## Thailand

**Section I: Summary of Construction Equipment**

Thailand offers growing opportunities for U.S. construction machinery
exporters. Viewed as premium products, American construction machinery
brands are major players in all segments of a market that comprises
excavators, bulldozers, motor graders, rollers, loaders and backhoes.
The existing prominent position in all key segments and the buyers'
strong reception of American makes are key advantages for U.S.
construction machinery manufacturers interested in exporting to
Thailand, a market which is expected to have a steady and high growth
rate.

Imports account for more than 90% of the market since only a few
Japanese manufacturers locally assemble their excavators using imported
components. Last year, imports of construction machinery had a total
value of \$401 Million, an equivalent of 35% increase over 2004. Growth
of the market, and hence imports, is expected to correspond with growth
in the construction industry, which has a projected annual average
growth rate of 10% till 2008. Overall investment in construction is
projected to be \$24.25 billion during 2007-2009, with investment in
public infrastructure accounting for more than 60% of the overall
estimates.

## 

## Section II: Market Overview

Last year, Thailand's overall investment in construction projects had an
estimated value of \$17.15 billion. Investment in public projects
accounts for 52% (\$8.425 billion est.) and private construction for 48%
(\$8.275 billion est.) A large increase in public construction is
expected with the government budget plan as high as \$10.8 billion,
representing a 23% growth over last year. Meanwhile, growth in private
construction investment is projected to be moderate. The value of
construction in the private sector is expected to grow only 8% to a
total of \$9.275 billion this year.

Development of transportation infrastructure, mainly expansion of the
rail-based Mass Transit system in Bangkok and construction and
maintenance of highways and rural roads, will drive growth in demand for
construction machinery. Demand for machinery will be derived from large
civil contractors and local distributors who are awarded the contracts
for these projects. Their demand for construction machinery is certain
to increase in response to the increase of projects they have on hand.
In addition, government purchases of machinery are expected particularly
in the area of road maintenance. However, procurements made by concerned
organizations such as Department of Highways, Department of Rural Roads
are through local companies only.

Similarly, demand for machinery will increase with expansion in
investment in private construction projects. Small and medium size
contractors are providers of construction services to developers and
homeowners. The value of new residential constructions throughout
Thailand is projected at \$5.55 billion, a 6% increase from estimates of
\$4.995 billion in 2005. High-end condominiums, office high rises and
industrial estate projects will outperform housing projects. Demand for
upper to high-end condominiums is expected to increase 8% to 13,000
units nation-wide. Foreign investment in 1,300 projects with a total
value \$16.1 billion approved by Thailand's Board of Investment in 2005
will expand demand for industrial estates and office buildings beyond
the 8% average growth of the sector.

Major types of construction machinery sold in Thailand are listed below
according to their market value.

Excavators 60%

Bulldozers 10%

Motor Grader 10%

Roller 5%

Loader 5%

Backhoe 5%

Others (such as Asphalt Paver, Generator Set) 5%

U.S. makes are prominent players in each segment. They are Caterpillar,
Dynapac, Gomaco, Ingersoll Rand, John Deere, Case etc.

**Section III: Market Trends:**

Thailand's construction industry is expected to grow more than 10%
annually over the next two years until 2008 when growth begins to
decline. Average annual value of construction investment is projected at
\$24.25 billion during 2007-2009. Public investment for infrastructure
development will be a driving force of growth in this industry.
According to the government's latest announcement in November 2005,
during 2007 to 2009 the government plans to invest \$45.1 billion for
developments of Thailand's physical infrastructure including
transportation, logistics, water resource management and residential
development for lowincome earners.

Industry is optimistic that demand for construction machinery will
expand steadily along with the growth in investment in private and
public construction. Industry believes the market fully recovered from
the excess supply situation caused by the country's economic crisis in
1997. The crisis was partly a result of an over supply in property
developments since demand was mainly for speculative purposes. It wiped
out a large numbers of construction machinery distributors as demand for
their machinery disappeared overnight. Post crisis demand which
gradually alleviated the industry excess supply situation came from the
re-export markets and more recently, the property market during
2000-2004, which grew at an annual average 15%. The fact that last year
imports actually grew more than one third over the 2004 level suggests
that import growth will be correlated with demand growth in the market.

**Section IV: Import Market**

Thailand's imports of construction machinery had an estimated value of
\$401 Million in 2005, a 35% increase from \$296 Million in 2004.
Industry experts estimate the market size of construction machinery on
total value of imports because only a small volume of local production
exists in the industry. Local production of construction machinery is
limited to the assembly of imported component parts without actual
manufacturing of essential components.

