Thailand is overhauling a key measure of factory output after US officials pointed to a widening gap between surging exports and declining domestic production as potential evidence that goods are being routed through the country to circumvent tariffs.
The concern has emerged as a vulnerability in Thailand’s trade negotiations with Washington. Exports jumped 20.8 per cent in June from a year earlier, extending double-digit gains for a fourth month, even as the Manufacturing Production Index contracted 3.1 per cent.
Thai officials reject the suggestion that the divergence reflects transshipment. Instead, they argue the factory gauge has become outdated, with an emphasis on traditional industries that fails to capture fast-growing production in areas including semiconductors and other electronics tied to the artificial-intelligence boom.
“We need to fix this as soon as possible because this has become our weak spot in the tariff negotiations,” National Economic and Social Development Council secretary-general Danucha Pichayanan told reporters in Bangkok on Aug 17.
Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas wants the revision completed by September, Danucha said.
Transshipment Concerns
Thailand, a major manufacturing and export hub with extensive supply-chain links to China, has faced heightened scrutiny over transshipment as the Trump administration seeks to prevent Chinese products from being rerouted through third countries to avoid higher US tariffs.
Danucha said Thai agencies had examined export and production data and found no evidence that transshipment explained the divergence. The problem, he said, was that the MPI no longer accurately reflected the changing composition of the economy.
He said the index relies partly on estimates and voluntary submissions from manufacturers, limiting its ability to capture shifts in production. Danucha said companies receiving state investment incentives should be required to report output data and that the MPI should adopt an adaptive methodology similar to that used in calculating gross domestic product.
Manufacturing accounts for about a quarter of Thailand’s GDP and employs more than 6.2 million people. The persistent mismatch between weak factory data and booming exports has made it harder to gauge the health of one of South-east Asia’s largest manufacturing bases and complicated efforts to attract foreign investment.
Industry Minister Varawut Silpa-archa said last week that semiconductor and photonics products, including optical switches and transceivers used in data centers, are among fast-growing industries that are not adequately captured by the current index. Some manufacturers in those sectors have doubled sales for two consecutive years, he said.
Officials plan to rebase the index to 2024 from 2021, which they say will better reflect newer industries that have expanded as global investment in AI infrastructure boosts demand for electronics produced in Thailand. BLOOMBERG
