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Overview of the Thai Aerospace & Defence Industries
Overview
The effects of the 1997 Asian economic crisis still persist in Thailand, especially in the defence industry sector.  Defence spending has been a target of government budget cut backs following the establishment of the emergency IMF loan agreements.  While defence maintenance and refurbishment program budgets have increased, there is no significant sign of growth in overall budget allocations.  See our Thai Government Budgets Page for details.  It is expected that the current government lead by Dr. Thaksin, will be working to redress this situation once Thailand the fundamentals of the Thai economy improve.  The Ministry of Defence has tried to develop some strategic defence industries along semi-commercial lines, as well as a program for the privatisation of a number of manufacturing facilities under its control which produce defence related consumables (boots, batteries, uniforms etc.)  However, significant gaps remain in Thailand's defence industrial capability and technologies.

Significant opportunities exist for supply of C4I systems, sensors & components; amoured vehicle, artillery and fire control refurbishment & upgrades; aircraft & flight systems up-grades, maintenance and spare parts; naval ships, dockyards & refurbishment; small arms, ammunitions, propellant, casings & lead; specialized training and simulation equipment & facilities.

Market Structure
In 1932 the Thai military supported the establishment of a constitutional monarchy and democracy in Thailand.  Ever since it has seen itself as the stablising element of society and has provided many of Thailand's Prime Ministers.  Although the pre-eminence of the armed forces has been eroded on many fronts, the military remains a powerful force across the board in Thai society.  As a result, issues of national security, military planning and materiel procurement tend to remain highly classified.

Force Development, Capability Analysis and Materiel Acquisition Planning are all conducted by separate and individual defence agencies according to their immediate needs and budgets.  National level defence budgets are not developed and spent on a national program basis.  Individual Armed Services control the spending of their own budgets and procurement processes.  These processes do vary from one agency to another but are structured along similar lines.  While procurement policies and guidelines tend to be highly detailed and process driven the decision making process is not transparent.

Official guidelines for procurement procedures tend to be in Thai language only, and there is significant variation in interpretation of them across all agencies and at times within individual agencies.  While procurement selection and acquisition procedures are highly structured there is very little delegation of authority regarding procurement decisions.  Multi-Service or Task Force procurement programs are not common.  Nor is procurement for common assets across the Services.

Recent reforms directed at creating a more centralised procurement structure for the armed forces, have increased the audit capacity of the Supreme Command and the MoD, but not reduced individual services' control over priorities, spending and selection processes.  Public tendering of procurement contracts is not the norm and recent attempts to do so by some services have more often than not ended in controversy due to intervention by high-level internal review committees.
We can provide a flow chart showing an overview of the Defence Procurement Cycle in Thailand on request.

Market Intelligence & Market Research
Good market intelligence is notoriously difficult to obtain in Thailand due to the security classification of both budgets and procurement planning.  In addition, almost all documentation is in Thai language.  Priorities are reviewed on a regular basis and changes made to them accordingly.  It is not unusual to find that an approved and budgeted program is shelved, the TOR's changed significantly, or reviews undertaken leading to significant changes of program direction late in the decision making process.  It is important therefore to secure good market intelligence at all stages of the marketing and sales process.
Political and commercial imperatives can also play a part in the allocation of individual services' budget priorities and programs.  This means that it is virtually impossible to gain good market intelligence without substantial commitment to local representation.
With the exception of US military FMS funded programs market access is most successfully made via the good offices of well-established local representatives.  Country of origin government support can be a critical marketing tool in Thailand once a marketing campaign is underway.  A number of Embassies in Thailand provide good market research capabilities to their own nationals.  However, few foreign governments have the resources to maintain the range of Thai military and other local Government Agency contacts that are required to follow all the dynamics of marketing campaigns once they begin.
In some circumstances it is possible to obtain details of the exact requirement, TOR or equipment specification prior to specific service units beginning the process of selection or opening tenders.  However, it is important to remember that the system is flexible enough to allow specifications to be modified where counter offers meet or exceed the mission requirements.  To determine what flexibility there is in any specific situation close order market intelligence is essential.  In addition, more recent macro economic imperatives mean commercial elements such as counter-trade, local manufacturing content, technology transfer and financial instruments can significantly influence program specifications and selection outcomes.
Finally, in a society were personal trust is the glue that binds and structures economic and social behaviour successful market access can be achieved only when the web of personal trust underpins basic commercial values.  Notwithstanding these latter values, the record clearly shows that without proper local marketing support effective market access will not be achieved.

Local Marketing Representatives
It can take years to build a successful marketing campaign in Thailand.  To pass through all the selection and review processes, get the budget appropriated and then deliver on the contract.  And then overlaying this, there is the routine changing of the guard in the Thai Government, Military and Bureaucracy.  This latter variable is the product of the annual reshuffle of senior Defence personnel in October each year and the frequency of early national elections.  (Dr. Thaksin Shinawatra is the 26th PM of Thailand since 1932).
In this environment, it is understandable that the most successful entrepreneurs conduct their business in a low key, almost secretive fashion.  This makes life somewhat bewildering for the new market entrant and frustrating for established successful international defence companies.  The key is finding efficient, effective and appropriate representation.
It is not difficult to understand why there are so many local Thai entrepreneurs in this market place.  Sales commissions based on contract value have been the norm and in the 1980's and early 1990's considerable sums were made by these groups in commissions.  Since 1997 life has been much tougher and many marketing representative companies have diversified their activities outside the defence sector to include the more lucrative government infrastructure projects.
The difficulty is not finding a representative but finding the right one who meets all the normal criteria of a good marketer, who can communicate with you and your senior staff effectively, and whom you can form a lasting and trusting relationship.  To add to your task, due to the highly competitive and opaque nature of the market, objective forms of assessment or intelligence on marketing representative companies is very difficult to obtain, even from government sources.
We can provide also a "Basic Potential Representative Check List" on request.  This list has been developed on the basis of our combined experience in the market place over many years.  This list eliminates most of the common problems of assessment.
See our Thai Aerospace & Defence Agents Page in Thailand with the names of the principals and contact details.  You should note that most do not have Web Sites or Email contact as yet.