Operators likely to brave floods in Thailand and stay put, says analyst

Operators likely to brave floods in Thailand and stay put, says analyst
Business & Markets 2013
Written by Surin Murugiah of theedgemalaysia.com
Tuesday, 24 September 2013 08:29

KUALA LUMPUR (Sept 24): Companies with businesses based in Thailand are likely to stay put and have the risk of flood incorporated in their product pricing, following fresh reports of flooding in Thailand, said an analyst.

On Monday, Reuters reported that more than 600,000 Thais have been affected by flooding since July and more than a quarter of Thailand's provinces have been inundated, prompting officials to issue landslide warnings and begin evacuation measures on Monday.

Devastating floods in 2011 killed more than 800 people and caused massive disruption to industry, cutting economic growth that year to just 0.1 percent, it said.

M & A Securities head of research Rosnani Rasul in a reply to the edgemalaysia.com on Tuesday said the Thailand government must have learned its lesson not to magnify the situation, adding that the situation this time was different as there is no political tussle unlike in 2011.

Rosnani said Thailand’s government was better prepared this time around, adding that they would try to calm the situation and provide the much needed assistance so that investors do not leave and the new one will keep coming.

“As for the players, I think they will stay and the risk of flood will be incorporated in their product pricing,” she said.

Meanwhile, commenting on the automotive sector, Rosnani said after the last major floods in Thailand, car manufacturers did not move their plants in a big way to Malaysia despite expectations they would.

She added that Thailand had admirable auto policy that attracts investors and Malaysia was trailing behind.

“It’s a challenge to make them move here. As for the players, perhaps it is more competitive to continue operate from Thailand as in dollar and cents, it is more profitable. As for the lesson learned, 1) moving plant to Malaysia is not an attractive option, so continue operate there 2) perhaps, increase insurance coverage and always aim for just-in-time to reduce losses.

“In short, there is nothing much they can do because the annual TIV volume in Thailand (local consumption and export) is more than 1 million units and hence, the economies of scale is just great versus Malaysia of about 600,000 plus. That is simply more than 50% higher in volume,” she said.