All eyes on aerospace sector
ROLLS-ROYCE is strategically looking at regionalising its aviation industry supply chain in Southeast Asia, with the move expected to be worth an estimated US$5 billion (Bt168 million) to $10 billion a year for external suppliers.
Around 49 per cent of the company’s revenue comes from the civil aerospace industry, and Rolls-Royce (Thailand) has committed to spending around US$600 million in the Kingdom over the next 10 years while also seeking more opportunities.
“In 2003, as little as 1 per cent was spent within this region [on purchases from the supply chain]. However, we have increased that number, where 15 per cent was spent in this region last year and this figure will continue to increase in the years to come,” said Hugh Vanijprabha, managing director of Rolls-Royce (Thailand).
There are three Thai companies that are currently supplying Rolls-Royce and their ability will be developed so they can supply directly to Rolls-Royce Singapore, he said.
“This development will provide good opportunities for suppliers within this region and even though there is competition from Singapore and Malaysia, who are also looking to get into Rolls-Royce’s production lines, we do have supplies from here in Thailand and we are looking to expand their capability,” he added.
Rolls-Royce (Thailand) has supplied over 120 engines to Thai Airways and have two projects in Myanmar to provide mid- and high-speed gas turbines while 50 per cent of their revenue in the Kingdom comes from the defence aerospace industry.
The company supplies to all three arms of the Thai military, for use in aircraft such as helicopters, transport aircraft and regional aircraft.
Some 80 per cent of the country’s navel marine engines and other equipment comes from Rolls-Royce.
Hugh said Rolls-Royce recently won a $9.2 billion deal with Dubai-based Emirates to supply engines for 50 A380 aircraft – the largest order in its history.
A lot of opportunities
“That poses a lot of opportunities within this region and those engines are currently being produce by Singapore suppliers,” he said.
He also revealed that the aviation market was expected to generate business worth nearly $4.75 trillion in the next 20 years while 68,000 aircraft were expected to be delivered worldwide in the same period.
One-third of the air traffic in the world is expected to be in Asia-Pacific, he said. Hugh identified the aerospace sectors ripe for Thailand to tap as manufacturing, maintenance, repair and overhaul services, commercial airlines and airport business.
He said that more non-tax incentives were still needed to promote the industry here including increasing the tax-break regulation for investment in aviation businesses from the current eight years – the shortest in the region – to match the standard of other countries at 12 to 15 years.
“It takes one to four years from building a business case to full production so our tax incentives are not attractive enough when compared to our neighbouring countries,” he said.
Sonklin Ploymee, director of the Board of Investment’s Unit for Industrial Linkage Development (Build), said the technology base of the aviation industry in Thailand was similar to the country’s automobile industry, which was about to mature.
She said Thai automotive suppliers could develop more “metal precision” in order to upgrade into suppliers for the aviation industry.
“Thai SMEs [small and medium-sized enterprises] can now import used machinery to the aviation industry but the main machines still have to be new machines to increase fairness for new domestic and foreign operators,” she said.
“Build is approaching Airbus to promote the aviation industry here in Thailand as we have a geographical advantage,” she said. “And the Board of Investment is looking to reduce the limitations within the aviation industry by trying to promote the transfer of technology via foreign firms which have the expertise.
“But this could lead to some amendment of regulations such as the Foreign Business Act, and that would require some time.”
