Taiwan ASEAN Studies Center Editor Team
The ASEAN’s New Industrial Landscape – Thailand and Malaysia's Latest Industrial Policies and Trends in Taiwanese Business Strategies conference organized by the Taiwan ASEAN Studies Center at the Chung-Hua Institution for Economic Research and supported by the Chinese National Association of Industries, concluded successfully on March 26, 2024. The conference had the honor of having Deputy Director-General of the Ministry of Foreign Affairs Asia-Pacific Department, Chen Jyun-Ji, Group Leader of the Ministry of Economic Affairs Industrial Development Bureau, Yen Fong-Ci, and Speaker of the Penang State Legislative Assembly, Choo-Kiang Law, to give the opening remarks. Following this, Kristy Tsun-Tzu Hsu (Director of the Taiwan ASEAN Studies Center, CIER), Stanley Kang (Former Chairman, Joint Foreign Chambers of Commerce in Thailand), Dr. Chin-Yoong Wong (Professor in the Department of Economics, Faculty of Business and Finance, Tunku Abdul Rahman University, Malaysia) gave presentations on the latest industrial policies of Thailand and Malaysia.
In the discussion, Dr. Ong Kian Ming (Former Deputy Minister of the Ministry of Investment, Trade and Industry, Malaysia), Nelson Wu (Deputy General Manager of Wistron Technology), Woranath Khemasiri, (Director, Southeast Asia and India Business Group Secretary General, PwC Taiwan)and Hong Kuo-Chi (Special Assistant to the Chairman of Kinpo Group) discussed and exchanged views on the current status and prospects of Taiwan-Thailand and Taiwan-Malaysia relations. The meeting was held online and broadcast live on YouTube, providing an opportunity for the public to access the content in the future, promoting greater understanding of Thailand and Malaysia’s industrial issues.
In his opening speech, Deputy Director-General Chen Jyun-Ji first noted that Southeast Asia, with a population of nearly 700 million and abundant human and natural resources, has the potential to become the third-largest economy in the world. Due to geographical proximity, Taiwan maintains close trade relations with ASEAN countries, which serve as crucial hubs for Taiwan’s foreign investments and trade expansion. Since President Tsai Ing-wen took office in 2016, the New Southbound Policy has included all ten ASEAN countries among its 18 target nations. Over the eight years of its implementation, bilateral trade volume has increased by over 80%, and the export share to New Southbound countries has grown from 17.7% in 2020 to 20.9%. The number of approved investments from New Southbound countries into Taiwan has reached 662 cases, a 22.45% increase. These results demonstrate that the New Southbound Policy has facilitated the establishment of regional partnerships with New Southbound countries through expanding trade cooperation, enhancing talent exchanges, and deepening regional connectivity, thus reducing risks and creating economic mutual prosperity.
Next, Yen Fong-Ci (Group Leader of the Ministry of Economic Affairs Industrial Development Bureau) mentioned that, in recent years, Taiwan’s ICT industry supply chains have been gradually shifting towards Taiwan+1 or China+1 strategies due to the impacts of the US-China trade war and the Russia-Ukraine war. Moreover, the tension in the Taiwan Strait has led many businesses and brands to require the relocation of Taiwan’s supply chains to other countries. Mexico, located near the US market, and Eastern European countries such as the Czech Republic are popular choices for relocation to serve the EU market. When assessing the shift of supply chains to Southeast Asian countries, Malaysia and Thailand are favored because of their stable political and economic environments, along with strong production capabilities in the region. Malaysia has high national income and educational standards, and its industrial development is centered on semiconductor packaging and testing, which aligns closely with Taiwan's industries. Thailand already has several Taiwanese Printed Circuit Board (PCB) manufacturers purchasing land locally, signalling upcoming production activities. In the process of relocating supply chains to Southeast Asia, local government support is crucial for landing evaluations, tax assessments, and securing favorable production conditions, highlighting the importance of understanding local policies.
Choo-Kiang Law (Speaker of the Penang State Legislative Assembly) also mentioned that Malaysia is a strong export trading nation, with robust growth in trade with Taiwan. Malaysia’s advantages lie in its sound economic foundation, comprehensive legal regulations, superior infrastructure, and multilingual talent pool. In the recently launched 2030 National Industry Blueprint (NIMP), strong support is provided to industries such as technology, electronics, semiconductors, healthcare, and aerospace, which are critical factors in attracting international investments.
