Japanese Industries' Relocation To Thailand Undone By Historic Floods

[webfact]

Industries' relocation to Thailand undone by historic floods

By HIROKO NAKATA

Staff writer

Thailand's worst flooding in 50 years is dealing a dramatic blow to Japanese automobile, precision instrument and other industries because the nation is now an important global production base for numerous manufacturers.

Some makers, whose main production plants are located in Ayutthaya Province, can't foresee when they can reopen their plants, as many facilities are submerged. Other firms with plants in other regions have been forced to halt operations because the floods have severed the supply of parts.

"The flooded area seems to be slowly widening," said Koji Sako, a senior economist in charge of Asian regions at Mizuho Research Institute.

"Moreover, flooded roads snap companies' supply chains," he said.

More than 400 Japanese firms in six industrial districts in Thailand have suffered flooding in factories, and the Thai government issued a flood warning to another 200 Japanese firms, according to a report released Tuesday evening by the Japan External Trade Organization.

There are thousands of Japanese firms across Thailand.

Automakers appear to have taken the biggest hit, as many of their parts suppliers have also been flooded out.

Honda Motor Co. said Tuesday its plant in Malaysia, which has the capacity to produce 40,000 vehicles a year, has started to curb production as parts supplies from Thailand run out.

The automaker has said its auto plant in Ayutthaya, Thailand, which has been halted since Oct. 4, won't reopen until Friday at the earliest. But the reality as of Tuesday was that the halt could last much longer.

"We have no idea how long we should shut down the plant because we can't enter the site," said company spokeswoman Fumika Ishioka.

The plant is its only one in Thailand, and it as the capacity to churn out 240,000 units a year.

Nikon Corp. is also unable to forecast when it will resume production in Thailand, the site of one of the camera maker's main assembly plants.

Nikon produces about 90 percent of its single-lens reflex cameras at its Ayutthaya plant, as well as more than 60 percent of its lenses.

Companies whose plants are not in the Ayutthaya region are also concerned about the situation.

Toyota Motor Corp. has said it will shut down its three assembly plants in southern and eastern Thailand at least until Saturday due to the shortage of parts.

"The scale of the damage remains unclear," spokeswoman Mieko Iwasaki said.

The automaker is currently trying to assess which components are in short supply, she said.

The assembly plants are key to the auto giant's strategy because almost half of the cars it produces in Thailand are for export globally, mainly destined for other member states of the Association of Southeast Asian Nations, as well as the Middle East and Australia.

"The next focus is how long plants will have to suspend operations," Mizuho's Sako said. "Manufacturers usually have inventories for a couple of months. If they have to close plants longer than that, it would hurt their sales."

Source: http://search.japantimes.co.jp/cgi-bin/nb20111019a1.html

-- japantimes.co.jp 2011-10-19

[zydeco]

I just heard on TV that 660,000 workers from industrial estates are "displaced". Where are they and their families going to go? Hope the government has a plan to employ them in flood reclamation and infrastructure repair or you could have an army of one million people angry and desperate and setting their sights on the last dry spot left in Thailand.

Edited October 19, 2011 by zydeco

[givenall]

I always wonder how economists in Thailand think and dealwith nation's economy especially during crises.

It is like when demand goes down they raise prices and now when unemployment is so high they have decided to raise minimum wage.

"call it "economy 101 backward"

I would not be surprise if most of these factoriesrelocate outside of Thailand

Edited October 19, 2011 by givenall

[moe666]

Since these plants are Japanese I doubt Thai economics has much to do with it. They where here for the cheap labor nothing else.

[Abduljabbar01]

THIS ISSUE GOES BOTH WAYS.

1. Thailand had a major flood and effected Japans automobile, precision instrument and other industries.
   
2. Japan had a 9.0 magnitude earthquake and following tsunami on March 11 has seen a rush by officials to gain control of power plants in the north-east of the country and have been under pressure to resolve the situation.

"The amount of radiation released by the Fukushima Daiichi nuclear power plant in the days after the 11 March tsunami could have been more than double that originally estimated by its operator, Japan's nuclear safety agency has said.

