Executive Summary

1. Principles and Rationales The Royal Thai Government (RTG) has established Special Economic Zones (SEZs) in in an attempt to promote trade, marketing, investment, employment, and utilization of raw materials from neighboring countries. RTG hopes that SEZs will enhance Thailand’s competitiveness, distribute prosperity to regions, reduce inequalities, improve a well-being of citizens, and solve problems threatening national security. In other words, the primary goals of initiating SEZs are to respond to Thailand’s demand for economic advancement and national security. On July 15, 2014, the National Committee for Special Economic Zones selected five provinces at the borders as the first phase SEZs. They are Tak, , Sa Kaeo, , and Songkhla. SEZs will not fulfill Thailand’s ambitions above unless the country invests on human resource development both in terms of quantity and quality. 2. Objectives 1) To compile, study, and analyze the present situations of numbers of labors in the five SEZs provinces 2) To study and analyze trends in demand of labors in the five SEZs provinces during 2017 – 2021 3) To study and analyze needs for migrant workers in the five SEZs provinces during 2017 – 2021 4) To study and analyze trends in labors’ demands for skills development in the five SEZs provinces 5) To study and analyze supply of labors in the five SEZs provinces in the present and during 2017 – 2021 6) To provide policy recommendations for manpower planning and skills development of Thai labors as well as for employment and skills development of migrant workers in the five SEZs provinces 3. Results The study results are divided into six parts consisting of (1) relevant plans and policies, (2) study results of Tak SEZ, (3) study results of Mukdahan SEZ, (4) study results of Sa Kaeo SEZ, (5) study results of Trat SEZ, and (6) study results of Songkhla SEZ. Those results are presented as follows: 2 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

3.1 Plans and Policies related to SEZs SEZs have been initiated by Asian Development Bank (ADB) in order to support and reap benefits from Economic Corridors. ADB integrated SEZs in its action plan for the transformation of Transportation Corridors into the Economic Corridors in view of economic integration, especially in the Lower region. Thailand has put forward the idea of SEZs in border provinces since 2004. Unfortunately, the National Economic and Social Development Board (NESDB) had not been able to endorse the plan due to legal constraints. A decade later, in June 2014, the National Council for Peace and Order (NCPO) created the Policy Committee on Special Economic Zones in order to promote trade and investment in those zones and defined the term special economic zone (SEZ) as: “An area specified by the Policy Committee for Special Economic Zones (PCSEZ) as zones which are to be supported with investment because they will be granted with special privileges for business enterprises promoted by the RTG. Investors will be facilitated in their investments via contact with the One Stop Service Center (OSS) and they will be offered tax incentives, financial measures, management of the daily commute of foreign labor to work and the allocation of rented areas. Also, the RTG will develop the infrastructure to cater for such investment” The RTG regards SEZs as a means to bring prosperity to regions in view of regional connectivity and Association of Southeast Asian Nations (ASEAN) Community. SEZs are also expected to reduce income inequality, improve well-being of citizens at those borders, and protect national security. Strategies for SEZs include (1) to build new economic zones at the borders based on connections with neighboring countries; (2) to support infrastructures, investment incentives, and one stop service centers; (3) to support small and medium enterprises (SMEs) and Thai entrepreneurs’ investment in neighboring countries; (4) to restore order at the SEZs, especially in terms of migrant workers management. Goals related to workforce in the SEZs deal with (1) import of specialists (2) import of migrant workers from neighboring countries, and (3) training of labors. Economic activities at those five SEZs are summarized in Table 1

Executive Summary 3

Table 1 Target Economic Activities

Target Economic Activities Tak Sa Kaeo Trad Mukdahan Songkhla 1. Agricultural and fishery industry including related X X X X X businesses 2. Ceramics manufacture X 3. Textile, clothing and leather industry X X X 4. Household furniture manufacture X X X 5. Jewelry and accessories industry X X 6. Medical equipment manufacture X X 7. Motor vehicles, machinery and parts industry X X 8. Electrical appliances and electronics industry X X X 9. Plastics manufacture X X 10. Medicine manufacture X X 11. Logistics business X X X X X 12. Industrial estates or zones X X X X X 13. Activities that promote and support tourism X X X X X Source: Office of the Board of Investment At present, the National Economic and Social Development Plan (NESDP) will be formally implemented on October 1st, 2016. Strategies with regard to manpower development in the SEZs include six strategies as follows:  Human capital development strategy: Thai citizens in all ages shall be enhanced knowledge, skills, and competencies. Thai labor age group shall have relevant knowledge and skills according to the demand of Thai labor market. They shall also be strengthened their financial literacy according to their economic circumstances.  Economic strength and sustainable competitiveness strategy: Thailand shall invest in the development of human capital, body of knowledge, technology, and innovation. The country shall strengthen the capacity of SMEs along with emphasizing creation of nascent entrepreneurs and smart farmers. Thai economy shall be developed based on human capital, fine infrastructure, as well as advancement of science, technology, and innovation.  Infrastructures and logistics strategy: Thailand shall intensively produce and develop logistical human resources specializing in the railroad industry, aeronautical engineering for aircrafts production and maintenance, creation of power-saving machines and equipment. Thai entrepreneurs in the logistical industry shall be highly supported in order to promote international transportation.  Regional, urban, and economic zones development strategy: Areas with strong economic potentials shall be maintained in an attempt to support regional connectivity and enhance the competitiveness of those areas. There are four focuses: (1) development of regions, (2) development of main cities in the regions, (3) development of economic hubs on the east coast, and (4) development of SEZs at the borders with strong emphasis on potential industrial and service clusters. 4 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

