Thai Business Closures Up 22 Per Cent

[george]

Business closures up 22 per cent

BANGKOK: -- The number of Thai companies that were forced to close down during the first half of this year nearly hit 7,000, up 22 per cent compared with the same period in 2007, news reports said Tuesday.

Altogether 6,899 companies were shut down in the January to June period, with 1,681 firms closing in June alone, according to figures released by the Business Development Department.

Thai firms are facing a myriad of challenges this year including rising oil prices, an inflation rate that reached 8.9 per cent in June, a slow down in consumption and growing political instability that has affected foreign investment.

During the first six months of this year, some 1,206 new companies were registered, up 6 per cent, the department's deputy director-general Pranit Lortragood said.

Thailand currently has a total of 548,818 registered companies.

--dpa 2008-07-22

[wolfmanjack]

I am not surprised by this at all. My costs have gone up and many of my customers are asking for lower prices to offset the increase in shipping costs. Also many of my suppliers have gone out of business within the last 2 years. Many of us in the export business started suffering from the strong baht and now are getting hit at both ends.

[geriatrickid]

were all those closures due to oil prices etc. or perhaps due to deficiencies in staffing, capitalization, leadership or not having a product or service that the market needed or wanted?

[Familyonthemove]

were all those closures due to oil prices etc. or perhaps due to deficiencies in staffing, capitalization, leadership or not having a product or service that the market needed or wanted?

..... I'm sure these are all factors in businesses closing, but aren't they are a constant, so the increase in the rate of closure is more likely due to oil price, political uncertainty and impending global recession. As Wolfmanjack says, oil prices impact shipping cost as well as production costs. I work in India as well as Thailand, and inflation is the business killer over there.

[cloudhopper]

Some other economic news:

Thai Trade Surplus Narrows as Global Oil Price Climbs (Update1)

By Suttinee Yuvejwattana

July 22 (Bloomberg) -- Thailand's trade surplus narrowed in June as soaring oil prices increased the cost of imports.

The surplus was $628 million, Siripol Yodmuangcharoen, the Commerce Ministry's permanent secretary, said in Bangkok today. The excess was $1.29 billion in May.

Thailand imports most of its oil, the cost of which surged last month, and the government is subsidizing some fuel charges. The Group of Eight nations on June 14 called on emerging markets to cease subsidizing the price of oil, citing the view such support was propelling demand and prices higher.

``Local oil consumption hasn't dropped much despite the rising price,'' said Nuchjarin Panarode, an economist at Capital Nomura Securities Pcl in Bangkok. ``It will take some time for Thais to adjust their consumption behavior.''

Imports rose 30.7 percent to $15.6 billion last month after increasing 15.7 percent in May. Fuel purchases added 66.4 percent, compared with a 4.7 percent gain the previous month. The price of a barrel of oil in New York has climbed 36 percent since December.

``An expected global economic slowdown and high oil prices remain key threats to our export target,'' Siripol said at a press briefing today. ``Agricultural products, especially rice, are the key drivers for our exports.'' He reiterated a 2008 export-growth target of 12.5 percent.

Record Exports

Exports gained 27.4 percent from a year earlier to a record $16.3 billion. They advanced 21.4 percent the previous month. Thailand, the world's biggest exporter of rice, is benefiting as surging commodity prices help offset slower demand from the U.S., the nation's largest single export market.

``Exports have been the main pillar of growth and will continue to be so,'' said Ramya Suryanarayanan, an economist at DBS Bank Ltd. in Singapore. ``Oil prices and, more importantly, the domestic political situation are hurting the recovery in domestic demand.''

The Southeast Asian nation will cut excise taxes for fuel and waive fares for cheap bus and train seats in a six-month program from July 25 to bolster support amid anti-government protests and the fastest inflation in a decade.

Consumer prices rose 8.9 percent last month as higher oil prices increased transportation, food and production costs. Finance Minister Surapong Suebwonglee said July 14 that the nation may fall short of a 6 percent economic growth target this year because of price increases. The economy expanded 4.8 percent in 2007.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at [email protected]

Last Updated: July 22, 2008 00:23 EDT

[Scott]

There seems to be very little good news. I was surprised that I got all excited when they announced that oil had fallen to below $129 a barrel!

