Sherpa Hossainy's Blog

Thailand flood likely to impact investments in Bangladesh

Posted in Bangladesh, Business, Dhaka, Export and Import by Sherpa Hossainy on November 5, 2011

Published in The Independent on 05 November 2011

Read the article on Independent website

Digital print version

Thailand’s worst floods in decades could possibly slowdown potential Thai investments in Bangladesh and dent the burgeoning bilateral trade between the two countries, businesspersons feared.

Almost nine million people were hit by the recent flood, which inundated one third of Thailand’s provinces, and forced almost 1,000 factories to shut down. The Bank of Thailand (BOT) on 28 October slashed the growth forecast to 2.6 per cent from an initial projection of 4.1 per cent.

BOT estimated the damage to industry at $3.3 billion, and analysts warned that any substantial damage to the capital Bangkok, which contributes almost 41 per cent to Thai GDP, could see the losses go double.

Mohammed Ali, vice president of Bangladesh-Thai Chamber of Commerce and Industry (BTCCI), said, “A BTCCI delegation was supposed to visit Thailand on 12 November and hold talks with the Thai government and businesspersons about possible Thai investments and bilateral trade but it was postponed due to the flood.”

Although, a Thai business delegation from Thailand Bangladesh Business Council (TBCC) is expected to arrive in Dhaka on 15 November, he said.

“We are preparing ourselves to hear not-so-positive things about the possible investments here because they have to deal with their own problem now. We’ll see how the discussions go,” Ali told The Independent.

During Thai Deputy Minister of Commerce Alongkorn Ponlaboot’s visit to Bangladesh last year the Thai minister said Bangladesh has become an attractive destination for Thai investors in readymade garment, leather, tourism, pharmaceutical and infrastructure sectors, and they are eager to invest.

“Some Thai businessperson wanted to set up jute processing industries and light engineering factories. We were eager to share the technology from Thailand. But those projects are most likely to be pushed back,” Ali said.

Total sector-wise Thai investments in Bangladesh, as registered by the Board of Investments (BOI), up to April 2011 were $4,228.40 million.

Thailand has also shown interest in Dhaka’s subway system project as well as the Dhaka-Chittagong Expressway project, and The Italian-Thai, a Thai owned construction company, has won the bid to undertake the $1.2 billion Dhaka Elevated Expressway Project.

The BTCCI vice president said the chamber has been vigorously trying to improve the bilateral trade with Thailand and encouraging Thai entrepreneurs to invest here in Bangladesh.

“We could’ve gone made further progress if the natural disaster had not have happened,” he said. A Thai trade fair, which was supposed to be take place in November in Dhaka, was also cancelled because of the flood, Ali said.

In July this year, Thailand sought land from Bangladesh government to set up new power plant and paper mills, preferably in Khulna to use the Mongla Port facilities. Commerce Minister Faruk Khan assured Thai delegation about acquiring land and hinted that a special economic zone could be in the offing.

“There are some industries in Thailand that want to relocate to Bangladesh because of cheap labour here and rising manufacturing costs in Thailand. But now we have to wait and see for Thailand to recover from their imminent economic debacle,” Ali said.

Although the trade volume between Bangladesh and Thailand has increased steadily over the years, the trade balance continues to remain in favour of Thailand. The bilateral trade between Bangladesh and Thailand was more than $909 million in 2010, over 39 per cent more than 2009, and the trade volume is expected to cross $1-billion mark this year.

In July-September of 2011-12 Bangladesh exported only $5.01 million worth of goods and in 2010-11 fiscal the total export was $33.01 million. Thailand enjoys a yawning trade surplus with Bangladesh as its export stood at $729.14 million against its import of only $22.88 million during 2010 (January-October).

Ali said, “Our exports will not feel the pressure because the volume is low. But the imports will surely be hit by the flood because the transportation system has collapsed in Thailand. But hopefully it will not stay like this for long.”

“Exporters, in the meantime, are also taking a go-slow approach because of the recent flood,” he added.

Major export items from Bangladesh to Thailand include frozen foods, chemical products, leather, raw jute, jute goods, agri-products, knitwear, woven garment, pharmaceutical products, furniture and testing appliances and instruments; while major import items from Thailand include cement, plastic products, textiles, yarn, machinery, rice, synthetic yarns and chemicals.

ABM Musa, managing director of Astex Fashions Ltd and a member of BTCCI, said, “Right now the impact is not being felt on imports but it could probably be felt after two or three months.”

Mahmudul Islam Chowdhury, president of International Business Forum of Bangladesh, said, “There could be a probable impact on our imports because shipments will be delayed.”

The widespread flooding in Thailand, world’s biggest rice exporter, has also damaged some 3.5 million tonnes of paddy rice in the country. Thailand exported rice worth $42.8 million to Bangladesh during 2010 (January-October). Bangladesh’s import of Thai rice was zero in 2008 and 2007 with import valued at only $5.4 million and $1.3 million in 2006 and 2005.

“As for the essentials (rice and daal) there would be no problem. The food items that we import are mostly consumed by upper-middle class, so the impact will be negligible,” Chowdhury said.

“Those businesspersons who have opened back to back LCs would be in trouble even though the overall impact on economy will be negligible,” he added.

Santi Pongchaisopon, president of CP Bangladesh Co Ltd, a Thailand-based multinational company, and director of BTCCI, said, “Our supply chain is not hurt because the factory is based in Bangladesh.”

Usa Wijarurn, minister counsellor (commercial) of Royal Thai Embassy in Bangladesh, said, “There hasn’t been any estimation on the damage on bilateral trade from our part and we also haven’t received any report from the Thai commerce ministry. We’ll have to wait for the actual figures.”

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