 International relations strategy: Thailand shall passively and proactively foster international relations and collaborations with a careful consideration on international agreements and treaties. Thailand’s competitiveness shall be increased so that Thailand shall be a hub of economic activities, educational services, financial services, health services, logistics, as well as research and development (R&D) 3.2 Tak SEZ 1) Location and Potentials is located along the line of the East-West Economic Corridor (EWEC). The 1st Thai-Myanmar Friendship Bridge is built there in order to link Tak Province to Rangoon, an economic hub of Myanmar, and support transportation to India and Southern China. At present, the 2nd Thai-Myanmar Friendship Bridge is currently built in an attempt to promote logistics and tourism in Tak Province. Majority of labors in Tak Province, especially in are Burmese coming through Mae Sot- Border Pass. This border pass is second to only Muse-Yunnan Border Pass in terms of importance. Regarding potentials of Tak Province in terms of labor availability and transportation of goods, this province is located near Myawaddy Trade Zone, where trucks containing goods from Thailand stop and many logistical services are available. Above all, Myawaddy Industrial Zone, which is located only ten kilometers from Mae Sot, shall be inaugurated in 2017. 2) Economic Structure In 2014, Gross Provincial Product (GPP) of Tak Province was 44,340 million baht, which was ranked 9th among Northern provinces. The highest proportion of GPP was belonged to the agricultural sector, followed by the manufacturing industry, retail businesses, and wholesale businesses, respectively. However, industrial activities of Tak Province are driven by labor-intensive small enterprises utilizing non-sophisticated technology and low financial capital. Most of the factories produce agricultural products. In terms of services, the province is mostly occupied by retail shops in Mae Sot. One of the strengths of Tak Province is border trade with Myanmar due to its geographical advantages. Tak Province has been always enjoyed the surplus balance of trade with Myanmar. In 2015, border trade valued 69,000 million baht. Most of the export goods were facsimiles, telephones, and food while import goods from Myanmar were agricultural products. 3) Workforce An analysis of trends of the population in Tak Province in the past five years revealed that population as a whole and labor age group in Tak Province have slightly decreased. The majority of labors have been prevalent in the agricultural sector (46.2 Executive Summary 5 percent) with a slight decline, followed by the service sector and the industrial sector, respectively. In the service sector, most of the labors have worked for retail businesses. The manufacturing sector has been dominated by garment industries. In terms of skills and educational levels of labors, the majority of labors have been employed for jobs that require non-sophisticated skills. Most of the labors have completed only elementary education or lower. However, percentages of labors with upper-secondary education and higher education have been increasing. Since Tak Province is the major border pass for migrant workers from Myanmar and there is a high demand for migrant workers in the province, it is occupied by migrant workers from Myanmar who want to work in the province or other provinces in Thailand. In 2015, there were approximately 20.6 thousand migrant workers from Myanmar in Tak Province alone. 4) Trends of Economic Structure during 2017-2021 In the near future, if the nature of investment in Tak Province will not be changed; namely, economic expansion will still rely on the manufacturing and the service sector, the economic growth of Tak Province will have averaged at 4.0 percent per year. Nevertheless, if the province can attract more investments from private agglomerations, the economic growth will have been able to reach 3.79-5.45 percent per year (Figure 2). Figure 1 Gross Provincial Products (GPP) of Tak Province in Different Scenarios of Growth Unit: Million Baht 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 2015 2016 2019 2024 2034 2015 2016 2019 2024 2034 2015 2016 2019 2024 2034 Base Case Medium Case High Case Agricultural Sector Industrial Sector Service Sector Total

Source: Forecasted by the consultant team 6 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

5) Summary of trends of labor demand, needs for deployment of migrant workers, and needs of labor skills development centers resulted from trends of economic expansion A forecast of trends of the population in Tak Province in the next five years (Figure 3) demonstrated that the number of population in the province will have increased. On the contrary, the proportion of population entering the labor market has decreased during the past five years, averaging 0.7 percent per year. This will possibly have resulted in the decline of the labor force in the next five years. This decline will have led to increasing shortage of labors around 40.3 to 50.7 thousand persons per year. At the early stage, it will have been noticed high demand of labors while the demand will have gradually decreased in later years. Figure 3 further showed that population in children age group will have continuously decreased, resulted in the lower number of labors in the labor market and the higher number of aging population. Therefore, in the next five years, Tak Province will have experienced the shortage of labors but that will be possibly solved by the import of migrant workers. At the same time, it is important to upgrade skills of labors in order to move from labor-intensive economic activities towards technology-intensive economic activities. Nevertheless, on the ground that trends of investments in Tak SEZ are still ambiguous, models of labor skills development are unclear. The needs for labor skills development centers may be unnecessary in the next few years. Figure 2 Population Forecast in Tak Province during 2016-2021

Unit: Person

600,000 0 - 15 15 - 59 60+ 500,000 400,000 300,000 200,000 100,000 0 20152558* 20162559 20172560 20182561 20192562 20202563 20212564

