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Floods cripple economy

Heavy inundation in Ayutthaya will hit auto industry hard: Toyota exec; FTI calls for 25 per cent pay cut and delay in Bt300 minimum daily wage.

Economic ripples from the nationwide flooding are reverberating, with rumours that some Japanese companies will relocate production facilities out of the country as some industrial estates are submerged and many more are threatened.

Distressed companies are pressing for government relief, which could come in the form of a delay to the Bt300 minimum wage as well as other financial assistance.

Within a few days, the Board of Investment (BoI) will decide if it will host the BoI Fair from November 10-25 as scheduled, following fears that the inundation may last until mid-November.

Suparat Sirisuwannangkura, senior vice president of Toyota Motor Thailand and chairman of the Federation of Thai Industries (FTI)’ Automotive Industry Club, quashed the relocation rumour, saying Japanese investors retain confidence in Thailand.

“The tsunami in Japan, which also resulted in supply chain disruption, left behind far greater damage than the floods. What worries them more is discrepant news flows. To help, the government should streamline the information to avoid causing confusion,” he said.

As water hit its assembly plant and those of its suppliers, Honda Automobile (Thailand) suspended operations at its sole assembly plant in Thailand, located in the Rojana Industrial Park of Ayutthaya. However, the company’s executive admitted that relocation was another question.

While saying that the floods would deal a huge psychological blow to car buyers and those planning to join the government’s first-car buyer scheme to be launched today, Suparat said the floods would hit the auto industry hard. Due to the supply disruption, which will affect exports and domestic sentiment, the industry’s output may not reach the 1.8 million-unit target this year, he said.

Toyota has cut out all overtime as production declines.

Ayutthaya is home to many major car and electronics manufacturers.

Somboon Hortrakool, director of the Electrical and Electronics Institute, said plants run by 200 firms in the industry are flooded, but it remains unclear how many workers they employ and how their exports will be affected. Besides the drop in demand in the US and Europe, the supply chain disruption would crimp exports, he said.

The FTI yesterday sought help from the Industry Ministry. FTI chairman Payungsak Chartsutipol said he proposed a 25-per-cent slash in employee pay. Then, while employers pay 25 per cent, the Social Security Fund should pay the remaining 50 per cent.

He also proposed the establishment of a support fund to help businesses replace or repair damaged machines and equipment with soft loans carrying a zero to 1-per-cent interest rate.

The government should also postpone the implementation of the Bt300 minimum wage policy by two to three years.

“Businesses are facing tough times. We want clarity on this. Then, the FTI will keep Japanese investors – through Jetro and the Japan Chamber of Commerce – updated on the government’s measures to revive the situation,” Payungsak said.

Vice Industry Minister Suphap Khleekajai said he would rush the FTI proposals for Cabinet approval.

Amara Charoengitwattanagun, director of the Rojana Industrial Park, said all three phases of the estate in Ayutthaya covering 10,000 rai and 300 factories were swamped.

The water could be pumped out only when tides outside the estate retreat, she said.

Songsri Boonba, inspector-general of the Labour Ministry, said many factories in the Saharattana Nakorn Industrial Park and Hi-Tech Industrial Estate have closed from October 7-16, affecting 180,000 workers

As the plants will need time for maintenance, the ministry plans to urge employers elsewhere to hire the laid-off workers.

Atchaka Sriboonruang, secretary-general of the BoI, said the Foreign Ministry would be asked to help speed up work permits for factories that want to bring in technicians to inspect machinery.

Some foreign workers should also be exempted from penalties if their work permits, now destroyed by floods, expire.

Pathum Thani Governor Peerasak Hinmuangkao insisted that industrial estates in the province would be spared from the floods, thanks to floodgates as well as preventive measures including reinforced dykes and pumps.

Source: The Nation

ThaiVest Editorial Team

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