Lack of confidence hurting industry

Although the US financial crisis is expected to have a varied impact on Thailand's manufacturing sector, a nationwide survey by the Federation of Thai Industries (FTI) shows the domestic political turmoil has already had a big effect on some local industries.

The toughest blows have been suffered by makers of luxury goods. Consumers have stopped buying luxuries, in order to spend their money on essential products.

While other manufacturers expressed similar experiences, many said they were waiting to see what the new year brought.

The FTI yesterday told a press conference the highest priority in the minds of many Thai business people was revising their plans to cope with uncertain markets and unclear demand.

The federation's survey was backed by comments from many of the country's industrial leaders. Siam Cement Group (SCG) president and CEO Kan Trakulhoon said he believed the financial meltdown in Europe would impact more viciously on Thailand than would the crisis in the US.

Although SCG's exports to the US and Europe contribute only a few per cent of its total revenue, he said he was concerned the crisis would indirectly turn down the Asean regional economy.

At present, Thailand's exports to Asean countries account for 23-25 per cent of its exports, while those to the US and the EU are almost the same: 11-12 per cent each.

PTT International Trading senior executive vice president Surong Bulakul said the crisis was certain to hit the group's exports next year.

"We need to review our export plans, particularly those for petrochemical products and petrol. We're also evaluating how the crisis will hit our absolute costs and the overall market before carrying on with future investment plans," he said.

Global petrol supplies tend to swamp markets with lower demand, following blends of ethanol and higher-efficiency vehicles, he said.

Asian Honda Motor senior vice president Adisak Rohitasune said it might be too soon to assess the certain impact on Thailand's auto-makers but that the economic signs for the coming year were not good.

"It's different from the 1997 economic crisis, which was a sudden shock, cutting down production capacity 75 per cent and reducing the number of employees. This time, there are several factors involved - such as fluctuations in the oil price - that probably affect the automotive industry more directly than financial problems," he said.

Adisak said exports of pickups in this quarter might fall 10-15 per cent year on year, because of the sharp drop in the US market.

Petrochemical giant IRPC has postponed two investment projects, including its Euro IV upgrading project and an efficiency-enhancement project on which it planned to spend more than US$2 billion (Bt69.53 billion).

IRPC president and CEO Piti Yimprasert said his company put the projects on hold because of uncertain market demand and supply. The financial crisis could also lead to problems in tapping investment funds.

Amata director and chief operating officer Viboon Kromadit said the global economic crisis and the country's political turmoil were forcing foreign investors to review their investments seriously.

"I dare not set our sales projection for the coming year, but I'm quite confident it will shrink considerably unless both economic and political tensions are solved. The main problem is not a shortage of money, it's about confidence," he said.