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8.4 Considerations of Industrial Development Strategy

8.4.1 Two Industrial Development Strategies

The industrial development strategies are generally divided into two types: industrial
development strategy by introducing external capital (ISEC) and industrial development
strategy by utilizing local resource (ISLR).

The first strategy, ISEC, is the strategy mainly by inviting enterprises to set up factories
in industrial estates with basic infrastructure such as land, traffic system, water supply
and electric power. The second strategy, ISLR, is the strategy for generating value
added products and promoting industry by highly advanced utilization of local resources
such as mineral, agricultural, forestry, and marine resources; traditional technology and
culture; and human resource.

However, the above categorization is used for convenience to show the industrial
development approach. Industry is not developed by only one approach. Industrial
development strategy practically lays special emphasis on ISEC in some stage or
condition, and on ISLR in another stage or condition.

In a stage of the regional industry being focused on the primary industry, the industry
mainly produces agricultural, forestry, and marine goods or makes materials for such
production. The industrial development relies inevitably on ISLR under this
circumstance.

In the process of industrialization, industrial agglomeration is observed in the urban

area, and then income disparities are increased between urban and rural areas. The
principal strategy to reduce income disparities is inviting enterprises having excellent
factories in the urban area to set up branch factories in the rural area. The income
disparities give the rural area a labor wage advantage that can attract industries.

In the stage of further industrial development with industrial agglomeration being

observed in the rural area as well, expanding the strategy of inviting enterprises
become possible utilizing agglomerated industry, technology, human resources, etc.
Simultaneously, for further ISLR, it is possible to prepare conditions such as spinouts
from engineers or the development bodies and product innovation by linkage with
industry, academy, and government or with other industries.

ISEC and ISLR are apt to be considered as opposing each other, as ISEC is for inviting
industries from outside and ISLR, for establishing industries by one’s self. However,
they have many common points to prepare conditions for industrial development and to
promote industry matching with the regional circumstances. Emphasis is put on the
preparation of production environment when ISEC is applied. Emphasis is put on

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human resource development and preparation of supporting system for start-up new
businesses and industries when ISLR is applied. In spite of such differences, they have
many common factors, i.e. preparation of production bases, labor force development,
human resource development, and preparation of the environment for industrial
development such as linkage between industry-academia-government and the living
environment, etc.

In other words, it is not easy to develop a new local industry in a region where people
have a negative attitude toward the idea of introducing enterprises from outside, and it
is not possible to attract enterprises to the region where the new local industry is nipped
off.

Recently, more importance is attached on environmental consideration and

zero-emission in both cases of ISEC and ISLR. For energy use, further utilization of
locally available natural energy is demanded. For advancing zero-emission, more
importance is attached on the linkage among industries and regions as well as on
recycling in enterprises. It is much better to use ISEC and ISLR in a harmonized way
instead of alternative way.

ISEC Harmonized ISLR

Figure 8.10 Industrial Development Strategy

(1) ISEC (Industrial Development Strategy by Introducing External Capital)

It should be noted that industrial location is to be realized when the industrial

requirements meet with the regional location conditions. Industrial requirements vary
with the kind of industry. For example, even when B-type industry is demanded in
A-region, realization is difficult, unless A-region’s location conditions satisfy the
industrial requirements for B-type industry.

The strength of industrial requirement is different depending on the type of industry.

industry into the following four types according to their strength of industrial
requirement:
• Infrastructure-oriented industry;

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• Consumer-market-oriented industry;
• Labor-oriented industry; and
• Resource-oriented industry.

Industry is not always involved in only one type, but sometimes in two or more types.
Each type of industry is characterized as follows:

1) Infrastructure-oriented Industry

The term “Infrastructure-oriented industry” can be defined as the type of industry that
shows a strong tendency to be located in the region with a particular infrastructure such
as a large port, a vast industrial area, an abundant supply of industrial water and a
high-speed traffic network.

This type of industry mostly belongs to the industry largely depending on imported
resources or the mechanical industry treating large and heavy goods. Typical
examples are iron and steel industry (blast furnace steel making, electric furnace steel
making, etc.), petroleum refining, petrochemical, paper and pulp, aluminum smelting,
copper smelting, lead smelting, zinc smelting, shipbuilding, car manufacturing, etc.

2) Consumer-market-oriented Industry

The term “Consumer-market-oriented industry” can be defined as the type of industry

that shows a strong tendency to be located in the region close to the product market or
having a large consumption. The market largely varies with the type of industry and it is
categorized into markets requiring urban function, population, industrial agglomeration,
agricultural agglomeration, etc.

Products requiring urban function are related with knowledge, information, logistics,
construction, etc. Typical industries requiring urban functions are car manufacturing,
computer, publishing and printing, ceramics, construction materials, steel processing,
medical machines, etc. Most products requiring population are those related with food,
clothing and shelter. Other products under this group are textile goods, furniture, fitting,
wooden goods, etc. Those requiring agricultural agglomeration are livestock feed,
fertilizer, carton boxes for packaging, various agricultural materials, etc.

3) Labor-oriented Industry

The term “Labor-oriented industry” can be defined as the type of industry that shows a
strong tendency to be located in the region where labor is available at low wage rate or
a large number of labor is available.

Industries requiring a large number of labor are shipbuilding, car manufacturing,

steelmaking, electric machinery, precision machinery, etc. Most factories belonging to

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industries such as food, garment, textile goods, electric machinery parts and electronic
parts require a large number of labor at low wage rate.

4) Resource-oriented Industry

The term “Resource-oriented industry” can be defined as the type of industry that
shows a strong tendency to be located in the region that yields mineral resources,
agricultural products, marine products, and forest products.

Typical industries categorized into this type are cement, agro-processing, livestock
processing, marine product processing, woodworking, etc.

There are several location tendencies of industry, as mentioned above. It is important

to clarify what regional conditions meet with which type of industry, and then the
industries to be introduced to the region should be chosen.

Clarification is necessary for the regional conditions listed below.

Table 8.24 Regional Conditions for Industrial Location

Land Coastal or inland, land area, geological conditions, ground, bearing

capacity, land category, land price
Water Supply Ground water (possibility of intake, depth of water where it is taken from,
amount of water taken from a well, total amount of water where it is taken
from, water quality)
Industrial water supply (amount, water tariff rate, water quality)
Port Sailing routes, depth at anchorage, number of wharfs by capacity, access to
the closest port (if there is no port at site)
Road Conditions of expressways, national highways, and other main roads
Access from the site to such roads
Railway Access to the closest railway station, possibility of siding
Air port Existence of air port, access to the closest air port
Urban functions Function and scale of the city, access to the city
Population Population at the site and surrounding area
Industrial Industrial agglomeration at the site and surrounding area
Agglomeration
Labor force Number of new graduates of universities, excess labor by sex and age,
labor wage level
Resource Kinds and availability of agricultural, forestry, marine and mineral resources
Source: JICA Study Team

Candidates are screened by the comparison of the industrial requirements with the
regional conditions. The industry having higher reality and satisfying the regional

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demands are normally selected from the screened candidates by assessments of

location demands, development effects, and environment impact.

The industry selected becomes the target industry. It is also important, at the early
stage, to involve some enterprises having a relation with the region in the regional
industrialization as target enterprises. Examples are enterprises that have top
managements coming from the region or graduated from regional universities, a lot of
employees coming from the region, and business connections in the region.
Connections with the local community and relatives should be fully utilized.

In general, introduction of enterprises into the rural areas by ISEC begins with
labor-intensive industries by utilizing the connections with the local community and
relatives. Garment and electronic parts industries are attracted by abundant labor force
and low labor wage in the region. Agglomeration of labor-intensive industries enables
further development of infrastructure and location of related industries like logistics and
services, followed by location of processing/assembling industries such as electric
machinery, car parts and precision machinery. In this stage, the regional level of
technology is gradually improved and quality of labor force is demanded together with
quantity. In the next stage, research and development departments may be
established in the factories and the regional industry may expand to the advanced
industrial agglomeration that becomes the conditions of ISLR.

The recent trend of information-oriented society and rapid development of information

infrastructure are creating a new industry that can be called “Human Resource-oriented
Industry”. Software development and information service industries are typical example.
The industry is rarely restricted by any factors except human resource and information
infrastructure, therefore, it can be located anywhere and called footloose industry.
Actually it shows a tendency to be agglomerated in urban areas, since highly educated
persons are apt to desire high quality of life and urban services. However, it is viable in
rural areas according to intentions of human resource. Various cost increase in urban
areas is encouraging mobility in human resource such as IT engineers and others in the
USA. Infrastructure development based on this phenomenon is one direction of
regional development. It is necessary to consider the strategy of attracting human
resource rather than industry.

(2) ISLR (Industrial Development Strategy by Utilizing Local Resource)

ISLR is the strategy to generate value-added products by highly advanced utilization of

local resources.

In case of introducing industry, a set of capital and technology that is required for
manufacturing a specific product is introduced. On the other hand, entrepreneurs
should develop own products by themselves, in case of ISLR. Although they can use
various measures such as obtaining cooperation from external experts and employing

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persons for product development, they still surely have to develop products by
themselves.

Local resources are categorized into (a) tangible resources such as agricultural,
forestry and marine products produced in the region; and (b) intangible resources such
as climatic conditions, landscape, folk art, history and people.

