IP Observer

Earlier this month our Chinese-language sister newsletter reported on how Taiwanese investment in Malaysia has never really bounced back since the fall in the wake of the Asian Financial Crisis. The author speculated that Taiwan could retake its place among the top patent applicants in Malaysia, after having dropped out of the top 10 in 2008 and not having retaken its place since. The reason for this optimism is Taiwan’s New Southbound policy, Taiwanese president Tsai Ing-wen’s revamped version of an previous attempt at making inroads into Southeast Asia. The new version of the policy takes into account the economic development of ASEAN nations, as opposed to viewing them simply as locations for factories with a cheap labor force. This shift in policy has been, in part, fueled by rise of the ASEAN Economic Community (AEC).

Along with Malaysia, Thailand is one of the founding members of ASEAN and is expected to play a significant role as part of the New Southbound Policy. Stanley Kang, chair of the Joint Foreign Chambers of Commerce in Thailand, recently visited Taipei in an attempt to encourage Taiwanese investment in the country as well as the greater region.

He outlined three major development projects in Thailand, namely Thailand 4.0, the Eastern Economic Corridor (EEC) along with the GMS Sub-region Railways. He also suggested that there was more stability in the country under the current government than in recent years. Thailand 4.0 is officially defined as “Creative + Innovative Smart Thailand”- moving from commodities, industries and trade in goods, to innovation, technology and creativity and trade in services. This is Thailand’s answer to mirror the economic development plans of other countries, including the “Nation of Makers” by the US, “Design in Innovation” by the UK, “Made in China, 2025”, “Smart Nation” by Singapore and South Korea’s “Creative Economy”.

The EEC initiative has caught the eye of Chinese internet giant Alibaba, which is reportedly set to start investing in its production and logistics hub, a “fifth generation e-commerce park”, in the region this year, according to industry minister Uttama Savanayana, as cited by the Bangkok Post. The park is also expected to provide support for domestic small and medium-sized enterprises (SMEs). Swedish fighter jet manufacturer Saab is also potentially interested in setting up a maintenance hub at U-tapao airport.

The EEC spans Chachoengsao, Chon Buri and Rayong provinces and will be home to the industrial upgrade that Thailand 4.0 hopes to usher in. As part of this initiative five of the country’s current industries will be upgraded, as shown in Figure 1.

Figure 2: Five Current Industries and Five Future Industries; Source: Ministry of Industry,
Thailand Moving Ahead with Cluster Development, 2015

The policy aims to shift Thailand from a country reliant on foreign companies, to a self-reliant innovative economy. The Eastern Economic Corridor Act in particular aims to relax regulations and create one-stop shop services for businesses. It also involves the establishment of regional R&D centers and will improve Thailand's logistics infrastructure with increased links and expansion to the countries transport networks on sea, on land, in the air, as well as its rail networks. This includes three deep sea ports, Laem Chabay Port, Map Ta Phut and Sattahip, to be surrounded by free trade zones (FTZs), and three airports, Don Muang, Suvarnabhumi, and U-Tapao, the latter of which is set to be upgraded with the addition of another runway. The airports are to be connected with high-speed rail links and also surrounded by FTZs. The policy posits Thailand as a "Gateway to Asia" – taking advantage of Thailand’s central location within ASEAN and proximity to ASEAN’s fastest-growing economies, CLMV (Cambodia, Laos, Myanmar and Vietnam). The area was already a hub for the petrochemical industry and a production base for motor vehicles and electronics, with access to a highly skilled workforce and natural resources.

Regulations for foreign companies entering the region are gradually becoming clearer.

To facilitate this policy, Thailand will need to ensure that it has adequate intellectual property right protections in place. The patent filing statistics from the Thai Department of Intellectual Property from recent years can give some insight into how much innovation is happening in three key sectors in the country: physics, chemistry and engineering (Figure 2) and how these relate to the sectors included in the Thailand 4.0 initiative:

Figure 3: Invention patent applications from foreign and Thai applicants to the Thai Department of Intellectual Property 2001-2016, and the number of invention patent applications in each scientific field 2001-2015 (Data source Thai Department of Intellectual Property, collated by Conor Stuart

Thai applications comprised 11% and 12% respectively of total invention applications in the chemistry and engineering fields in 2015, while in the physics field, they accounted for a slightly larger portion at 15%. This can give some indication as to domestic innovation in Thailand.

Thai invention patent applications to the Taiwan Intellectual Property Office have also shown modest growth. Although in third place, in terms of ASEAN applications, they trail quite far behind applications from other ASEAN nations, such as Malaysia and Singapore, which, perhaps due to their linguistic ties with Taiwan, have seen much greater numbers:

Figure 4: Information Source: TIPO Annual Report
(No applications were recorded from Lao, Cambodia and Myanmar)

Figure 5: Information Source: TIPO Annual Report
(No applications were recorded from Lao, Cambodia and Myanmar)

Despite the rise in applications from Thailand in 2016, granted patents fell from 11 to 3.

There has been more substantial growth in grants to Thai applicants for US patents, contrasted below with applications from other ASEAN nations.

Patents granted by the USPTO to the other five ASEAN member nations are shown below CLMV + Brunei (non-founding member countries):

Nine of the ten ASEAN member nations (Myanmar is not yet participating) are also participating in the ASEAN Patent Examination Cooperation (ASPEC) initiative, which shares search and examination results between the offices of the member nations, enabling expedited patent grants. The ASEAN IP Portal recently released statistics on the take-up of the initiative as in Figure 7.

As Taiwan's vice minister of economic affairs, Wang Mei-hua has stated previously, however, countries like South Korea, China and Japan have already made significant inroads into the ASEAN region, and have all established free trade agreements with the region. The number of investment by Taiwanese parties in Thailand fell by 12% from 2015 to 2016 and the total amount of investment fell by 47% from US$432 million to US$228 million, leaving some questions as to how Taiwan will realize its ambitions in the region.

The Joint Chambers of Commerce in Thailand comprises members from 32 nations and is similar to a think tank in its purpose, working with the Thai government, the embassies of different countries, the private sector, the Institute of Directors, the Thailand Development Research Center, the Asian Development Bank, the Thai branch of the Japan External Trade Organization, the World Bank, the UN Economic and Social Commission for Asian and the Pacific and the Thailand Management Association.