As jobs dry up, big building firms seek smaller projects, KBank says

Economy May 05, 2014 00:00

By Sucheera Pinijparakarn
The Na

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Large construction companies are chasing medium-sized projects because bigger jobs, including public projects, are unlikely to be seen while the political deadlock persists.

Suradech Kietthanakorn, Kasikornbank first senior vice president for its corporate business division, said there was still some loan demand from corporate customers, but mostly in the power sector and construction companies bidding for small power producer (SPP) projects.
During the first quarter, the bank observed a trend of corporates competing with medium-sized companies for medium-scale projects. 
“While public investment is unable to proceed during the interim government, many corporates have shifted to medium-sized projects instead,” he said.
Many of these medium-scale projects were approved by government agencies before the administration took on its caretaker role, so the tendering process has been able to proceed. 
The competition by corporates against medium-sized enterprises has threatened to lower their margins, Suradech said.
Jiratchayuth Amyongka, a senior executive vice president at CIMB Thai Bank, said it was possible that major construction firms were moving into medium-sized projects to keep their workers employed. But he believed that even if large companies are awarded such projects, they will hire local subcontractors to do the work.
SMEs in tourism need help
CIMB Thai has not found that its medium-sized clients in the construction sector have been affected by corporate moves into their territory, but it has seen more small and medium-sized enterprises getting overdue on their loan payments.
He said the bank would propose to its board this month a special assistance programme to help SMEs. If approved, such packages are expected to be introduced right away.
The measures will vary, depending on whether clients have been affected directly or indirectly by the situation. Around 70-80 SME customers in tourism-related businesses are the priority segment to be helped, Jiratchayuth said.
Suradech said construction companies had also faced a slowdown in building projects as many developers are launching fewer projects than normal, like high-rise condo blocks. Developers have quickly sold existing projects before beginning new ones to ensure sufficient cash-flow.
Moreover, KBank has found that condo speculators have also been making fewer purchases and have attempted to sell their existing units.
He said giant Thai construction companies might look to neighbouring countries such as Indonesia, to cash in on their planned infrastructure projects.
The opening economy in Myanmar is another opportunity for Thai construction companies, and KBank can assist them by cooperating with bank partners in that country because the local banks can help determine credit risk, he said. Local banks in Myanmar know their own market better than Thai banks do.