Profits ploughed back into R&D

06.12.17

Prominent companies are setting aside more than 3 per cent of their net profit on research and development (R&D) under corporate Thailand’s embrace of innovation.

The National Science Technology and Innovation Policy Office (STI) estimates that private sector investment in R&D will reach Bt140 billion in 2018. The increased spending forms part of the country’s efforts to move up the industrial ladder as an innovative producer under the government’s Thailand 4.0 technology strategy.PTT is setting aside 3 per cent of its net profit each year for research and development to promote the company as an innovative firm in the region. SCG Group’s outlays on R&D average Bt6 billion, or about 5 per cent of its net profit, a year. CP Group spent Bt4.57 billion in 2016, or about 5 per cent of the group’s net profit, on research.

Thai Union Group will spend an average of Bt300 million a year from 2018-20 under a programme to boost sales of innovative products in 2020 to US$800 million out of projected total sales of US$8 billion for   that year. In the property sector, Magnolia Quality Development Corporation Ltd (MQDC) set up a Research and Innovation for Sustainable Centre last year with a budget of Bt200 million to research and develop innovative technology under the concept of “wellbeing innovation”.

The company also has set aside a budget averaging 3 per cent of profits a year for its research and development centre. Cholanat Yanaranop, executive vice president of SCG and chairman of the SCG innovation committee, said that the company had more than 1,800 R&D experts, a budget of more than Bt6 billion a year for R&D, and long experience of the markets in both Thailand and elsewhere in the Asean region.

This has helped sharpen the company’s insights into its customers’ needs.“The Open Innovation Centre by SCG has the full capability to strengthen innovation development for the company’s businesses and partners to faster create high-value added (HVA) products and services in order to respond to various customer needs,” Cholanat said.  R&D is significant for SCG in enhancing competitiveness. In 2016, the industrial giant recorded sales of Bt160 billion from the HVA group, which accounted for 38 per cent of the total revenue from sales, Cholanat said. The innovation centre would also support R&D for startups around the world that possess intellectual property in science and technology, allowing them to collaborate with SCG in developing high-capability innovations, he added.

PTT Plc’s president and chief executive officer, Tevin Vongvanich, said the group was setting aside an average of 3 per cent a year of its profits a year for investment into research and development. “All research and development has to take a long time before resulting in commercial products that meet our customers’ demand,” he said. “However, once they are commercialised, they generate high returns for our business.” The group said it has concentrated on investing in R&D to create innovative products that serve customer demand. The company’s research focuses on products related to the petrochemical industry. The R&D budget supports both PTT’s own research and also capitalises on research by others, by developing it into commercial products. The total budget, including R&D for 2016-20, remains at Bt300 billion for the company and its subsidiaries.

“We will revise our investment budget every year. It may be changed for 2017-21. That has to wait for approval by the company’s board at the end of this year before releasing a new investment plan, Tevin said.CP Group CEO Supachai Chearavanont said that the group spent an average of 5 per cent a year of its net profit for research and development into products.  “Research and development is a key measure to drive our business and ensure sustainable growth in the long term,” he said.Thai Union Group’s chief executive officer Thiraphong Chansiri said: “We have expanded our investment on research and development since 2015.

This is part of our drive to make business growth sustainable as companies face environmental changes. We have to find a way to improve our products through innovation and better serve our customers’ demands.”The property sector has also witnessed increased investment in innovation, such as the Research and Innovation for Sustainable Centre set up by MQDC. MQDC’s chief adviser to centre, Singh Intrachooto, said 15 researchers investigate the various aspects of residential and commercial building standards for healthy and environmentally sensitive buildings, including the office, retail and hospitality segments.

Dr Kitipong Promwong, secretary general of the STI , said the private sector across all types of industries had been increasing its R&D budgets every year. According to a survey by the STI, research and development investment by the private sector came to Bt100 billion in 2016, up 29.4 per cent from the Bt85 billion posted in 2015. For 2017, it expects this figure to hit Bt120 billion, before reaching the estimated Bt140 billion for 2018.  “This increased spending is part of the country’s drive to become an innovative nation within 10 years,” Kitipong said.