The revelation has raised fears that the situation at the plant, where fuel in three reactors suffered meltdown, was more serious than government officials have acknowledged."

Now the whole area is contaminated and no one will be able to build a house or other accommodations for a few 100 or 1000 years. Even crops have suffered and there are bans prohibiting exporting of meet, produce and etc.

In the end, whose to blame? Mother nature.

What we call Man's power over Nature turns out to be a power exercised by some men over other men with Nature as its instrument.

C. S. Lewis

[wintermute]

Since these plants are Japanese I doubt Thai economics has much to do with it. They where here for the cheap labor nothing else.

It will impact Thailand greatly if these factories relocate. At least 35-40% of Thailand's GDP comes from industry. The automotive and electronics industry by itself is at least a quarter of GDP. These Japanese industrial factories contribute a lot to employment in cities outside Bangkok. If they go under those cities will most likely suffer from mass unemployment and recession.

[h90]

Since these plants are Japanese I doubt Thai economics has much to do with it. They where here for the cheap labor nothing else.

It will impact Thailand greatly if these factories relocate. At least 35-40% of Thailand's GDP comes from industry. The automotive and electronics industry by itself is at least a quarter of GDP. These Japanese industrial factories contribute a lot to employment in cities outside Bangkok. If they go under those cities will most likely suffer from mass unemployment and recession.

Another part comes from food production and tourism. Food production is of course in trouble with the floods.

Tourism less, but also. With the tourism is much more connected....

[lovelomsak]

Next month everything will be back on track this is Asia.

[OzMick]

Since these plants are Japanese I doubt Thai economics has much to do with it. They where here for the cheap labor nothing else.

It will impact Thailand greatly if these factories relocate. At least 35-40% of Thailand's GDP comes from industry. The automotive and electronics industry by itself is at least a quarter of GDP. These Japanese industrial factories contribute a lot to employment in cities outside Bangkok. If they go under those cities will most likely suffer from mass unemployment and recession.

Wel they could go back to planting rice, but without the subsidies financed by industry taxation, it wouldn't be very popular.

[FalangBaa]

But if they relocate and Thailand loses 30% of its GDP, if that happened (though it's highly unlikely), then the baht would probably be back up to 65 to the pound or 40 to the dollar...

[wana]

But if they relocate and Thailand loses 30% of its GDP, if that happened (though it's highly unlikely), then the baht would probably be back up to 65 to the pound or 40 to the dollar...

that would be a kick in the nutsack for everyone whos bought property and businessses with their ex-pat wages

[FalangBaa]

But if they relocate and Thailand loses 30% of its GDP, if that happened (though it's highly unlikely), then the baht would probably be back up to 65 to the pound or 40 to the dollar...

that would be a kick in the nutsack for everyone whos bought property and businessses with their ex-pat wages

Only a fool would buy property in Thailand (low ROI) or make investments in the country (I'm talking about individuals here, not big Japanese corporations) since you aren't actually permitted to take money out of Thailand. Considering that the returns on the Thai property market are so low anyway compared to property in developed countries, why buy? You cannot legally buy any more than a condominium anyway. I am currently renting a house that I could live in for 88 years for the same amount of money it would cost to buy it, based on the price my neighbour's house down the street has just sold for. (BTW, I live in Phuket.) Rental prices in Thailand are so low, why buy even if you could? Your return on investment will be much higher if you buy property in your home country and lease it out. If a foreigner has "bought" a house in Thailand, he means his wife has bought it.

[Nisa]

I always wonder how economists in Thailand think and dealwith nation's economy especially during crises.

It is like when demand goes down they raise prices and now when unemployment is so high they have decided to raise minimum wage.

"call it "economy 101 backward"

I would not be surprise if most of these factoriesrelocate outside of Thailand

Thailand has one of the fastest growing economies in Asia.

The unemployment rate in Thailand is incredibly low and has been going down for decades. This natural disaster is not going to have any significant or negative long term effect on unemployment.

