Govt might offer subsidy for insurance

After New Year’s, the government is expected to explain to the public about the progress of post-flood reconstruction and plans for water-resources management, Poramethi Vimolsiri, deputy secretary-general of the NESDB, said yesterday at seminar hosted by Deloitte Touche Tohmatsu.

He said policy-makers would next month discuss among themselves the reconstruction and water-management plans.

Two committees have been working out details of these plans, he said. The Strategic Formulation Committee for Reconstruction and Future Development chaired by Virabongsa Ramangkura and the Strategic Formulation Committee for Water Resources Management chaired by Deputy Prime Minister Kittiratt Na-Ranong were set up by the government in an attempt to win back the confidence of investors and the general public.

Poramethi conceded that insurance costs would rise after the unprecedented flooding. While large firms may be able to absorb these rising costs, he said the government was concerned that small firms and households might not be able to do so.

Therefore, the NESDB is studying how the government could step in to provide support for them. There are many options for the government such as taking all risk first and then selling the product to private insurers, or sharing the risk with private insurers in the first place, he said.

From the experience of the US government, such intervention could fail if the government takes too high a risk, such as solely insuring against flood disaster, he said.

"If the government must step in, the government has to find a way on how to diversify the risk," he said.

The NESDB has estimated the damage from the floods at Bt493.86 billion. And the cost of reconstruction in both the short and long terms could be Bt400 million to Bt500 billion, which is not much compared with the fiscal position and high level of foreign reserves, he insisted.

The NESDB expects economic growth to slow to 1.5 per cent this year from the earlier forecast of 3.8 per cent before the floods, but that gross domestic product will expand by 5 per cent next year.

Poramethi said he was not yet aware of many firms intending to relocate their plants out of Thailand.

Deloitte partner Gordon Smith said that from the company’s survey of 250 firms recently, about 1 per cent of them said they would relocate their plants, while the majority said they would stay in Thailand and many said they did not know yet what to do.

Responding to a question on investor confidence after the floods, Smith said: "It’s too early to say."

He also suggested that firms should ask for help from third-party professionals on insurance claims in order to get fair payments from insurers.

Meanwhile, Bandid Nijathaworn, former deputy governor of the Bank of Thailand, expressed confidence that multinationals would continue to do business in the Kingdom.

"Thailand has the advantage of high-quality labour. If they move to other countries they have to begin from scratch, and start training workers," he noted.