22 Jun Can Thailand become a global aviation OEM/MRO hub?
With the proliferation of low-cost airlines serving a burgeoning middle class, Thailand is looking to establish itself as a global aviation OEM/MRO hub in the Asia Pacific region. But the government will need a clear strategic direction if it is to transition the country into a reliable operating hub with a quality supply chain and a skilled, qualified workforce.
Thailand has significant potential with manufacturing trending toward 'rightshoring'
Thailand’s strengths as an MRO hub
Thailand’s central geographic location makes it highly suitable as an MRO hub. Its deep seaport can accommodate transport critical for very large aircraft components. Current transportation infrastructure development projects, such as high-speed rail connections between the major airports, will also improve flexibility and logistical speed for MRO.
Under its Thailand 4.0 strategy, the government identified several innovative industries, including aerospace, as “engines of growth.” To attract investors, it has set up tax incentives and simplified requirements for residence permits and land ownership, as well as ‘free zones’ where materials and goods can be stored and re-exported without taxation or tariffs.
Thailand has two important hurdles to overcome to attract the type of investment that could establish the country’s reputation as a reliable global aviation hub for the growing OEM/MRO market (pdf): a fragmented local supply chain infrastructure and the English language barrier.
Poor infrastructure poses obvious logistical risks, but convincing Thailand’s existing local operators to invest in new technologies may prove more challenging. Aerospace is a niche market and commercial justification of big investments for small volumes will be difficult without the right incentives.
How the Thai government can help
Thailand has significant potential with manufacturing trending toward assembly and high-tech fabrication at advanced ‘rightshore’ locations rather than low-cost offshore locations. However, investors will be looking beyond the usual incentives to the mitigation of certain risks.
Without a well-established, and properly certified and regulated, local supply chain, attracting top-tier investors will be complicated. Government support in persuading a launch customer to showcase Thailand’s qualifications is a crucial part of the equation. The recent agreement between Airbus and THAI to evaluate possibilities at U-Tapao International Airport is a positive start.
Attracting a large aircraft assembler first and letting the supply chain grow from there, rather than the other way around, should prove a smart strategy. It makes the move immediately more practical for smaller investors and suppliers whose risks from distance and lead times would otherwise be too prohibitive.
Right now, efforts at a national level toward breaking the language barrier are another necessity. English is the global aviation industry’s operating language, so English-literate engineers and mechanics are a must for international investors to come on board.
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