Tangible resources are processed and finally provided as food together with the
primary products of agriculture, forestry and fishery. While, intangible resources are
utilized mainly for tourism and keeping a company with urban inhabitants.

In the process of local resource utilization, price of value-added product increases

drastically from the raw material price to the intermediate product price, and further to
the final consumer price.

Take Japan’s food situation, for example. In 1998, its agricultural outputs and marine
product outputs were JPY 10 trillion and 2 trillion, respectively, or 12 trillion in total.
Industrial outputs of food processing that includes processing of imported agricultural
products was JPY 24.8 trillion, double the total of agricultural and marine product
outputs. The final expenses for food and drink cost JPY 80 trillion, broken down into the
following: JPY 16 trillion, 40 trillion and 24 trillion for perishable foods, processed foods
and food-restaurant, respectively.

Consumer support is essential for ISLR, whether tangible or intangible resource is

utilized. More competent development is required with the progress of market
expansion from restricted area to wider area. It is necessary to develop products by
following more reliable steps. Human resource and organization become the most
important for product development.

Four types of product development is shown in Figure 8.11.

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TYPE-1: Surface change of existing

product
Improvement of Existing
Product
TYPE-2: Substantial change of existing
product
Product
Development
TYPE-3: Development of essentially new
product
Development of New
Product TYPE-4: Development of new product by
further processing steps

TYPE-1 is the product improvement without any substantial changes from the existing
products, while TYPE-2 is adding something to the existing product. TYPE-3 and -4 are
those for new product development. Type-3 creates quite new products, and TYPE-4
adds further processing to the primary product or primary processed product currently
marketed.

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Product development is performed according to the following sequence.

STEP-1 Review of Resource

STEP-2 Getting Ideas

STEP-3 Market Research

STEP-4 Product Screening

STEP-5 Formulation of Commodity Concept

STEP-6 Manufacturing Trial Piece

STEP-7 Manufacturing Prototype Model

STEP-8 Merchandising

STEP-1 “Review of Resource” consists of research of material resource, human

resource and required fund.

In STEP-2 ”Getting Ideas.” By utilizing the results of STEP-1, investigation should be

made to answer the questions: “What kind of new products should be created?” and
“What and how should the existing products be improved?”.

STEP-3 ”Market Research” is carried out for various products obtained by STEP-2. In
this step, research work should be made to answer the questions: “What are the similar
or related goods?”; “What characters do they have?”; “Why are the products popular?”;
“Why are the products not popular?”, etc. For the concerned goods, statistical data
should be collected and market route should be researched in this step.

In STEP-4 ”Product Screening” deals with screening of various products for

development or improvement according to the results of market research. Screening

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should be done based on comprehensive evaluation in consideration of competition,

raw material procurement, required technology, production facilities, market route, etc.

A definite concept of commodities and its basic specifications should be formulated in

STEP-5. At first, one should come up with a key word for each product in consideration
of the regional history and culture. Based on the key word, commodity information such
as content, image, trade name and price should be threshed out.

STEP-6 is to manufacture a trial piece including the commodity content and package
design. Entrepreneurs make trial pieces, if they have facilities and technologies for
manufacturing. If they do not have such facilities and technologies, they should
outsource such work.

In STEP-7, a prototype model should be made from the trial piece so that entrepreneurs
can ask consumers to try it and make modifications and improvements.

STEP-8 “Merchandising” is the final step in which acquisition of licenses and trial
marketing should be achieved and marketing strategy should be threshed out.

It should be noted that appearing to have abundant resources and possibilities of new
products largely differ from obtaining consumers’ support.

(3) Basic Principle of Development Strategy

There is no opposition to adopt the industrialization strategy whether ISEC or ISLR1 at

the beginning of industrialization. The difference between them lays weight on the
development and/or improvement of production conditions or on the nurturing of the
entrepreneurs and excavation of technological seed and the development of
investment climate for industrialization, such as development of industrial infrastructure,
HRD, collaborative activity between industry and academia, improvement of living
conditions, etc. is common to both ISEC and ISLR.

The industrial agglomeration in the I-san region remains at a low level; factories are
scattered and of low density. Moreover, most of the factories are classified as small
scale. , For example, in Kalasin, which is a rather industrialized province in the region, a
factory employing only 28 workers is already ranked in the top-ten companies and in the
rest of provinces, factories with 7 to 8 employed workers are already considered as
rather large factories. There are some “large” factories employing between two and
three hundred workers; however, they are mostly seasonal workers with few regular
employees in agro-products processing factories such as sugar, rice mill, tapioca and
canned tomatoes Aside from agro-processing industry, other existing types of industry
are garment, wooden products, and jewelry, but the factories are few and industrial

1
ISEC: Industrial Development Strategy by introducing External Capital, ISLR: Industrial Development Strategy by utilizing
Local Resource

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linkage remains weak.

Under the current situation of industrial structure and of each factory, it is quite difficult
for the existing factories to achieve a self-sustained growth; therefore, the adoption of
industrial development strategies are limited as follows: 1) to promote the investment
from outside of the region, 2) to create a new industry and/or business, and 3) to
integrate the investment promotion and the creation of new industry/business.
Evidently the current situation of industrial location shows it is quite difficult to promote
industries from other regions unless dramatic improvement of location conditions in the
region is achieved. Regarding the second approach, which creates new business by
utilizing local resources and/or technological seed and nurturing and/or attracting
entrepreneurs, it will also be difficult because it requires establishing the proper system
and this takes a longer time.

Although both strategies to develop industries, in fact, have difficulties to overcome,

they should encourage the industrialization in the region. There are some bright factors
in the region as summarized hereafter.

From the viewpoint of promoting the investment from other regions, the location
conditions shall be improved by completion of the second Mekong International Bridge
in 2004 and the improvement of Asian Highway. The advantages given by
suchdevelopments can be enjoyed not only by this region but by other regions as well.
Therefore, the inter-regional competition of the investment promotion shall be severe.
Even though the competition is hard, the benefit of such an advantage in the region will
be rather large.

Attention should also focus on the functions of existing higher education institutes.
There are currently 8 higher education institutes, including the Kasetsart University, in
the region and they offer courses to cope with regional requirement, but the contents
and level of curricula need to be improved. These institutes shall be the prime engine
for the creation of new business and/or promotion of direct investment, subject to the
private-academia collaboration through the offer of technological seed possessed by
them and strengthening the R&D capability and HRD function as well as enhancement
of regional industry.

The strategy adopted by the region, therefore, is to phase the development of

infrastructure coping with the change of outer conditions, and to effectively establish the
HRD and industry support facilities for new industry and business creation.

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8.4.2 Investigation on Target Industry

(1) Investigation on Potential Industry

This part of the report investigates potential industries in the study area. It is important
to invite enterprises from the outside as well as to promote the local enterprises in the
region. In order to select industries for promoting and inviting enterprises, potential
industries are generally picked by three measures. The first measure is selection
according to the regional resources and the second measure is selection of desired
industries to resolve the problems that the region has. The third measure is selection of
potential industry by comparison of industrial requirements and regional conditions for
industrial location.

For the study area, potential industries are investigated from the following three
viewpoints:
• Industries utilizing the regional resources;
• Industries coping with the regional problems; and
• Industries meeting with the regional conditions for industrial location.

Manufacturing industries and logistics have own requirements for location. According
to the requirements, desirable sites are selected. Regional conditions of the study area
are evaluated to select desired industries.

Target industries that are the policy target for industrial development are investigated
based on the potential industries.

1) Industries Utilizing the Regional Resources

The key industry is agriculture with production of cassava, rice, sugarcane, corn for
livestock feed, tomato, and livestock products in the study area. There is the food
processing industry utilizing these products there, although its scale is small.

It is possible to promote the food processing industry as the leading industry by high
degree use of agricultural and livestock products to increase productivity.

The study area has a possibility of promoting paper processing and shearslit, since it is
located on the way to Laos and Vietnam from Khon Kaen where a paper mill is located.
It also has a possibility of manufacturing wooden products such as construction
materials and gardening materials using wood imported from Laos and Vietnam.

There are factories such rice mills, garages, sawmills, wood processing, garment,
plastics molding, however, their production capacities are as large as meeting with
regional demand. A lot of rice mills are located, but they do not have machinery.
Therefore, industrial agglomeration that encourages new enterprises is not observed in

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the area.

In consideration of the current regional situations, the following are potential industries
utilizing the regional resources:
• Manufacturing starch from cassava;
• Manufacturing compound livestock feed from corn, cassava, freshwater fish, etc;
• Manufacturing construction materials from bagasse;
• Manufacturing fried potatoes, potato chips, and potato flakes;
• Manufacturing processed food of rice such as Mirin, Japanese sweet sake used as
seasoning;
• Processing of beef for human consumption or for pet-food;
• Processing and shearslit of paper produced by the factory in the neighboring
region;
• Manufacturing products of imported wood from Laos and Vietnam; and
• Manufacturing of agricultural machinery and its parts.

2) Industries coping with the regional problems

The region should solve its own problems by generating large job opportunities in the
short or medium terms, and by forming industrial structure for sustainable development.
Investigation is made here on industries that cope with the problems in the short and
medium terms.

