Thailand Picks Up Broken Pieces

[webfact]

ECONOMY

Thailand picks up broken pieces

THE NATION

Thailand's consumer confidence slumped to the lowest level in more than a decade in November because of huge losses to the manufacturing sector, leading to massive layoffs and a possible drop in the Kingdom's investment attractiveness.

Standard & Poor's Ratings Services, while downgrading Thai Reinsurance and threatening another cut by one notch on a weakening financial profile, said yesterday that based on information collected from its rated insurers and market data, market gross loss estimates have already exceeded US$10 billion (Bt308 billion). Also yesterday, Munich Re, the world's leading reinsurer, said the floods might cost it about €500 million (Bt20.6 billion).

"It therefore remains difficult to estimate losses in the worst-affected industrial areas around Bangkok," the reinsurer said, describing the floods as "the costliest natural catastrophe" in Thailand's history.

Swiss Re on Tuesday estimated claims costs of $600 million.

Prime Minister Yingluck Shinawatra said yesterday that the disaster might cost the economy as much as Bt1.3 trillion.

Though consumer confidence plunged to 61 points in November, according to a survey by the University of the Thai Chamber of Commerce, university economist Thanavath Phonvichai said the index had bottomed out. He is also of the view that government spending on reconstruction along with insurance claims will help boost the economy from early next year.

Deputy Prime Minister Kittiratt Na-Ranong says he expects the economy to expand 7 per cent next year, against the Bank of Thailand's forecast of 4.8 per cent. Banluesak Pussarangsri, executive vice president of CIMB Thai Bank, warned that the 7-per-cent rate was too ambitious, particularly when the euro zone is plunging into recession. The bank expects flat growth or even a 1-per-cent contraction next year.

CIMB sees a possibility that exports next year will contract 5-10 per cent.

He noted that the manufacturing sector would likely recover fully by the end of the first quarter, but that was also when more problems could surface in the euro zone. "Government programmes like higher wages, first-home and first-car policies as well as programmes to increase farmers' income may not help much," Banluesak said.

Floods that hit plants in seven industrial estates have largely reduced Thailand's attractiveness as a manufacturing centre. Worsening that was the news yesterday that Mead Johnson Nutrition (MJN) would invest $325 million in new manufacturing and research-and-development facilities in Singapore, despite its four-decade presence in Thailand. Still, the company promised that its Chon Buri plant would play a key role in its regional supply-chain activities, exporting products to a growing number of markets across Asia, and that it would continue investing in operations, brands and the people of Thailand.

"As we move forward, we remain committed to our employees, customers and business partners here," said Blair Sailes, general manager of MJN Thailand.

Foreign manufacturers are waiting for the government's water-management master plan. As an ad-hoc policy to soothe their worries, operators of flooded industrial estates are building bigger flood barriers next year. According to Government Savings Bank senior executive vice president Pisit Serewiwattana, four of them have proposed soft loans totalling Bt5 billion: Rojana Industrial Park, Bt2 billion; and Bt1 billion each from Bangkadi Industrial Park, Bang Pa-in Industrial Park, and Nava Nakorn Industrial Estate. GSB is committed to lend a total of Bt15 billion for this purpose. Under the scheme, the borrowers will pay only 0.01 per cent per annum for seven years.

Other funding programmes are also sought for affected manufacturers.

According to Industry Minister Wannarat Charnnukul, more than 2,400 business operators have registered for financial help under his ministry's coordination, mostly small and medium-sized enterprises. With help from the Small Business Credit Guarantee Corporation, GSB and 14 commercial banks, the ministry's working-capital programme seeks to streamline the borrowing process to help recover flood-affected businesses as quickly as possible.

The Cabinet at an extraordinary meeting on Monday is to consider rehabilitation projects in detail, after screening by the Office of the National Economic and Social Development Board. There are fears that government units may have submitted duplicating proposals and the combined amount in demand may surpass the rehabilitation budget of Bt1.2 trillion. Last week, two flood rehabilitation committees came up with a number of proposals, asking for more than Bt19 billion in financing.

So far, the Cabinet has approved in principle a Bt12.98-billion budget to recover roads, utility services, temples, schools and the irrigation system. Another Bt6.8 billion was approved to rehabilitate flood victims, which will be carried out by six ministries - Social Development and Human Security, Education, Labour, Natural Resources and Environment, Public Health, and Interior.

-- The Nation 2011-12-09