Stability, consolidations concerns for investors

Foreign private-equity investors remain cautious over Thailand's political stability and say the increased minimum daily wage will lead to consolidation of businesses.

At the Asia Private Equity Forum in Hong Kong yesterday, investors expressed concern that political stability in the Kingdom could create frustrations over the next five years. However, they see great potential in the Thai market in such sectors as food processing and manufacturing, while selected businesses such as media also remain attractive.

Lew Oon Yew, the managing partner and co-founder of Proventeus Capital, said the increase in the minimum wage to Bt300 per day would lead to consolidations and was favourable to the private-equity business.

However, Lew said that while the higher minimum appeared to be putting more money into the pockets of workers, there were consequences to be faced.

"Small businesses are not likely to be able to survive, because the whole business model of small companies hinges on extremely low costs. By doing this you are essentially driving small businesses out."

The Asean region has seen a resurgence of business in the private-equity segment since the 1997 financial crisis. Jared Lim Chih Li, the managing director of Asiasons Capital, sees the region's gross domestic product growing by 5-6 per cent annually over the next five to 10 years with its strengthening domestic demand and large, young workforce.

Meanwhile, to relieve the impact from the higher minimum wage, the Commerce Ministry has launched a plan to help small and medium-sized enterprises trade and invest more in Asean countries. After chaired the nine decades anniversary of the Business Development Department, ??

Commerce Minister Boonsong Teriyapirom said the Asean Economic Community would be a key factor strengthening SMEs.

He added that Thai enterprises needed to adjust to rising labour costs by trading with and investing in other Asean markets.

The Ministry of Industry said yesterday that in at least 62 provinces, no business had yet closed solely because of the new Bt300 minimum wage.

Witoon Simachokedee, permanent secretary of the ministry, said it would take about three months for any such impact to be seen.

The rate of factory closures is normal, he said.