There is a constraint on generating job opportunities in the study area, because it has
an industrial structure relying on agriculture. Due to the constraint, the area has a large
excess labor that result in the largest supplier of migrant workers in Thailand. Therefore,
it is important to invite labor-intensive industries to generate job opportunities constantly
in the short and medium terms. It is also important to select industries with little
environmental load from the viewpoint of environment protection.

Industries of both labor intensive and small water consumption are listed, referring to
industrial characters shown in Japanese industrial classification. For the purpose of
study, labor- intensive is defined by the number of employees per floor area being more
than 1.5 times of the average in Japan, at 14.6 employees per thousand square meters.
Small water consumption is also defined by the water requirements per floor area being
less than half of the average in Japan, or 69.5 cubic meters of daily requirement per
thousand square meters. The results are as follows:
• Food: manufacturing food such as bread and cakes;
• Textile and garment: manufacturing such as net, outerwear, shirts, underwear,
clothes, personal articles, bedclothes and embroidery;

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• Wood, wood products, and furniture: manufacturing wooden containers, wooden

statues, religious items, furniture and fittings;
• Paper and paper goods: manufacturing paper goods and paper containers;
• Publishing and printing: printing and bookbinding;
• Petroleum and coal products: manufacturing briquets and oval briquets;
• Rubber products: manufacturing rubber belts, rubber tubes, and industrial use
rubber products;
• Leather and fur goods: manufacturing industrial use leather goods, leather shoes,
bags, and handbags;
• Ceramics, stone and clay goods: manufacturing construction clay material and
ceramic products;
• Metal products: manufacturing of tableware, cutlery, metal fittings and metal
spring;
• Machine, electric, and precision machinery: manufacturing metal processing
machinery, wood processing machinery, metal molds and parts, electric machinery
such as power generators and electric motors, electric measuring instruments,
parts for electronic and communication equipment, surveying instruments, gauges,
optical instruments and medical instruments; and
• Other manufacturing industry: manufacturing stationeries such as pens, pencils,
ballpoint pens, accessories, and buttons.

The above industries are listed for the short and medium terms. It is necessary to give
a role of elements in the industrial structure aimed for the long term to these industries.

3) Industries meeting with the regional conditions for industrial location

The regional conditions for industrial location are shown in the section 8.3, and they are
summarized below.

Traffic Conditions

The road system is relatively developed in the study area. Although the northeastern
part is currently blocked off by the River Mekong, the future traffic between Laos will be
available by the new bridge construction project. There is no high-speed traffic system
in the area.

There are two airports in the study area such as Nakhon Phanom and Sakon Nakhon
and, in addition, there are three airports including an international airport in neighboring
Kohn Kaen, Ubon Rachatani (international airport), and Savannaket (Lao PDR). In the
future, the airport will be the important location factor to develop the industry as well as
road network.

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Infrastructure (water, land, electricity)

It is easy to acquire land for industrial use, although so far no industrial estate is
developed in the area. For water supply, industrial water supply system is not prepared
and underground water contains salt. It is easy to receive electric power.

Labor

The study area has abundant labor, being a supplier of migrant workers. Most of them
are unskilled and the training for them is insufficient. On the other hand, it is possible
that the skilled workers in the metropolitan area whose hometowns are in the study area
will be returning to the I-san region.

Approach to Market

As the study area is 700 km away from Bangkok with no expressway, an approach to
the major market is not so good. Although there is a population of approximately 3
million in the study area, the regional market is insufficient to attract the direct
investment of industry.

Urban Functions

Each capital of four provinces has a population between 70,000 and 200,000, and a
standard level of urban functions such as medical care, educational, cultural, sports and
welfare facilities.

Industrial Agglomeration

No industrial agglomeration is observed in the study area. The neighboring area, Khon
Kaen, has industrial agglomeration, however, it is 400 km away from the study area.

The above conditions are compared with the industrial requirements to investigate
potential industries. For the investigation, industries are classified into three types, by
product: “Basic Resource Type”, “Daily Products Type”, and “ Processing and
Assembling Type”. Taking each type’s requirements into consideration, potentials of
industrial location are studied.

Basic Resource Type Industry

This type of industry includes the iron and steel, petroleum refining, petrochemical, and
nonferrous metal industries. As these industries require an approach to mineral
resource as an important factor, they are normally located near production sites of
mineral resource or ports. However，the fine chemical industry requires accessibility to
market, water supply, and agglomeration of research institutions. It is less possible to
locate the basic resource type industry in the area, because the regional conditions of

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the area do not satisfy its industrial requirements. The area has neither mineral
resource that can be used as industrial raw material nor a large port for receiving raw
material.

Daily Products Type Industry

Industries belonging to this type are those manufacturing daily goods such as food,
beverage, textile, garment, wood, furniture and leather. Some factories process locally
available raw materials such as agricultural, forestry and fishery products, while the
other factories process the raw materials brought from other regions for satisfying the
regional demand.

This type of industry also includes manufacturers of rubber products and plastic
products. However, these products are widely used from daily goods to industrial use
and their industrial requirements are mainly market and abundant labor.

Potential industries categorized in this type are processed goods of agricultural, fishery,
forestry and livestock products, and wood, and wood products that utilize local
resources. Textile goods, garment and plastic products also have a potential, because
of abundant labor.

Processing and Assembling Type Industry

This type of industry is engaged in assembling and manufacturing parts for industrial
machinery, precision machinery, car, etc. and categorized into the manufacturing
industry of metal products, general machinery, electric machinery, precision machinery
and transporting machinery like cars. The key industrial requirements are accessibility
to market, agglomeration of the related industry and abundant labor.

The area is about 700 km away from Bangkok and 400 km from Khon Kaen,
neighboring areas with industrial agglomeration that is not so good for market
accessibility and traffic conditions. There is a potential of manufacturing parts of
electric and electronic machinery and agricultural machinery. The new bridge
construction project will develop the potential of locating these industries, because the
study area will be a relay point for transportation between Thailand and Laos/Vietnam.

(2) Investigation on Target Industry

The above investigation on potential industry revealed that industrialization would be

very difficult in the study area that has small industrial agglomeration and not good
regional conditions in terms of traffic system and accessibility to market. In order to
promote industrialization in the area, it is necessary to work out political measures to
improve the regional conditions and lead industrial location politically.

Some of these measures are to nurture enterprises of food processing especially

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agro-processing and its related industries, to provide incentives and support for
production in case of new enterprises entering to the area, to lead industrial location of
recycling and environmental industries of promise in Thailand, and to set up
organizations for human resource development and high-tech promotion.

Mere potential industries based on the regional industrial potential are not enough even
for solving employment problems that are a short tem issue. Therefore, it is necessary
to politically lead the industries that show promise for sustainable development.

The following are four goals of target industry for industrialization in the study area:
• To promote agglomeration of “Industries utilizing the regional resources” that can
be introduced in the short term;
• To attempt agglomeration of “Logistics with light processing,” because the study
area is located in “a relay point” of various places in Thailand and Laos/ Vietnam;
• To lead politically the location of promising industries, “Reuse and recycle
industries,” and set up a leading model business; and
• To agglomerate politically “Assembling industries” that have a strong linkage
among enterprises for the sustainable development in the study area.

Industries meeting with the above four goals are listed as follows:

1) Industries Utilizing Regional Resources

Among industries of this category, the target industry is the food processing industry
utilizing resources of agriculture and fishery that are key industries in the area.
Industries manufacturing souvenirs related to tourism resource and those requiring
abundant labor are also included in the target industries.

Industries related to Agriculture and Fishery

a) Processing of cassava

Manufacturing technology of starch from cassava is being developed by Kasetsart

University and others, and it is at the initial stage of industrialization. The crops
researching center in Rayon is performing a series of research work from cultivation to
processing of cassava. Thus, the target industries are as follows:
• Starch manufacturing industry;
• Ethyl alcohol production as an addition to liquid fuel;
• Starch processing industry as eco-material products (to agricultural sheets, food
containers, plates, packaging materials, etc.); and
• Other food processing industry such as fried potatoes, potato chips, flaked
potatoes, etc.

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b) Manufacturing livestock feed from corn and other agricultural and fishery products

Compound fertilizer is manufactured from corn for livestock feed, bagasse that is
sediment of sugar cane, cassava, and freshwater fish. And so the selected target
industry is compound fertilizer manufacturing industry.

c) Other processing Industry

Demand for rice, the key agricultural product in the area, is stagnant. Manufacturing of
Mirin, Japanese sweet sake for seasoning, from rice for export is a promising value
added industry. A Japanese enterprise actually has a plan of new factory for
manufacturing a kind of Japanese liquor from Thai rice in another area.

Manufacturing pet food from beef, the key livestock product in the area, for export is
also a promising industry.

Following are the selected target industries:

• Sake and Mirin brewing industry utilizing rice;
• Beef processing including pet-food;
• Fish meet sausage production;
• Construction material utilizing bagasse; and
• Wooden products using local materials.

