Failure to develop water plan not an option: manufacturers

At the seminar, “Industrial Rehabilitation after Flood Disaster”, hosted last week by Krungthep Turakij, three industrial-estate operators said that aside from the construction of more robust flood barriers at the estates as a short-term measure, investors are demanding a water master plan for long-term security.
“The plan is a priority to ensure quick recovery in the manufacturing sector,” said Kobkarn Wattanav-rangkul, chairwoman of Toshiba Thailand and Bangkadi Industrial Park – one of seven inundated industrial estates.
“Though it may require seven to eight years to implement, the plan is a must; there are fears that this will be forgotten about over time. It’s the private sector that is pushing for drastic and permanent action,” she said.
“We need quick action, as some [manufacturers] have decided to shift investment from Thailand.”
Around the middle of this month, drainage at Bangkadi is expected to be complete and workers should be able to return to the factories. A flood barrier is planned, with construction to begin early next year and completion expected in August.
The situation is better at Rojana Industrial Park, which is now dry. Large trucks were expected to be able to enter to deliver heavy machinery as of last Thursday. Nava Nakorn Industrial Park is expected to be dry by December 10 Saturday.
“The comprehensive master plan must take into account water usage for industrial, agricultural and consumption purposes,” said Khajohn-sak Mahakunawan, an adviser to Rojana. “Proper resource allocation would automatically prevent floods, as it would be assisted by sluice gates and ‘monkey cheek’ [catchment] areas. This disaster shows that |blocking water only worsened the |situation.”
Nipit Arunvongse Na Ayudhya, managing director of Nava Nakorn – the operator of Nava Nakorn Industrial Estate – said operators had no problems with investing in barriers, though some stand to benefit little from the investment as they sold all the land and benefit only from utilities services.
“As the master plan is not available yet, insurance companies put renewals on hold. This is scary. Though some companies want to maintain investment here, they cannot do so without the insurance and parent companies’ consent,” Nipit said.
“To foreign investors, the point is not who is responsible for the disaster. Instead, they want clear water-management strategies: how dam water is managed, how waterways will be built, and who should be responsible for regular waterway drainage and sluice-gate maintenance.”
Vice Minister for Industry Suparp Kleekhajai said factories in the seven industrial estates showed preliminary losses of Bt125.8 billion, including Bt27.4 billion in damaged raw materials and Bt16.5 billion in damaged finished goods. Some of the machinery losses of Bt68 billion might be recoverable if repairs are successful.
The World Bank estimates losses at Bt1.3 trillion, due mainly to supply-chain disruptions affecting factories outside the estates and those overseas. The automotive and electrical/electronics sectors were hit the hardest, and there are fears that delayed recovery may result in permanent loss of clients.
“Production [of automobiles] should return to normal early next year, except for Honda. Three new manufacturing plants will start next year to boost output,” said Vallop Tiasiri, president of the Thailand Automotive Institute.
“All are geared towards the new goal, to boost output to 2.5 million units and capacity to 3 million in the next few years, which will turn Thailand into the world’s 10th-biggest car manufacturer.
“The crisis has not led to any change in the plan. Yet it could dampen Thailand’s future attractiveness, as automotive investment is long-term and risk management is crucial.”
Supachai Suthipongchai, chairman of the Federation of Thai Industries’ Electrical, Electronics and Allied Industries Club, said he expected the crisis to cut Bt500 billion from export value in the current fourth quarter.
He is seriously worried about the recovery, given the shortage of specialists to help fix machinery. At the seven industrial estates alone, more than 10,000 plastic-moulding machines were damaged. It could take a year to fix all of them, because of lengthy diagnosis and the imports of parts. Ordering replacements would take a similar amount of time, as manufacturers could not cope with such huge orders all at once.
“All are concerned about a recurrence of this disaster and possible relocations. Compared with the auto industry, relocation of electrical and electronics plants is easier. Don’t forget that Thailand will be less attractive [anyway] with higher minimum wages, labour shortages, and poor education quality,” Supachai said.
 Seeing the problems in the supply chain, Suparp said that aside from tax waivers on parts and machinery for the automotive industry, the ministry is helping small and medium-sized enterprises through an industrial clinic. As of November, about 1,325 factories had registered for help, ranging from machinery diagnosis to maintenance.
The Small and Medium Enter-prise Development Bank of Thailand will also focus on affected business operators.
Suparp said he was convinced |that Thailand would remain attractive to Japanese companies, which are looking for new manufacturing sites after the tsunami in their own country, even though 80 per cent of factories at the seven inundated industrial estates belong to Japanese manufacturers.
“The overall sentiment remains positive. Thailand should benefit from the relocation from Japan, thanks to smooth political, economic and cultural ties. Despite some negative factors, there has been no significant change in that sentiment,” he said.