Firms told to buy foreign machines now

While the government and economists in recent weeks have advised businesses to take advantage of the baht's rise to import machinery to expand their plants, financial institutions say companies are wavering because of related costs.

Porawan Rungsang, deputy managing director of Kasikorn Factory and Equipment, said last week that customers especially SMEs are interested in taking advantage of the strong baht, which makes foreign equipment cheaper, but it takes at least six months to order from overseas.

The cost for waiting for the machines to arrive is a concern. The costs include interest that has to be paid to banks and fees for forward exchange contracts.

Banks have suggested locking in a future exchange rate but customers say they want to monitor the currency's direction, which might be even further north, said Songpol Chevapanyaroj, executive vice president of Kasikornbank.

While the stronger baht could reduce import costs, it didn't mean that businesses would increase, he said, because they want to evaluate the situation before deciding how many machines can support enlarged production capacity.

Sayam Prasitsirikul, head of SME products at Bank of Ayudhya, said the bank had not yet seen customers take out loans to acquire production machinery while the baht was moving up.

Porawan said demand for machine leasing would be higher this year because the increase in the daily minimum wage is a |factor in businesses installing |more machines to replace manpower.

overseas, local dealers

Machines are ordered both from overseas and via dealers here in Thailand. Construction companies are expected to require more machines this year to support growth in projects, but they can get them from local dealers, unlike heavy industries that need to get them from abroad.

According to Kasikorn Factory, imports account for 30-40 per cent of new machinery.

Competition in equipment leasing is expected to be more intense this year because captive leasing companies are resuming their focus on this segment, especially SMEs in provinces.

The equipment leasing market was tipped to accelerate 15 per cent this year, faster than the 10-12 per cent last year, she said.

SMEs with annual sales of Bt10 million-Bt20 million are the focus of Kasikorn Factory this year.

The company projects its loan portfolio this year will bulge to Bt11 billion from Bt9 billion last year.