As the regional resources-oriented industry, ethyl alcohol production from cassava

and/or sugar cane is given focus. Produced ethyl alcohol is used as added mixture to
fuel for a 10% share of total fuel content. The Government of Thailand considers
establishing 4 factories to produce such ethyl alcohol. The feasible production volume
is calculated as 500 kilo liters per day in minimum by MOI; therefore, the annual
production volume will be 165 thousand kilo liters and the required materials will be 240
thousand tons of cassava or 280 thousand tons of sugar cane per year. The supply of
materials from the North Eastern Region will be sufficient since the production amount
of cassava and sugar cane per annum is 8.9 million tons and 17.4 million tons,
respectively. On the other hand, the total consumption of fuel in the region amounts
around 674 thousand kilo liters per year; therefore, the required total amount of ethyl
alcohol is estimated as 67.4 thousand kilo liters when total fuel production convert from
the ordinary to the new energy. This figure is only 40% of the minimum production
requirement, so some policy measures to introduce the new mixed fuel should be
adopted (i.e. tax incentives to keep price competitiveness and to enhance the
substitution from ordinary fuel to the ethyl alcohol mixed fuel, etc.). The project shall
contribute to increase the farmers’ income, to create job opportunities, and to utilize the
existing rich bio-mass in the region as well.

Industry related to Tourism Resource

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Manufacturing souvenirs for tourists visiting dinosaur remains in Kalasin, Lam Pao
Reservoir and the festival in That Phanom in the study area, is promising. It is
recommended that souvenirs be manufactured as the original brand in the area from
raw materials not only locally available but also purchased from surrounding areas and
Laos.
• Manufacturing industry of leather goods, cane and bamboo goods, wood products,
paper products, rubber products, etc.

Industry requiring a Large Number of Labor

It is possible to develop the labor-intensive industries requiring a large number of

workers, because the area is the largest supplier of labor in Thailand. These industries
are as follows:
• The textile and garment industry;
• Manufacturing industry of wood, wood products, furniture, etc;
• Manufacturing industry of plastic goods; and
• Electric and electronics and its related products industry (print circuit board, switch,
relay, etc.).

The garment industry targeting the domestic market faced difficulties through the
severe competition with low-priced products imported from China, Vietnam, and India.
The export-oriented garment industry, which is consisted of foreign investors mainly, is
shifting their production from ladies’ to men’s products (higher-grade products). Some
investors locating their factory in BKK point out that to locate in BKK and its vicinity is to
get several advantages such as export procedures and logistics. Therefore, the
incentives to relocate from BKK are quite small except that labor would be much
cheaper as against the rising cost of labor in BKK.

It is pointed out that the equipment being used by textile and garment industries in
Thailand are quite old and their competitive edge is being eroded by countries with the
latest equipment and advantage of low labor cost. To survive such severe competition,
the garment industry in Thailand will have to shift its products to the higher-grade
products and higher value added products. Under these situations, the targets to
promote into the region should be the investors who tend to shift their products.

2) Logistics with Light Processing

The area is about 700 km away from Bangkok and 400 km from Khon Kaen. However,
its eastside is facing with Laos across the River Mekong, Vietnam being located east to
Laos.

The new bridge over the River Mekong is under construction. This bridge is expected to
encourage the traffic between the area and Laos/Vietnam. It is expected that the route

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between Khon Kaen/ Bangkok and Laos/ North and Middle Vietnam be the key route,
and the area be the important place as relay points.

From such points of view, the following industries of logistics with light processing are
selected as target industries.

• Logistics with light processing industry that is related to agricultural and fishery
products (food processing, warehouses, sorting, transportation, etc.)
• Logistics with light processing industry for wood and wood products (sawing,
manufacturing of building materials, stockyards)
• Industries of processing and shearslit of paper
• Industries of the secondary processing and shearslit of steel
• Logistics such as warehouses of raw materials, semi-products, products,
commodities, etc., sorting, labeling and transportation

3) Reuse and Recycle Industries

It is internationally required that a resources recycle system be established to cope with

the environmental problems caused by a series of current industrial systems consisting
of raw material, production, consumption and disposal.

As the Thai industrial structure will inevitably move in this direction, it is necessary to
take political measures for it. It is hoped that development should be carried out based
on the concept of resource recycling, and that the country’s model business of reuse
/recycling should be started in this newly developed area. Although the reuse/recycle
business requires the investigation on transportation costs for disposal and products,
price of recycled products, dumping area, etc., it is expected to improve employment
situation in the area and to decentralize the Thai industry.

It is anticipated that there is a demand for reused goods in the neighboring areas of
Laos, Vietnam and China.

The following industries are deemed as promising reuse and recycling industries.

Reuse Industry
• Repair, processing, transportation, selling and maintenance of cars, construction
equipment, agricultural machines and implements, scrap tires, electric generators,
electric appliances, office equipment, etc.
• Collecting rare metals

Recycle Industry
• Recycling scrap tires

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• Recycling wooden waste

• Recycling plastic waste
• Recycling waste of glass, etc.

4) Assembling Industry

In the region that has no industrial agglomeration, technicians, production facilities and
information are insufficient for supplying parts to factories, even if they come from
outside, and those located in other regions.

As the study area has almost no industrial agglomeration, it should begin with
promoting industries utilizing regional resources and then promoting the logistics with
light processing industry to improve industrial agglomeration, taking advantage of new
bridge construction over the River Mekong.

A large number of engineers, researchers, related enterprises, and information will be

gathered to the area according to industrial agglomeration. It will lead a formation of
industrial structure with enterprises’ linkage.

The long-term target in the area is to establish an industrial structure that mutually links
large-, medium- and small-scale enterprises. It is necessary to make an agglomeration
of the assembling industry that is labor-intensive and require a strong linkage effect in
the course of establishing the industrial structure.

An agglomeration of the industries having a wide range and a strong linkage effect is
not expected under the current conditions in the area, as such industries require a
relationship with market. The most important thing is to politically lead promotion and
invitation of the core enterprise in the course of establishing industrial agglomeration in
the area.

The promising industries related to assembling are as follows:

• Industries of manufacturing agricultural, industrial and construction machines,
office equipment, etc. and their parts; and
• Industries of manufacturing parts of communication and electronic instruments.

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Investigation of Potential Industry according to Region

Utilizing regional resources Coping with regional problems
• Processing industry of agricultural and • Labor intensive industry
fishery resources • Industry with strong linkages among
• Industry related to tourism resources
enterprises
• Industry using abundant labor

Meeting with regional conditions for industrial location

• Daily product industry meeting with regional demand
• Industry requiring labor

Location of Study Area

Relay point between Khon Kaen-Bangkok and Laos-Vietnam
→ Logistics with light processing

Political Leading for Target Industries

Leading of promising industry in Thailand
→ Reuse and recycle industries
Industrial agglomeration led by the core enterprises
→ Assembly industries

Target Industries
1. Industries utilizing regional resource:
2. Logistics with light processing:
3. Reuse and recycle industries:
4. Assembly Industries:
8.4

Supporting Measures for Leading Industries

1. Improvement of regional conditions
2. Incentives
3. Establishment of Supporting organizations for technological renovation and human resource
development organization
4. Establishment of organizations for collecting and supplying information and supporting
information-orientation

Figure 8.13 Investigation on Target Industries

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8.4.3 Direct Investment Promotion Measures

Judging from the current situation of the industrialization in the region, it requires for the
direct investment promotion into I-san region to improve the investment climate from
the long-term point of view and to persistently make effort to achieve the target.

In general, there are two basic measures to promote the industries; one is infrastructure
development as a hardware aspect and the other is provision of incentives as a
software aspect. Basically the promotion measures in the region will follow the above
directions, and the provision of high-speed data communications lines and related
support functions for regional industry should be focused. Strengthening of functions
such as HRD, excavation of technological seed, and private-academia collaboration
based on the development of latest IT-related infrastructure is essential not only for the
industrial promotion measures but for the vitalization of local industries as a whole. In
other words, the development of such IT-related infrastructure shall give the opportunity
to overcome the handicap of the remote area to promote industries.

(1) Infrastructure Development

1) Industrial Park Development

Recently the propriety of the preceding infrastructure development for industrialization

is discussed; however, in the purchase of factory lot, investors will not be able to decide
the land acquisition when the proposed land remainas forestry mountain and/or
un-reclaimed fields without the decisive evidence of development. Whether the land is
reclaimed or not, the most important factor for investors is to certainly purchase the land
with required conditions and at a proper time. After the economic crisis in particular,
manufacturers hesitate to purchase land for new factories without any concrete plan.
But when a new factory establishment plan was decided, the investor is rather rushing
to select the factory lot from recently available land. This indicates that even in the
industrial park development the market oriented management strategy is required.

From the developer side, the largest concern at the planning stage is whether the
investors really purchase the developed land (each lot of industrial park) in accordance
with the plan or not. Regarding the private developers, the profitability is the final
objective; however, the target of the development of industrial park as a regional
development project is rather different from the profitability. Obviously the profitability is
important to implement the project but not the proper objective from the point of view of
regional development.

Certainly the development of infrastructure for industry is not only that of industrial park;
however, it is an effective method as a packaged infrastructure development. From the
regional development point of view, the industrial park development will contribute not

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only to the regional economic growth but also to the management of environmental
protection and to the implementation of urbanization through the purification of land
usage. When it is planned to develop the industrial park, the most important issue is to
select the efficient development strategy (e.g. selection of the method of stepwise
development in coping with the actual demand) in order to reduce the initial investment.
In the region where the demand for industrial site will be revealed at least in the long run,
for example, the comprehensive land use plan, which will be able to control the land use
by zoning, to protect the urban sprawl, and to prepare for the future demand, should be
conducted.

