It may be a mid-tier economy right now, but Thailand is aiming for the big leagues. To make that happen, it's embarking on an ambitious growth plan that includes $50 billion in infrastructure spending.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
Thailand is ready to take the next step economically. Sitting among the world's mid-tier economies, Thailand plans to invest heavily in infrastructure to raise its profile among foreign investors and position itself as one of Southeast Asia's primary gateways for commerce.
This nation of 68 million people already has a lot going for it. Its manufacturing sector is strong, particularly in the automotive and technology areas. It is the world's number-two producer of hard disk drives. It ranks 12th in automotive manufacturing and sixth in the production of rubber tires. It is also the seventh-largest maker of computer devices. On top of that, Thailand boasts a fairly robust growth rate of 3.2 percent, a low cost of living, and a business-friendly environment—the World Bank ranks it the fifth-best nation in Eastern Asia when it comes to ease of doing business.
Part of its economic success is a result of its location. Thailand is surrounded by many of the globe's fastest-growing economies. Its neighbors include the powerhouse markets of China and India, and it's situated within a short journey of half the world's population. It's easy to see why Thailand aims to position itself as the gateway to these substantial markets.
But location and past success are not enough to assure a solid future for a mid-range economy. Many nations languish for years in the middle of the economic pack. To avoid this fate, Thailand has launched an ambitious economic growth plan designed to kick-start its economy and future-proof its workforce and industrial base. Known as "Thailand 4.0" (the initiative is the fourth iteration of the government's ongoing growth plan), the program is essentially a strategy for transforming a trade-based economy into a technology- and innovation-driven one.
"To gain economic growth, we need to introduce size and innovation," says Dr. Bonggot Anuroj, senior executive adviser with the Thailand Board of Investment.
As part of the effort, the government of Thailand is now finalizing plans that include a US$53.4 billion investment in major infrastructure projects through 2022. Once the plan is approved (which is expected to be next month), work will begin immediately to improve roadways, deep-sea ports, airports, and rail connections to create a logistics corridor that will have few rivals in Southeast Asia.
GROWTH INDUSTRIES
As for where the money will go, government leaders in Thailand have identified five industries "of existing strength" for further investment: automotive, intelligent electronics, advanced agriculture and biotechnology, food processing, and tourism. They have also identified five emerging growth areas for further development: aviation, biofuels and biochemicals, medicine and healthcare, digital technologies, and—of particular importance to the supply chain profession—robotics and advanced automation.
Dr. Anuroj says the latter will also play a critical role in addressing Thailand's future labor needs. Much like Japan and other developed Asian nations, Thailand is facing an aging population. "We may experience a lack of manpower in the future. So we are looking to grow our automation and robotics capabilities. These will be new engines of our growth," he says.
With respect to geography, almost all of the investment will be concentrated on three provinces on the eastern shore of the Gulf of Thailand. Known as the Eastern Economic Corridor (EEC), the target region includes the provinces of Chonburi, Chachengsao, and Rayong, which all lie within 150 miles of Bangkok. This area has been the industrial heart of Thailand for more than 30 years. Most of the major automotive manufacturers, including Honda, Toyota, Ford, General Motors, and BMW, have plants in the region. The area also boasts the world's 20th busiest port, Laem Chabang. In addition, it is home to a healthy oil and gas industry as well as a second port, Map Ta Phut, that handles bulk commodities.
Thailand believes that further infrastructure investment within this region will help it compete with Asia's other top logistics centers, like those in China, Japan, and Singapore. "We want Thailand to be a logistics hub," says Dr. Anuroj.
WHAT WILL BE BOUGHT WITH BAHT
All this will come at a hefty cost. To position the Eastern Economic Corridor as a major logistics center, Thailand's government will invest 1.5 trillion Thai baht (US$43 billion) in the area over the next five years.
One beneficiary of the spending will be the deep-sea cargo port of Laem Chabang, which is already one of the region's busiest. Its container operations currently handle 7.6 million TEUs (twenty-foot equivalent units) annually, and it does a robust roll-on/roll-off (Ro-Ro) business of 1.2 million automobiles a year.
"Our goal for Laem Chabang is to be one of the top 15 ports in the world and to be the prime gateway to Asia," says Kamit Sangsubhan, secretary general for the EEC Office of Thailand.
New rail connections are already under construction at Laem Chabang that will provide the capacity to haul 2 million TEUs annually between the port and Bangkok. Plans also call for the addition of six on-dock tracks for building trainloads.
