Factors affecting the location of

industries in NIE’s

Thailand.

Overview of factors.

Physical Factor - Land• Land refers to the space in which people carry out their activities. For example, in the farming industry,

where huge plots of land are required for the cultivation of rice and rearing of animals.• Industries prefer to set up their operations on land that is level, because it is easier to clear the land of

existing features than to flatten uneven land.• Where the industry is located is also dependant on how much land is required. Industries that require large

land area are often found far away from city areas, as land there is more expensive and congested, as compared to land in the rural and suburban areas.

• For example, in Thailand, wet rice (Paddy) production contributes a large portion to the Thai economy and labor force. It is also a traditional activity, and is the world’s largest exporter of rice, with 9.2 million hectares of land for rice-growing area, which produced around 30 million tons of rice in 2008.

• These 9.2 million hectares of land are located in the suburbs of Thailand, such as in Nan, as compared to in the capital of Thailand, Bangkok.

• In Thailand, they also practice terracing, which is a method used to cultivate wet rice on sloped land.

Physical Factor – Raw Materials• Raw materials are naturally occurring or partially processed physical substances that are used as inputs for production or

manufacturing. Some primary industries are located where the raw materials are directly involved in the extraction of natural resources

• However, the location of the secondary industries is influenced by the nature and availability of raw materials as well as the cost incurred in transporting them. Industries may be located near the sources of raw materials if their raw materials are bulky and relatively heavier than their finished products. These are known as weight-losing industries, and the industries can cut costs by locating their factories near the sources of raw material, instead of transporting the extra weight.

• One example is the tin and tungsten mining industry in Thailand, Kanchanaburi Province. As the raw materials (tungsten and iron ores) are bulky and heavier, the factory that is processing the raw material is located within the vicinity of the mine. After production, the lighter and less bulky products are then transported to the town, where tourists and locals can purchase them. This helps the industry cut costs as they can save on transporting the additional weight.

Physical Factor - Energy• Energy refers to the power needed to run machines. Machines used in industries require large amounts of energy, are

usually located near energy sources such as coal and oil, as they are bulky and costly to transport.• A constant supply of energy is also an important factor, as disruptions in the energy supply would mean a delay in the

production process. This would cause the factory to have to compensate the customers, as they did not deliver the goods on time, and the customers would not have trust that the factory will deliver goods on time, thus reducing the profit the company can earn.

• One example of the location of factories near a source of electricity in Thailand is the Bhumibol Dam, located at the Phraya River, in the Tak Province. It was built for the purposes of water storage, and hydroelectric power production, The dam produced 22% of Thailand’s power generation in 2003. Therefore, factories in the vicinity of the dam will be able to get hydroelectricity from the dam., and do not have to spend extra money importing electricity for industrial usage.

Human Factor - Capital• Capital refers to the financial resources needed to set up and run a business or industry. Capital is needed in many areas

such as renting land, purchasing raw materials and machinery, as well as transporting finished products.• Companies prefer to locate their industries where the costs of buildings and machinery are low., especially for new or small

companies• Companies also like to position themselves where there are loans from banks and financial institutions, as the loans

provided at low interest rates help to increase the amount of capital available for companies to set up and maintain operations.

Human Factor - Labour• Labour refers to the employment of people to run operations and are paid a sum of money; wages. • Industries tend to locate their factories where labor is low in cost and is readily available, especially for the labor-intensive

industries, as they have a large demand for laborers.• In Thailand, 47%, which is nearly half, of the working population is working as agricultural workers. They were paid an

average of 4028 bahts monthly, in 2005. This shows the important of cheap labor in countries such as Thailand. For the same year, the gross monthly domestic income was 5840 bahts. Therefore, these cheap labor attract foreign investors to set up their industries, as they have to pay the workers less, and can earn more profit in this manner.

Human Factor - Market• Market refers to the demand for the goods and the services. The demand is defined as the desire and ability to pay for

them. Markets can be made out of individuals or businesses, and can differ based on age groups. Without markets for their goods, industries cannot sustain their businesses.

• Secondary industries may choose to locate near their consumer markets for practical reasons, which is that in the weight-gaining industries, it will cost much less to transport the lightweight raw material to the factory, rather than to transport the heavy product to the market.

• One example of this in Thailand is the weaving industry in Phichit, Kampengpet, Suphanburi and Chainat. In these parts of Thailand, carpets are weaved from thread spun by insects, such as silkworms. The weaving factories are located nearer to the markets, as the raw materials (thread; silk) is lighter than the product (carpets and rugs). Therefore, it would be more cost effective to locate the factory nearer to the market.

