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B3bn poured into Thai-Chinese zone

Posted by arnon_k On November - 11 - 2010 ADD COMMENTS

Thai and Chinese investors plan to invest a combined 3 billion baht to further develop the Thai-Chinese Rayong Industrial Zone and set up new projects there so that the facility can serve as a production base for expansion into Asean.

The investors yesterday signed two memoranda of understanding and two investment agreements to utilise around 500 rai in the industrial estate in Rayong province.

Kiat Sittheeamorn, president of the Thailand Trade Representative (TTR) Office, said the Thai-Chinese Rayong Industrial Zone would be further developed and operated by Amata Group and Holley Group of China. It will be located in the Amata Industrial Estate.

Established in 1970, Holley Group is a multi-industry corporation under Holley Worldwide Holdings. Its core business is pharmaceuticals but the group also has presence in several industries such power metering instruments and power automation systems, wireless and wide-band telecommunication, electronic materials, real estate, agriculture, petrochemicals and mining.

Holley employs a 10,000-strong workforce worldwide, with manufacturing bases and branches in the United States, France, Russia, Argentina, India, Thailand and the Philippines.

The second project is an investment by Futong Group in the Thai-Chinese Rayong Industrial Zone. The company plans to invest US$50 million to manufacture fibre-optic cables for the telecommunication industry.

The third project involves a US$40-million investment by Hebei Lizhong Wheel Group to set up a tyre factory in the industrial zone.

The fourth agreement is between Huawei Technologies of China and United Information Highway of Thailand for a national broadband expansion project.

Mr Kiat said the moves showed China was interested in using Thailand as a base for investment for exports to Asean ahead of planned integration in 2015.

Cumulative bilateral investments of the two countries were US$1.04 billion over the past six years.

Amata shares closed yesterday on the Stock Exchange of Thailand at 15.00 baht, down 40 satang, in total trade of 154.89 million baht.

Capital controls urged

Posted by arnon_k On November - 11 - 2010 ADD COMMENTS

Thai authorities may have to implement stronger measures to control the heavy inflows into the country’s capital markets and rein in the baht’s appreciation in line with action by other countries, says an economist with a foreign-based bank.

The economist predicted the baht would strengthen to 29 to the US dollar by year-end. As a result, the government should impose new capital controls during the final two months of 2010 to ease the currency strains.

“New capital controls should be started, using soft measures first and increasing in degree, in accordance with the current situation here and in other regional countries,” said the economist.

Taiwan’s central bank recently announced capital control measures for that country’s bond market, followed by the South Korean government hinting it may revive a 14% tax on domestic Treasury and central bank bonds held by foreigners as early as next January.

The impact of the weakening dollar has been heavy, particularly after the US Federal Reserve announced a US$600-billion second quantitative easing to increase market liquidity.

“Thailand’s existing measures will not be enough to control foreign capital inflows and the stronger baht. Additional measures will be necessary,” said the economist, who asked not to be named.

“I think all central banks in the region including Thailand’s have prepared measures for capital controls, because all regional countries have been heavily affected by the dollar depreciation and foreign capital fund inflows. The Bank of Thailand may wait to see the market situation here and in other countries before announcing any measures.

“In my opinion, the government should implement a capital gains tax for investment in the SET, as well as a 100% tax on foreign exchange gains. Such measures would help to ease the stronger baht efficiently.”But Robert Zoellick, president of the World Bank, disagreed, saying fears of a surge in capital flows to emerging markets have been overblown, with some concerns overstated.

“Even if you didn’t have the quantitative easing, as long as you have differential growth rates, you are going to see capital flow to these emerging markets,” Bloomberg quoted Mr Zoellick as saying.

Asian currencies fell yesterday, led by the Singaporean dollar and the baht on market concerns that policymakers will follow China and Taiwan in imposing capital controls.

Taiwan yesterday announced it would restrict foreign investment in government bonds and money-market products, while China said it will force banks to hold more foreign exchange.

Separately, Ariya Tiranaprakij, executive vice-president of the Thai Bond Market Association, said bonds have been affected by the Thai government’s revival of a 15% capital gains tax on foreigners’ bond investments.

“The trading volume in bonds has declined since the government’s announcement. Investors are also concerned the central bank may implement new measures for capital controls, leading to sluggish activity in the market,” she said.

Currently, trading volume is about 4 billion baht a day, down from 10 billion a day during the first two weeks of last month. However, the capital control measures for Taiwan’s bond market have not yet significantly affected Thailand’s market.

Thiti Tantikulanan, the head of capital markets at Kasikornbank, said Taiwan’s soft capital control measures for its bond market would not have a significant impact on Thailand’s.

Tha baht has strengthened mainly on the dollar depreciation. Foreign capital inflows are expected to continue into the stock market and commodities.

Thai exporters say a further rise in the baht would weaken some suppliers in the industrial supply chain, resulting in damage to the industrial structure.

Tourism in the drink

Posted by arnon_k On October - 20 - 2010 ADD COMMENTS

Domestic high season a wash in Korat

Heavy floods are sinking domestic tourism, especially in the Northeast, which is now seeing stranded travellers, submerged properties and room cancellations.

