FTI: Potential for political stability only bright spot next year

Thursday November 29, 2007

Baht appreciation, high oil prices, slow domestic consumption and a global economic slowdown will continue to be the main challenges facing Thailand's industrial sector in 2008, according to the Federation of Thai Industries (FTI).

While many of the negative factors this year would persist into next year, more political stability following the Dec 23 elections could bring some improvement, FTI vice-chairman Payungsak Chartsutipol said after the group's annual meeting yesterday to review the year's performance and outlook. The Office of Industrial Economics projected that the industrial sector's GDP would grow by 5.09% next year, up from 4.5% this year.

Mr Payungsak said the baht's appreciation against the weak US dollar would adversely affect industries that use a high percentage of local content such as food and furniture. ''The foreign exchange rate will not return to the level of 40 baht to a US dollar,'' he said.

High oil prices would also continue to challenge the logistics sector and manufacturing plants unless their markets are near their production bases, he said. Therefore, the industrial sector needs to improve supply chain management in order to cut logistics costs.

FTI members yesterday expressed some pessimism about the post-election climate, which is expected to feature a coalition government and protracted political wrangling. This could further slow domestic consumption and affect foreign investor confidence, they said. ''Foreign investors might go to other countries unless the political situation in Thailand can improve,'' said Mr Payungsak.

Also a challenge is the sub-prime crisis, which has resulted in declining export volume to the United States and some other countries. Exporters need to find new markets such as Africa, the Middle East and former Soviet states.

The FTI intends to focus on logistics and supply chain improvement for its members, as well as setting up a centre for SME manufacturers.

For the capital-intensive steel industry, Mr Payungsak projected expansion of 5% next year in response to the growth of automotive, electronics and electrical and construction industries. Local steel volume would increase to 12.6 million tonnes from 12 million this year.



headline says it all ......................