Companies 'losing heart': TCC

Commerce dismisses wage impact, cites rise in total

Although the Commerce Ministry says a jump in business closures last month was not related to the nationwide increase in the minimum wage, the Thai Chamber of Commerce claims the psychological impact has caused some companies to lose heart and go out of business.

"Companies that have faced difficulties will be reluctant to go on because they have to shoulder higher labour costs. The wage increase has quickly prompted companies to shut down easily," Somkiat Anuras, vice chairman of the TCC, said yesterday. The Business Development Department reported yesterday that closures in January rose 9 per cent to 1,202 companies year on year, but dropped 68 per cent month on month.

Deputy Commerce Minister Natthawut Saikua said the rising number of closures was not abnormal, particularly when the overall number of businesses was increasing in line with new registrations.

According to the department, the number of new companies normally exceeds the number of collapsed firms by a factor of 5 in a healthy economy.

Natthawut said most of the wound-up businesses had either been set up to serve a specific project and their contracts had expired, or they had lost export quotas. Relatively few firms had to cease operations because they faced losses, lacked liquidity or were hit by tough competition, he said.

The department reported that 38 per cent of the closed firms gave the reason that they lost a quota in the lottery trade, 26 per cent said they suffered financial losses, 26 per cent said they failed to reach their income target and 10 per cent said they faced conflicts, health problems or a death in the company.

Somkiat said that although the increase in company closures could not necessarily be blamed on the wage increase, rising labour costs had weakened the will of enterprises.

The impact of the wage increase will start to be felt and become a major cause of business closures next quarter, he said. The TCC has consistently opposed improving the minimum wage.

The department also reported that business openings last month soared 60 per cent year on year to 8,184, a new high, and had surged by 80 per cent compared with December's figure.

The paid-up capital of new firms during the month increased 133 per cent year on year and 142 per cent month on month to Bt40.75 billion.

Most firms registering in January were in the entertainment, lotto trading, karaoke, construction and property development, advisory, and construction-material retailing and wholesaling businesses.