Source: Forecasted by the consultant team Executive Summary 7

3.3 Mukdahan SEZ 1) Location and Potentials is located at the end of EWEC. There is the 2nd Thai-Lao PDR Friendship Bridge in the province and the province is located not far away from significant SEZs of Lao PDR and Vietnam; those are: (1) Savan-SENO Special Economic Zone (SASEZ): This SEZ shows high investment potentials in terms of goods distribution services as well as manufacturing and production. Owing to tax incentives, many foreign leading companies are investing in the area such as Nikon, aircraft parts production companies, and sugar production companies, etc. Those companies still require foreign supervisors while employment of local Laotian workers is still limited. The main challenge of SASEZ are poor infrastructures and slow development of Lao PDR. In addition, there are problems relating to laws and low wages. Many Laotian workers prefer to work in Thailand because of low wages in Lao PDR. (2) Lao Bao Special Economic Commercial Area (Lao Bao SECA): This SEZ demonstrates strengths in terms of tourism, textile services, auto parts, and agricultural processing, etc. SECA is located in a short distance from Danang Port and has available infrastructures to support the economic corridor. However, SECA also has some shortcomings. The Danang port is still in the process of development. It currently causes relatively high transportation costs and has limited capacity to accommodate large amount of goods. Entrepreneurs then prefer to use Port (Klongtoey Port) or Laem Chabang Port in order to save costs. 2) Economic Structure In 2014, GPP of Mukdahan Province is 22,322 million baht, ranked 7th among provinces in the Northeastern part of Thailand. The largest proportion of GPP belongs to the agricultural sector, followed by the service sector and the manufacturing sector, respectively. Low-tech small enterprises utilizing low financial capital dominates economic activities in the province. Most of the establishments are agricultural-processing factories. Retail businesses are prominent in the service sector. Majority of the establishments are located in Mueang Mukdahan . Border trade is a main economic activity in the area. The value of border trade is second to only Province. This may partly due to the level of development of that is second to only . The value of border trade during 2012-2013 slightly dropped because of the opening of the 3rd Thai-Lao PDR Friendship Bridge in Province that is 116 kilometers away from Mukdahan. Furthermore, Mukdahan is the main stop where goods will be transferred to Southern China and Vietnam. 8 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

3) Workforce During the past five years, it has been noticed a slight increase in population in Mukdahan while the number of workforces has been reducing. Up to 58.2 percent of labors in Mukdahan have been worked in the agricultural sector at a declining rate, followed by the service sector and the industrial sector, respectively. In the service sector, the majority of the workforce are working for retail businesses. Construction is the major source of employment in the industrial sector. With reference to skills and educational levels of the workforce, the majority of labors are low skills labors with only elementary education or lower. However, labors with upper-secondary education and higher education are increasing. Since Mukdahan Province is one of an important border between Thailand and Lao PDR, a number of workers from Lao PDR come to work in Thailand. However, compared to other border provinces, the number of migrant workers in Mukdahan is less than others. Mukdahan is considered as a stepping stone where migrant workers stay for a while until they can find the way to work in other larger labor markets. In 2015, the province consisted of only 131 unskilled labors under section 9 of the Alien Working Act, B.E. 2551 (2008). Most of those labors were Laotians. 4) Trends of Economic Structure during 2017-2021 In the near future, if investment trend of Mukdahan will not dramatically change; namely, the province will still rely on key manufacturing and service industries, economic growth in the province will have averaged at 3.33 percent per year. However, if there is an external factor in terms of investments by private agglomerations, the economic growth will have been able to reach 3.10-7.41 percent per year (Figure 4). Figure 3 Gross Provincial Products (GPP) of Mukdahan Province in Different Scenarios of Growth Unit: Million Baht 50,000 40,000 30,000 20,000 10,000 0 2015 2016 2019 2024 2034 2015 2016 2019 2024 2034 2015 2016 2019 2024 2034 Base Case Medium Case High Case Agricultural Sector Industrial Sector Service Sector Total

Source: Calculated by the consultant team Executive Summary 9

5) Summary of trends of labor demands, needs for deployment of migrant workers, and needs of labor skills development centers resulted from trends of economic expansion A forecast of population trends of Mukdahan in the next five years (Figure 5) revealed that the number of population in the province will have slightly increased. Nevertheless, during the past five years, the number of new entrances into the labor market in the province has shown a decreasing trend with the average growth only at 1.9 percent per year. This might have resulted in a diminishing number of workforces. An analysis of labor demands further demonstrated that during 2017 to 2021, the province will have demanded more labors, approximately 3.3-4.3 persons per year, especially during the later years. Figure 5 additionally showed that population in children age group and aging group will have been likely to increase while the labor age group will have decreased. Therefore, in the next five years, Mukdahan will have been faced with a shortage of labors. This problem might have been solved by the deployment of migrant workers but upgrading skills of labors is also very important in order to move towards technology-intensive economic activities. Nevertheless, on the ground that trends of investments in Tak SEZ are still ambiguous, models of labor skills development cannot be specified. The needs for labor skills development centers may not be necessary for the next few years. Figure 4 Population Forecast in Mukdahan Province during 2016-2021 Unit: Person