In the I-san region, the development of industrial park as packaged infrastructure will be
required to promote the industrialization. There is little problem of land acquisition and
reclamation to develop the industrial park but, on the other hand, the water supply to the
industry is considered to be a problem so the careful survey for water supply in both
quality and quantity shall be conducted. In addition to this, as the selection of
development site, it is required to study the condition of flood.

2) Development of Data Communications System

The objective of the development of data communications system should be to develop

the system to totally support local industries from the viewpoint of so-called “regional
informatization2” while the system is an incidental function of the industrial park and the
contents of the development are to expand the Internet access points, to construct the
high speed data communications lines, and to provide services with reasonable price.
Practically the development is to establish the high-speed data communications
network by optical fibers, which will make possible interactive data exchange and
collaboration. Recently, information technology becomes the key tool of management;
in other words, modern management requires its effective use. Therefore, easy access
to the high-speed telecommunications network is essential. While the materialization of
the ITC 3 infrastructure should be assessed carefully, at least the information system to
support the regional industry development is that to fully utilize the various resources
possessed by the region and to stimulate the restructuring of regional society and
economy. The players of the system, therefore, are not only the industries but also
universities, administrations, and local communities, which join the system from each
standpoint. The procedure of the establishment of the system, for example, will be that
each sector sets up the local area network (LAN), then the LANs are networked as the
wide area network (WAN). The procedure is summarized as follows:
• In the private sector, provincial chamber of commerce and industry, industrial
estates, etc. will set up the LAN. In the LAN, subscribers, which are companies
under the provincial chamber of commerce and industries and/or tenanted in the

2
“Informatization” is a coined word to indicate the process of the establishment of information-oriented society.
3
ITC: Information Technology and Communications

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industrial estates, enjoy the services such as commonly usable information. In

addition to such a service, leasing and rental of IT-related equipment with
reasonable price or free of charge is provided.
• In the academia, the campus-LAN in the existing higher education organizations
will be established at initial stage4. The LAN in the higher education organs will be
networked and then connected with the network in the private sector.
• The establishment of the LAN will be expanded to the administrations and other
public sector, communities, and other NGOs. The networking among the
communities aims to search “regional resources” and to efficiently utilize such
resources and results to enhance the activities of self-development of
communities.

The current situation of informatization in the I-san region, however, remains at low
level. So-called information systems are mainly established at the higher education
organs but they are insufficient, except that in the Kasetsart University connected to the
UNINET. In other words, most of the existing information systems are limitedly utilized
as the documentation and the retrievals of the Internet. Except the higher education
organs, even such systems are introduced into the public sector and a few in the private
sector. At the community level, on the other hand, there are few information systems.
The key issue to establish the IT society in the region shall be to enhance the
networking among whole sectors. In the study region, therefore, the strategy to build
the network should focus on the networking at the community level, which is the
weakest link of the network.

(2) Improvement of the Investment Circumstance in the Institutional Aspect

The incentives for industrial promotion in the region is limited to tax incentives that are
provided to the industry in Zone 3 by the Central Government under the new BOI
scheme. Such incentives, on the other hand, are applicable to any region designated
as Zone 3. There is no special treatment prepared by the NBR region itself. Therefore,
the measures to promote the industry into the region are only provided by the BOI.

4
Obviously the establishment of LAN will be excluded at the organizations that have already set up Campus-LAN such as
Kasetsart University.

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Universities & Other

Public Research Institutes
Higher Education Inst.

Administrative Body New Industries from

Outside

NGO

Community Local Industries

Local Resources

Figure 8.14 Concept of Information Network for Local Industrialization

Generally, the investors evaluate the candidate sites based on the physical location
conditions such as water supply, electricity, telecommunications, transportation
conditions, etc. firstly then compare the institutional aspect, such as incentives in the
selected sites. While the difference of the incentives is not the decisive condition to
select the site, the investors attach importance to the living conditions such as security
and/or comfort and the good prospect in the blue print of the regional development.

In case of Japan, there are some laws and special measures to enhance the
development of certain regions such as Industrial Relocation Law, Development Law
for Hokkaido and Tohoku Region, Development Law for Okinawa, and so on at the
National Level. In addition to them, almost all local governments from village to the
province have an ordinance for the provision of incentives and the institutions for the
industrial promotion. The major incentives provided by the local governments are tax
reduction and/or exemption and various subsidies such as the subsidy of 300 million
yen maximum to a promising industry and that of 50 thousand yen per subject to certain
numbers of employment, and so on. The above special treatment by some local
governments attracted the investors’ attention at first but when the others adopted
similar measures few investors paid attention to it. Notwithstanding the efforts made by
the local governments, the investment to such regions remained at a low level
compared to the number of prospective investors. These experiences in Japan indicate

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only that the provision of incentives focusing on the designation of the region is
insufficient to promote industries; therefore, the re-designation of the zoning in Thailand
will be of little contribution to enhancing the industrial promotion to the region.

Under this scheme are inland depots, SEZ, flexible systems for business activities,
deregulation, etc.

(3) Local Industry Platform (LIP)

The supporting functions for local industries, in general, are local HRD function,
technical/technological assistance function, function for enhancing the entrepreneurs,
incubation function, consultancy function for management skills, and so on. The
Industrial Promotion Center of Thailand, for example, is categorized as the supporting
institution possessing above functions. Global enhancement of the supporting function
of the industry tend to be important, especially in Japan, the USA, Germany, and other
developed countries; the new business creation measures, e.g. incubation function,
encouraging and/or nurturing the entrepreneur-ship, etc. are reinforced. In connection
with such movement, encouraging industrial usage of the fruits of the R&D activities
resulted and accumulated in the universities and institutes and the collaboration
between academia and industry to support the technological development in the
regional industry are activated. It is also notable that most industry-supporting policies
have been shifting to the support of establishing efficient organizations that can easily
handle difficult situations on the spot, and that of putting the “right person in the right
place” to really work such organs.

Basically, new business creation and development of industries have common

supporting functions, while there are differences of conditions of countries, regions, and
industrial structures. The I-san region, therefore, should posses supporting functions
such as private-academia collaboration, HRD, incubation, information dissemination,
finance, consultancy, research, marketing, and so on. In order to efficiently provide
such services, the most important issue is to establish a regional information network
system to integrate all sectors in the region with other regions and furthermore with the
world. Through such a system, the various resources in the region will be usable and
the relevant information will be fed back in each sector and stimulate change in the
region. The establishment and enhancement of the linkage of functions through the
information network system is a key factor to activate the regional industry, to promote
the investment, and to create new businesses. This indicates that the core
management body of the supporting functions will be established inevitably. The Study
Team proposes the installation of the information network system to support local
industries aimed at developing the local industry, promoting direct investment, and
creating new businesses on the one hand, and the establishment of the core
management body aimed at implementing the related activities, namely the Local
Industry Platform (LIP), on the other hand. Shortly the LIP is the system to efficiently

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implement the industrial development and new business creation, and is the new type
of infrastructure toward the next generation.

The business concept of the LIP is shown in the following figure. The concept is
different from the existing Industrial Promotion Center of Thailand, and is characterized
by the following:
• The LIP will be managed by either the Local Government or private sector in
coordination with the central government;
• One of the major activities of the LIP is that related to the information network
aimed at promoting the usage of IT in the region; and
• The LIP will appoint the personnel from the private sector and enhance the linkage
between industry and academia and/or among industry, academia, and public
sector.

The concept of the LIP is summarized as follows:

1) Formation of LIP

The LIP is consisted of two major parts; one is the Local Consortium and the other is the
implementation body called the Platform. The former is composed of the whole sectors
organizing the region such as private companies, universities, R&D institutes, NGOs,
regional inhabitants, and regional government, and is aimed at the discussion and
decision of the basic policy for the activities of LIP, finding the source of funds, and so
on. The latter is the implementation body to be entrusted by the Local Consortium.

2) Organization

When a new organization is established as the Platform, the organization should secure
the public’s benefit. Recently the university is requested to contribute to supporting the
regional development directly from technological aspect to managing as well as to
supplying the capable personnel to the industry. In other words, some of the supporting
functions implemented by the Platform are in common with that expected in the
university. Therefore, it is one of the options that the new organization is set up in the
university. In case of Japan, many universities established the supporting facilities to
support the regional/local development, e.g. local industry supporting center, regional
collaborative research center, etc.; therefore, utilizing such an existing center as the
platform is reasonable in terms of resource allocation (finance, technological support,
human resources, etc.). If such a center was established in the university in the I-san
region, the center is practically used as the platform. If not, the new organization shall
be established as the foundation.

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3) Management

Actually the management of the Platform should be initiated by the personnel belonging
to the business sector or, at least, having the experience to do business. It is required
that the Platform should follow the rapid progress of the global economy and that of the
ITC so the managers of the Platform are required to have the knowledge and
experience to cope with the dynamism of the economy.

Public Research Institutes Universities & Other

Higher Education Inst.