Raising or not discounting prices when demand goes down is something "some" small business owners (across the globe) do and you can think it ridiculous but it keeps many of them in business during slow times. Lower or higher prices is not always going to dictate the number of customers at certain small shops. But in general this concept of rising prices when demand is down is not the standard practice as can easily be witnessed during hi & low season. Business 101 tells you that your profit margins of your total sales need to cover your expenses if you are not going to be in the red. In other words, the more sales you have the lower prices you can provide.

As for big factories, that were well aware of flood dangers from building on a flood plain, relocating outside Thailand ... I highly doubt this will happen. Natural disasters can happen anywhere but Thailand actually has few as compared to many other places. As for how governments handle these disasters, nobody is every satisfied and there is always complaints just as there will always be complaints when a government is spending tons of money on flood prevention during a drought.

Bottom line is sh@t happens and it happens everywhere but Thailand has always been resilient and able to continue functioning during a crisis. These can be witnessed by the continued investor support and strength of the baht as much of the countries in the world see declines and have a loss of confidence despite Thailand's political unrest and uncertainty..

[Nisa]

Next month everything will be back on track this is Asia.

And us farangs on Thaivisa will find another thing to blame Thailand for beyond a 50-year worst monsoon turning into a 50-year worst flooding.

[wintermute]

Thailand has one of the fastest growing economies in Asia.

The unemployment rate in Thailand is incredibly low and has been going down for decades. This natural disaster is not going to have any significant or negative long term effect on unemployment.

It's way too early to say for sure and i'll go ahead and state that you are wrong. It will be a significant hit on industry. Closing down major factories (hundreds of thousands of unemployed) will severely disrupt employment at the economic level I'm not sure if Thai labor covers unemployment for natural disasters but this could be very serious. Many of those employees are skilled workers and are also primary breadwinners. Not to mention the profit margins of major Thai corporations who own a significant joint stake in these factories as well.

At the multinational level they may in fact consider just writing everything off and moving elsewhere especially if insurance balks at covering this under "act of god" or "natural disaster" clauses. This depends on whether the Thai government offers up significant recompense or assistance in rebuilding.

These flood issues aren't something that will go away. Global warming, the strange weather patterns we have been seeing in the past 5 years, etc.. will have a direct impact on tropical peninsular countries like Thailand the most.

[Thaddeus]

Bottom line is sh@t happens and it happens everywhere but Thailand has always been resilient and able to continue functioning during a crisis.

I'm sorry but my failing memory needs some help.

What crisis has Thailand suffered before this one that even come close in its scale?

[Nisa]

Bottom line is sh@t happens and it happens everywhere but Thailand has always been resilient and able to continue functioning during a crisis.

I'm sorry but my failing memory needs some help.

What crisis has Thailand suffered before this one that even come close in its scale?

You can measure a crisis in many ways from economic impact, deaths, property damage and so on. But not sure what point you are trying to make since I simply stated Thailand has always had the ability to be resilient during a crisis. Are you suggesting that this crisis will somehow be different?

It appears you are asking me to back up something I never said but in fairly recent memory ...

The Tsunami ... but you are right as the flooding doesn't come close to that disaster.

I'd have to go back and look at the numbers in terms of economic damage the political riots during the seize of Bangkok caused but in some ways that period was a worse crisis for Thailand.

There has also been numerous devastating flooding in Thailand over the years and just because this is the worst in 50-years doesn't mean no other flooding has come close.

[wana]

Bottom line is sh@t happens and it happens everywhere but Thailand has always been resilient and able to continue functioning during a crisis.

I'm sorry but my failing memory needs some help.

What crisis has Thailand suffered before this one that even come close in its scale?

something like this.....

http://www.angelfire.com/mac/aphisit/ThaiCrisis.htm

[Nisa]

Thailand has one of the fastest growing economies in Asia.

The unemployment rate in Thailand is incredibly low and has been going down for decades. This natural disaster is not going to have any significant or negative long term effect on unemployment.

It's way too early to say for sure and i'll go ahead and state that you are wrong. It will be a significant hit on industry. Closing down major factories (hundreds of thousands of unemployed) will severely disrupt employment at the economic level I'm not sure if Thai labor covers unemployment for natural disasters but this could be very serious. Many of those employees are skilled workers and are also primary breadwinners. Not to mention the profit margins of major Thai corporations who own a significant joint stake in these factories as well.