400,000 0 - 15 15 - 59 60+

300,000

200,000

100,000

0 25582015* 20162559 20172560 20182561 20192562 20202563 20225641

Source: Calculated by the consultant team 3.4 Sa Kaeo SEZ 1) Location and Potentials is located along the Southern Economic Corridor, which is an important strategic location for transportation of good from Thailand to Panomphen and Southern Vietnam. It is selected by the Industrial Estate Authority of Thailand (IEAT) to be built as the Sa Kaeo Industrial Estate starting in 2017. Furthermore, the province is located 10 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

not far from two SEZs and an industrial estate that can be easily connected to inner and Southern Vietnam; those are: (1) Poipet O’Neang Special Economic Zone (POSEZ) where Thailand can use its potentials in terms of co-production. (2) Sanco Poipet Special Economic Zone, which is currently under construction by co-investment between Cambodia and Japan. (3) Sisophon Industrial Park Co., Ltd., which is 50 kilometers away from the border. Thailand and Cambodia can jointly utilize raw materials from this area. Nevertheless, those areas in Cambodia are still having some limitations such as security systems and infrastructures. At present, they cannot well attract investors. 2) Economic Structure In 2014, GPP of Sa Kaeo was 35,997 million baht, ranked 8 among provinces in the Eastern parts of Thailand. The major share of GPP was the agricultural sector, followed by the manufacturing sector and the service sector, respectively. Economic activities of SEZ in Sa Kaeo are different. In Wattananakorn District, most of the establishments are a large one in the industrial sector. The majority of high-capital establishments utilizing medium to high level of technology are agricultural-processing industries. Highest utilization of technology and capital is found in the food industry. On the contrary, most of the economic activities in District are service industries. The highest number of service businesses in Sa Kaeo is found here. Prominent service businesses in this district are retail and wholesale businesses. Border trade is a key economic activity in this SEZ. Among Cambodian border provinces, Sa Kaeo enjoys the highest value of surplus and increasing border trade. Key export goods are agricultural machines and equipment. 3) Workforce During the past five years, it has been noticed a slight increase in population in Sa Kaeo Province while the number of workforces has been declined. Most of the workforce in the province have been in the agricultural sector (43.2 percent) but the number has likely been smaller, followed by the workforce in the service sector and the industrial sector, respectively. The majority of labors in the service sector have been working in retail businesses, followed by hotels and restaurants. The major share of labors in the industrial sector is in manufacturing industries. In terms of the workforce distributed by skills and educational levels, the majority are low-skilled labors with elementary education or lower. Fortunately, labors completing post-secondary education have been likely to increase. Executive Summary 11

Since Sa Kaeo is a major border between Thailand and Cambodia, a considerable number of workers from Cambodia are working in the province. However, compared to other border provinces, the number of migrant workers in Sa Kaeo is much smaller. Migrant workers from Cambodia tend to consider Sa Kaeo as a pathway to go to other provinces with larger labor markets. In 2015, the province consisted of only 660 unskilled labors under section 9 of the Alien Working Act, B.E. 2551 (2008). Most of those labors were Cambodians. However, being a SEZ, the province facilitates daily commute migrant workers according to section 14. As of February 2016, there are 957 Cambodian daily commute migrant workers (total 2,398 workers) in Sa Kaeo. Most of the daily commute migrant workers are in Chantaburi Province. 4) Trends of Economic Structure during 2017-2021 In the near future, if there is no dramatic change in the investment trends; namely, economic growth still rely on expansion of the manufacturing and the service sector, economy will have grown 3.46 percent per year. However, if the growth is determined by an external force in terms of investments by private agglomerations, the growth will have reached 2.04 to 7.01 percent per year (Figure 6). Figure 5 Gross Provincial Products (GPP) of Sa Kaeo Province in Different Scenarios of Growth Unit: Million Baht 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2015 2016 2019 2024 2034 2015 2016 2019 2024 2034 2015 2016 2019 2024 2034 Base Case Medium Case High Case Agricultural Sector Industrial Sector Service Sector Total

Source: Calculated by the consultant team

12 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

5) Summary of trends of labor demands, needs for deployment of migrant workers, and needs of labor skills development centers resulted from trends of economic expansion An analysis of trends of the population in the next five years (Figure 7) revealed that population in Sa Kaeo will have slightly increased. However, the flow of workers into labor market during the past five years have continuously decreased with average growth at 1.23 percent per year. This might have resulted in decreased number of workers. An analysis of demand for labors demonstrated decreasing trend of the workforce. During 2017-2021, Sa Kaeo will have demanded approximately 0.94-1.04 hundred thousand workers per year, especially during the later years. At the same time, Figure 7 further showed that children population will have decreased while working age group and aging group will have increased. Therefore, in the next five years, population in the province will have increased but the rate of entry to the labor market will have decreased. Since the province will have still demanded labors, migrant workers from neighboring countries can help to fill this gap. Nevertheless, with the hope to replace poor-skilled labors with technologies, skills development for labors is important. It is currently difficult to pinpoint exact demand of skills development in the province due to ambiguous investment trends at present. The province may not need to set up labor skills development centers in the next few years. Figure 6 Population Forecast in Sa Kaeo Province during 2016-2021 Unit: Person 600,000 60+ 15 - 59 0 - 15 500,000 400,000 300,000 200,000 100,000 0 20152558 * 20162559 20172560 20182561 20192562 20202563 20212564

