Thailand's worst construction year since 1997 crisis

Posted on 17 September 2007

The construction and building material industries will rebound in the next two years as the budget for megaprojects is released, says Kan Trakulhoon, president of the industrial conglomerate Siam Cement Group.


''After the industry results were quite poor over the past two years, I would say that the industry will turn to zero growth next year thanks to the general election by the end of this year,'' he said at a seminar on the future of Thai construction held by the Thai Contractors Association.


The construction industry is now having its worst year in the decade since the 1997 financial crisis, mainly due to the political uncertainties.


Demand for cement for the first seven months of this year dropped 7%, and Mr Kan projected it would fall by 10%, or 29 million tonnes, for the whole year.


Building materials have followed suit, with sanitaryware down 5% to 3.6 million tonnes, steel products dropping 4% to 2.7 million tonnes, fibre cement declining 15% to 80 million tonnes and roof tiles slipping 10% to 21 million tonnes. ''They will bottom out next year,'' Mr Kan noted.


Thailand needs to develop infrastructure and logistics systems much further, he said, as only two megaprojects had taken place since 1997: Suvarnabhumi Airport and the Airport Link.


Therefore, after the election, the government's planned megaprojects should get started and drive growth.


''The first budget for the future will be issued in the fourth quarter of 2008, so the industry's growth will be seen at that time,'' he said.


The election would not only improve the public sector, Mr Kan said, but also boost consumer confidence.


''There are some good signs from the low- to middle-income residential sector as housing and condominium projects are still selling out in a short time,'' he added. ''So we had better hold our breath throughout next year, and things will be fine.''


Polpat Karnasuta, president of the Thai Contractors Association, said government expenditures for fiscal 2008 were set at 200 billion baht, up 70 billion baht from 2007. The increase is unlikely to offset the slump in construction projects among the private sector, he said.


This year is hard as companies need to bid for jobs that generate zero margins compared to a norm of 5% to 7% in the past few years.


''Now, they just have to work on new projects ahead in order to retain their employees and create liquidity,'' he said.


Prior to the 1997 economic crisis, government spending on large construction projects was at least 400 billion baht per year, Mr Polpat noted.


''The megaprojects are the only hope for the construction and building materials industries during the slow economy,'' he said.


''We can see very large room for future development, including the double-track railway project, the new route of the Skytrain and the huge demand for waste treatment and garbage treatment facilities across the country.''


Bangkok Post, September 14, 2007

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