The port will soon enter Phase III of its development project. This phase, which is expected to take seven to eight years to complete and will come at a cost of US$2.5 billion, will include the addition of a new basin and terminals to service ships.
The channel at Laem Chabang will also be deepened from its current 16 meters to 18.5 meters (just over 60 feet). Capacity will increase to 18.1 million TEUs. Other planned enhancements will boost the port's Ro-Ro capacity to 3 million vehicles annually.
In a bid to alleviate congestion, the port will soon introduce an electronic scheduling system for trucks. New access roads will further improve container flow in and out of the port. In addition, a "coastal terminal" will open next year that will accommodate the smaller vessels and barges that ply the Chao Phraya River (the inland waterway to Bangkok) and feed cargo to smaller ports in the region. The coastal terminal is expected to process 300,000 TEUs per year.
The terminal operators at the port will also make significant investments in technology once Phase III gets under way.
"We have a lot of technology to operate our port," says Anat Machima, senior operations manager at Hutchison Ports, a terminal operator that handles about 30 percent of the current container volume at Laem Chabang. Among other enhancements, automated cranes will be installed for loading and unloading ships at the berths. These will be remote-controlled from an adjoining building, as will the rubber-tired gantries that will work the new container yards. "We are the most modern port in Southeast Asia. The technology drives us to be competitive," he adds.
THE SKY'S THE LIMIT
Over on the aircargo side, work is under way to expand U-Tapao Airport, a former U.S. military base now operated by the Thai navy. Total investment at the airport, which lies about 90 miles southeast of Bangkok, is budgeted at US$5.7 billion. The airport already has a passenger terminal, which is being expanded to turn U-Tapao into Thailand's third international airport (a move aimed at reducing the strain on Bangkok's other two airports). Last year, 700,000 passengers used U-Tapao, and traffic is on pace to increase 20 percent this year.
Next year, construction will begin on a second runway and a new aircargo terminal. The EEC office also hopes to make the airport a center for aviation maintenance, repair, and overhaul. Thai Airways already has a three-hangar maintenance operation at U-Tapao for both narrow- and wide-body airplanes. However, the facility sits on the site of the new runway, so it will soon be demolished and replaced with a new building containing five hangars.
The area around U-Tapao is currently home to some 20 industrial developments, with more to come. There are plans in the works to develop properties adjacent to the airport for cold-chain logistics and other distribution operations, including the establishment of a large free-trade zone.
As for the region's ground transportation network, the Eastern Economic Corridor is currently slated for rail-track upgrades. In addition to the on-dock tracks being built at the port, US$1.8 billion will be spent to upgrade existing lines and double-track the rails between the EEC region and Bangkok to accommodate higher volumes of intermodal container traffic.
High-speed passenger service connecting Bangkok to the EEC will be added within the next few years, funded by a US$4.5 billion government investment. An extensive highway improvement project is also on the docket to facilitate the movement of freight by truck. This includes adding lanes to existing highways as well as the construction of new roads. The budget for the highway projects is US$1 billion.
DEVELOPING A TALENT PIPELINE
While Thailand plans to spend heavily on infrastructure improvements, it is not neglecting investments in human capital. Working with private industry, the government is establishing "Cities of Innovation" within the EEC region. These "cities," which are essentially research clusters containing educational facilities and hands-on laboratories, are designed to promote the development of new technologies and train the next generation of business leaders. The first City of Innovation—a center devoted to research on biochemicals, biofuels, and agriculture—is already up and running. The second, which will focus on automation, artificial intelligence, and robotics, will open soon. Planning is under way for a third center that will be dedicated to aeronautics and space technology.
In addition, private industry is working with government and other agencies to assure a steady supply of talent to fill jobs in manufacturing and logistics. One such collaboration is the Thai German Institute, a center opened in 1992 by the two governments to bring German technology and training to Thailand. German instructors taught at the center for the first 10 years, but today, local instructors provide the advanced technical training with support from private industry. In all, the center offers some 200 courses on topics such as automated systems, electronic controls, machine maintenance, and smart factories.
Companies pay for the training of about 3,000 of their employees annually. These students typically already hold university degrees and have at least five years of experience in the industry before they're sent for the advanced training. Industry suppliers, such as Japan's Sanmei robotics company, provide automated systems and equipment for hands-on work. It's all designed to assure that Thailand can meet the challenges of tomorrow, while keeping the manufacturing plants and logistics centers of today humming.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."