Human Factor - Government• Government is made up of a group of people who look into the way a country is run. It plays an important role in deciding

the types of industries suitable for its economy, where they should be located, and the growth of such industries.• Governments can provide financial incentives such as tax exemptions or bank loans with low interest rates to attract

companies to set up operations in a place• One example in Thailand is that the Bangkok Post Thailand Finance ministry is working on a new incentive to attract foreign

investors. This new incentive will entitle new foreign investors a 15 years tax break.

Human Factor - Transport• Transport refers to the movement of people and goods from one place to another through the use of vehicles. It is needed

to carry raw materials from the source to factories and to distribute finished products to the local and foreign markets. An efficient transport is important for industries that are not able to conduct their manufacturing activities near their source of raw materials or markets.

• When a good transport system is available, less money will be spent on bringing goods from one place to another. Therefore, places with a cost-effective transport system often attract more industries. That may explain why many industries are located near airports, ports, railway stations and expressways.

• In Thailand, Bangkok, transport routes for vehicles are rather developed. In Thailand, there are 5 different types of highways, each for a specific purpose, in different parts of Thailand. The rural highway is one that can be used for transporting raw goods from the primary industries to the secondary industries in the town in weight gaining industries. Thus, this will attract industries to set up their businesses in Thailand.

Human Factor - Technology• Technology refer to the knowledge, skills and tools that people use to meet their needs. Advancements in technology have

enabled industries to overcome numerous physical constrains. Technology has also enabled means of transports or communication to be cheaper and faster, thus greatly reducing the importance of distance to markets or labor when selecting an industrial location .

• The availability of advanced technology is especially important for quaternary industries that often require a quick transmission of information. These technology-driven industries will choose locations where infrastructure such as cables, mass communications media or Internet access is readily available.

• For example, the Thailand Science park located in the town of Tha Khlong , Khlong Luang district, Pathum Thani province. near the city of Rangsit, in the North of Bangkok. It is owned by the Ministry of Science and Technology and is the country’s largest science and technology research park. It is easily accessible as it is linked to downtown Bangkok by two highways and many city bus routes. This technological advancement will make Thailand a more attractive place for foreign investors.

References and Acknowledgements • Rice paddies in Bali, Indonesia. Photograph. Britannica Online for Kids, Web , 9 March 2012.

http://kids.britannica.com/comptons/art-90734/Rice-is-grown-in-terraced-wet-paddy-fields-in-Bali• Prairies in Saskatchewan, Canada. Photograph. World News , 9 March 2012. http://article.wn.com/view/2011/03/10/Huge_plastic_bags_a_worry_on_Prairies/ • Rice production in Thailand. Information. Wikipedia. Web, 9 March 2012. http://en.wikipedia.org/wiki/Rice_production_in_Thailand#Government_policy • Picks & Pans: Mining Tungsten Ore – A Case History, Monrovia, California. ICMJ’s prospecting and Mining Journal, 9 March

2012. http://www.icmj2.com/02May/02MayFeature.htm • Bhumibol Dam, Amphoe Sam Ngao, Tak Province, Thailand. Wikipedia, Web. 9 March 2012.

http://en.wikipedia.org/wiki/Bhumibol_Dam• Bhumibol Dam, Amphoe Sam Ngao, Tak Province, Thailand. Wikipedia, Photograph. 9 March 2012.

http://en.wikipedia.org/wiki/File:Bhumibol_dam_front.jpg • Thailand Weaving, Thailand. Photograph, Wholeplanetfoundation, Picture, 9 March 2012.

http://www.wholeplanetfoundation.org/blog/2012/02/photos-typical-microcredit-client-businesses/thailand-weaving/ • Tax exemption for new investors – What about the old ones? Thailand. Information. Doingbusinessthailand. Web. 9 March

2012. http://www.doingbusinessthailand.com/thailand-taxes/tax-exemption-for-new-investors-what-about-the-old-one.html

• Thailand average salaries & expenditures. Thailand, Figures. Worldincome, Web, 9 March 2012. http://www.worldsalaries.org/thailand.shtml

Conclusion

• Therefore, in conclusion, the location of an industry depends on what the industry is producing, and using, and also the requirements of the factory, such as the energy demand.

• No matter what the industry is doing, much effort must be put in to decide on a suitable and cost-effective area to start up an industry.

• Done by Kelvin Wong Sheng Wen (33) , 4/4.