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Political uncertainty in Cambodia has forced the garment and footwear industry to look to alternative countries to meet production needs, forcing more than 70 factories to close and a sharp drop in orders, a senior official from the Garment Manufacturers Association in Cambodia (GMAC) said.

Speaking at a press conference before the 6th Cambodia International Textile and Garment Industry Exhibition and Machinery Industry Fair in Phnom Penh on Monday, Ly Tek Heng, the GMAC operations manager, painted a worrying picture of the first eight months of the year, the Khmer Times reported on Tuesday.

“I think the political situation has affected business, both businessmen and investors. When one country has instability in politics, it is difficult to make investments and there are concerns, especially from buyers,” he said.

“The political issues, illegal demonstrations and competition from the other garment and footwear exporting countries such Vietnam, Bangladesh and Myanmar has deterred investors from investing in Cambodia and has made buyers reluctant to order products from Cambodia.”

He said that in the first eight months of this year, more than 70 factories had been shuttered, while only 20 new ones had opened. This came as orders from buyers for footwear and clothing made in Cambodia dropped by almost 30%, forcing not only closures, but the slashing of hours for workers.

The decline in orders has had a knock-on effect within the industry, leading to a decline in orders for machinery used to make clothing and footwear, warned Akai Lin from Chan Chao International, which organised the fair.

“For the last few years, the demand for machinery in manufacturing has been great, but now it is decreasing slightly due to factory closures, leading some buyers to wait for the political situation to improve before making orders,” he warned.

Commerce Ministry spokesperson Soeng Sophary on Monday downplayed the news, telling the Khmer Times that the closure of factories did not mean the industry was under threat. She blamed global insecurity for the closures, citing the upcoming presidential elections in the United States, the recent referendum in the United Kingdom where just over half the population voted to leave the European Union, as well as the high price of electricity.

“Cambodia is a small country which depends on garment exports, and as such is affected by outside issues as our export market focuses on the UK and US. The factory closures are maybe due to changing demand in the EU and US. The economic waves in foreign countries have an impact on Cambodia,” Sophary said.

“However, it is not only the impact from outside the country, but also domestically, since investors are looking for profit with low operational costs. So if the operational costs in other countries are lower than Cambodia, they could turn to those countries. We have an issue on electricity and labor costs that we be must be alert to,” she said.

She stressed that it was too early to judge whether the industry was in trouble, as the 70 closed factories need to be compared with the 20 which have opened, which may be bigger or more important.

In contrast to GMAC’s figure of a 30% drop in buyer’s orders suggesting trouble in the garment sector, recent figures released by the ministry paint a far healthier picture. The ministry stated that total garment and footwear exports in the first quarter of this year have increased by 39% to $2 billion.

The EU was the largest market, taking $717.8 million in goods, followed by the US at $419.2 million and $41.7 million to Canada.

In 2015, total exports in the sector were $6.3 billion, a 7.6% growth over 2014, with 699 factories ‒ from 73 in 2014.

KPN Motor has listing in sights

Posted by pakin On August - 8 - 2016 ADD COMMENTS

KPN Motor Car Co says its ambitious plan to list on the Stock Exchange of Thailand is still on track despite unfavourable conditions including a slow economic recovery.

Founder Keattisak Keeratiyakornsakul said the company’s two main businesses, assembly and distribution of taxis, and tyre distribution, have performed strongly with about 1 billion baht in combined revenue.

Mr Keattisak, who is also managing director, said KPN Motor is conducting a feasibility study to offer hire-purchase loans to taxi drivers who want to buy their own vehicles.

He said at least four financial companies have offered to serve as financial advisers and offer loans for the company to manage hire purchase, an activity that will strengthen the financial status of KPN Motor.

At present, the business of taxi-assembly and selling taxicabs has a small margin of only 3-5%, but financial services are likely to create higher profit, according to Mr Keattisak.

He said before listing the company on the bourse, KPN should operate a hire-purchase business, together with taxi assembly and tyre distribution.

The company has no connection with KPN Group Corporation, a conglomerate owned by the Narongdej family.

KPN Motor Car was formed in 2000 by Mr Keattisak as a small auto-parts trader before expanding into the wholesale trade for auto parts for Toyota.

The company later expanded into selling several tyre brands. Its distribution channels includes two outlets and an online platform.

In 2008, it started to assemble and distribute taxicabs. Since then, the company has distributed more than 5,000 units, said Mr Keattisak.

The competition in the taxi-assembly business is intense with a number of assemblers.

However, the potential remains strong thanks to the growing demand for replacement taxis in Bangkok and Greater Bangkok.

The number of taxis in the metropolitan area totalled 97,766 with 72,439 drivers as of April, according to the Land Transport Department. In 2015, new registered taxis rose by 23.1% to 9,409 units in Bangkok and Greater Bangkok.

About 10,000 taxicabs need to be replaced every year as the average lifetime of a taxicab is only nine years.

KPN’s taxicabs are sold via 25 outlets in Bangkok and vicinities, 20 of which are partnerships with Toyota dealers and gas installers. The rest are run by KPN.