Source: Calculated by the consultant team

Executive Summary 13

3.5 Trat SEZ 1) Location and Potentials Trat Province is located in the Southern Coastal Economic Corridor, only 340 kilometers away from Laem Chabang Port and 250 kilometers away from Sihanoukville Port in Cambodia. Trat is also not far from Koh Kong Special Economic Zone (KKSEZ), which is a potential SEZ in terms of location. It is a center of economy, trade, and investment in the Southwestern part of Cambodia. Nowadays, there are several foreign direct investments there such as Hyundai’s cars from Korea, Mikasa’s volleyball and Yazaki’s electrical wires from Japan, and KKN Apparel Co., Ltd.’s clothes from Thailand. 2) Economic Structure In 2014, GPP of Trat was 36,999 million baht, ranked 6th among the eastern provinces. Largest share of GPP was the agricultural sector, followed by wholesale and retail businesses and other service industries, respectively. The industrial sector in Trat is mostly occupied by small enterprises that utilize low capital and non-sophisticated technology. Fabricated metal products enterprises are the most numerous. The service sector is dominated by wholesale and retail businesses, followed by garages and motorcycle repair shops. Most of the establishments in Trat are located in Mueang Trat District. Cross-border trade is vital to Trat’s economy, owing to its strategic location that is adjacent to three provinces of Cambodia that are Battambang, Pursat, and Koh Kong. The value of cross-border trade at Border Pass is continuously rising. The value is only second to the Aranyaprathet Border Pass. In 2014, the value of cross-border trade of Trat was 29,636 million baht. Major exports were consumer goods while major imports were goods from Koh Kong SEZ that were electrical wires, cars, and rubber balls. 3) Workforce In terms of population, during the past five years, it has been noticed an increasing trend of population and workforce in Trat. Most of the workforce in Trat have been working in the agricultural sector (50.96 percent) at a declining rate, followed by the service sector and the industrial sector, respectively. In the service sector, most of the labors are in the retail and wholesale businesses. The majority of the workforce in the industrial sector are in construction and manufacturing industries. Most of the labors are low-skilled labors and completed only elementary education or lower despite an increasing number of workers with upper-secondary education and higher education. Since Trat is a border province, its labor market consists of a considerable number of migrant workers from neighboring countries. However, the number is relatively lower than other border provinces. Most of the migrant workers come from Cambodia in order to work in the agriculture, fishery, and construction. They are seasonal workers. After 14 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

the end of working season in Trat, they usually travel to work in other provinces. In 2015, there were 6,125 low-skilled migrant workers from three nationalities. Most of them were Cambodian. 4) Trends of Economic Structure during 2017-2021 In the near future, if investment trends of Trat is almost unchanged; namely, it still rely on expansion of the manufacturing and service sector, the economic growth will have averaged at 3.05 percent per year. However, if the growth is stimulated by investments of private agglomerations, the growth will have reached 2.85 to 7.16 percent per year (Figure 8). Figure 7 Gross Provincial Products (GPP) of Trat Province in Different Scenarios of Growth Unit: Million Baht 100,000 80,000 60,000 40,000 20,000 0 2015 2016 2019 2024 2034 2015 2016 2019 2024 2034 2015 2016 2019 2024 2034 Base Case Medium Case High Case Agricultural Sector Industrial Sector Service Sector Total

Source: Calculated by the consultant team 5) Summary of trends of labor demands, needs for deployment of migrant workers, and needs of labor skills development centers resulted from trends of economic expansion In the next five years, the forecast (Figure 9) revealed that population in Trat will have rarely changed. However, the rate of entry of workforce into the labor market has been decreasing during the past five years, averaged only 0.42 percent per year. The analysis of labor demands revealed that during 2017 to 2021, Trat will have needed approximately 50.7 thousand workers per year. The demand will have been intensive during later years. Figure 9 further showed that aging population in Trat will have increased while children and working age group will have decreased. Therefore, in the next five years, Trat will have been likely to experience a shortage of labors. Fortunately, the situation will not have been severe because of migrant workers from Cambodia. However, it is really important to upgrade skills of labors in order to use technologies instead of labors. At present, it is difficult to foresee demands of skills development in Trat due to unclear trends of Executive Summary 15 investments in the future. In the next few years, Trat SEZ may not have yet needed skills development centers. Figure 8 Population Forecast in Trat Province during 2016-2021 Unit: Person 250,000 0 - 15 15 - 59 60+ 200,000

150,000

100,000

50,000

0 25582015* 20162559 25602017 20182561 20192562 20202563 20212564

Source: Calculated by the consultant team 3.6 Songkhla SEZ 1) Location and Potentials Among the first phase SEZs, Songkhla SEZ is the farthest SEZ from Bangkok. Its positioning includes export processing industries and multimodal transport due to its location and potentials as follows: (1) of Songkhla SEZ is adjacent to State and State, which connect to Singapore. They are also not far from Penang Port and Klang Port of Malaysia. Malaysia is a major source of the rubber industry, palm oil, food- processing industry, and Halal food. Thailand is enriched with raw materials for these industries. (2) Sadao Border Pass and Padang Besar Border Pass of Songkhla SEZ are the land border with cross-border trade value that is ranked among the top three in Thailand. Important manufacturing industries in these areas are rubber-processing industry, seafood, and electronics. These two border passes are a strategic site for regional connectivity in terms of trade, investment, and railway transportation between Thailand and Malaysia through Padang Besar Border Pass. (3) There is a great infrastructure plan in Songkhla SEZ such as - Sadao Motorway, Hat Yai-Padang Besar Shuttle Train, development of Sadao Border Pass and Padang Besar Border Pass, and development of electricity and tap water. (4) Sadao District is a center of trade and nightlife that is attractive to both Thai and foreign tourists, mostly from Malaysia and Singapore. 16 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