At the multinational level they may in fact consider just writing everything off and moving elsewhere especially if insurance balks at covering this under "act of god" or "natural disaster" clauses. This depends on whether the Thai government offers up significant recompense or assistance in rebuilding.

These flood issues aren't something that will go away. Global warming, the strange weather patterns we have been seeing in the past 5 years, etc.. will have a direct impact on tropical peninsular countries like Thailand the most.

You are right that the flood issues will not go away but everyone knew this too when they built their factories in natural flood plains.

How long do you anticipate the factories to be closed? They were not washed away and this wasn't salt water.

Every year places are flooded in Thailand but these areas come right back after the water recedes.

Edited October 19, 2011 by Nisa

[Thaddeus]

It appears you are asking me to back up something I never said but in fairly recent memory ...

I'm sorry if you got that impression, I wasn't.

The Tsunami in 04 was a crisis and many more lives were lost than in this event, I don't want to sound dispassionate either, but the tsunami was much more localised than this and in no way affected agriculture or manufacturing to any notable extent.

The Financial crisis in 97 touched on many more lives is some way at the time and recovery from that was slow but manageable.

This event impacts on agriculture, manufacturing, future investment, employment and tourism.

It is going to take much longer to bounce back from this one and it is going to hurt many more people in real terms.

Plus it is going to take different factions to work together to achieve it, something that they find difficult to when there isn't a crisis going on.

[wintermute]

You are right that the flood issues will not go away but everyone knew this too when they built their factories in natural flood plains.

I seriously doubt factory owners calculated in rebuilding costs after each natural disaster into their long term overhead. That's why there were flood walls built (which didn't hold) because they didn't understand the magnitude of flooding possible.

How long do you anticipate the factories to be closed? They were not washed away and this wasn't salt water.

Do you think sensitive electronics and machinery used in manufacturing, some of which cost more than the physical building itself, are waterproof? The factory itself isn't the concern it's the equipment inside. How much of that is salvageable is unknown at this point.

Every year places are flooded in Thailand but these areas come right back after the water recedes.

Those places being flooded weren't filled with major industrial factories either. Farmland and small villages being flooded is a small economic hit to the country but when skilled workers and factories that contribute a large percentage of GDP are flooded that's another matter entirely.

This isn't difficult to understand.

[wintermute]

The Tsunami in 04 was a crisis and many more lives were lost than in this event, I don't want to sound dispassionate either, but the tsunami was much more localised than this and in no way affected agriculture or manufacturing to any notable extent.

Tourism is around 6-7% of Thailand's GDP. When the Tsunami hit it killed many people and destroyed hotels but rebuilding hotels and guesthouses is a lot cheaper. The people that died were mostly service workers, foreign tourists, and day laborer types. I don't want to sound crass but those people are infinitely replaceable. On the other hand when skilled employees are kept out of work and multi-million baht factories are destroyed that is a huge problem for the economy.

Edited October 19, 2011 by wintermute

[Nisa]

It appears you are asking me to back up something I never said but in fairly recent memory ...

I'm sorry if you got that impression, I wasn't.

The Tsunami in 04 was a crisis and many more lives were lost than in this event, I don't want to sound dispassionate either, but the tsunami was much more localised than this and in no way affected agriculture or manufacturing to any notable extent.

The Financial crisis in 97 touched on many more lives is some way at the time and recovery from that was slow but manageable.

This event impacts on agriculture, manufacturing, future investment, employment and tourism.

It is going to take much longer to bounce back from this one and it is going to hurt many more people in real terms.

Plus it is going to take different factions to work together to achieve it, something that they find difficult to when there isn't a crisis going on.

You can be doom and gloom all you want but a couple hundred people dying in this years flooding compared to over 5,000 deaths (8000+ injured and near 4000 missing) in the Tsunami would make that a much worse disaster. The Tsumami buildings and property where washed away as well as it being salt water that destroys much of what it touches. The flooding is standing water that will recede leaving behind a mess but also leaving behind most buildings and property intact. People were also able to prepare for the floods in terms of moving belongs higher. The farms will be producing just fine during the next growing cycle and the factories will for the most part will be up and running in a fairly short time. Not to mention the Tsunami caused at least, if not more, monetary damage to property and the economy.

