And on the Other Side of the World, X-Shoring ...

Let's start with a good one: The arrival of Tesla is finally confirmed. Congratulations, Monterrey, you still have to read the fine print, but an investment of this magnitude can benefit the local — and national — economies. My question is whether there is a strategy in place or whether it is just a stroke of luck to grow this kind of fruit.

In this article, I would like to comment on offshoring on the other side of the Pacific. All things being equal, Thailand had its Tesla moment in December 2022 when the Toyota family chose it to unveil the first battery-electric version of its bestselling Hilux pickup (formerly assembled in Tijuana, mind you). It was announced not as a single investment but as part of a partnership with Bangkok-based CP Group. The partnership would convert agricultural biomass into fuel for hydrogen-powered vehicles — hydrogen, not lithium.

The arrival of this investment was not an isolated act. Instead, it resulted from a long-term strategy to leverage the competitive advantages of a dynamic country in the heart of Southeast Asia that has taken advantage of the capital outflow from China to develop its industry.

The Toyota-Thailand alliance is an example of how Southeast Asia's second-largest economy has attracted some of the world's largest and most technologically advanced companies to invest billions of dollars and make it their regional hub and R&D centers.

According to the Malaysian-based KW Global Trade consulting firm, "in 2022, these investors were companies as diverse as Amazon Web Services that has pledged to invest US$5 billion; BYD Co, China's largest electric car maker, has pledged to invest US$660 million; and Taiwan's Foxconn Technology, moving into electric vehicles through a US$1 billion-plus joint venture with Thai energy giant PTT".

Overall, the Board of Investments Thailand (BOI) welcomed US$20 billion in FDI  requests in 2022, up 39% year-over-year. And in early 2023, the BOI upped the ante by launching an even more ambitious five-year investment promotion strategy. It aims to catapult Thailand by offering greatly enhanced incentives that appeal to current investors and new projects that bring upstream industries and advanced technologies linked to domestic companies. The net result figures are similar to Mexico's, regardless of the size difference between the economies.

Here is the crux of the matter. Overseas, in Thailand, there is a five-year plan, not a disdain that stifles government action. The government and the private sector are working hand in hand, transcending ideological or political differences. There, they are launching a promotion campaign based on technological development, not just production capacity or "strategic location." So, again, there is a plan, communicating vessels and precision aims, not shotgun blasts that sometimes hit the pound-for-pound chickpea, Tesla dixit.

For example, under the Thai strategy, investments in upstream industries and advanced technologies, such as advanced materials manufacturing, biotechnology, and nanotechnology, which involve innovation and technology transfer through research collaboration with Thai entities, will receive superior incentives, including an income tax exemption of up to 13 years without limit.

We had something similar in the defunct Special Economic Zones project, but that's another sad story to be told at another time.

In another significant strategic move, for the first time, major long-term investors will be rewarded for their loyalty with additional tax breaks and other privileges if they have some form of tie-up with domestic partners. Those who plan to follow Toyota's lead and set up regional headquarters, alliances, and R&D operations will also get significant incentives. The same will apply to small and medium-sized enterprises and new economy start-ups in digital media, data centers, and other fast-growing sectors. 

The strategy aims to "restructure" the economy to ensure Thailand remains innovative, competitive, and inclusive in a post-Covid world. Through incentives, they push companies to cooperate, search for global partnerships, strive for innovation and ingenuity, and not only wait to fetch the low-hanging fruit of a misunderstood supply chain development through simple manufacturing. We have been down this road in Mexico but are in a waiting period due to our pettiness.

This strategy envisions looking ahead to one of the most important inputs for economic development: the Bio-Circular Green Economy or BCG, a government policy that has spawned a burgeoning sector of green, innovative, and renewable industries, both foreign and domestic. BCG is one of five priority sectors at the heart of Thailand's strategy, along with the electric vehicle supply chain, smart electronics manufacturing, and digital and creative industries. Y la Cheyenne, Apá?

Among the foreign companies Thailand wants to attract are those facing increasing pressure from stakeholders to address environmental, social, and governance (ESG) concerns. "As the world focuses on ESG, investors need clean energy, and other countries are looking to the future and can provide it.

And, of course, we must consider the political tensions between China and the US. Mexico and Thailand both seek to profit from this global reality. We want to bring Asian companies to settle in Mexico and join the bonanza of the North American market. They want to attract companies to their shores, arguing their competitive advantages to serve the ever-growing Indo-Asian market. 

Official figures bear this out. In 2022, Mexico attracted Foreign Direct Investment (FDI) flows totaling US$35.3 billion dollars, according to Ministry of Economy records, this was its best level of attraction in the last seven years. That same year, Thailand landed US$20 billion in investment, proving that both countries are prosperous in the top sourcing countries from the geopolitical divides.

In Thailand, Chinese companies ranked first in dollar terms, with more than US$2.3 billion pledged. However, Japanese investors retained the top spot regarding the number of projects approved and remained the largest cumulative source of FDI. Regarding investment volume, U.S. companies ranked third in 2022, followed by Asian powerhouses Taiwan and Singapore in fourth and fifth place.

In Mexico, by country of origin, FDI flows in 2021 came mainly from the US (47.5%), Spain (13.7%), Canada (6.5%), United Kingdom (5.7%), Germany (5.2%), and Japan (5.0%).

In other words, these are the same investors we seek for Mexico, not necessarily leaving the Asian region but looking favorably on a global and comprehensive strategy to stay and prosper.

What investors are saying about Thailand and other ASEAN countries: "We like what we see." It's a roadmap that recognizes the change. It's designed to reshape the investment landscape and is essential to attract the next generation of industries. Is it the same in Mexico? I don't necessarily think so.

And if you think Thailand is small, remember that it is already the world's second-largest exporter of computer hard drives, the world's tenth-largest automobile manufacturer, and one of the world's leading suppliers of food products. These existing industrial clusters, strong supply chains, and good infrastructure such as ports, roads, and power are some of the main attractions of this APEC member country. 

In other words, we are very excited about the benefits of "offshoring," "nearshoring," or "x-shoring," as you might want to call it. From Spyral’s perspective, we are still shelling with a shotgun. We are fortunate to be hunting a few ducks, although there could be many, many more