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Published on August 6, 2007

But Bank of Thailand data suggest a pickup in domestic consumption and investment, and economists suggest the outlook for 2008 is brighter than for this year on several fronts, including domestic politics and overseas economies.

National Economic and Social Development Board secretary-general Ampon Kittiam-pon is optimistic, saying that recent factory closings have been the fault of individual companies.

"I think it is a problem of individual companies, not industries as a whole," said Ampon. He explained that labour-intensive industry exports in the first half of this year had expanded. Textiles grew 2.6 per cent year on year. Leatherwear and footwear sales rose 14.7 per cent. Furniture exports grew 6.6 per cent, and decorative items increased 7 per cent.

However, labour-intensive industries are under pressure from lower-labour-cost countries such as China, Vietnam and other emerging nations.

These industries have been hit by the strengthening baht too.

Ampon said the board was investigating the effects of both events on each industrial sector.

The board investigation separated industry into three categories. It will publish its results for economic ministers on Wednesday.

The first category includes highly competitive industries such as automobiles, petrochemicals and electronics. Ampon said companies in these areas could absorb more labour.

The second group includes industries affected by exchange-rate appreciation. They require monitoring and assistance. These industries are foods, textiles, leather products, footwear and small and medium-sized industries. The third group includes industries required to relocate to lower-cost countries, replace machinery and find niche markets.

He said government assistance was available; including spending on freight, technology to improve productivity, intellectual infrastructure and environmental controls.

University of the Thai Chamber of Commerce international-trade studies department director Aat Pisanwanich was less optimistic.

He said more companies would shut in the next few years if the baht did not weaken.

He said several problems faced both individual companies and industry sectors.

Companies have cash-flow issues and industries high labour costs and labour shortages, as well as competition from China.

He predicted 5 per cent of workers in labour-intensive industries might lose their jobs.

"But, I don't think we will face an economic crisis like 1997 due to the relatively strong overall economy," Aat said.

The country has a natural cushion to absorb mass layoffs: agriculture. During the Asian financial crisis it took up labour from the manufacturing and services sectors.

Fiscal Policy Office deputy spokesman Ekniti Nitithanprapas said agriculture and agri-business were still the backbone of the economy.

Although the farm sector represents 10 per cent of the economy only, it is relatively competitive, he said. Global demand for farm products is strong and agri-businesses have added value to the sector, Ekniti said.

Tourism, hotels, health-care services, spas, construction and software are likely to expand when domestic demand picks up, too, he explained.

"What we do now is speed up government spending to boost domestic demand" Ekniti added.

Business people have adapted, and some have done pretty well. Among these is Jirawat Tangkijngamwong, secretary-general of the Thai Furniture Industries Association.

He explained that while about 50 furniture companies had gone bust this year he had survived by business acumen: "I raise prices, target high-end customers abroad and try to increase sales in the domestic market," said Jirawat, deputy managing director of Deesawat Industries, a family owned company.

The Small and Medium Enterprise Development Bank praised Jirawat as a role model for small companies.

Jirawat participates in trade fairs both here and aboard, dealing directly with customers willing to pay higher prices for products that suit their needs.

"I hire Japanese designers to ensure my products meet international tastes," he added.

Wichit Chaitrong

The Nation