a robust trend in senior leadership changes. It feels like we are entering a period of increased turnover in executive positions.
I think this is because a lot of people in leadership positions feel weary; they have been in non-stop battle mode for the past three years. After enduring covid and navigating a volatile business landscape, people understandably want a change of scenery or a bit of time off.
Burnout is a real phenomenon. According to Deloitte’s 2023 Human Capital Trends report, 70% of C-suite executives are “seriously considering leaving for a job that better supports well-being.”
There is another reason we may be seeing some more changes at the top end of the hierarchy this year: during covid, many companies transitioned towards more sustainable local leadership.
During the past two-to-three years, it has been more important to be close to your people. Besides, relocating executives around the world wasn’t especially practical with covid restrictions in place.
Now that we’ve returned to normality, businesses are transforming once again. Many manufacturing operations are looking to bring in new perspectives and skills from outside of Thailand to optimise their business models and adapt.
Strong Demand For Specific Skillsets
Despite a general hiring reticence, manufacturing businesses still have high demand for cutting-edge tech skills in areas such as project management, and digital manufacturing.
The talent pool in Thailand is still relatively small for these particular skillsets. As a result, we see a lot of opportunities for young engineering talent, mainly from Europe or North America, with companies that need tech-savvy talent, but can’t afford to populate their team with expats on expensive overseas relocation packages.
Early-to-mid career millennials in their late 20s-early 30s are a source of attractive, relatively cost-effective new hires. These candidates are generally sought after for shorter term assignments.
Thailand’s Learning Curve
One of our clients recently set up a new factory in Thailand. They need dozens of talented high-value workers. But the technology being employed at their manufacturing facility is at the forefront of their field, and there simply are no advanced degree graduates within Thailand who are qualified to do this kind of work.
So, the company is taking the novel approach of hiring local candidates and paying to send them overseas for advanced degrees.
There has been significant government investment in production + logistics infrastructure. But not enough has been done to equip Thailand’s academic institutions to keep up with the ever-changing demands of the labour market.
Efforts to fill the gap with Public-Private Partnerships may mitigate the talent shortage somewhat; the government has been working with technical colleges and corporate employers to create programmes to train Thai students in cutting-edge technology.
Speaking Of Infrastructure …
The Thai government has reiterated its commitment to the 2.2 trillion-baht investment programme in the Eastern Economic Corridor. We are 18 months into the programme; infrastructure improvements should be completed by 2027.
Much of this investment is directed towards sectors where future technology is being developed, such as biotech. But we do not see enough concurrent investment in higher education to support this growth, in terms of staffing needs.
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