Most of the areas that have been flooded during this years tsunami have experienced flooding during the last decade. The big difference now is you have flooding in many places at the same time and it lasting longer.

[phiphidon]

The Tsunami in 04 was a crisis and many more lives were lost than in this event, I don't want to sound dispassionate either, but the tsunami was much more localised than this and in no way affected agriculture or manufacturing to any notable extent.

Tourism is around 6-7% of Thailand's GDP. When the Tsunami hit it killed many people and destroyed hotels but rebuilding hotels and guesthouses is a lot cheaper. The people that died were mostly service workers, foreign tourists, and day laborer types. I don't want to sound crass but those people are infinitely replaceable. On the other hand when skilled employees are kept out of work and multi-million baht factories are destroyed that is a huge problem for the economy.

No, you do sound crass. "day labourer types".

[Nisa]

You are right that the flood issues will not go away but everyone knew this too when they built their factories in natural flood plains.

I seriously doubt factory owners calculated in rebuilding costs after each natural disaster into their long term overhead. That's why there were flood walls built (which didn't hold) because they didn't understand the magnitude of flooding possible.

If they didn't calculate in a 50 year flood happening then it is 100% on them. Places like Japan as well as insurance companies take into account 100 year flood cycles, not just 50 year. In the US you cannot even buy a single family home without 100 year flood data. These people built in a flood plain and they were aware of this. For those people and areas that built flood walls .. they were well aware they were not 100% protected just as putting an alarm, Lojack, steering wheel lock on your car doesn't prevent theft or make insurance companies give you theft insurance for free because there is no risk of theft. Every factory of any significance was well aware they were in a flood area and that was a risk of building there.

In a month from now, 90% plus of the areas will be back to normal.

They had warning to protect equipment and this is fresh water, not salt that may have got into unprotected equipment that had no power flowing to it..

While a horrible disaster, this is simply another crisis in the road for Thailand that they will get over and in this case, fairly quickly ... Farm land, homes and businesses are flooded every year in Thailand and those areas get back to normal very quickly after the water is gone.

Edited October 19, 2011 by Nisa

[Nisa]

The Tsunami in 04 was a crisis and many more lives were lost than in this event, I don't want to sound dispassionate either, but the tsunami was much more localised than this and in no way affected agriculture or manufacturing to any notable extent.

Tourism is around 6-7% of Thailand's GDP. When the Tsunami hit it killed many people and destroyed hotels but rebuilding hotels and guesthouses is a lot cheaper. The people that died were mostly service workers, foreign tourists, and day laborer types. I don't want to sound crass but those people are infinitely replaceable. On the other hand when skilled employees are kept out of work and multi-million baht factories are destroyed that is a huge problem for the economy.

No, you do sound crass. "day labourer types".

No doubt. On top of it being a completely crass and insensitive thing to say .. it seems to be going out of the way to say something crass. How many of the 200 killed in the flooding were affluent people? And rebuilding hotels and guest houses from ground up is more than cleaning up a factory that was flooded with fresh (not salt) water?????????? Does anybody really think workers are going to be out of work for anywhere near the same period they were during the Tsunami? It doesn't matter what industry is hit in terms of the economy as they all have a ripple effect and in the end it all comes down to dollars lost or % of GDP in which case I still bet the Tsunami will be greater than the flooding.

[wintermute]

No doubt. On top of it being a completely crass and insensitive thing to say .. it seems to be going out of the way to say something crass. How many of the 200 killed in the flooding were affluent people? And rebuilding hotels and guest houses from ground up is more than cleaning up a factory that was flooded with fresh (not salt) water?????????? Does anybody really think workers are going to be out of work for anywhere near the same period they were during the Tsunami? It doesn't matter what industry is hit in terms of the economy as they all have a ripple effect and in the end it all comes down to dollars lost or % of GDP in which case I still bet the Tsunami will be greater than the flooding.

