UNCLAS SECTION 01 OF 02 CHIANG MAI 000039

SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV EINT BTIO SCUL TH
SUBJECT: HOLLYWOOD, BOLLYWOOD...CNX-WOOD? U.S. FIRM LAYS PLANS FOR
CHIANG MAI'S MOVIE CITY

CHIANG MAI 00000039 001.2 OF 002


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Summary and Comment
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1. U.S.-based Creative Kingdom International (CKI) has announced
unofficial plans to establish a "movie city" near Chiang Mai,
with the aim of developing the area as a filmmaking and
entertainment production center in Asia. After five years of
slowly and quietly expanding its investment in Chiang Mai, CKI,
a Los Angeles-based architecture, video game design, and graphic
animation firm, is preparing to make what could be the single
largest U.S. investment in northern Thailand -- a $220 million
movie production hub in Chiang Mai Province. Though the firm
does not expect to open the doors of the six planned studios
until 2014, Creative Kingdom's American CEO will publicly launch
the project on June 19.


2. Comment: Despite its label as Thailand's "second city,"
Chiang Mai's economy (and that of most of northern Thailand) is
narrowly based, relying mainly on two sectors -- agriculture and
tourism -- that are vulnerable to seasonal fluctuations.
Creative Kingdom's bullishness on Chiang Mai demonstrates the
potential that graphic design, information technology, and
entertainment services have as the land-locked province's third
economic pillar. Success could mean that Chiang Mai will have
found a new source of foreign investment and economic
diversification. End Summary and Comment.

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Lights, Camera . . .
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3. Creative Kingdom International (CKI) is a Los Angeles-based
firm that for the past five years has slowly taken over three
levels of office space at a major shopping complex in downtown
Chiang Mai. Each floor of CKI's offices is packed with Thai
twenty-somethings who, wired to their computer terminals, are
designing the latest online video game, brainstorming the next
episode of a Thai animated television series, or drafting
sketches of Macau's newest big casino resort. While escorting
Econ staff on a tour of the facilities, Amcit CEO Eduardo Robles

behaves like a cartoon character of his own, jumping from
cubicle to cubicle while riffing on the company's next video
game launch "The Call of Cyrene," showing off the firm's design
for a wealthy sheikh's latest real estate venture off the coast
of Singapore, and explaining why CKI is placing its bets on
Chiang Mai to surpass Hong Kong as Asia's next movie capital.


4. The firm maintains offices in L.A., Johannesburg, Dubai,
Beijing, Manila, and Chiang Mai. Originally operating as an
architectural design firm, CKI's most loyal clients have been in
the Gulf region among investors in major real estate projects
such as casinos and resorts in luxury tourist destinations like
Macau and the Maldives. With Dubai as the source of most of
CKI's financial support, the firm had previously intended to
focus its operations there, importing graphic design and
artistic labor from Thailand and the Philippines. At that time,
CKI only maintained a small office in Chiang Mai as the
subsidiary CKA Chiang Mai Co. Ltd.


5. Over the years, the firm discovered the high level of talent
available at low wages in an affordable setting in northern
Thailand. As a result, CKI began to expand its presence here,
hiring more Thai designers and technicians. CKI even
re-exported its Thai labor from Dubai back to the Chiang Mai
office, saving costs for the firm and making their employees
happier to be back home. Seeing the prospects for expanding its
investment in Chiang Mai, CKI developed three separate branches
of its company -- architecture, graphic animation, and internet
game design -- each occupying one of the three office floors it
leases. CKI trains its Thai employees in Chiang Mai and keeps
them loyal to the company by providing above-market wages and
low-interest housing loans. CKI has even relocated much of its
Filipino staff to Chiang Mai to consolidate operations.

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Tapping into Chiang Mai's Creative Economy
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6. CKI's success in its first five years of operations in Chiang
Mai has unveiled the province's potential for a competitive
advantage in what Prime Minister Abhisit Vejjajiva recently
called "the creative sectors of the economy." According to the
Board of Investment's northern office, Thailand is transforming
into an animation and gaming design center where foreign
companies are "outsourcing work for high-quality software and
animation at economical prices." CKI says that the wealth of
creative talent in northern Thailand makes it a ripe destination

CHIANG MAI 00000039 002.2 OF 002


for foreign investment from the entertainment and movie
production sector.


7. A survey of local higher education institutions is a
testament to the high-tech, artistry, and design skills that
northern Thailand is producing. Chiang Mai University (CMU),
one of Thailand's best, offers majors in subjects such as
industrial design, computer and software engineering, animation,
and information management at its faculties of Fine Arts,
Architecture, and Engineering, as well as its College of Art,
Media and Technology. The annual number of CMU graduates across
these subjects per year is nearly 900. In addition, Chiang
Mai's Rajamangala University of Technology graduates about 265
students per year in architecture, fine arts, and technological
media. The city of Chiang Mai is host to five other
universities as well.


8. CKI says that by investing in the creative aspects of the
Thai economy, where the firm believes there is a national
competitive advantage, Chiang Mai can lessen its dependence on
the seasonally vulnerable agriculture and tourism industries.
Currently, agriculture and hotel/restaurant services comprise
25% of Chiang Mai's provincial GDP, with the remainder made up
of a composite of other services including education, public
administration, and real estate.

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Fabulous CNXwood?
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9. After five years of low-profile, but successful, operations
in Chiang Mai, Creative Kingdom is finally stepping into the
limelight. CEO Robles told us he views CKI's first five years
in Chiang Mai as a test pilot to see if the city could succeed
as a host for greater entertainment industry investment. The
city passed this test, which is why he is ready for the firm to
put up an estimated $220 million to construct a 12-acre movie
city that he plans to call "CNXwood," a play on Chiang Mai
airport's 3-letter IATA code. He envisions Chiang Mai
surpassing Hong Kong as Asia's movie production hub, but first
it needs the infrastructure -- studios, back lots, and
production facilities -- to attract more investors. (Note:
Chiang Mai is already well-established as a desirable, low-cost
filming location, having served over the last two decades as the
setting for mainstream films like "Good Morning Vietnam," "Rambo
IV," and portions of "American Gangster," as well as lesser
movies like "Operation Dumbo Drop," "Air America," "Rescue
Dawn," "Stealth," "Sniper 3," and "Vampires 3").


10. The question everyone is asking Robles about the movie city
is: Why Chiang Mai? He cites three reasons why the area is
ideal for his investment: incredible talent in artistry,
graphic design, and entertainment; predictably good weather for
movie production; and (the proverbial cherry on top) an
estimated 20% savings in movie production costs compared to
other Asian cities such as Hong Kong. CKI only recently began
making public its plans, but is doing so unofficially for now as
it tries to finalize details.


11. The company has already developed designs for the movie
city on land it has tentatively agreed to acquire. However,
when news of the project went public in the Thai press earlier
this month, the firm began to get better offers from other land
developers. Robles said one of the new offers is particularly
tempting, so CKI is not entirely sure which site it will choose.
Nonetheless, the company is steaming full speed ahead and will
officially announce the project to Hollywood-based and other
foreign investors at a launch party on June 19 at Chiang Mai's
swanky, Disney-esque Mandarin Oriental Dhara Dhevi Resort.


12. This cable was coordinated with Embassy Bangkok.
MORROW