Thailand - Commentary: Thai factories told: Run to the hills

Bangkok (The Nation/ANN) - Songpol Chevapanyaroj, executive vice president of Kasikorn Bank in Thailand, predicts that some flood-damaged factories in Ayutthaya and Pathum Thani provinces will likely relocate to higher ground in the Northeast and Eastern Seaboard.

The Northeastern provinces of Nakhon Ratchasima, Krabin Buri, Sa Kaew and some parts of the Eastern Seaboard are among the top relocation destinations being considered for factories owned by Japanese and other foreign investors.

"There are three categories of flood-damaged company. The first group are those who also have factories elsewhere, so they will boost production at these alternative plants.

"In this case, their factories in Ayutthaya may not return to full capacity due to fears of floods next year or in the near future. They may recover only 25-30 per cent of their previous capacity [while the rest of the output will come from other factories].

"The second group are those who have no alternative factories, so they have no choice but to rebuild their previous capacity.

"The third group are those who want to relocate their entire production facilities to other provinces or regions that are on higher ground.

"Both Ayutthaya and Pathum Thani are in low-lying areas-at sea level. The new locations will have to be much higher than sea level [to avoid future floods].

"Logistically, Nakhon Ratchasima, for example, is now well-connected by a network of new highways, which can lead to neighbouring markets such as Laos and Vietnam.

"In my opinion, there are now more natural disasters such as earthquakes, tsunamis and floods [perhaps] due to global warming. We need to revamp the overall planning on water resources, as Thailand has started to witness more rainfall in an abnormal pattern in some areas where there was hardly any rain before at certain times of the year. There are also worries about drought due and the lack of water for farming.

"I think that building permanent concrete walls as high as 5-7 metres [up from the previous 3-4 metres] to protect factories from flooding, as planned by some industrial estates in Ayutthaya, may be only a medium-term solution to rebuild confidence among investors, but it's not a long-term solution.

"Regarding our customers, most of the flood-affected ones are those in the electronics and automotive sectors. They include large multi-national companies as well as SMEs whose operations are suspended. Some of their machinery is damaged and will have to be repaired or replaced.

"Most of the big firms have insurance coverage, including for business interruption and all industrial risks, so they will be compensated.

"SMEs, however, will recover faster than the big factories that have more sophisticated equipment and machinery.

"Overall, the total amount in loans granted by banks to companies in the seven flooded industrial estates is about 60 billion baht (US$1.94 billion), but not all companies will need new loans, as they will have insurance compensation.

"Due to the supply chain impact in the electronic and auto sectors, we have also prepared credit and other financial facilities to help those indirectly affected, even though their factories were not flooded but they were disrupted by the floods, as the suppliers' factories are inside the flooded industrial estates.

"We also have talked with the Japan Bank for International Cooperation (JBIC) and six Japanese regional banks about the provision of special financial and credit packages to Japanese and related firms in Thailand.

"Some of our flood-relief loan programmes include zero-per-cent interest rates for a period of up to six months," he says.

Nophakhun Limsamarnphun in Bangkok/The Nation | ANN

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