Toyota’s Altis is a popular model for taxi assembly and the model sells at 800,000 to 900,000 baht a unit.

Other models from Toyota such as the Innova, Camry and Fortuner are also available.

Mr Keattisak expects to sell 1,000 taxicabs this year.

After listing on the stock market, Mr Keattisak said the company will expand into property development with its first project, a low-rise condominium on Pradit Manutham Road, scheduled to start construction in 2019.

“Urbanisation and new mass-transit routes in Greater Bangkok are positive factors for the property sector to develop both residential and commercial projects,” he said.

Nissan’s new models aim to drive growth

Posted by pakin On August - 3 - 2016 ADD COMMENTS

Nissan Motor (Thailand) aims to raise its market share to double digits by 2018 from 5.6% now.

President Kazutaka Nambu, who yesterday outlined the Japanese carmaker’s mid-term plan ending in 2018, said Nissan plans to launch five new models by 2018 to help boost market share.

He said the company is also confident in the strong fundamentals of Thailand’s car market and expects it to recover to hit annual sales of 1 million vehicles again in 2020.

“Although the current market has been hit hard by massive car sales driven by the first-time car buyer scheme that expired in 2012, the market remains full of potential for Nissan to grow its sales and market share,” Mr Nambu said.

Under its three-year plan, Nissan will also focus more on upgrading its dealership network and after-sales service.

According to marketing consultant J.D. Power’s survey of the customer service index for Thailand’s automotive market in the mass segment, Nissan was ranked sixth with 858 points.

Honda and Toyota were ranked top with 882 points each, with Isuzu third on 875 points.

Mr Nambu said Nissan would develop its 200 outlets and service centres nationwide to move up to the top three in the near future.

For the fiscal year that started in April, Nissan is also upbeat about achieving sales growth of 2% to 50,000 vehicles, with market share up by 0.5% to 7%.

However, Nissan reported its sales dropped by 5.2% from April to June to 10,392 vehicles.

“The overall market is expected to shrink by 7-8% this year to only 740,000 units,” Mr Nambu said. “The market is expected to recover from next year.”

Nissan reported its highest sales during fiscal 2012 with 138,000 vehicles, propelled by the first-time car buyer scheme, before dropping to 74,000 in 2013.

Nissan sold 56,600 vehicles in its 2014 fiscal year, down 23.5%.

Nissan reported last month that its eco-car production had passed 500,000 vehicles, comprised of the March and Almera models. Its plant in Samut Prakan started to make eco-cars in March 2010.

Some 50% of the output was for export to 13 countries including Japan.

Although the parent firm has yet to disclose plans for Nissan’s eco-car expansion, it remains committed to production.

Banks tackle liquidity surplus

Posted by pakin On August - 1 - 2016 ADD COMMENTS

With more deposits than loans, commercial banks are awash with liquidity. Now they are seeking ways to control the cost of funds in a bid to maintain profitability.

Among the methods banks use to control these costs are pushing current accounts and savings accounts (CASA), which have low, variable interest rates as opposed to fixed rates, and to stop offering new special deposit packages.

Siam Commercial Bank (SCB) is searching for investment opportunities in both local and international markets as another way to manage the liquidity surplus, president and chief executive Arthid Nanthawitthaya said.

SCB’s cost-to-income ratio of 36.1% in the second quarter was the lowest among the country’s four largest banks by assets. The bank’s CASA represented 62.5% in the April-June quarter, up from 61.5% in the final quarter last year and 58% over the same period last year.

The other large banks are Bangkok Bank, Krungthai Bank and Kasikornbank.

Mr Arthid said SCB is earmarking a large budget to improve its core banking business under the SCB Transformation scheme to support long-term sustainable growth. The budget amount is yet to be finalised.

The country’s third-largest lender by assets kicked off SCB Transformation running through 2020 in April last year to sharpen its competitiveness in the face of rapid change in the global environment with the rise of financial technology.

The first phase of the scheme is aimed at improving the bank’s service quality by reducing customer complaints and increasing the number of new customers in each business unit.

Kasikorn Research Center (K-Research) said the excessive liquidity of 14 commercial banks fell slightly in June from the previous month, thanks largely to higher lending.

Their combined lending in June rose to 10.5 trillion baht from 10.5 trillion in May, the research house said.

The 14 commercial banks’ total deposits also fell marginally to 11.2 trillion baht in June from 11.2 trillion in the previous month.

K-Research said the increase in higher gross loans to deposit and borrowings to 91.4% in June from 90.9% in May was another indicator that the 14 commercial banks’ liquidity had tightened marginally.

For the first six months of 2016, the commercial banking industry’s cost-to-income ratio fell to 42.5% from 43.9% over the same period a year before.

Kiatnakin Bank’s chief executive Apinant Klewpatinond said the bank would concentrate on putting money into high-yield financial instruments to improve comprehensive income and reduce the costs of funds in the second half.

“Although the bank enjoyed a wider spread [between deposit and loan rates] and recorded a better net interest margin due to the fixed-rate charge of auto loans, it didn’t come from real capability in doing business,” Mr Apinant said, adding that the bank plans to focus more on high-margin loan products.

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