Potential border areas of Malaysia that can well support Songkhla SEZ are the Northern Corridor Economic Region (NCER), which aims to intensively develop the economy in the region and raise income level of the population. The NCER consists of Penang State, Perlis State, Kedah State, and Perak State, which is adjacent to , , and of Thailand. Malaysia is ambitious to develop this area to be a world-class economic region by 2025 with special focuses in three important activities that are electric appliances and electronics (E&E), agriculture, tourism, and biotechnology. This aim is expected to be achieved by an economic environment with integrative supports of domestic and foreign investments, societal and local development, infrastructure, as well as physical environment. Malaysia anticipates to see NCER as an attractive alternative for both Malaysians and foreigners to work, travel, study, and live there. 2) Economic Structure In 2014, GPP of Songkhla was 219,329 million baht, ranked 6th among Southern provinces. The biggest share of GPP was occupied by the manufacturing sector, followed by the service sector and the agricultural sector, respectively. Industrial activities of Songkhla is run by small enterprises that mostly employ unpaid workers or unpaid family workers. The most common form of economic activities of Songkhla is retail businesses. Most of the establishments (18,074) in Songkhla are retail businesses. In addition, Sadao District, which is an SEZ, shared the second highest number of establishments in Songkla Province (5,318). This number is second to only , which has 17,030 establishments. Cross-border trade is an important economic activity in Songkhla. Thai- Malaysia cross-border market is the biggest market in Thailand with trade value in 2015 up to 485,758.96 million baht. Sadao Border Pass and Padang Besar Border Pass generated trade value 98.72 percent of cross-border trade between Thailand and Malaysia. Sadao Customs Office is very important in Southern border provinces and Songkhla Province because of its highest trade value and it is a door to ASEAN Highway No. 2 (Thailand’s Highway No. 4) and North-South Expressway of Malaysia. It can be also connected to Penang, Kuala Lumpur, and Singapore. 3) Workforce During the past five years, the population in Songkhla have slightly increased while workforces have decreased. Over a half of workforce (51.1 percent in 2014) in Songkhla have been in the service sector, followed by the agricultural sector and the industrial sector, respectively. In the industrial sector, the majority of the workforce (about 100,000 workers) have been in the manufacturing industries, followed by construction, and mining/quarry, respectively. Workers in the agricultural sector have dealt with economic Executive Summary 17 activities such as cultivation, domestication, hunting, and forestry. In terms of skills and educational level of the workforce, the majority are low-skilled and earn a living by jobs that require non-sophisticated skills. Compared to other first phase SEZ provinces, wage in Songkhla is the highest in 2016. Employees in the private sector earn approximately 10,878 baht per month. Songkhla is the border province that consists of migrant workers from various nationalities, especially from ASEAN countries. Most of them are semi-skilled and skilled labors. According to Section 9, since 2015, the number of migrant workers in Songkhla has gradually decreased. Majority of migrant workers in Songkhla came from Burma, Lao PDR, and Cambodia. They need to stay in Thailand and are not yet allowed to be daily commute migrant workers like those in other SEZs. 4) Trends of Economic Structure during 2017-2021 In the near future, if there is no significant change in investment trends; namely, the economic expansion is still driven by the manufacturing and service sector, the economic growth of Songkla will have been at 3.66 percent per year. Nevertheless, an external factor such as investments by private agglomerations will have possibly contributed to the economic expansion of 3.20 – 5.74 percent per year (Figure 10). Figure 9 Gross Provincial Products (GPP) of Songkhla Province in Different Scenarios of Growth Unit: Million Baht 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2015 2016 2019 2024 2034 2015 2016 2019 2024 2034 2015 2016 2019 2024 2034 Base Case Medium Case High Case Agricultural Sector Industrial Sector Service Sector Total

Source: Calculated by the consultant team 5) Summary of trends of labor demands, needs for deployment of migrant workers, and needs of labor skills development centers resulted from trends of economic expansion 18 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

The forecast revealed that in the next five years (Figure 11), the population in Songkla will have slightly increased. However, the entrance of workers into the labor market during the past five years has shown a declining trend, averaging only 1.16 percent per year. This declining trend might have persisted in the next five years, resulted in a shortage of labors around 3.1 – 3.2 hundred thousand workers per year. The intense demand for more labors will have been noticed during the later years. Figure 11 further demonstrated that population in children age group and aging group will have decreased, resulted in the need for migrant workers. Songkhla Province will have needed to upgrade skills of workers because of this reduced number of workforce. At present, it is difficult to foresee demands of skills development in Songkhla due to unclear trends of investments in the future. In the next few years, Songkhla SEZ may not have yet needed skills development centers. Figure 10 Population Forecast in Songkhla Province during 2016-2021 Unit: Person 60+ 15-59 0-14 1,500,000

