Business must have access to liquidity

So says a new survey by the University of the Thai Chamber of Commerce (UTCC).

The construction and property segments will be hardest hit, due to difficulties accessing credit. Some 700,000 unemployed labourers will be laid off from these sectors if companies are unable to maintain operational levels.

Moreover, another 1.5 million lay-offs will be seen if other enterprises cannot proceed as normal due to a liquidity shortage. Those sectors facing a 100-per-cent liquidity shortage are food, garments, electronics, steel, electric appliances, hotels and restaurants, healthcare and wholesale/retail.

Based on a survey of 800 business respondents, UTCC's Economic and Business Forecasting Centre said up to 75 per cent of businesses had experienced a liquidity shortage since the economic slowdown began.

Centre director Thanavath Phonvichai said the government must seriously urge all financial institutes to approve credit and loans for enterprises more easily, or else the number of unemployed would rise sharply and more businesses go bankrupt.

"State-owned and commercial banks must more easily approve credit for enterprises during this tough economy. The government should also cut another 50 basis points from the policy interest rate, in order to reduce costs for the business sector," said Thanavath.

Most respondents also believed the country's economy would contract 1-4 per cent this year.

Sauwanee Thairungroj, vice president for research at UTCC, said businesses that lacked liquidity could survive an average of 8.6 months.

The trading sector could last the least longest at 7.4 months, following by the service sector at 7.9 months, agriculture at 8.4 months and manufacturing at 8.6 months.

Enterprises have recently implemented many measures to solve liquidity shortages. These include saving energy, cutting back on marketing, looking for new orders more aggressively, reducing workdays, finding new joint investors, finding new investment sources, cutting salaries, laying off workers, reducing advertising costs, selling off business units, suspending operations temporarily and even closing down.

Yajai Chuwicha, head of UTCC's Chamber Business Poll, said almost 60 per cent of respondents reported facing difficulty in finding loans.

The main causes of liquidity shortages are lower purchasing orders, lack of bank guarantees, banks and other financial institutes denying loan approvals and customers defaulting on payments.

Phongsak Assakul, vice chairman of the Thai Chamber of Commerce, said customers and importers were passing their financial burden onto exporters by asking for credit-term extensions.

"The number of non-performing loans are expected to increase sharply during this economic meltdown," said Phongsak.

He called for the government to help enterprises by providing short-term soft loans, extending loan-payment periods and relaxing its loan regulations.

Meanwhile, Dusit Nontanakorn, the newly appointed chairman of the Thai Chamber of Commerce, has called for a peaceful political situation.

The poll showed the uncertain political future was the most negative factor for business sector, following by the global economic crisis.

"The revived political turmoil is worsening the economic slowdown. Anyone creating conflict must stop doing so. The administration, justice and legislative powers must not be unreasonably attacked," he said. "It's very embarrassing the way that Thais are tearing each other down while every other country has tried to cope with the economic crisis."