Imagine thinking that would make one happy!

[VegasVic]

I am not surprised by this at all. My costs have gone up and many of my customers are asking for lower prices to offset the increase in shipping costs. Also many of my suppliers have gone out of business within the last 2 years. Many of us in the export business started suffering from the strong baht and now are getting hit at both ends.

Its kind of a double whammy (a triple when you throw in higher energy prices and high inflation) that the strong baht has brought upon businesses in Thailand. First and foremost as you have pointed out, the strong baht has hurt Thai exporters very bad, in some cases they have lost market share that they will never get back even when the baht weakens. Then there are all the tourist businesses and cottage industries that rely on tourists that have been devestated because of the strong baht and escalating energy prices. If the baht does continue on a weakening trend then perhaps next year tourisim numbers will improve, but sadly many of those export jobs may never return. I tried to point out a year and a half ago the double edged sword effect that the strong baht would have on the Thai economy, but alas my posts fell on deaf ears.

[wasabi]

Time to stop the madness THB back to 50:1 USD and everyone is happy.

[cclub75]

BANGKOK: -- The number of Thai companies that were forced to close down during the first half of this year nearly hit 7,000, up 22 per cent compared with the same period in 2007, news reports said Tuesday.

Altogether 6,899 companies were shut down in the January to June period, with 1,681 firms closing in June alone, according to figures released by the Business Development Department.

There is a golden rule : do not believe the feel good propagandastaffel... Never.

And go instead at the source of the datas.

And what do we see ?

Total companies dissolution reached 3 504 in june alone, that's a whooping +215 % compare to june 2007...

Look here at the data of the Business Development Department :

http://www.dbd.go.th/mainsite/fileadmin/st...6/02_200806.htm

Where is the trick ? The propagandastaffel made their own choice as to what to put inside the "companies" definition.

The datas of the BDD include Limited Companies + Limited Partnerships + Ordinary Partnerships...

So it's a much better indicator, because broader (partnerships are used by small businesses, typically family businesses).

Thank you to ThaiCrisis to have pointed out this.

http://thaicrisis.wordpress.com/2008/07/23...plodes-in-june/

[soundman]

I am not surprised by this at all. My costs have gone up and many of my customers are asking for lower prices to offset the increase in shipping costs. Also many of my suppliers have gone out of business within the last 2 years. Many of us in the export business started suffering from the strong baht and now are getting hit at both ends.

Not surprised by these figures at all.

I fear the "real" local economies are in far worse positions than the government "massaged" figures of inflation, GDP etc. released for "public" consumption.

My industry (pro AV) is in a huge hole. Potential customers are regurarely offering me less than my cost and asking for credit for up to a year. "Sorry mate - no sale! This is my price - take it or leave it. "

Three years ago our factory had around 35 full time staff. Currently sales with reasonable margins are as rare as hens teeth and we only have around five staff on the books.

Soundman.

[wolfmanjack]

were all those closures due to oil prices etc. or perhaps due to deficiencies in staffing, capitalization, leadership or not having a product or service that the market needed or wanted?

I would bet that many of the closures were due to both the exchange rate and the increase in costs related to the increase in oil. As i said in my previous posts we are getting squeezed at both ends. The trucks that deliver my raw materials has recently raised their charges from 3,000 baht per trip to 4,500 baht per trip. The drying oil i use has gone from 480 baht to 550 baht per 10 liter can in the last month. ALL of my supplies and raw materials have increased in price. In the past I operated on a 20% profit margin and was doing okay. Now that margin is being eroded away to almost nothing.

The customers that are still ordering from me tell me they have to do an 8 time markup instead of a 6 time mark up in order to cover their additional costs. When the customers gets squeezed by higher costs in their home country, higher cost of product plus the higher shipping costs they start to look elsewhere such as indonesia and vietnam.

I have been exhibiting at trade shows in Bangkok twice a year since 2001. The last 2 years have seen progressively worse attendance. The last show was completely dead. The buyers are not coming like they were before and the few that do say the prices in thailand are too high now.