All sectors brace for challenges and opportunities

The more major blow came in October and November during heavy flooding in many areas of Thailand, particularly in Ayutthaya province, where a large number of suppliers of automotive electronic parts are located.
This led to serious parts shortage for the Thai auto industry, which is dominated by Japanese auto-makers.
Honda was hit hardest, since both of its assembly plants are at Rojana Industrial Park in Ayutthaya. They were submerged for months, causing major damage to newly assembled automobiles and to machinery.
Many say Honda will not be able to resume production before the middle of 2012.
In the first 11 months of 2011, total auto sales were up by 4.6 per cent, with 739,506 units sold, despite a plunge of 67.5 per cent in November sales, according to figures from Toyota Motor Thailand (TMT). However, auto sales in 2011 are expected to remain at the same level as 2010 because of the anticipaed further decline in sales during December.
In 2012, auto-makers are hoping to restore normal production, and many companies have announced that their factories will start to run at higher capacity by the end of January.
“Right now we are assembling vehicles from old inventory, and the number is still quite small,” TMT spokesman Boonchuan Viphusanavanich said at the Tokyo Motor Show this month. “It will take until late January before we can start increasing production at a higher level.”
Nevertheless, smaller companies such as Mazda have been able to deliver certain models to customers with no waiting period.
In 2012, the government’s first-car-buyer programme is also expected to keep orders flowing for vehicles priced under Bt1 million because of the considerable excise-tax rebate offered.
However, Honda, the No 2 auto-maker in Thailand, will have difficulty responding to the increased demand before mid-2012 because of the damage at its Rojana factories.
The Japanese auto-maker will also have to consider relocating its assembly plants to a safer location than Rojana.
Other auto-makers are also calling on the government to ensure that businesses will not be affected by a flood like the one in 2011, and are urging more cooperation from the government in restoring investor confidence.
Looking on the bright side, this year’s flood has given an edge to the pickup-truck market, because of their greater capability in going through high water levels when compared with regular passenger cars.

INSURANCE

The devastating flood has washed out the life and non-life insurance business this quarter, as premium income dropped by 1 per cent after showing growth of 13 per cent in the first three quarters.
The life-insurance industry in the first 10 months did Bt326 billion in business, up by 12 per cent.
The Thai Life Assurance Association forecasts the industry next year to surge 12 per cent ahead of this year.
However, the flood will make people more aware of personal security, which will benefit the life-insurance outlook. Gross life premiums next year are projected to grow by nearly 15 per cent.
 The trend in life-insurance products in 2012 will be unchanged. New graduates will look for basic protection with lower premiums, while the general public will be more interested in health and personal-accident coverage because they know that many people died |in flood-related incidents.
As of December 9, nearly 700 people had died in flood-related incidents and only one-sixth of them had taken out life insurance. Compensation claims amounted |to only Bt34 million from 103 |policyholders.
Non-life premiums in the first |10 months increased by 15.1 per cent to Bt103.05 billion.
The General Insurance Association predicts that non-life premiums next year will triple the level in 2011 because all sectors |will give greater importance to insurance. Higher premiums for |all-risk, home and auto insurance will help boost gross premiums.
However, the flood has created serious difficulties for both Thai insurers and customers, as reinsurers will impose more restrictions on risk coverage for natural disasters. General insurance premiums will also rise, as both insurers and |reinsurers now consider Thailand |a high-catastrophe-risk country.
Nobody can say now how much premiums will go up until the final assessment is completed by next month.
Without insurance, corporations will have a hard time accessing loans from banks, as it is one of their requirements to protect against credit risk.

 BROADCASTING

Broadcasting businesses are forecast to witness healthy growth next year, though there are a number of changes and challenges lying ahead for this industry.
These include tougher competition among key players, the industry revamp after the National Broadcasting and Telecommunica-tions Commission implements the broadcasting-frequency reallocation plan, and the blooming of the satellite TV business.
However, advertising expenditure fuelling these businesses remains the key indicator.
GroupM trading partner Rathakorn Surbsuk said the growth of ad spending in Thailand would match the global rate of 6-7 per cent. The 2012 European Football Championship (Euro 2012) and the Summer Olympic Games in London will be positive factors driving growth in ad spending next year.
“Normally, having those major sports events in 2012, ad spending could grow by double digits easily, but the floods in this quarter had a negative impact on ad spending,” he said.
Although advertising expenditure in the final quarter of 2011 was washed away by the massive flood, broadcasting businesses enjoyed positive full-year growth thanks to their healthy performance in the first nine months.
Industry watchers forecast that overall advertising spending next year will still be strong, though it might see a slow start.
With solid demand and limited supply in the market, owners of traditional media are unlikely to offer low cost and flexibility at the same time.
New media such as digital, cable and satellites can reach the same audience at a relatively low cost and are likely to provide more flexibility than traditional media, but most advertisers do not take advantage of these alternatives.
However, high competition in the satellite-TV business will continue next year because of the increased penetration of KU-band and C-band satellite dishes in the Kingdom, which are expected to replace territorial antennas in 50 per cent of households by the end of this year. In the next three years, industry observers expect cable and satellite TV will reach 80 per cent of all households, translating to Bt5 billion in ad spending, up from Bt2.5 billion this year.
The number of satellite TV channels on the C-band platform increased this year from 90 to 155, up by 60 per cent. In the coming year, observers expect about a 30-per-cent rise in the number of new channels, with more segments.
Meanwhile key content providers for satellite TV – including GMM Grammy, RS, Workpoint Entertainment and Nation Broadcasting Corporation – are focusing on segmentation to lure advertising, while platform operators keep adding new features to attract more customers.