Imports of Construction Machinery by Market Value 2005

  ----------------------- ----------------------- -----------------------
  Countries of Origin     Value in \$ Million     \% Share

  Japan                   103                     26

  China                   33                      8

  U.S.A.                  20                      5

  Korea                   14                      3.5

  Germany                 7                       1.7
  ----------------------- ----------------------- -----------------------

U.S. makes are prominent players in the construction machinery market in
Thailand. They dominate most segments of the market, except for
excavators where they rank second with 29% market share. U.S. makes
control more than 90% of the motor grader and bulldozer segments. In
addition, up to 80% of the rollers and 60% of the loaders sold in
Thailand are of U.S. brands. Premium quality and more advanced
technology are competitive strengths of U.S. makes. They compete well
and dominate segments where technology, performance and durability are
of critical importance. However, they are generally sold at a higher
price that often impedes them from competing in segments where price is
of greater concern than premium quality.

Higher transportation costs contribute partly to the cost disadvantage
of U.S. imports. The greater distance between the U.S. and Thailand as
compared to that of its competitors has a multiplying effect on large
size items such as construction machinery. According to a major
distributor of a U.S. make, the transportation expense of their U.S.
imports is as high as 10% of the machine cost. To overcome some of its
cost disadvantages, U.S. manufacturers export to Thailand from their
production bases in the region. For example, eight out of ten U.S. make
excavators sold in Thailand are exported from U.S. manufacturing
operations in China and Japan. This explains the reason for China being
the second largest exporter of construction machinery into Thailand.
Similarly, the value of imports from Japan contains a certain amount of
U.S. make products.

## Section V: Competition 

Imports from Japan have a leading market share in Thailand's
construction machinery market. The three major Japanese makes, Komatsu,
Kobelco and Hitachi supply more than 40% of the hydraulic excavator
market, the largest segment of the construction machinery market.
Komatsu, the dominant Japanese player, has a 30% share of both the
excavator and loader market. It also has a 5% share of the motor grader
and bulldozer market. Competitive price, acceptable quality and
after-sale service are Komatsu's key competitive strengths. Komatsu
assembles its hydraulic excavators locally for both domestic and export
markets, and this enables Komatsu to offer its excavators at a lower
price and compete effectively among price-conscious buyers. In addition,
Komatsu is favored in government projects for being a local made
product.

Unlike Komatsu, other Japanese makes such as Kobelco, Hitachi, Sakei and
Furukawa succeed in only one or few product segments. Kobelco and
Hitachi are known to compete only in the excavator market. Sakei
competes in, and has a 15% share of, the roller market. Furukawa is a
small player in the loader market, having an approximate 5% market
share. These Japanese makes also compete on price by offering acceptable
quality products at lower price in each of their respective segments.

**Section VI: End Users**

Government purchases are for new machinery only and account for 30% of
the construction machinery market. Large civil contractors who work
mainly on large public infrastructure projects account for another
30--35% of the market and they purchase mainly new machinery. Small
contractors who work mainly on real estate projects and other small
private projects make up the remainder of the market. Small contractors
with limited financial means make up most of the used construction
machinery market. Regardless of their financial capability, leasing is
not a financing option. Purchases of construction machinery in the
private sector are financed by local banks /financial institutions.

Government purchases are made via bidding, which in most, if not all,
cases require the bidders to be registered companies in Thailand.
Moreover, Government purchases involve longer time and more people in
the decision making process. Potential suppliers for projects need to
work on the process from its initial stage when actual users of the
construction machinery prepare their request proposal stating the
desired specifications. In this way they can ensure that their products
meet the specifications and hence they are eligible to bid. In addition,
they need to develop relationships with a number of people involved
since a committee is set up to decide on each government purchase of
major items including construction machinery. Right strategy and good
relationships are needed and companies on the ground are better equipped
than their foreign counterparts. Therefore, it is recommended that U.S.
exporter identify a local representative to work in the market

Similarly, local distributors are important for success of construction
machinery in the private sector market. Local distributors' reputation
and their ability to provide after sale services are prime
considerations of buyers in this segment. In addition, a good client
relationship is often the deciding factor in a close competition.

**Section VII: Market Access**

Imported construction equipment is subjected to a 5% duty. No local
standard or other certification requirement exists to impede their free
access into Thailand. Moreover, Thailand is in the middle of FTA
negotiations with the U.S. Despite its pending result, the FTA may
possibly be beneficial to U.S. construction machinery exports once the
negotiation is successfully completed.

Competition in the market is a natural barrier to access for U.S.
construction machinery in Thailand. To overcome this barrier, exporters
of U.S. construction machinery need to have the right products at a
competitive price. Of equal importance, capable local distributors are
necessary to establish a newcomer in this intense competition market.

