Retail sector forecasts 7% growth in H2

Corporate July 29, 2014 00:00

By Kwanchai Rungfapaisarn
The Na

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TRA cites junta's funds for projects; urgent steps urged

The Thai Retailers Association (TRA) yesterday forecast growth in its industry of not less than 7 per cent year on year in the second half, thanks to the junta’s allocation of funds to be invested in government projects over the past two months. The retail sector now could see full-year growth of between 6 and 7 per cent.
However, the TRA urged the military’s ruling National Council for Peace and Order (NCPO) to stimulate the economy further via various urgent measures. These include the setting up of a separate ministry to support small and medium-sized enterprises, as well as price controls on food, transport and fuel.
The TRA indicated that overall retail-sector growth during the first half was only 4 per cent as a result of many negative factors that prevailed since the latter half of last year. However, the association foresees healthier growth during the current half, along with the expected expansion of gross domestic product by 2 per cent. 
TRA president Busaba Chirathivat noted that the economy during the first half had been decelerating, according to the Office of the National Economic and Social Development Board, which indicated that GDP growth was negative-0.6 per cent. For the retail business, it put growth at 4.6 per cent. 
She said the slowdown was due to domestic instability, leading to an environment that was not conducive for consumer spending. Purchases of durable goods were down 4.5 per cent, semi-durable goods 3.0 per cent and non-durable or consumable goods 5.0 per cent. This clearly reflected that the buying power of lower-level consumers and farmers had not recovered. Family debts are also at a relatively high level. People remained extra cautious about spending during the first half of the year. 
First-half expansion 
In terms of retail business expansion during the first half, more branches were opened, leading to net growth. This included 7-per-cent growth in the number of convenience stores, 3.5 per cent more supermarkets, 3.5 per cent more department stores and 4.5 per cent growth in the number of specific-purpose stores. 
Chatrchai Tuongratanaphan, TRA executive director, said the retail industry in the second half of this year would be better than in the first half, driven by a number of major factors. The NCPO has injected a lot of money into government spending over the past two months and as a downstream business, the retail industry will benefit from the better cash flow in the final quarter. The new Board of Investment has also approved many investment projects during the past two months.
The TRA yesterday recommended the following measures to the NCPO for consideration:
l The government must identify urgent measures to lower the cost of living. This can be done by setting limits for the cost of food, transport and fuel. 
l The government must launch a clear programme for promoting border trade. This includes opening more border trade locations, and improving the effectiveness of logistics and transport by expanding and modernising the road network. 
l The government must identify a scheme to improve confidence to create an environment conducive for spending and investment. This may include organising various tourism-promotion activities during the low season, with the cooperation from the tourism, hotel and retail industries. 
l The government must identify urgent measures to assist SMEs, especially with regard to the problems related to cash flow and limited liquidity due to high labour and energy costs. These may include revising the regulations to allow SME manufacturers and sellers to be able to use the invoices received from retailers as guarantees to borrow from both public and private banks to increase their liquidity. 
l The government should set up a Small and Medium Enterprises and Trade Development Ministry. This should be accomplished by combining all relevant offices, including the Office of Small and Medium Enterprises Promotion (Osmep), SME Bank, the Thai Credit Guarantee Corporation (TCG), the Ministry of Commerce, the Ministry of Industry, the Interior Ministry’s Department of Community Development, as well as other scattered units, under one comprehensive umbrella. This should lead to a clearer organisation responsible for the systematic and effective development and support of SMEs, which account for 99 per cent of Thai industry. 
l Since Thailand has high potential to attract tourists, because of its natural  attractions and culture as well as internationally recognised hotel and service sectors, the government should consider gearing the country towards being a totally integrated tourist destination. This includes reducing the import taxes and duties for luxury products in order to stimulate spending of both domestic consumers and tourists. Such a programme should help divert high-profile spenders back to the country. 
l The government should not inhibit entrepreneurs from conducting businesses in the airports and retail business areas nearby. This would allow free competition in all sectors, which would eventually bring more revenue to the government. 

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