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Two-thirds of Thai industries will find it difficult to pull out of depression in post-Covid era, predicts FTI

May 14. 2020
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By The Nation

Most Thai industries will find it difficult to survive in the post-Covid era, the Federation of Thai Industries (FTI) warned as it called on the government to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and make more free-trade deals with trade partners. 

 Of the 45 industry groups in Thailand, 32 are expected to suffer a drop in demand and will recover slowly after the outbreak due to the global slowdown, Kriangkrai Thiannukul, vice president of FTI, said on Wednesday (May 13). 

He added that only 13 industries will expand after the pandemic, namely medical and healthcare devices, pharmaceutical, information and communication technology, pulp and paper, sugar, air-conditioning and cooling systems, food, electricity generating, chemical, rubber products, plastic, printing and packaging and aluminium product.

The Covid-19 outbreak has boosted the medical and healthcare device industry, as well as e-commerce-related industries such as plastic, aluminium and packaging, he said. 

Food, meanwhile, is always important for world food security. Thailand is also the second-largest manufacturer of air-conditioning and cooling systems, which is expected to expand in the post-Covid period, especially since the top manufacturer of these products – China – is still struggling with the virus fallout. 

However, at least two-thirds of the industries will face a grim future, namely cloth, textile, auto and parts, cosmetics, leather, shoes, jewellery and ornaments, steel, cement, roof and parts, granite and marble, glass, ceramic, sawmill, plywood, furniture, machinery, agricultural mechanics, ship building, steel construction, metal casting, electronics and telecommunication, herb, palm oil, food supplement, petroleum refinery, petrochemical, gas, renewal energy, handicrafts, environment management and biotechnology, he warned.

These industries will suffer a drop in demand for their products and services as consumers’ purchasing power will weaken due to economic woes. 

“After the outbreak, global economies, including that of Thailand, will recover slowly as businesses will not be able to run at full capacity. Things will not return to normal until a vaccine is available and that will take about 12 to 18 months, plus the time required to distribute the vaccine globally,” he said. 

In addition to this, the global supply chains were hit hard last year by the trade war between the world’s two largest economies – US and China. This year, the pandemic is having an even greater impact on global supply chains as air and sea transport has been shut down. 

Meanwhile, it is believed that many businesses will move their production out of China and return to their country or to their region. US manufacturers will also move part of their production back to their country or to Canada and Mexico. European businesses are also expected to move some production back to their continent, while Japanese investors are also expected to either return home or set up in the Asean region, he said. 

“During the pandemic, demand for medical devices has been high, but China cannot export them, while the US cannot increase its production at home because it depends on China for raw materials,” he said. 

Hence, he said, Thailand has to be ready for big changes, as export accounts for 70 per cent of Thai economy and tourism represents 12 per cent – or 80 per cent of the country’s GDP relies on the global market. 

On the positive side, the US has become the largest importer of Thai products, he said, while Chinese investors are also eyeing the option of moving their production to Asean and Thailand. 

On the other hand, he said, Thailand is facing stiff competition from Vietnam, Malaysia and Indonesia, which are being considered by many foreign investors, he said. 

Many high-tech industries are considering Malaysia, while Vietnam and Indonesia enjoy trade privileges under the Generalised System of Preferences (GSP) offered by developed countries, he said, adding that most of Thailand’s GSP has been cut. Vietnam has also plenty of free-trade agreements, he said. 

He said it was also time that Thailand looked into speeding up negotiations to join one of the largest trade blocs – CPTPP, which it has been reluctant to do so far.

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