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ACHARA DEBOONME
THE NATION February 6, 2012 1:00 am
As feared, last year's flood crisis has led to the hasty passing of laws to help support post-flood reconstruction. Though this speediness might satisfy some people, it could derail necessary preparation for the upcoming rainy season and also ruin Thailand's long-term attraction for foreign investors, many of whom have been hit by more than US$100 million (Bt3 billion) in indirect losses.
As soon as the floods started receding, Prime Minister Yingluck Shinawatra began assuring everybody that a disaster like this will not occur again thanks to her comprehensive water-management master plan.
Some progress has been seen as the Cabinet gradually approves this project or that. On Thursday, a government committee approved six short-term projects that will require an investment of about Bt7 billion. On that very day, Science Minister Plodprasob Surassawadee announced that in a few months it would be clear which areas, covering a total of 24,000 square kilometres, will be used as monkey cheeks.
Investors, be they local or foreign, have their eyes and ears trained on this project. They are anxious because this plan is crucial for their future business plans, especially after many sustained financial and non-financial losses after floods submerged seven industrial estates and 26 provinces. The World Bank has estimated economic losses worth Bt1.4 trillion due to the shutting down of factories and disruptions in the supply chain, especially in the automotive and electronics industries. This covers losses shouldered by foreign companies with manufacturing plants in the Kingdom.
The supply-chain disruptions caused by Thailand's flood crisis and Japan's March 11 earthquake and tsunami plunged the latter's vehicle production by 12 per cent and exports by 7.8 per cent. The Japan Automobile Manufacturers Association said manufacturers produced about 8.4 million vehicles but only exported 4.46 million units last year.
Japan's largest computer services provider, Fujitsu, also cut its profit forecast by 42 per cent to $459 million (Bt14.2 billion) for the 2011 fiscal year ending on March 31, 2012, as Thailand's flood crisis disrupted the production of computer components. Toshiba Corp, the world's second-largest maker of flash memory chips, also cut its annualised profit forecast by 54 per cent to $853 million due to the floods and a strong yen. An executive said the floods alone could be blamed for half of the missing earnings. As of January 31, four of the 10 affected plants in Thailand have reopened.
For many manufacturers, relocation could be in the picture if risks elsewhere are less costly and if there is a greater chance of huge losses like this eating up possible gains in the future.
It is not surprising then that the government has hastily issued four executive decrees to widen its borrowing capacity and seek more funds for post-flood reconstruction. The idea is to ensure the availability of funds for short- and long-term infrastructure, which should prevent another disaster.
QUICK REACTION IS GREAT, BUT POOR PLANNING IS ANOTHER ISSUE
In a move to widen the room for borrowing, the executive decree involving the Financial Institutions Development Fund's Bt1.14-trillion debt is pressuring the banking sector as commercial banks are being forced to help repay the debt. To avoid extra cost, two banks have so far announced plans to raise funds through the bond market. However, this would only crowd out the demand for bonds from non-banking companies and drive up the bond interest rate. This, in turn, would worsen competitiveness, as commercial banks will have to shoulder higher costs.
Another decree for Bt350-billion borrowing is also being criticised for its lack of details.
Deputy Prime Minister Kittiratt Na-Ranong has been insisting on its "urgency", but this reason seems to be backfiring as new evidence shows that the government has large enough room for borrowing and it could promulgate royal decrees instead of executive ones. Thanks to a new bullet supplied by former finance minister Thirachai Phuvanatnaranubala, the Democrat Party and some senators are now attacking the government saying that there was no "urgency" to justify the issuing of executive decrees when properly-debated royal decrees can be issued instead. The Constitution Court is being asked if the two decrees are constitutional.
An official at the Constitution Court hinted last week that a ruling should be made within a month. If these two decrees are not constitutional, the other two are not constitutional either. The norm requires that the government should resign for issuing a non-constitutional law. However, if stepping down is not in the picture, then it can change its course by submitting draft bills to the Parliament.
The problem here is that this parliamentary session ends on April 18, and given the lengthy process, the government might be able to submit the draft bills before closing. However, the parliamentary vetting process is also lengthy and it is very possible that the bills would be discussed again when the new Parliament reopens in August.
Several provinces were flooded last August. If the volume of rain this year is as high as last year, another disaster is looming if there is no prevention infrastructure in place.
What is in the picture then is that all seven inundated industrial estates will be shielded by "Chinese walls", thanks to soft loans from Government Savings Bank. But without extra money, plans for the 2-million-rai monkey cheeks, forest rehabilitation or other long-term measures will only get delayed. Proclaiming "urgency" for the move, the government would only be disappointed if its key plans get foiled. However, the private sector and even the entire economy will be more disappointed. Given a strong yen, the earthquake and tsunami, several Japanese companies might be planning to relocate to Thailand. But what if the risks here are as great as those in Japan?
Bypassing thoroughness will only be a painful lesson for both the government and the economy.
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