Flood-prevention plan seen as crucial to avoiding closures, relocations in electrical, electronics
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Factory closures or relocations in the electrical appliance and electronics industries are predicted for the second or third quarters this year if the government does not have a concrete flood-prevention plan in place to restore investor confidence, accor
The priority for the government is to maintain existing operations as far is possible before thinking about increasing investment in the country. Although some factories may decide not to shift production from Thailand, it is possible they will reduce employment in order to cut costs, they said.
The government's Strategic Committee for Water Resources Management, chaired by Prime Minister Yingluck Shinawatra, has approved six urgent and two long-term plans to tackle the country's massive flood problems.
Of the Bt350-billion price tag, Bt300 billion is earmarked for systems to manage water in the Chao Phraya River basin. The remaining Bt50 billion will be used to build systems in another 17 areas.
Some of these schemes will be completed within one year, while others will start next year.
The electrical appliance and electronics industries were hit the hardest by the flood water during the final four months of last year, as most of the factories in these sectors are located in Ayutthaya and Pathum Thani provinces, the most flood-affected areas.
Seven industrial estates, which are the manufacturing bases for many electronics companies, were under water for a month.
Somboon Hotrakool, director of the Electrical and Electronics Institute (EEI), recently said it was possible for electronics companies operating in the Kingdom to think about risk diversification by having factories in different locations.
Therefore, he said, if there were any factory relocations or closures, they would occur in the second and third quarters of this year.
“Relocation was not obviously revealed in the final quarter of 2011 as most of the electronics companies were thinking about how to deliver products to customers as fast as possible. Besides, they are waiting for the government’s policies and master plan to prevent future floods.
“So, if nothing is clear for investors, we expect to see relocations and plant closures in 2012,” he added.
Somboon said the outlook for the electrical and electronics industries this year remained uncertain, although investment in both sectors is expected to decline.
While some factories may decide to maintain their production in Thailand, new investments in areas such as research and development and high-technology products may be lower than previously expected.
Operational downsizing is predicted as well, so the employment rate in these industries will decline, he said.
According to Board of Investment data, applications for investment incentives from the electrical appliance and electronics industries from January to September last year had a combined value of Bt62.6 billion, the fourth-highest ranked sector, with 198 projects.
The investment value increased sharply from Bt22.8 billion in the same period of 2010, when there were 163 projects.
The EEI recently forecast an opportunity loss in the two industries of Bt170 billion for the final quarter of last year. The loss will continue in the first half of this year, depending on how quickly flood-affected plants can resume production.
Somboon added that although the institute had an optimistic view that the electrical appliance and electronics industries would grow by 6 per cent and 11 per cent, respectively, the estimates could be revised if it has new and updated information from the key players in the sectors.
Sampan Silapanad, president of the Electronic and Computer Employers’ Association, said about 50 members of the association so far had no plans to leave Thailand.
Some of them, multinational companies, have shifted orders to other manufacturing bases temporarily, therefore the concern in the industry is whether orders will return to the Thai manufacturing bases, he said.
“The question from investors in the electronics industry about a concrete plan to manage water remains. They are looking for a water-management plan.
“The government should think about the following two steps: the first is to maintain existing production and bring back orders as fast as possible, and the second is to facilitate continuous investment. If the first step does not occur, the second will not follow,” he added.
A source from the electrical appliance and electronics industries said investment in hi-tech production, as well as R&D by some companies, could be revised following the devastating flooding.
Toshiba Thailand is one company that has been trying to convince its parent to establish an R&D base in Thailand, but the plan is now uncertain due to the impact of the floods.
