New Home for Thailand’s Tobacco Monopoly

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Features

The Thailand Tobacco Monopoly (TTM) will be moving house from its current location in the heart of Bangkok’s central business district to a 220 rai (35.2 hectares) plot of land at Rojana Industrial Park in Ayutthaya, a province about an hour’s drive from Bangkok.

By Nattira Medvedeva

The Thai government first began talking about moving TTM from its existing site on one of the most highly coveted pieces of real estate left in the center of the city in the mid-1990s.

“Twenty-four years ago we presented this land to HM Queen Sirikit,” said Dr. Daonoi Suttiniphapunt, managing director of TTM. “TTM had 600 rai (96 hectare) in total, of which approximately 420 rai (67.2 hectares) we presented to Her Majesty. First we built a park with an artificial lake on a 120 rai plot near the Queen Sirikit National Convention Center. [This is now called the Benjakiti park] The remaining 300 rai (48 hectares) will be developed into an expansion of the Benjakiti park.

Originally the move to the new facility in Rojana Industrial Park was to start in 2020, once all the new machinery needed had been acquired. However, that plan has been accelerated so now moving to the new facility is slated to be completed by 2019. The transfer of vacated land to the Treasury Department will happen in phases, with the first phase of 61 rai (9.76 hectares) already being handed over.

TTM had previously planned to locate the new facility in Chachoengsao province, also about an hour’s drive east of Bangkok, but then changed to Chiangmai province in Northern Thailand in order to have closer access to raw materials. However, since TTM’s main market and distribution center is in Bangkok, they had to change again and in 2009, decided on the Rojana Industrial Estate.

The move to the new facility in Rojana Industrial Park will only be for TTM’s production arm. Administration, or the back office, will stay in its current location in Bangkok. Out of its 3,200 employees at TTM’s site in Bangkok, 1,800 of them will be moving to Rojana. The new facility has been built and ready since last year.

Also: TTM & Farmers: In a proactive move addressing a dispute with Thai tobacco farmers, Dr. Suttiniphapunt revealed that in previous years TTM has had to buy leaf that the farmers grew in excess of their quotas but TTM will not be continuing doing so any longer.

“TTM received Cabinet approval to allocate approximately THB15 billion for building the new facility and equipping it with cigarette production and printing and packaging machinery, as well as a logistics system, IT system, warehouse, and even staff accommodation,” said Dr. Suttiniphapunt.

The acquisition of machinery for the new TTM facility was divided into six contracts. The first contract was for tobacco primary processing machinery. Four contracts were for secondary process machinery, and the sixth contract was for ASRS – automated storage and retrieval system.

“Originally our Cabinet-approved budget had allocated THB7 billion for the acquisition of machinery, but after some careful consideration we were able to reduce that amount by THB944 million. This does not include any cost reductions that may happen throughout the course of the e-auctions,” explained Dr. Suttiniphapunt. “Before we wrote the TORs we sent members of our Board, who are specialists in production machinery, as well as members of our team, to visit various cigarette production factories in Asia and Europe to learn what types of machines are currently being used. Armed with that information we engaged a specialist to write the TORs, reviewed them, and had a prosecutor also review them. Then we started our e-auction.”

“For the first contract for primary tobacco processing there were four bidding companies, from 11 who had originally expressed interest. Of these four, three companies had some commercial errors in their documents, so our Board decided to cancel this first e-auction and redo it again, seeing that having only one error-free bidder would not be in the best interests of TTM as there would be no price competition. So, we started a new e-auction with all four companies bidding and are scheduled to start considering the bids soon. This has caused only a two-month delay, so it is still alright.”

“For the second contract, the dry ice expanded tobacco process (DIET Process), there are only two companies who manufacture this machinery, Airco DIET and Toromont Energy Systems. About 80% of cigarette production factories in the world use Airco’s machinery. Only Airco DIET entered the bidding. We checked with Toromont but were told that they were not interested to bid, so there was no reason to do another auction. The bidding price was lower than our cost estimate as well, so we have already signed the contract for this.

“As for the contract for ASRS, we faced a similar situation with bidding companies as we did for the four companies bidding for the primary processing contract, they also had commercial errors in their documents. Right now we are still deliberating what course of action we will take on this. The remaining three contracts are in process, we will be sending out invitations to bid soon. We expect to have all six contracts signed by this September and expect to be able to start gradually installing the machinery in the new facility in 2017 with installation of all new machinery being completed in 2018.”

Not all the machinery at the facility in Rojana Industrial Park will be brand new. In fact, Dr. Suttiniphapunt estimates that about 60% of the machinery in the new facility will be machines currently being used at TTM’s site in Bangkok that will be moved to their new home. Moving the used machines to Rojana will start this year in parallel with regular production schedules so there will be no drop in output.

“We are going to be moving about 30 machine sets [from Bangkok to Rojana],” said Dr. Suttiniphapunt. “Each set takes about three months to move and install, as they’ll need to be overhauled as well. We should have everything installed and ready within 2019, and full production capacity in 2020.”

“There will be no halt in production even as we move the machines. If one machine is in the process of being moved, there will have to be another machine that can be used instead. We will also use OT to ensure that our production output levels remain the same.”