1,000,000

500,000

- 25582015* 20162559 20172560 20182561 25622019 25632020 20212564

Source: Calculated by the consultant team 4. Conclusion and Recommendations 4.1 Conclusion Since the development of SEZs is relatively new in Thailand, there are currently several challenges and limitations. At present, the RTG has done some achievements in terms of launching relevant policies but this seems insufficient for precise manpower planning for SEZs. The policies for SEZs during the past five years have continued to be changed. Although the analysis of manpower planning for SEZs cannot currently be done in- depth, the analysis revealed overall potentials of each SEZ. This result is useful for investors to make a decision based on general strengths and potential of workforce in specific industries as follows: Executive Summary 19

1) Potentials of Physical Environment of SEZs In terms of potential of physical environment of those five SEZs, each SEZ has different advantages and limitations as summarized in Table 2. Table 2 Summary of Key Potentials of SEZs Number of Land ownership in Transportation Number of Province migrant Location demarcation of ship Airfrei 1 skilled labors Land workers industrial zones ping ght Tak high low Valleys with limited Under negotiations for X X plains lands Mukdahan low low plains Under negotiations for X lands Sa Kaeo low low plains Preparing for construction X of industrial estates Trad2 moderate low Coastal areas with Under negotiations for X * * limited plains lands Songkhla moderate high plains Under negotiations for X X X lands Remarks: 1. Only un-skilled and skilled labors under Section 9 of the Alien Working Act, B.E. 2551 (2008). 2. Although there are both harbor and airport in Trat, their capacity to provide services is still low. Source: Analyzed by consultant team For the sake of clarity, qualitative data in Table 2 was transformed into quantitative data according to the twelve-point scale (Table 3). The scores revealed that Songkhla, Tak, and Sa Kaeo are among the highest potential SEZs that can attract investors. Table 3 Scores of Physical Potentials of 5 SEZs Number of Land ownership in Availability of Number migrant demarcation of industrial transportation of skilled Location workers zones (No= 0 Yes= 1) labors (limited Province (high = 3 (Under negotiation for lands= total (low = 1 plains= 1 and medium = 2 1 and Preparing for ship airfrei and plains = 2) land and low = construction of industrial ping ght high = 2) 1) estates = 2) Tak 3 1 1 1 1 1 8 Mukdahan 1 1 2 1 1 6 Sa Kaeo 1 1 2 2 1 7 Trat 2 1 1 1 1 6 Songkhla 2 2 2 1 1 1 1 10 Source: Analyzed by consultant team 2) Potential of Workforce in SEZs in Selected Economic Activities Due to limitations in terms of time and budget for field work in each province, this research could not cover all types of economic activities in one survey. High potential economic activities in each SEZ were then first selected for investigation of labors’ 20 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

potentials in five dimensions. Those dimensions are (1) traditional economic activities in the SEZs (2) availability of labors in selected industries (3) availability of educational institutions, curricula, and trainings for target economic activities (4) deployment of migrant workers from neighboring countries. The analysis was summarized as key economic activities or priorities of those SEZs that are mandatory to take into account during policy formulation and planning (Table 4). It is concluded that logistics, agricultural industries, and tourism are the most potential economic activities in terms of workforce. Table 4 Potential of Workforce in SEZs in Selected Economic Activities

Activities Tak Mukdahan Sa Kaeo Trat Songkhla 1. Agricultural and fishery industry high high high high high including related businesses 2. Ceramics manufacture low 3. Textile, clothing and leather moderate low low industry 4. Household furniture manufacture low low low 5. Jewelry and accessories industry low low 6. Medical equipment manufacture low low 7. Motor vehicles, machinery and low low parts industry 8. Electrical appliances and low low low electronics industry 9. Plastics manufacture low low low 10. Medicine manufacture low low low 11. Logistics business high moderate high moderate high 12. Industrial estates or zones1 13. Activities that promote and high high high high high support tourism Remarks: Industrial estates/industrial parks are not economic activities. This category cannot be evaluated potentials of labors Source: Analyzed by consultant team

4.2 Recommendations In view of those analyses of primary data and secondary data mentioned above, the following policies are recommended to relevant agencies for the overall manpower planning and skills development of Thai labors as well as the need for deployment of migrant workers in those SEZs.

