The Industry Ministry is upbeat about the unpopular rubber city project in Hat Yai district as it expects to connect with a new special economic zone (SEZ) in Sadao district in the future.
The 2,284-rai rubber city was set to begin construction in March 2016.
The Industrial Estate Authority of Thailand (IEAT), the project's host, said the first phase is complete. The remaining 1,218 rai is being developed for the second and third phases.
But few investors have indicated interest in the rubber city.
Deputy industry minister Somchai Harnhiran said the ministry and IEAT are keen on the rubber city project to grow in line with the upcoming Sadao SEZ.
"The rubber city is positioned as the hub of the industry, as the government has specified this location can serve other related industries such as tyres and medical gloves," he said.
"The project covers all 14 southern provinces that have rubber plantation areas."
Thailand is the top natural rubber producer globally, representing 36% of global production, while Indonesia and Vietnam are second and third, respectively.
Mr Somchai said the ministry aims to strengthen the rubber value chain in the southern provinces across upstream, midstream and downstream segments in a bid to make local small and medium-sized enterprises (SMEs) more competitive.
He said both the rubber city and Sadao SEZ can grow and expand together and will support the Pracha Rat initiative as well.
"The ministry has hand-in-hand projects to provide marketplaces for local SMEs as well as encourage them to create new rubber-related products, expecting to build a business cluster of roughly 500 SMEs in Songkhla province," said Mr Somchai.
For the Sadao SEZ project, the cabinet also approved a 1.29-billion-baht budget to establish an industrial estate in that district.
The IEAT will be responsible for developing infrastructure and facilities in the first phase on 629 rai in fiscal 2019, with the remaining 298 rai in 2020.
The project will serve mainly as a production base for the rubber and palm industries, as well as a production base and trading centre to export products like electrical equipment, electronics, computers and components to Malaysia.
In addition, the ministry plans to set up a halal certification centre in Songkhla to promote Muslim food products for domestic and overseas markets.
This centre will provide innovation, technology and know-how for SMEs in the halal sector.
The halal food market has high potential as there are 1.7 billion Muslims in the world, with 2.8 billion expected by 2050.
The halal project can support local SMEs in three deep-south provinces -- Pattani, Yala and Narathiwat.
The halal food industry is one of 11 Thai products to be exported globally and the government is focused on further development as it can help other related industries such as logistics and tourism.