Industry clusters are back in favour after the military regime expressed confidence that they would strengthen small and mid-sized enterprises and make larger companies more competitive.
The Board of Investment's recent meeting, chaired by National Council for Peace and Order chief Gen Prayuth Chan-ocha, agreed to cancel existing investment zones and pursue regional industrial clusters, a part of the BoI's investment strategy for 2015-21.
The BoI sees at least 11 industrial clusters emerging under the new plan, which promotes technology, value-added industries and eco-friendly projects.
The strategy, to be put in practice at the start of next year, will target seven sectors: agro-industry and agricultural products; minerals, ceramics and basic metals; light industry; metal products, machinery and transport equipment; electrical and electronics; chemicals, plastics, paper and services; and infrastructure.
Promotional privileges will be based on category and merit for the country.
The new industrial preferences will include an even higher corporate income tax exemption for investors committed to research and development. Full details have not been disclosed.
The BoI now offers an eight-year corporate tax exemption and a waiver of import duties on machinery and raw materials.
The board will also change its method of evaluating projects by concentrating on quality instead of the value of applications. It is committed to closely monitoring and evaluating projects after applications are approved.
Harvard Business School's Michael Porter, one of the most influential business scholars of the past decade, defines clusters as groups of similar and related firms in a defined geographic area that share common markets, technologies and worker skill needs, and which are often linked by buyer-seller relationships.
Firms and workers in an industrial cluster draw competitive advantage from their proximity to competitors, skilled workforce, specialised suppliers and shared base of sophisticated knowledge about their industry.
Paron Israsena Na Ayudhya, chairman of the National Economic and Social Development Board (NESDB), said the government plays a significant role in cluster development, especially in terms of research and development budget and providing new technology and designs to make products that conform to world demand.
According to Mr Paron, Thailand has applied the cluster concept over the past 11 years and succeeded in developing various clusters such as an orchid cluster in Ratchaburi province that supplies vendors in New York.
Suvitchai Saengtien, chairman of the orchid cluster, said R&D plays a significant part in the enterprise.
"Orchid growers in Ratchaburi can now compete with Singapore," he said.
The group is seeking cooperation from other orchid-growing countries to exchange information and technology.
Thanin Pa-em, the NESDB's deputy secretary-general, said the agency is in the process of drafting guidelines for development of industrial clusters in Thailand, to be completed by October.