I'm not trying to be P.C. but evaluating things from just an economic perspective. Replacing machinery in factories is a lot more expensive than hotel rooms. Do you not understand how factories work or do you think people magically put things together out of thin air inside those buildings?

To be perfectly honest the lives of farmers, fishermen, and laborers is not worth much economically. That's just being non-P.C. and rational about it. From a human standpoint it's tragic and sad what happened to them but if Thailand lost tens of thousands of farmers it wouldn't do much to the economy as long as the industry remains intact.

[Nisa]

No doubt. On top of it being a completely crass and insensitive thing to say .. it seems to be going out of the way to say something crass. How many of the 200 killed in the flooding were affluent people? And rebuilding hotels and guest houses from ground up is more than cleaning up a factory that was flooded with fresh (not salt) water?????????? Does anybody really think workers are going to be out of work for anywhere near the same period they were during the Tsunami? It doesn't matter what industry is hit in terms of the economy as they all have a ripple effect and in the end it all comes down to dollars lost or % of GDP in which case I still bet the Tsunami will be greater than the flooding.

I'm not trying to be P.C. but evaluating things from just an economic perspective. Replacing machinery in factories is a lot more expensive than hotel rooms. Do you not understand how factories work or do you think people magically put things together out of thin air inside those buildings?

To be perfectly honest the lives of farmers, fishermen, and laborers is not worth much economically. That's just being non-P.C. and rational about it. From a human standpoint it's tragic and sad what happened to them but if Thailand lost tens of thousands of farmers it wouldn't do much to the economy as long as the industry remains intact.

You clearly have no idea what you are talking about. Most machinery will not need to be replaced and how in the world can you boldly say that a piece of machinery doesn't cost as much as a hotel?. Complete buildings and their contents were lost during the Tsunami and in this case buildings are intact, advance warning was given to protect machinery, it is fresh water and not salt making the ability to repair and/or clean machinery, that was powered off, much more possible than having to replace machinery .. that by the way is done often when factories upgrade.

You are really being doom and gloomish if you don't believe Thailand and the vast majority of these factories will quickly bounce back.

It is not a matter of being PC but simply an issue with your logic in your claim of more than 5000 dead is less significant than some factories closed for a month or so.

Have you even looked at the predicted (at the time) and actual Tsunami economic impact and compared them to the current predictions due to the flooding?

Edited October 19, 2011 by Nisa

[wintermute]

You clearly have no idea what you are talking about. Most machinery will not need to be replaced and how in the world can you boldly say that a piece of machinery doesn't cost as much as a hotel?

Factories full of sensitive components, electronics, and industrial machinery are indeed more expensive than buildings. Are you really this dense or are you trying to be obtuse?

Complete buildings and their contents were lost during the Tsunami and in this case buildings are intact, advance warning was given to protect machinery, it is fresh water and not salt making the ability to repair and/or clean machinery, that was powered off, much more possible than having to replace machinery .. that by the way is done often when factories upgrade.

Yes i'm sure the sensitive equipment used in machining automobile components and HDD electronics can just be rinsed off in the sink and put back to use pronto!

It is not a matter of being PC but simply an issue with your logic in your claim of more than 5000 dead is less significant than some factories closed for a month or so.

From an economic perspective it is less significant.

[Nisa]

It is not a matter of being PC but simply an issue with your logic in your claim of more than 5000 dead is less significant than some factories closed for a month or so.

From an economic perspective it is less significant.

Again ... Have you even looked at the predicted (at the time) and actual Tsunami economic impact and compared them to the current predictions due to the flooding?

And by the way ... a car can be submerged in fresh water and be cleaned/fixed up fairly easily and run just fine but not if that water is salt water. As for equipment in factories, the electronics is often one of the cheapest components these machines repairable and not needing to be replaced ... and once again, they had advance water the flood was coming and were able to take precautions.

We can disagree all we want but my point was and will continue to be (and will almost surely be proven in a short time) is that things will be back to normal for the most part fairly quickly in the vast majority of these areas hit by flooding. So, lets wait a month and see what happens in a month.

Edited October 19, 2011 by Nisa