Administrative Body

L I P New Industries
from Outside

NGO

Community Local Industries

Local Resources

Figure 8.15 Concept of LIP

On the other hand, the objective of the Platform is to develop the region as a whole;
therefore, the organization should secure public interest through the transparency of
the implementation of the activities. In addition, the activities by the Platform have a
public character (non profitable), so the financial assistance by the public sector is
required. It is the reason for the public sector to be involved. The Platform is the
generic measure to enhance the linkage of all sectors as a web, so flexible and speedy
activities are always required to eliminate red tape.

4) Functions

The functions to be required are categorized into two according to the situation of
regional conditions such as the existing facilities and the provision of services; one is
the function to be possessed by the Platform and the other is the function to be

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outsourced. Most of the functions to be required are in shortage in the region, so the
newly established organization shall possess these functions by itself. When the
existing facilities, such as Kasetsart University, have to perform some functions, the
Platform should cooperate with them. In this manner, the Platform should play the role
of one-stop service center. In case of the new business creation (or incubation), for
example, a stage-wise support from the start-up is required so the Platform should
prepare the system to consistently support them by the incubation manager. In addition
to it, the functions such as market development, information dissemination and
exchange, HRD, promotion of the regional IT usage, etc. shall be dominated by the
Platform to smoothly implement in line with the objectives. Following are the functions
of the Platform to be selected by the Regional Consortium from the point of view of
efficiency and rationality of actual implementation:

HRD Support Function

The personnel to be nurtured are for the following business categories: IT, Business
Administration, Production Management, Quality Control, Entrepreneur, Middle
management, Leader for the self-development of the community.

Technology Development Support Function

The components of the functions are: (1) Support of technology development by the
private company, (2) Excavation of development seed in the region, (3) Leasing and/or
rental of testing and analyzing equipment, (4) Entrusted testing and Analyzing, and (5)
Assistance of collaboration among Industry, Academia, and Public Sector.

Technology Transfer Function

The function is to strengthen the transfer of technology on the R&D fruits from the R&D
institutes to the private sector.

Venture Business Support Function

The components of the function are: (1) Matching service between the market need and
technology seed and (2) Management of incubator.

Financial Assistance Function

In cooperation with the Venture Capitalists, Banks, and Financial Companies, the
provision and mediation of the financial aspect of the entrepreneurs and of the start-up
business is performed by this function.

Consultancy Service for Management Function

In cooperation with the Accountants, Lawyer, Banks, and CCI, the services of the

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management aspect of the companies are provided.

Marketing Support Function

The components of the function are market development services and promotion of
e-commerce.

Information Dissemination and Exchange Function

The information on industries, technologies, products, and markets will be provided in

order to strengthen the exchange among the different types of industries and between
regions.

Regional IT Usage Promotion Function

This task is intended to support the acceleration and expansion of the broadband
telecommunications system in the region, to develop the agent system and database,
and to promote the IT usage in the communities and other relevant organizations.

Required Human Resources

• Incubation Manager
• Network Manager
• Marketing Manager

Technology
HRD support transfer function
function

Technology
Development Support Financial assistance
function

LOCAL INDUSTRY
PLATFORM Information dissemination
Venture business and exchange function
support function

Regional IT
Marketing support usage promotion
function
Consultancy service
for management
function

Figure 8.16 Concept of LIP’s Functions

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(4) Other Industrial Promotion Measures

The direct investment promotion starts from publicizing the region to the potential
investors for the purpose of attracting them. The actual activities to approach such
investors are generally to trace their kith and kin in the local community and to hold a
seminar and study tour to the sites. At the study tour and/or the promotion seminar, it is
required that the relevant information and data, which are presumed to be requested by
the potential investors, and the available services provision including the incentives
based on the case study of the potential investor should be prepared. The organization
in charge of the industrial promotion in the region shall be experienced in promotional
activities so no explanation is needed. However, in case of Thailand, the IEAT is the
major builders of industrial estates, so the promotional activities have been mainly
implemented by the IEAT. It indicates that the promotional activities in the region with
less development of industrial estates are rather inactive. In fact, the Joint Public and
Private Consultative Committee that aims at the information exchange and discussion
to solve the regional economic issues including the promotion of direct investment is
existing, but it is hard to say whether the committee sufficiently dispenses its function of
discussing industrial promotion in detail, or whether it is the proper committee to report
from the local to the central government. (?)The direct investment promotion activity
has the aspect of regional competition on one hand; therefore, the bigger organization
or inter-regional organization faces more difficulties. In other words, the individual
activity by the region is fruitful in some aspect, so the autonomous activity for the
promotion will be encouraged.

The Study Team proposes two tactics with regard to the activities of the direct
investment promotion.
a) It is said the NBR is a huge pool of seasonal workers. The labor mobility, therefore,
has been one way from NBR to Bangkok and its surrounding area of which the
situation is a disadvantage to promote industry. The tactic to convert such a
disadvantage to an advantage is to promote the movement of the establishment of
the factories into the hometown of seasonal workers in cooperation with the local
government and CCI. The target industries to promote are the footloose industry
and the labor-intensive industry in particular. Firstly, the local government studies
the situation of workers (e.g. what company or industry employs
seasonalworkers?). It is not unusual that a certain company sticks to the practice
of employing many workers from the same town. Workers from the NBR are
mainly unskilled but some of them have had some experience of working in a
factory. Some managers mentioned that the engineers and managers are hesitant
to move to the NBR but the majority of workers from the NBR could possibly
welcome the prospect of returning to their hometown. To situation, the provision
of retraining the employed NBR workers to relocate the factory to the NBR is

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proposed.
b) The second tactic to introduce the factory into the NBR is to prepare the “U-turn
and J-turn5 Information”. The local government collects data on which workers,
employed in BKK and its surrounding areas and abroad, tend to return to their
hometown and/or its vicinity. The data collected reflects types of occupation and
experience, expected occupation, expected region to return, and so on.
Regarding manpower, the supply of Bachelor degree holders by the universities in
the region amounts to only around 1000 now, but their numbers are expected to
increase to around 4,000 from the year 2004. In addition to them, the proposed
HRD program by the Study Team will be able to supply the 1,000 degree holders.
In the near future, the NBR will supply enough well educated human resources in
quantity and in quality. The expansion plan of the higher education sector in the
region is characterized as coping with the requirement of the industry.

New Business Creation

Infrastructure for Promotion of Industrial Linkage

Existing Local Industry Newly Promoted Industry

a) HRD support
b) Technology development support
c) Technology transfer
d) Venture business support
e) Financial assistance
f) Consultancy service for management
g) Marketing support
h) Information dissemination and exchange
i) Collaborative activity among Industry, Academia, and Public
Sector
j) Regional IT usage promotion
k) Industrial Park Development

5
U-turn means that the workers who went out to work in the big city return to their hometown. J-turn means that the workers
who went out to work in the big city return to a city near his hometown.

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8.4.4 Industrial Development Framework and Industrial Location Policy

(1) Industrial Development Framework

Based on the macro framework, the development scale of the region in 2020 is
estimated. In the coming 20 years, the region will develop the industrial land (or
industrial estate) of around 450 hectares.

(2) Industrial Location Policy

The industrial location policy within the region is summarized as follows.

1) Nakhon Phanom

Judging from the accumulation of existing industry, the situation of regional resources,
the airport as the transportation conditions, and the future plan of the third international
bridge, the Nakhon Phanom has the potential of industrial development. The strategy
to enhance the industrial location is to designate a special zone for industrial location
and to improve basic infrastructure. The target industry is summarized as follows:
• Construction and Civil Work Materials, Gardening Materials utilizing the Laotian
log and gypsum, Furniture
• Electrical and Electronics Parts (PCB, Switch, Connector, etc.)
• Agricultural Machinery and its maintenance, Motor, Pump
• Others (Garment & Apparel, Food Processing, Natural Rubber Processing)

2) Sakon Nakhon

The major industry in Sakon Nakhon is agriculture and livestock. In addition, Sakon
Nakhon is characterized by the accumulation of higher education organizations such as
Kasetsart University, Rajamangla Institute of Technology, and Rajabhat Institute. The
transportation condition is also rich within the I-san region. The strategy to industrial
development in the province is to strengthen the HRD and R&D function in relation to
the agri-genetics to enhance the food processing industry and agriculture. In the future,
the “Sakon Nakhon Bio Park” will be established aiming at accumulation of
biotechnology related industries. The target industry is summarized as follows:
• Food Processing Industries;
• Livestock Products (Meat products, Dairy Products, Pet Food Products);
• Organic Fertilizer and Compound Feeds;
• Garment and Apparel;
• Bio-industry related to the Agriculture (Food Supplements Substitutions for
Agricultural Chemicals, Reagents);

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• Agricultural and Environmental Engineering;

• Information Services Industry related to Agriculture and Environment;
• International Collaborative R&D Center; and
• LIP (Local Industry Platform).

3) Mukdahan

The geological condition in Mukdahan is similar to that in Nakhon Phanom so the target
industry in Mukdahan competes with that of Nakhon Phanom. The accumulation of
factories, however, is rather poor compared to the ones in Nakhon Phanom, and there
are only two modern factories (Sugar Factory and Pet Food Factory). Although the
current location condition remains at a low level, the future potential of Mukdahan shall
be raised by the construction of the 2nd International Mekong Bridge in 2004. Selection
of the target industry is conducted by its future potential and the resulting benefits from
introduction of the transportation-related industry. The target industry is summarized as
follows.
• Truck Terminal and Logistic related services Industry (Forwarder, Vehicle
Maintenance, Guest House);
• Warehousing, Stockyard;
• Construction and Civil Work Materials, Assembly of Furniture Components;
• Precise Precutting of Wooden Products;
• Mixture and Packaging of Balanced Compound Feeds and Fertilizer;
• Labeling and Packaging of Daily Sundry Goods;
• Filling Gas, Bottling, Packaging; and
• Decomposition of Machinery and Recycling.

