It’s now the Year of the Cat in Geelong after the town’s all conquering Aussie Rules team won the premiership – But there have been some more reasons to celebrate in Geelong off the field as well.
Geelong and the neighbouring surf coast area is booming after some lean years economically following the shakedown of local manufacturing and the financial collapse of the local building society Pyramid.
The Geelong economy is doing well, its manufacturing sector is diverse and the surround areas like Barwon Heads, Torquay and Lorne are benefiting from Melbourne expatriates looking for a ‘sea change’ on the coast (in fact the original award winning ABC drama ‘Sea Change’ starring Sigrid Thornton, John Howard, William McInnes and David Wenham, was actually filmed on location in Barwon Heads).
Geelong is also benefiting from internationalisation. In fact, soon after the Cats won the flag, the town received a visit from the Thailand Board of Investment (BOI). The BOI is interested in linking in with Geelong to supply its ever expanding automotive assembly industry on the eastern seaboard which is about two hours drive out of Bangkok.
In fact, when I visited the region on a visit to Thailand earlier this year, I noticed a strong Australian presence there. The region which has been dubbed “The Detroit of the East” was the epitome of modern global manufacturing. The factories there all had state of the art technology, the workers were highly skilled, production techniques were sophisticated, and over 60 per cent of production was earmarked for export.
Australia is one of the leading investors in Thailand and many Australians have set up major operations on the eastern seaboard. According to Sean Riley, Australia’s Senior Trade Commissioner for Thailand and the Greater Mekong region, “Over 2500 Australian companies directly export to Thailand but this underestimates the increasing numbers that are setting up operations in Thailand to support their businesses back in Australia,” he explained.
The eastern seaboard of Thailand is a hub for the automotive industry and many automotive component makers have a foot in both camps – Australian and Thai – to take advantage of the booming market in the Mekong Delta.
For example, TriMotive who produces automotive components for one tonne pick-up trucks in Thailand sees an off-shore presence as vital for his company’s prosperity back home in Australia. As Robert Saunders, the managing director of TriMotive put it: “Every Australian manufacturer should think globally in order to survive locally.” Saunders, who runs the international arm of the company from Dandenong in South Eastern Melbourne, explains the company philosophy. “You don’t have to make everything yourself that you sell. Much of our business is about managing relationships with other manufacturers who sub-contract to us. As a result, much of the business is in managing the global logistics of the supply chain.
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The establishment of our Thai plant, however, has been good news for our business back in Dandenong as the company’s quality control is in Australia, R &D is all in Australia, as are all our major business relationships,” he explained. Saunders explained the move to Thailand in terms of market expansion. “Basically, the pick-up truck market is very small in Australia – and we’ve almost reached capacity. The Thai operation is allowing us to tap into the booming market in Asia, and has enabled us to expand our operations both domestically and internationally.
We’re teaching the Thais to tow and it is paying off for us big time,” he said. The fact that the major players in the automotive game are based in the same location is a plus for Tri-motive. The region is a major automotive ‘cluster’ with all the global players located there as well as training facilities such as the German-Thai Education Institute and similar institutions.
The availability of skilled labour in the business park is a major incentive for establishing operations on the eastern seaboard. Indeed, many of the companies I interviewed on the eastern seaboard were Australian managed (and in some cases Australian owned).
Despite the diversity in what these companies produced – everything simple household goods like nozzles and tow bars to specialist medical equipment and precision instruments – they all had one thing in common. Each company had expanded its operations in Australia as result of its foray into Thailand.
For example, I visited TUTA Healthcare Australia that manufactures specialist medical equipment (such as intravenous drips), The Precision Valve Corporation that produces aerosol valves, ANCA Manufacturing that manufactures high technology computer numerical control (CNC) devices for the machine tools and metal industries.
According to Mark Patman, General Manager of Melbourne based ANCA the availability of skilled labour was the biggest surprise to his company when setting up. “We had the perception that we’d have problems getting skilled labour here, which is crucial in our business as we deal with very sophisticated capital equipment but the reality has been quite the opposite. We’ve picked up some great recruits and their Thai capacity to learn is just sensational” he explained. Patman’s company, which exports 98 per cent of all its production to multiple destinations around the world, has only had its Thai operation in place for two years and this development has spurred further growth for the business in Australia.
“The new operation in Thailand has allowed us to create jobs and expand our R & D in Bayswater (in Melbourne) as well. We keep a R & D to revenue ration of around 7:1 in Australia and the Thai plant has now completed its 100th export order.” he added. The skilled labour issue was a key issue in the minds of the owners of the business parks on the eastern seaboard. According to David Nardone, President & CEO of Hemaraj Land and Development: “We deliberately placed the factories close to technical colleges so we have a ready supply of skilled labour. We’ve now had 20 years of foreign investment here on the eastern seaboard in automotive and petrochemicals with at least 12 Australian companies in the Hemaraj business park.
Over 60 per cent of production in the business park is re-exported and we’ve seen the number of projects double here in the past couple of years,” he said. However, the question remains why Thailand would attract much of this investment action instead of better performing economies nearby such as Vietnam or even China. The Thai investment authorities, however, are increasingly collaborating with their neighbours. “China is not a threat – we look to partner with China” says Mrs Sudjit Inthaiwong, Deputy Secretary General Thailand Board of Investment (BOI). According to the BOI, Thailand also provides training to the Vietnam and the emerging economies of the Mekong Delta, as they still have a way to go in terms of economic development, particularly in high-skill manufacturing.
Many of the Australian companies have been attracted to the areas because of the BOI’s programme. “The combination of the Thai-Australia Free Trade Agreement (TAFTA) Investment incentives from BOI, and Thailand’s strategic location in the Mekong Delta that is driving this investment – particularly from Australia” says Sean Riley. Richard Saunders at TriMotive agrees: “The investment incentives in this country are magnificent,” he said. And the demand for tow trucks in rural Thailand is helping manufacturing companies like TriMotive build their global business operations. Despite the political situation, most Australian companies are bullish about their prospects.
As Mark Patman puts it: “The political issues don’t affect us in manufacturing, we look more at economic issues like the baht (the Thai exchange rate) and logistics.” In addition, the availability of skilled labour has helped. As Paul Coffey, Ge
neral Manager of TUTA Healthcare Australia says: “TAFTA has helped us as have the Board of Investment incentives and the Thai government in terms of education and training to help increase skill levels. In my experience, the Thais are honest; they have integrity and are passionate about what they do. In our business it really has been the land of smiles.”
In conclusion, whilst the footy club has made Geelong the land of smiles in ‘The Year of the Cat’, the injection of some Thai investment could help the automotive industry get the cream and we could well see The Cat Empire having a touch of Siamese in years to come.
