Crisis and opportunity

By Chantana Sukumanont
Deputy Chairman Executive Committee (Marketing and Sales) of Siam City Cement.
Published on January 16, 2009

Chantana Sukumanont

Construction Trace this time begins right at the start of the year. In order to draw some conclusions about what is going to happen in the construction industry in the first quarter, let's begin by reviewing the overall performance and health of the industry last year.

In the first half of last year, prolonged political turmoil was discouraging investor's confidence and government policies in the construction industry. No new mega-projects were launched. Cement consumption growth was minus 6 per cent, compared with 2007. In the second half of last year, the US financial crisis worsened the global economy, which affected the growth rate of domestic cement consumption and the volume of exported cement fell 20 per cent year on year.

Additionally, the number of permitted land allotments around the country was cut 25 per cent in the first nine months of 2008, and at the end of last year the housing market was oversupplied to the tune of about 300,000 units.

So far this year, the global crisis has been hitting the Thai economy even harder. The Bank of Thailand is projecting gross domestic product growth of 0.5-2 per cent.

The dramatic downturn in the economy and low consumer confidence in future income will directly affect purchasing-power and demand for new property. It is also expected that most banks and financial institutes will raise restrictions on the availability of credit this year, so there will be difficulty in financing new construction projects.

Since housing estates have a considerable oversupply waiting to be sold this year, many real-estate investors have delayed new investments. The Kasikorn Research Centre predicts housing completions this year in the greater Bangkok area will fall 14.8 per cent from last year.

In order to survive in this environment, developers need to adapt their business strategies to match consumer demand. Focused marketing may need to be changed to mass marketing in order to cover the housing segment.

However, the government realises the importance of investment in construction. Every baht invested in the construction business will have an effect on the economy 2.5 times greater. Therefore, it has already launched new stimulus measures for the property market. It has extending for another year a reduction in the specific business tax on property sales from 3.3 per cent to 0.11 per cent and has cut transfer and mortgage fees from 2 per cent to 0.01 per cent. It has also increased the tax allowance on property sales from Bt100,000 to Bt200,000.

The government's mega-projects need to be pushed to commence on schedule this year. Projects planned for this year include the Red Line rail link from Bang Sue to Taling Chan and the Purple Line from Bang Yai to Bang Sue.

Among the unpleasant problems affecting the construction industry, let us take a look at the Chinese word wei-ji, which means "crisis". If the two parts of the word are separated, wei means "danger" and ji means "opportunity". This shows us that no matter how difficult the circumstances, no matter how dangerous the situation, a tremendous opportunity lies at the heart of every crisis.

I hope it is not too late to wish all readers a prosperous 2009. Hang tight! I'll be back in April.

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Crisis and opportunity

Construction Trace this time begins right at the start of the year. In order to draw some conclusions about what is going to happen in the construction industry in the first quarter, let's begin by reviewing the overall performance and health of the industry last year.

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