**Section VIII: Major Infrastructure Project/Opportunities for US
Companies**

The Royal Thai Government's most recent announcement on its development
plan for the country, Mega-projects 2005-2009, outlines key areas of
opportunities for U.S. construction machinery exports. The plan calls
for development of mass transit systems, highways, railroads, deep
seaports as well as water reservoirs and distribution channels. Specific
projects outlined in the plans include both new and existing plans of
relevant ministries. They include Bangkok Mass Transit Development, new
distribution channels through the Andaman Sea, modernization of rail
transport services, construction of 3^rd^ Bangkok outer ring road
expressway, and modernization of Integrated Water Resource Management.
Details of each project are available at
<http://www.modernizethailand.com/>

Implementation of this Mega-project is unique and different from any
traditional public procurement process. In each of the development
areas, the Thai Government provides only an outline of their development
objectives and brief detail of their requirements. None of the
traditionally available terms of reference, specifications, or detail
design are provided. Potential bidders are free to bid with a technical
proposal and financial plan deemed to best meet the government's plans.
Deadline for submission of technical proposal is set for April 26, 2006.
The selection process is scheduled by September 2006. Regardless of the
selection result, construction activities arising from these planned
projects will significantly increase demand for more construction
machinery in Thailand. Interested U.S. exporters can obtain updated
information either via the website or Commercial Service Bangkok at
[www.buyUSA.gov/thailand/en/](http://www.buyUSA.gov/thailand/en/)

Few public construction projects in Thailand involve the Asian
Development Bank, U.S. Exim Bank or OPIC. The competitive interest rate
in the local market and the relatively small size of projects make the
costs and financing terms of using U.S. Exim or OPIC unattractive in
Thailand. Meanwhile, Thailand being a graduate from the developing
country status has much fewer projects qualifying for the support of
Asian Development Bank.

In contrast, the U.S. Trade and Development Agency (USTDA) plays a more
active role in promoting U.S. exports into Thailand. The agency invested
nearly \$10 Million in the development of Thailand's transportation
infrastructure such as aviation, ports and transportation logistics.
Thus, U.S. exporters interested in seeking TDA support for their
potential projects in Thailand are encouraged to visit the agency
website at [www.tda.gov](http://www.tda.gov/).

**Section IX:**

## Key Contacts

**Local trade associations**

Thai Contractors Association

110 Wireless Road

Pathumwan Bangkok 10330

Tel: 662-255-3991 thru 2, 662-255-3386 thru 7

Fax: 662-255-3990

Website: [http://www.tca.or.th](http://www.tca.or.th/)

Contact: Mr. Poomson Rojlertjanya

President

The Association of Thai Concrete Products Industry

47/1 Radchadapisek Road

Ladyao Jatujak

Bangkok 10900

Tel: 662-939-0884 thru 5

Fax: 662-939-0887

Contact: Mr. Wittawat Pornkul

President

The Engineering Institute of Thailand

487 Ramkamhaeng 39 Road

Wangthonglang Bangkok 10310

Tel: 662-319-2410 ext 339

Fax: 662-319-2711

Website: http://www.eit.or.th

Contact: Dr. Karoon Chandrangsu

President

The Consulting Engineers Association of Thailand

3^rd^ Floor E I T Building

487 Ramkamhaeng 39 Road

Wangthonglang Bangkok 10310

Tel: 662-935-6440

Fax: 662-935-6441

Website: http://[www.ceat.or.th](http://www.ceat.or.th/)

Contact: Dr. Prasert Patramai

President

## Government organizations

Department of Highways

Ministry of Transport

2/486 Sri Ayudhaya Road

Rajthevee Bangkok 10400

Tel: 662-354-6668 thru 76

Fax: 662-354-6572

Website: http://www.doh.go.th

Contact: Mr. Chaisawasd Kittipornpaiboon

Director General

Department of Rural Roads

218/1 Rama 6 Road

Phyathai Bangkok 10400

Tel: 662-299-4591 thru 2, 662-299-4334 thru 6

Fax: 662-299-4336

Website: [http://www.dor.go.th](http://www.dor.go.th/)

Contact: Mr. Surachai Thansitpong

Director General

Expressway & Rapid Transit Authority of Thailand

2380, Phahonyothin Rd.,

Saenanikom, Chatuchak District,

Bangkok, 10900\
Tel: 662-579-5380 thru 9, 662-562-0044

Fax: 662-561-2984

Website: http://www.eta.co.th

Contact: Mr. Pachearn Pirotesak

Governor

Bangkok Metropolitan Administration

173 Din Sor Road

Sao Chingcha, Pranakorn

Bangkok 10200

Tel: 662-221-2141 thru 69

Fax: 662-221-2170

Website: [http://bma.go.th](http://bma.go.th/)

Contact: Mr. Apirak Kosayodhin

Governor

## Relevant Website

[www.aecasia.com/thailand](http://www.aecasia.com/thailand): website of
comprehensive information on engineering and construction products for
builders, engineers, architects and contractors

**Section X: Upcoming Trade Shows/Events**

**CONEXPO Asia 2006**, organized by the Association of Equipment
Manufacturers (AEM), organizer of CONEXPO/AGG one of the world leading
construction equipment trade shows this first edition of CONEXPO in Asia
is a combination of exhibits, industry education, networking, and
hands-on equipment demonstrations.

Date: May 15-18, 2006

Location: China National Agricultural Exhibition Center

Beijing, China

Website: [www.conexpoasia.com](http://www.conexpoasia.com/)

Email: info@conexpoasis.com

Tel: 1-414-298-4141

Fax: 1-414-272-2672