Is Thailand really trailing in the SEA manufacturing race?

Thailand’s industrial sector has witnessed significant investment activities, particularly in high-value advanced manufacturing industries. Yet beneath this apparent success lies a more complex narrative—one that reveals both opportunity and mounting regional pressures.

The numbers tell a compelling story. Since the initial rounds of the US-China trade war prompted supply chain relocations, Thailand has emerged as a significant beneficiary. Manufacturing Foreign Direct Investment (FDI) inflows between 2021 and 2024 averaged 42.4% higher than the five-year pre-pandemic benchmark. Even more striking, computer and electronics products surged by 94.7%, far surpassing the overall FDI growth of 20.8%. (Figure 1)

This investment frenzy has created tangible effects on the ground. Industrial land sales have reached new heights since 2023, marking two consecutive years of record transaction volumes. The Eastern Economic Corridor's promotional zones have shown exceptional appeal, sustaining strong transaction activity well into the first half of 2025. With serviced land inventory running perilously thin, industrial estate developers have scrambled back into the acquisition mode to meet overseas manufacturers' near-term appetite.

Figure 1: 5-year Average FDI Inflow, by industry, (2015-2019 vs. 2020-2024)

Source: Bank of Thailand, analysed by JLL Thailand Research

Regional competition across Southeast Asia's industrial landscape is intensifying dramatically. Vietnam and Indonesia—economies boasting robust GDP and FDI growth—present formidable alternatives to manufacturers seeking to diversify their operations. Washington’s clarification of tariff implications in late July prompted regional supply chains to recalibrate. This has created a more level playing field and called Thailand's pronounced advantages into question.

When comparing FDI inflow, Thailand recorded a solid 25% growth rate, with FDI inflows rising from USD 6.3 billion to USD 7.9 billion (Figure 2). While maintaining a smaller absolute volume compared to Indonesia and Vietnam, Thailand's consistent growth showcases its enduring appeal as a regional investment gateway.

Figure 2: SEA FDI inflows, by economy, 2015-2019 vs. 2020-2024

Source: UNCTAD, analysed by JLL Thailand Research

Nevertheless, Thailand continues to attract substantial capital allocation to advanced manufacturing sectors, particularly digital technologies, electronics and electrical equipment, and electric vehicle production. The Board of Investment's record-breaking 1.1 trillion Thai baht in registered applications for 2024 underscores persistent investor confidence. This success reflects Thailand's enduring strengths. The country offers broad-based, modest economic growth, skilled labour pools tailored to key target industries, robust infrastructure readiness, and generous government incentives. Advanced manufacturers seeking a stable Southeast Asian foothold typically pursue long-term investment strategies. Thailand provides compelling short-to-medium-term fundamentals and offers a relatively safe entry point into the region's dynamic markets. Industrial and logistics assets reflect this measured optimism, with capitalisation rates estimated between 6-7.5% as of the first half of 2025—suggesting investors remain willing to accept relatively modest yields for Thailand's perceived stability.

While the initial wave of supply chain diversification favoured Thailand, sustained success will require continuous innovation in policy frameworks, infrastructure development, and skilled workforce cultivation. Thailand's industrial gambit may yet prove prescient, but only if policymakers can stay ahead of the accelerating regional competition that shows no signs of slowing.