After the speeches by the distinguished guests, the meeting proceeded with three carefully arranged special reports and a comprehensive panel discussion. The first special report was delivered by Kristy Tsun-Tzu Hsu (Director of the Taiwan ASEAN Studies Center, CIER), focusing on the outlook for Taiwan-Thailand and Taiwan-Malaysia relations and economic cooperation. Southeast Asia has been a major beneficiary of the global supply chain shift, especially with significant increases in investment in the semiconductor and electronic components sectors since 2021. In Taiwan’s foreign investment structure, Taiwan’s investments in New Southbound countries surpassed those in China in 2022, reflecting that Southeast Asia is becoming the core region for Taiwanese investments abroad, with Vietnam leading and Thailand following closely behind.
Regarding Taiwan’s relationship with these countries, Taiwan’s economic ties with Thailand and Malaysia have been warming up each year, with bilateral trade and investment reaching historic highs in 2023. For example, Taiwanese PCB manufacturers have moved operations to Thailand since 2022, driven by both the China+1 and Taiwan+1 strategies, as well as favorable incentives offered by the Thai government, stable utility supplies, and a well-equipped workforce Malaysia, Taiwan’s second-largest trading partner in ASEAN, with exports focusing on integrated circuits, marking a growing partnership in the semiconductor industry. For instance, many suppliers in the Apple supply chain are based in Malaysia, far outpacing other ASEAN countries.
Looking ahead, both Thailand and Malaysia are receiving renewed attention from European and American governments and foreign businesses due to the development of key industries such as electric vehicles, electronics, and semiconductors. Taiwan’s investments in both Thailand and Malaysia have reached peaks previously unseen, though there are challenges such as political stability, the limited FTA network, talent shortages, and competition between foreign investors and Taiwanese businesses. Moreover, both Thailand and Malaysia maintain friendly relations with China, and are cautious in their development of ties with Taiwan. However, cooperation in supply chains and talent development remains a promising avenue for engagement.
The second presentation was given by Stanley Kang (Former Chairman, Joint Foreign Chambers of Commerce in Thailand) on the topic of Thailand’s Latest Industrial Policies and Economic Overview. Following the COVID-19 pandemic, the Thai government has actively promoted digitalization, innovation, services, and sustainable development. In terms of digitalization, the government has launched the Thailand 4.0 initiative, aimed at upgrading industries through automation, data-driven processes, and smart technologies. This involves the introduction of new technologies across various sectors to enhance traditional industries while fostering emerging industries. Regarding innovation, the government has introduced the BCG (Bio-Circular-Green Economy) model, which promotes the upgrading of agriculture, improving food safety, strengthening the grassroots economy, and encouraging green manufacturing. At the same time, the government is focused on the development of the Eastern Economic Corridor (EEC), transforming Thailand into a high-tech, high-value-added, and highly innovative nation.
Additionally, Thailand is actively developing digital wallets and land bridge projects, while boosting local industries in PCB and new energy vehicles. In the services sector, the government is not only upgrading S-curve industries but also enhancing Thailand’s soft power to improve its global competitiveness. Lastly, in terms of sustainable development, the government is prioritizing environmental protection, resource utilization, and improving labor rights and social justice, while also enhancing the environmental, social, and corporate governance (ESG) capabilities of businesses. Thailand has developed comprehensive industrial policies to address challenges arising from geopolitical shifts and global economic changes, further enhancing the country's competitiveness and value-added industries.
The third presentation was given by Dr. Chin-Yoong Wong (Professor in the Department of Economics, Faculty of Business and Finance, Tunku Abdul Rahman University, Malaysia), who presented an analysis of Malaysia’s current economic situation, using the semiconductor industry as a case study to explore Malaysia’s manufacturing strength in the new Cold War era. As a region that can cooperate with both China and the United States, Malaysia plays a crucial role in the overall development of Southeast Asia. Malaysia established a Free Trade Zone as early as 1972, laying a solid foundation for future industrial development. However, starting in 2001, due to changes in global manufacturing, Malaysia’s manufacturing sector began to decline from its previous growth trajectory. As a result, Malaysia began seeking additional export markets.