Executive Summary 21

1) Migrant workers are still mandatory to economic advancement of those SEZs but protective policies are needed. Empirical evidences  Number of Thai workforce and the flow of labors into labor markets are insufficient. Deployment of migrant workers is subsequently needed.  Most of the migrant workers consider SEZ provinces as a stepping stone to go to work in other provinces that can offer higher wages. Guidelines  Formulate policies for regulating migrant workers in the SEZs.  Promote community participation in the formulation of local regulations and policies related to migrant workers.  Collaborate with local governments of neighboring countries in terms migrant workers management in order to promote mutual understanding and avoid conflicts in the future. Organizations in Ministry of Labors, Ministry of Health, local administrative organizations, agencies in charge of national charge of those security such as Ministry of Interiors and Ministry of Foreign Affairs guidelines Etc. 2) Manpower planning to support selected potential economic activities and prospective investment in SEZs Empirical evidences  Prominent economic activities in all SEZs are logistics, agricultural industries, fishery, and the like.  Those specific economic activities determine occupations and job positions in different contexts and locations of SEZs  Regarding logistics and supply chain of each economic activity, they may not be completed within SEZs. Upstream of the supply chain may be done in other districts and other provinces. Agricultural processing industries are easily fluctuated by climate changes and produce lower values compared to other manufacturing activities. Guidelines  In the first phase (1 – 3 years from now), it may necessary to prepare initial manpower planning in order to response to economic growth.  In the long-term, it is mandatory to study other higher-value economic activities that are suitable for SEZs in order to prepare the relevant workforce.  Activities required continuous implementation are: - Promote collaboration among all stakeholders. The private sector should play role in specifying desired qualifications and competencies of the workforce so that educational providers can prepare relevant curricula. Training and upgrading skills of the workforce will then be also prepared by responsible agencies. - Provide employment opportunities for disguised unemployed workers and inactive labor force such as the disadvantaged group, ethnic minorities, and school dropouts Organizations in Ministry of Labors, Ministry of Education, local private establishments charge of those Etc. guidelines

22 The Study of Demand for Labor in Special Economic Zones in the next five years (B.E. 2060-2564) in connection with ASEAN Community

3) Upgrade skills of workforce in SEZs and nearby areas by collaboration between labor sector, educational sector, and related agencies in order to support sustainable development Study results  Population trend and workforce trend of those SEZs will have gone in the same direction as that of the national level or will have decreased while the aging population will have increased.  Majority of labors in those SEZs has been in the traditional agricultural sector. They have completed low levels of education and have been unable to adjust themselves to the modern industrial and service sector. Guidelines  In the first phase (2 – 3 years from now), since most of the labors have been worked in the agricultural sector, they may not have sufficient skills and attributes for the industrial and the service sector. It is currently necessary to equip them with skills for the industrial and the service sector. The first phase of skills development for labors may pay attention to selected economic activities, for example: - Logistics activities – The Department of Skill Development should be the host for training and upgrading skills of the workforce because the DSD has developed various relevant curricula and occupational standards. - Agricultural activities –This should be done by educational institutions, especially vocational education institutions and universities providing courses in Agriculture.  In the long-term, when investment trends in the SEZs become clearer, it is important to specify positioning of each SEZ because their positioning will determine economic activities and occupations of workforce. This information is really vital to manpower planning and development. Organizations in Ministry of Labors, Ministry of Education, Ministry of Social Development and Human Security, Ministry charge of those of Tourism and Sports, local administrative organizations, private sectors such as the Federation of guidelines Thai Industries of each province, the Chamber of Commerce of each province and supportive organizations such as the Ministry of Industry and the Ministry of Agriculture and Cooperatives. Etc. 4) Strengthen local entrepreneurs, especially SMEs entrepreneurs in order to support future economic expansion Study results  Most of establishments in those SEZs are SMEs that are family businesses with limited utilization of financial capital and technologies. Quality of their products are unstable or they are unable to accommodate high demands of the markets.  Local entrepreneurs are at the root of local economic growth. Unfortunately, they have limitations in terms of knowledge, understanding, equipment, and financial capital that can respond to economic expansion. As a result, their potentials are underemployed. Guidelines  In the first phase (1 – 2 years from now), it is important to support their access to information, news, knowledge, and financial resources as well as support their training and coaching in key economic activities. At the early stage, the focus may be at the production of the Smart SMEs in selected highly- potential economic activities.  In the next 3-5 years, when policies of SEZs become clearer, investments in new economic activities should be promoted. Traditional economic activities should be upgraded in order to respond to the demand of the creative economy. Organizations in Ministry of Labors, Ministry of Education, Ministry of Science and Technology, the Office of Small and charge of those Medium Enterprises Promotion, Ministry of Industry, Ministry of Commerce, and local administrative guidelines organizations. Etc.

Executive Summary 23

5) Provide supports and advices regarding manpower for external investors Study results  The growth of SEZs is partly determined by external investors due to limited capacity of local entrepreneurs.  At present, in some SEZs, external investors are currently investing in both target and non-target economic activities. Guidelines  One-stop service centers in each province should prepare permanent staff who can provide advice regarding labor market and availability of workforce so that investors would be confident that they will not experience a shortage of labors.  Local agencies should support in terms of tax incentives if those investments lead to the minimum employment of local workers and workers from neighboring provinces Organizations in Ministry of Labors, the Board of Investment, one stop service centers in SEZs, the Office of Small and charge of those Medium Enterprises Promotion, Ministry of Industry, Ministry of Commerce, and local administrative guidelines organizations Etc. 6) Promote changes for sustainable development Study results  Development of SEZs is expected to distribute prosperity to regions and enhance competitiveness of Thailand  There are some misunderstandings between policy makers at the national level and local citizens regarding benefits of SEZs. Guidelines  In the first phase (1 – 2 years from now), local organizations should promote understanding and awareness of benefits of SEZs among local citizens through various ways of indirect and direct communications.  In the long-term, participation by local citizens will be required in order to raise awareness and promote a sense of belonging among those in the SEZs. Organizations in All stakeholders charge of those guidelines