4) Kalasin

Kalasin leads all agricultural production in the I-san region, so industries related to
agriculture should be promoted. At the same time, it is expected that a branch factory
from Khon Kaen will be relocated and/or established in the area. Tourism is also a
promising industry because of the Lam Pao Lake; therefore, tourism-related
manufacture such as handicraft items as souvenir will be expected. In addition, based
on the aquaculture (e.g. catfish), fish paste products will be expanded. An industrial
estate should be developed to prepare such industries. The target industry is
summarized as follows:
• Agricultural Food Processing;
• Freshwater Fish Products (Fish Paste Products);
• Starch, Ethanol, Citric Acid, Eco-materials, Compound Feeds, Organic Fertilizer;
• Sugarcane Processing (Sugar, Compound Feeds, Fertilizer, Construction
Materials using Bagasse);

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• Garment and Apparel (Silk, Cotton);

• General Machinery (Agricultural Equipment and Spare Parts);
• Ceramic Products;
• Leather Bags and Shoes;
• Construction and Civil Work Materials; and
• Handicraft Items as Souvenir.

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＜Sakon Nakhon＞ ＜Nakhon Phanom＞

+ Food Processing Industries + Construction and Civil Work Materials,

+ Livestock Products (Meat products, Dairy Gardening Materials utilizing the
Products, Pet Food Products) Laotian log and gypsum, Furniture
+ Organic Fertilizer and Compound Feeds + Electrical and Electronics Parts (PCB, Switch,
Connector, etc.)
+ Garment and Apparel
+ Agricultural Machinery and its maintenance,
+ Bio-industry related to the Agriculture
Motor, Pump
(Food Supplements, Substitutions for
Agricultural Chemicals, Reagents) + Others (Garment & Apparel, Food Processing,
Natural Rubber Processing)
+ Agricultural and Environmental
Engineering
+ Information Services Industry related to
Agriculture and Environment
+ International Collaborative R&D Center
+ LIP (Local Industry Platform)

Nakhon

Sakon

Kalasin Mukdahan

To Khon Kaen

＜Kalasin＞ ＜Mukdahan＞

+ Agricultural Food Processing + Truck Terminal and Logistic related

+ Freshwater Fish Products (Fish Paste services Industry (Forwarder, Vehicle
Products) Maintenance, Guest House)
+ Starch, Ethanol, Citric Acid, + Warehousing, Stockyard
Eco-materials, Compound Feeds, + Construction and Civil Work Materials,
Organic Fertilizer Assembly of Furniture Components
+ Sugar cane Processing (Sugar, + Precise Precutting of Wooden Products
Compound Feeds, Fertilizer, + Mixture and Packaging of Balanced
Construction Materials using Bagasse) Compound Feeds and Fertilizer
+ Garment and Apparel (Silk, Cotton) + Labeling and Packaging of the Daily
+ General Machinery (Agricultural Sundry Goods
Equipment and Spare Parts) + Filling Gas, Bottling, Packaging
+ Ceramic Products + Decomposition of Machinery and
+ Leather Bag and Shoe Recycling
+ Construction and Civil Work Materials
+ Handycraft Items as Souvenir

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8.5 Regional Development Projects and Programs

Aiming at the establishment of final firms and export-oriented industries for niche
markets, a business creation method should be introduced in the study area. Business
creation is the answer to queries on how to find business seeds, how to study capability
of the seeds, how to establish pilot plant and samples, and how to conduct test
marketing with product creation (see Figure 8.19).

Step-1 Step-2 Step-3 Step-4 Step-5 Step-6

1,000 theme 100 theme 50 theme 30 theme 10 theme 1 theme

Preparation Research Testing Application Plant Venture

of Meeting and of Exemplification Business
Conjuncture Examination Project

Figure 8.19 Model Process for Business Creation

Step 1: During the section exchange meeting with industries and universities, a number
of themes are proposed for the preliminary potential product as a business
seed, depending on the interest of attendees. Therefore, invited participants to
the meeting should represent a cross section of different business fields in
order to get new and diverse ideas.

Step 2: At the conference or business forum, about a thousand themes will be

announced. From this number about 100 themesshall be selected for further
study. Another section meeting will be set up, forming section groups and
starting the study work more deeply.

Step 3: Each section group shall examine and test the new themes. At this stage,
around 50 themes shall be selected.

Step 4: If the section groups find the new ideas have some potential, a request to the
government shall be made for R&D institutional funding for around 30 themes
out of the 50 selected in Step 3.

Step 5: Government selects around 10 themes among 30 appreciations, and provides

the funds for them. The groups will be setting up the pilot plant of this fund and
continue further detailed R&D.

Step 6: The group who could get good result can establish a new company and start

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the venture business. The government will provide technical and financial
support for the project.

Projects and programs for industrial development are concerned with business creation
activities, mainly with Information network, human resource development, Industrial
policy, manufacturing infrastructure, raw material development, development of new
product, up-grading of product, manufacturing technology and market development
with business start up support and technical support to local enterprises.

It is very necessary that these industrial developments are carried out in coordination
with the central/local government and that their functions are in accordance with
industrial policy of central/local government. Otherwise these developments will not
work well as a whole, because the relationship among their functions is important for
local manufacturing industrial development.

Upon this industrial strategy related with function, the projects and programs are
marked as described in the Table 8.25.

Table 8.25 Projects and Programs for Local Industrial Activities

1 2 3 4 5 6 7 8 8
Function Manufacturing Infrastructure
Raw Material Development

Manufacturing Technology
Up-grading of Product
Development of New

Market Development
Information Network
Human Resource

Industrial Policy
Development

Product

Project and Program

1 Local Industrial Platform ● ● ● ● ● ● ● ● ●
2 International Join Research Center by Universities ● ● ● ● ● ● ●
3 Industrial technology Development Center ● ● ● ● ● ● ●
4 Sofia Plaza ● ● ● ●
5 Mediaship ● ● ●
6 Nakhon Phanom Industrial Area ● ●
7 Sakon Nakhon Bio-Park ● ● ● ● ● ● ●
8 Mukdahan Special Economic Zone ● ●
9 Kalasin Industrial Area ● ●
10 Compatriot Office for I-san People in Bangkok ● ● ● ● ●
11 Small and Medium Industries Support Program ● ● ● ●

The development projects and programs are proposed for supporting local industrial
activities for business creation and establishment of niche industries in the study area.
However, the projects and programs are effectively and efficiently located in the study
area. The location of inducement of the projects and programs are described in Figure
8.20.

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Figure 8.20 Location of the Projects and Programs and Its Linkage

The general description of projects and programs are shown in Table 8.25, although
some parts need further fine-tuning and economic feasibility study. Major projects and
programs are outlined as follows:

(1) Local Industrial Platform System

Local Industrial Platform (LIP) is a comprehensive supporting system for generating

businesses and improving the business activities for regional industry. LIP provides
information tools and a networking system across the boundaries of industry,
connecting comprehensive services including incubation for venture business,
technical support including R&D, business start up support.

LIP is organized jointly with government, the private sector and the academic
community to provide support, always keeping in mind the needs of industries.
However, a government-established, private-sector-operated LIP for speedy
supporting services should be studied.

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(2) International Joint Research Center by Universities

This is a research center where experts of universities conduct research studies jointly
with the researchers of client side, i.e. public and private industries, public
administration, or regional inhabitants. It enables universities to transfer own
technology and knowledge as a Technical Licensing Organization (TLO) and to study
regional needs and regional resources. On the other hand, in addition to the final
research results, researchers of the client side can obtain related technology and
knowledge and use special equipment during the research work. It is desired that the
research subjects be chosen from a regional perspective including social science as
well as industry.

Desirable management body is universities in the region. It will involve not just one
university but several universities including foreign ones. International research of the
regional subjects may improve the regional resource to global standard. It can
contribute to human resource development from the regional to international level.
Required functions are as follows:
• Basic R&D activity for local product especially agriculture;
• Creation of niche products and business;
• Collaboration scheme with large company for new product and business;
• Supporting system for SMI agro-based industry;
• Provision of pilot plants;
• Provision of testing facility;
• Provision of incubation facility;
• Provision of multi-purpose exhibition hall and information center;
• Provision of information for regional resources and agro-industry;
• Provision of incentive scheme for setting up a new company;
• HRD for agro-business;
• Promotional activities for invitation of R&D institutes and university;
• Operation of agricultural experiment farm; and
• Development of plant factory.

(3) Industrial Technology Development Center Project

It is important, not only for industry but also for the regional development, to promote
the local industry utilizing the regional resource. This project is to establish a base to
provide industrial technology and information support for the purpose of improving and
developing product capability of the regional resource of agriculture, forestry, fishery,
mining, etc. The center, as a local-oriented technology research center, undertakes
laboratory tests and contracts research work and consultancy work, opening up the
laboratory to the region and lending special test equipment.