The Nakhon Ratchasima office of the Tourism Authority of Thailand (TAT) forecasts business losses of 100 million baht in the severely affected province.

Attapol Wannakij, director of the office, said the floods had damaged more than 30 establishments including restaurants, hotels and resorts located along the Lam Takhong River and inside Nakhon Ratchasima city including the Dusit Princess Korat Hotel and the V-One Hotel Korat.

“The floods have also prompted potential visitors to put off or cancel their trips to the region,” said Mr Attapol.

But the hardest-hit properties seem to be those located along the river, where flooding from Khao Yai flows through, with one resort, Suan Thung Lung Pee in Kham Thale So district, completely inundated.

Mr Attapol said losses at Suan Thung Lung Pee were not yet measurable, as the resort contains antiques and valuable collectibles that have been almost entirely devastated by the floodwaters.

Chanraem Payapsri, owner of the Ban Mai Chai Nam Resort and Restaurant in Pak Chong District, said collectibles and other property had been washed away. The water is up to the second floor, and guests are cancelling their bookings.

“Property losses are estimated at about 100,000 baht, but the opportunity losses will be much higher, as we cannot sell food or services,” she said.

However, Mr Attapol remains optimistic the situation will recover in the next few weeks ahead of the province’s peak season at year-end.

“Losses from flooding will become marginal and tourism can rebound after this disaster. Nakhon Ratchasima will still a 5% to 10% increase in tourism revenue this year from 9.8 billion baht last year,” he said.

About 30-40 resorts in Nakhon Ratchasima are now submerged. This month’s reservations have all been cancelled despite this being the domestic high season.

Local families like to take their children on holiday during the month-long school break.

Damage cannot be assessed yet, as floodwaters remain and many resorts cannot even be contacted due to electricity cuts in affected areas.

Major tourist attractions in Muang, Pak Chong, Chakkarat, Sung Noen and Pak Thong Chai districts have suffered damage including the Pak Thong Chai Silk and Cultural Centre in Phimai district, which cannot be contacted.

Samer Jinbapong, president of the provincial travel association, said flood problems are expected to be resolved before the year-end high season. The association has not yet seen any cancellations of advance room reservations for November or December.

Thawatchai Arunyik, the TAT’s deputy governor for domestic marketing, said the agency received one report estimating total damage at hotels and resorts in Nakhon Ratchasima at more than 40 million baht. However, that will need to be reassessed.

“I think Thai tourists still want to travel to the province but are worried about the situation. Any tourists wishing to travel to this region should get up-to-date information and monitor risky destinations before travelling,” he said.

Juthaporn Rerngronasa, the TAT’s deputy governor for international marketing in Europe, Africa, the Middle East and the Americas, said the floods had not affected the international market as few foreigners visited the region.

Korn reasserts inflation priority

Posted by arnon_k On October - 19 - 2010 ADD COMMENTS

Inflation and international reserves remain the priorities of the government as it seeks to maintain economic sustainability amid fluctuations in the global financial system and ballooning cross-border capital flows, says Finance Minister Korn Chatikavanij.

The global financial market has increasingly fluctuated and different parts of the world have felt the impact, he told a sustainable development symposium hosted by Siam Cement Group (SCG) yesterday.

Cross-border capital flows amount to US$11 trillion or 20% of the world’s gross domestic product, compared with only $1 trillion or 5% of global GDP in 1990. This has been partly caused by a 350% rise in free trade agreements over the past 20 years to 450 at present.

“To maintain economic sustainability, we have to cope with inflation. Once inflation rises, prices of goods will surge and a large majority of Thai people will be affected, especially low-income consumers,” Mr Korn said.

The Bank of Thailand’s inflation policy has proved a success in the past decade in curbing the impact of inflation on the economy, said the minister.

Maintaining adequate international reserves is also the focus of the government, he said.

“Although the status of the country’s international reserves is not worrisome at the moment, we have learned once the problem [of inadequate reserves] occurs, confidence in our country will be seriously affected,” Mr Korn said.

As public debt remains at a high level and the government continues to invest in infrastructure, participation from both local and foreign private sectors is welcome, including an agreement with China to build high-speed trains in Thailand.

As Thailand’s aging population is increasing at a faster pace than the global average, the kingdom has to increase the efficiency of its workforce to sustain its competitiveness, he said.

He also warned that Thai business operators have neglected sustainable development despite global threats from rising world temperatures and non-tariff barriers related to the environment imposed by trading partners.

SCG president and chief executive Kan Trakulhoon said green demand posed both threats and opportunities for Thai companies.

“I think Thai companies can develop green products and we can be the first mover on this global trend,” he said.

SCG, which was top of the building materials sector in this year’s Dow Jones Sustainability Index, has invested 5 billion baht per annum in sustainable projects. This is comprised of 3.6 billion baht for key environmental projects including a waste heat generator, 400 million baht for corporate social responsibility and 1 billion baht for upgrading machinery for a cleaner environment.

Speaking about the effect of the strengthening baht, Mr Kan said the impact on SCG has been less than expected as the group’s core petrochemical business has benefited in terms of imported raw materials and spare parts.

He estimated that an appreciation of one baht against the US dollar results in a loss of less than 700 million baht for SCG’s bottom line, less than a previous projection of 800 million.

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