Govt finally sees the need for long-term planning

After multiple weeks of uncertainty and the lack of a clear strategic direction amid the flood crisis, the Yingluck government finally seems to be getting its act together. Yesterday, Dr Virabongsa Ramangkura, a former finance minister, was named chairman of a national committee in charge of reconstruction and development in the wake of the worst flooding in more than five decades.

Virabongsa, a widely-respected economist, will have the daunting task of restoring domestic and international confidence in Thailand in the coming months, due to the huge damage inflicted on millions of people and the national economy.

Officially more than two-million people in over 30 provinces have been affected by the massive deluge over the past several months, which has also caused over 500 deaths so far. In addition, over 14,000 firms have been directly or indirectly affected.

At seven industrial estates in Ayutthaya and Pathum Thani provinces, over 1,000 factories, many of which are Japanese or foreign-owned, have been inundated, causing a huge impact not only for Thailand but also the global supply chains of the automotive and electronic industries. Car production in Japan and the US has been suspended due to the lack of certain parts and components previously produced in Thai plants. Even Toyota, whose assembly plants in Thailand are not directly affected by the flooding, has had to suspend its production lines here and abroad due to the shutdown of parts-suppliers in flooded Ayutthaya province. One Toyota executive commented that an average vehicle has 10,000-20,000 parts and if even the supply of only one part is disrupted, the whole production system is affected.

When Japan was struck by the earthquake and tsunami in March this year, there was also a major global supply chain disruption to both the automotive and electronic industries,

In the electronics sector, Western Digital of the US, which produces one third of the world’s computer hard disk drives, was badly hit as its plants in Ayutthaya became submerged. This has meant shortages and higher prices of hard disks in the global market.

For Thailand, several hundred thousand workers have been left temporarily out of work, while factory damage is so far estimated to the tune of several hundred billion baht. Repairs will have to be made before these people can return to work. Perhaps more importantly in the long term, Japanese and other foreign investors’ confidence in Thailand as a manufacturing hub has been damaged, and many are not yet sure if the country can really prevent a repeat of this massive disaster.

For Virabongsa, his immediate task is to restore this confidence in Thailand. The former deputy premier and finance minister has said he will lead an official delegation to Japan shortly to seek advice and support for rebuilding Thailand’s industrial base.

Details are not yet available but Virabongsa has said the Yingluck government will do its best to ensure this year’s flooding will not happen again. As head of the high-powered committee for reconstruction and development, he will spearhead projects over the next 12 months to boost the safety and security of the country’s industrial parks.

Virabongsa’s committee will also formulate long-term strategies to rebuild the country in the wake of this disaster. He was quoted as saying that the country will seek input from the Japanese government and industrial and business groups, including Kaidanren, on measures the country can take to retain international investment.

In the short- and medium-terms, Virabongsa has indicated that all Thai and foreign investors with factories in Ayutthaya and other affected provinces will be helped to return to normalcy.

However, some industrial estate locations will also be reconsidered because they may not be suitable for the long run as far as the downstream flow of floodwater is concerned. Ayutthaya province is a good example, so the government will also consider long-term measures to help investors in this area relocate to safer areas.

In addition, the government has announced plans to invest as much as Bt800 billion in mega-infrastructure projects on water resources management so as to solve the annual flooding problem on a longer-term basis.