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Published on August 3, 2007

The Industry Ministry has ordered the Department of Provin-cial Industrial Works to closely monitor plants in 10 provinces to see if they are in financial trouble and need assistance, following the closure plans of a giant garment factory and two footwear companies.

The plants under scrutiny are located in Suphan Buri, Chon Buri, Samut Prakan, Nakhon Ratchasima, Nonthaburi, Pathum Thani, Nakhon Pathom, Samut Sakhon, Chachoengsao and Rayong. All are labour-intensive and export-oriented.

"The department will have to look at the plants and report on their condition on a daily basis," said Deputy Industry Minister Piyabutr Cholvijarn.

Assistance for financially troubled companies will come from the Small and Medium Enterprise Development Bank; a Bt1.2-billion fund from the Office of Small and Medium Enterprises Promotion; and Bt5 billion from the Bank of Thai-land and commercial banks.

Industry deputy permanent secretary Witoon Simachoke-dee, who oversees the Depart-ment of Industrial Works, said officials would talk to plant owners and report back twice a day.

The ministry order came after Thai Silp South East Asia Import Export announced its closure late last month and Union Footwear and Rangsit Footwear announced plans to discontinue business at the end of this year. The three companies, which together employ more than 7,000 workers, cited the strong baht as a reason for closure, along with fierce competition from countries like China, India and Vietnam, and heavy capital investment requirements in several areas.

Labour permanent secretary Chulathawat Intrasuksri was reported as saying on Wednes-day that he had been informed of the likely closure of four factories in Suphan Buri: auto-parts moulder Choknamchai Auto Pressing; canned fruit and vegetable exporter Agro-On (Thailand); Adidas shoes manufacturer Suphan Footwear; and Hi-Tech Apparel.

However, Suphan Buri governor Somsak Phooreeseesak yesterday expressed surprise at the report, saying he had discussions with Chulathawat and the latter had attended the National Legislative Assembly all day.

"The Labour permanent secretary said he would quickly set up a committee to investigate how he was in the news," Somsak said.

Wallop Witanakorn, president of Hi-Tech Group - the owner of Hi-Tech Apparel - said the report prompted his clients in Hong Kong to check if the news was true and whether it would hurt orders. Buying agents for Nike in Thailand also called and later informed their head office of the actual situation, he said.

"We have already taken orders for next year, and we have even turned down some orders as our capacity is full. Right now, some garment factories in Thailand have to turn down orders," he said, adding that Nike had placed orders for about 50 million items in Thailand and Adidas about 30 million items.

The entire group now employs 4,900 workers at its six plants - two each in Bangkok and Chaiyaphum and one each in Samut Prakan and Suphan Buri. The Suphan Buri plant is also seeking 200 skilled workers. The entire group is now recruiting 2,500 more workers.

Federation of Thai Industries chairman Santi Vilassakdanont insisted that the footwear industry was still expanding. Saha Group, whose shoes from 10 factories dominate 80 per cent of the export market, still enjoys an annual export value of about Bt30 billion. Nike is one of its clients.

"Saha Group's orders are 15 per cent above capacity. It is not hurt by the strong baht as, under sale contracts, if the foreign exchange rate changes more than 5 per cent, we're eligible to adjust the sale price," said a high-level executive of the company.

Santi noted that while buyers are shopping around, with the focus on cheap labour markets like Vietnam and China, some of them are coming back to Thailand after witnessing logistics and quality problems in other countries. Nike is one of Saha Group's clients, he said.

On Union Footwear's decision to shut down, Santi said the company had experienced a number of problems. It is likely that the shareholders want to divert investment into other industries, he added.

The Stock Exchange of Thailand (SET) is also closely monitoring whether around 10 listed companies in the textile and footwear business are feeling the impact of tough competition and the baht's appreciation.

If the SET finds that these companies are reeling and their shareholders' equity plunges into net loss, the exchange will help then find ways to improve earnings, SET president Patareeya Benjapolchai said yesterday.

"The textile business is one sector that needs adjustment because it is less competitive than China, which has lower labour costs. There are fewer of these companies in the stock market, thus a smaller number of investors," she said.

There are currently 25 textile and footwear companies listed on the SET, but some are modern textile firms and joint ventures with Japan, she said.

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