Thailand is the first country to exploit the industrial prospects of cassava. For non-food application of cassava, ethanol for use in gasohol and biodegradable packages appear to hold good potential to revolutionize the cassava industry of the country. To systematically assess the potentials and to identify key issues confronting the development of these new industries, Porter’s diamond framework was applied. From the analysis, key regulatory issues were identified for each industry. Marketing and manufacturing issues were also identified. Research and development should concentrate on the production issues. Clustering of related industries should be formed to overcome these key issues and improve on the competitiveness of gasohol and biodegradable packages.

Introduction

The aim of this presentation is to address key issues associated with the future development of the cassava industry in Thailand. The paper will first give a brief outline of the cassava industry in Thailand. This will be followed by a description of the competitiveness analysis according to Michael Porter. Then, the analysis will be made on future industries that would make use of cassava as raw material. The analysis should identify key issues that need to be addressed in the development of the future industries. It is hoped that the presentation will help scientists and technologists in designing their research and development projects that will better support the future development of cassava industry and enhance the competitiveness of the country.  

Cassava in Thailand
Cassava (Manihot esculenta Crantz) is one of the three major crops in Thailand. About 18-20 million tons of cassava roots are produced each year, making Thailand one of the world largest cassava producers (www.cassava.org). However, due to abundance of rice, cassava is not the main source of carbohydrates for Thais. Unlike countries in Africa and Latin America, cassava is not a subsistence crop in Thailand. So cassava production has been integrated with various industries of the country such as cassava chips and pellets for animal feed, paper and textiles, starch (including modified starches) and flour, and sodium mono-glutamate (MSG). Since these are low value products, many attempts have been made to develop other starch-derived products of higher values. Ethanol production from cassava (and molasses) represents one such effort to improve the country’s security in the form of gasohol or bio-energy. Another line of development is the production of cassava based packaging materials and packages that are biodegradable and hence more environmentally friendly. Biopolymers and fibers are being explored as new bio-industry that may substitute polymers made from petrochemicals. While more research and development must be carried out in order to improve the technical feasibility, it is also essential to look further ahead on the marketing and the business environment for these products. To gain more understanding on the future of these new industries, it is desirable to analyze how these industries will improve the competitiveness of the country. In this paper, the analysis will be made using the Porter’s diamond on the competitiveness framework. The analysis will be made on two new industries, namely gasohol and biodegradable packages derived from cassava. For those who are unfamiliar with the Porter’ diamond, a brief description is provided below.

These 4 conditions are interrelated. Government can play roles in developing favorable conditions by offering the most productive environment for business, namely macroeconomic, political, and legal context.

The author wishes to apply the Porter’s diamond to analyze the competitiveness of two new cassava-based industries in order to identify key issues that will be confronting these new industries. The industries in question are gasohol and biodegradable packages. They are selected for the analysis because they potentially can have strong impact on the country’s agro-industry sector. The analysis and the issues are discussed below.

Gasohol
Thailand has been investing in the energy development with anticipation of the strong demand for energy in the industrialization. In addition to natural gas, ethanol from cassava and molasses to replace MTBE (methyl tertiary butyl ether) as additive in gasoline to make gasohol has been promoted (www.apecenery.org) Aroon Auansakul, Bangkok Post, 7 April, 2004). Figure 1 shows the analysis of the microeconomic business environment of gasohol. The strong impediments are several as indicated by (-) unfavorable factors. These become the key issues that hinder the growth and the competitiveness of gasohol. The main one is the government’s subsidy to keep the price of gasoline low and hence the pressure to develop gasohol is lessened. Another government’s regulation on the high excise tax for alcohol as spirit keeps the price of gasohol high. Government needs to make changes to improve the conditions to make gasohol competitive. On the business side, the big oil companies will be against gasohol development unless they are given certain incentives to get involved. To grow the gasohol industry, it is also necessary to create clusters of related industries such as car engine and vehicle industry, fermentation equipment industry, and the gasoline oil refinery industry.  The next issue is the choice of raw material between cassava and molasses from sugar industry.

Biodegradable packages
Environmental concerns of plastic bags and packaging foams have led to the research and development of biodegradable packages made from cassava starches (www.trekthailand.net/projects/3/) (www.tve.org/ho/doc.cfm?aid=897) . Figure 2 shows the microeconomic business environment analysis of the biodegradable packages. The main issues that will make the biodegradable packages unfavorable are indicated by (-). The demand of the products seems to be weak because there is no regulatory requirement that will mandate the use of biodegradable packages. This condition may be changing. As EU regulations will soon require exporters of goods into the EU to use only degradable packaging materials. On the commercial side, biodegradable packages will be more costly than the conventional packages. This will hinder the development of the biodegradable materials unless government can provide suitable incentives. On the product development and production process, there remain many challenges that may be overcome by clustering among equipment industry, starch industry and users of the packages. When the production can be automated and reaches the economy of scale, the cost of the biodegradable packages should be competitive.

The application of the Porter’s diamond framework for microeconomic business environment has provided a systematic analysis of the potentials of two new cassava-based industries, namely gasohol and biodegradable packages. The analysis identifies key issues on the regulatory side as well as the marketing side that need to be addressed in order to promote these new industries. Research and development should focus on the  industrial scale production processes and equipment development. Cluster of related industries in each case should be formed to improve the competitiveness of these new industries.