Malaysia’s manufacturing sector, particularly in the IC industry, has become one of the main drivers of the country’s industrial growth. The country maintains close ties with Taiwan and other countries in this sector. Following the US-China trade war, with shifts in international dynamics, Malaysia's manufacturing sector has regained attention from foreign investors. For Chinese companies, Malaysia has become an important site to enhance electronic product yield, especially in packaging and testing areas, due to US export restrictions on advanced chips and equipment.
In September 2023, Malaysia introduced the New Industrial Master Plan (NIMP) to address changes in international circumstances. This policy covers four key development directions: deepening economic complexity, advancing digitalization, driving green transformation, and improving the welfare of the people. In the electronic industry, the government plans to develop wafer manufacturing, IC design, and chemistry sectors, as well as establish smart factories, AI centers, and promote domestic new energy vehicles and carbon capture, utilization, and storage technologies. Malaysia’s neutral geopolitical stance, its attractiveness to international investment, and its strengths in packaging technology make it a focal point for global investments.
During the panel discussion, online attendees raised questions regarding the current status and future outlook of Taiwan-Thailand and Taiwan-Malaysia relations. The discussion was lively and enthusiastic. In Malaysia, former Deputy Minister of Trade and Industry, Ong Kian Ming, stated that the Malaysian Investment Development Authority offers various investment incentives, and the mature development of the electronics and electrical industries in both Singapore and Malaysia has attracted numerous international electronics companies to invest, laying a strong foundation for future investors. Other sectors, such as electric vehicles and new energy, are also actively seeking investments. Despite the competition between Southeast Asian countries for foreign investments, there remains room for cooperation in supply chains, with the potential for regional supply chains, such as in the automotive sector, where Malaysia and Thailand could collaborate.
According to Nelson Wu (Deputy General Manager of Wistron Technology), the company will continue to invest in Malaysia, particularly in automation and smart manufacturing. Malaysia, however, faces challenges such as the lack of a demographic dividend and a labor shortage, which remain major barriers to investment. In addition to introducing foreign workers, Malaysia needs to improve the competitiveness and welfare of local employees. Moreover, Malaysia's supply chain is not as complete as China’s. While Penang has a relatively well-established electronics supply chain, many critical components and parts are still lacking. Facilitating local industry and technological upgrades, as well as the transfer of supply chains, is a significant challenge for businesses. Companies are encouraged to invest in Malaysia and help build a more complete supply chain and industrial cluster to enhance localization.
Regarding Thailand, Woranath Khemasiri, (Director, Southeast Asia and India Business Group Secretary General, PwC Taiwan), stated that recent investments by Taiwanese businesses in Southeast Asia are mainly based on supply chain transfer. For example, Vietnam has attracted many major electronics manufacturers, Malaysia has attracted semiconductor packaging and testing factories, and Thailand has recently attracted numerous circuit board manufacturers. Based on his experience in advising leading circuit board companies, Khemasiri identified three main reasons why circuit board manufacturers favor Thailand. Firstly, the circuit board industry requires a stable and sufficient supply of water and electricity, and Thailand has an advantage in this regard. Secondly, the industry requires a large labor force, and Thailand has an edge over Malaysia in recruiting workers, as it allows the employment of foreign workers, making it easier to recruit enough labor. Thirdly, for Taiwanese businesses, Thailand is more accepting of Chinese culture and business practices, which increases Taiwanese companies' willingness to send staff to Thailand.
Hong Kuo-Chi (Special Assistant to the Chairman of Kinpo Group) shared his experience of Kinpo Group’s investment in Thailand. Kinpo Group began investing in Thailand in 1989, making it the company's first large-scale overseas manufacturing base. The considerations for choosing Thailand included: the simple and obedient local culture, industrial zones surrounding the Gulf of Thailand, ease of imports and exports, political and economic stability, the government's allowance for the introduction of foreign workers (with around 65% from Myanmar), a stable labor supply with few labor disputes, and stable energy supply. The Thailand Board of Investment (BOI) also offers various investment incentives. He further stated that Kinpo Group will continue to increase investments in Thailand, and its subsidiary, Thai Kinpo, has become one of Thailand's largest electronic manufacturing services (EMS) companies, and even one of Southeast Asia’s largest. In recent years, Thai Kinpo has become increasingly popular with international manufacturers, primarily because of its comprehensive production support system that can quickly meet clients’ non-China supply chain demands. Given the ongoing US-China trade conflict, Thai Kinpo anticipates a large influx of international orders and has already expanded its factories. The company plans to further expand into the electric vehicle charging station market.
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