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The center also supports general industrial activities for quality control with industrial
testing, establishment of I-san brands, I-san trademark, control of origin of products, etc.
The proposed facilities of this center are as follows:
• R&D facilities for manufacturing industrial activities;
• Technical support for plant process and usage of tools;
• Control of brands, origin of products, trademark, etc.;
• Collaboration scheme with large company;
• Provision of incentive scheme for collaboration;
• Industrial production support for niche industry;
• Provision of information with IT for manufacturing industry;
• Provision of incubation facilities;
• Provision of testing facilities;
• Certificate scheme for technician; and
• Provision of library.

(4) Sofia Plaza

The project is to set up a facility and system of technology transfer by permanent or

semi-permanent residence of old and middle-aged technicians and engineers coming
from Japan or other foreign countries for the purpose of transferring and teaching
industrial technology. Recent observations point to the fact that a lot of these
technicians and engineers wish to live abroad permanently or for a long time. Sofia
Plaza provides a good opportunity for them to live abroad; they can come as
cooperation volunteer workers and still be productive in their old age.

It would be useful for the regional enterprises to have reliability and high productivity by
thoroughly following a fundamental technology and quality control method. It is
desirable to have flexible plans for keeping a healthy lifestyle and to make preparations
for receiving cooperation volunteers, since their motives for living abroad are different
from those going abroad for a job. Program and facilities are as follows:
• Provision of information network;
• Provision of accommodation;
• Provision of workshop;
• Provision of library; and
• Setting up of a multi-purpose information exchange room.

(5) Mediaship (Information Base for Community)

Mediaship is proposed as a base for promoting awareness of the importance of

infrastructure and opening up the opportunity of elementary human resource
development. It should be the base where people get experiences and arouse their

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curiosity through absorption of knowledge and experiences and listening to lectures

about things that could be applied in daily life. It should also supply information on the
regional industry, opportunity of exhibiting local products, tourist information, and
opportunity to cultivate friendships. Expansion of Mediaship is desirable. Mediaship is
useful for people in the region, as it may take some more time for a large majority to
have personal computers and use the Internet sufficiently. The mediaship program
includes the following:
• Setting up of the regional community hall;
• Introduction of multi-purpose information exchange room;
• Multi-purpose exhibition hall; and
• Provision of information for local activities and industrial information.

(6) Nakhon Phanom Industrial Area

The industrial area is planned as mixed industries with footloose industry and local
resources oriented industries. This industrial area is to be located on the gateway to
central and north Vietnam through Laos in the future. Industrial location would be
expected for labor intensive industries using airport facility. These labor intensive
industries include textile and garments, plastic products, printed circuit boards (PCB),
switches, connectors, and for local resources base industries such as manufacturing of
construction materials, natural rubber products, foods, and wood/gypsum/lime
products imported from Laos.

A development plan should be made applying a zero-emission concept and cluster

development method similar to other industrial areas. Introduction into the area of
rental system of lots, factories, warehouses, etc. should be considered. Necessary
facilities and functions are as follows:
• Setting up of LIP system;
• Provision of industrial area by town planning with land use by province;
• Provision of land scheme (equal value exchange with real estate and Kukakuseiri);
• Provision of administration office with promotion facilities;
• Provision of IT base with multi-purpose hall;
• Provision of science technology information;
• Promotion activity for relocation and new investment;
• Provision of incentive for relocation and new investment in I-san; and
• Investment promotion by large company for small business.

(7) Sakon Nakhon Bio-Park

This project is intended to develop a science park base for R&D institutes and factories
related to biotechnology for agriculture by utilizing the academic and research facilities
in Sakon Nakhon Province such as Kasetsart University. Increase in agglomerated

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profits is expected by concentrating such activities into the Bio-Park.

Progress in biotechnology contributes not only to medical care, medicines, and the food
processing industry, but also to the electrical and electronic industries. Agriculture, the
leading industry in the region, is an important field of biotechnology. As is generally
known, Singapore announced that biotechnology would be the high-tech industry to
follow IT. The Bio-Park is planned to have farms for research work on biotechnology.
Prior to setting up the Bio-Park, the proposed projects such as International Joint
Research Center by Universities, and Industrial Technology Development Center
connected by LIP should be realized in Sakon Nakhon. Participation of foreign capital
and organizations may be possible depending on the development concept. Main
activities are as follows:
• Setting up of LIP system;
• Induce R&D institutes of private and public sectors;
• Setting up an International Joint Research Center by University;
• Setting up an Industrial Technology Development Center;
• Setting up experimental farms; and
• Setting up of agricultural plant industry.

(8) Mukdahan Goods Distribution and Processing Center

The objective of this project is to develop an industrial area with a truck terminal and
light industry base. It is planned for environment-friendly industries with zero-emission
concept. The cluster development method, which is a stepwise development
according to the demand situation, is applied to the industrial area to reduce cost. It is
expected to induce standard factories, warehouses, information center, and related
common service facilities. The following industries are assumed to be located in the
industrial estate:
• Setting up of LIP;
• Delivery industries of grouping, sorting, and labeling for daily goods;
• Mixed industries of complex livestock fodder and fertilizer;
• Refilling and recharging industries for liquid material, gas and powder;
• Paper industries for treatment, finishing and cutting;
• Recycling industries for broken down automobile and machinery;
• Wood industry for cutting and assembling of semi-products and finished products;
and
• Food processing industry for local market.

It is expected that with the introduction of the above-mentioned industries, the

government should prepare the system and program as follows:
• Setting up of LIP system;

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• Provision of industrial area and industrial land under the town development
scheme;
• Equal value exchange and Kukakuseiri schemes for industrial land development;
• Incentive scheme for international trade business;
• Special incentive scheme for purchase of raw material from abroad; and
• Migration scheme for foreign workers.

(9) Kalasin Industrial Area

The provincial government has a development plan of industrial park with assumed
industrial locations of food, machine and metal industries, and it has already requested
approval from MOID and IEAT. However, the economy suffered and demand from
industries began to decrease after the financial crisis. It is therefore highly
recommended that development of the industrial area be well balanced from an
economic standpoint.

An industrial area is planned to be developed in Kalasin, taking into account the

expected stronger linkage with Khon Kaen for supporting industries and food industrial
base. It may be that the industrial park will mainly consider the regional character of
Kalasin. There is another possibility of locating manufacturers for agro-machinery base,
and complex livestock fodder and fertilizer.

The phasing development method is applied for cost reduction and information
infrastructure is developed for obtaining higher competitiveness. Major activities are as
follows:
• Setting up of LIP system;
• Provision of industrial area by town planning with land use by province;
• Provision of land scheme (equal value exchange with real estate and Kukakuseiri);
• Provision of administration office with promotion facilities;
• Provision of IT base with multi-purpose hall;
• Provision of science technology information;
• Promotion activity for relocation and new investment;
• Provision of incentive for relocation and new investment in I-san; and
• Investment promotion by large companies for small business.

(10) Compatriot Office for I-san People in Bangkok Project

It is assumed that the local industrial supporting activities by governments operate on a

top-down system. However this system does not work well. Taking this into
consideration, the local people themselves should determine their actual economic
situation. Otherwise, they would not get a grasp of the total economic system which
I-san is part of. I-san should take its place in the economic system as a large city and

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learn a lot of market circumstances in Thailand.

Therefore strengthening of I-san people’s linkage and promotional activities should be

done in Bangkok. It is recommended that a Compatriot Office for I-san people be set up
in Bangkok. I-san people who possess strong leadership qualities should operate and
coordinate this office; however, the provincial government should provide the
infrastructure for I-san and funds for its operation as well. The contents of this project
are as follows:
• Provision of compatriot office in BKK;
• Advertisement of I-san brand goods and products;
• Setting up of sales research center as an antenna for I-san products;
• Sales promotion activities with exhibition room;
• Provision of room for meetings and information exchange among I-san people
including businesspersons;
• Provision of trade, commerce and market training;
• Financial assistance scheme for office operation by province; and
• Provision of information center with IT hub.

(11) Small and Medium Industries Support Program

Industries in I-san are facing a lot of difficulties on management of industries. They

cover raw material, production technology, financial and marketing aspects. On the
other hand, a lot of projects and programs are on going by ministries and agencies.
I-san is the poorest region in Thailand but it produces commodities for the local market
and export market. I-san products are contributing to the Thailand economy, but the
profits from their production are small.

SMI support program should be focusing on business creation in I-san. Related to the
business creation, it should be setting up financial scheme, technical support scheme,
business administration method, human resources development, etc. This activity from
local side is very important. On the other hand, LSI should support SSI and MSI. The
LSI should support regional development, too. So, special considerations for I-san
industries are required for a wide range of aspects including:
• Financial scheme of investment and working capital for C&FI and SMI in I-san;
• Special incentive scheme for the establishment of a new factory in I-san from
department/division independent from the LSI in BKK;
• Special incentive scheme for newly established businesses to generate new small
businesses and investments in I-san by I-san people;
• Special scheme for HRD support for a starting new business in I-san;
• Creation of SMI technical and management support system by LSI;
• HRD for new business leaders of I-san people;

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• Supporting system for U-ey people to I-san for establishment of new industries;
and
• Land purchase and/or rent scheme for new investment in I-san.

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