Due to the rising price of polyolefins as well as the country's murky economic and political situation, the level of bad debt among small and medium-sized plastics manufacturers has risen to hundreds of millions of baht since the beginning of the year.

Meanwhile, many plastics companies have decided to set up new plants in Vietnam in order to reduce their losses as a result of the appreciation of the baht.

Somsak Borrisuttanakul, chairman of the Federation of Thai Industries' plastics club, said last week that about 100 plastics-makers had closed their businesses last year because of rising oil prices and the political turmoil.

He said between 3 per cent and 5 per cent of all producers would shut their plants or have a high level of non-performing loans this year due to reduced domestic consumption and expensive raw materials.

The plastics industry has about 5,000 manufacturers. Meanwhile, the price of polyolefins, which are used as raw material in the industry, remains high at US$1,300 (Bt45,500) per tonne.

However, he forecast that the price might fall in the second half of the year due to added capacity from plants in China and the Middle East.

"Nevertheless, it is important that operators prepare themselves to handle this crisis by improving their efficiency and productivity," he added.

Somsak said the domestic plastics industry was forecast to shrink by 3 per cent this year. "We usually increase more than the country's [growth in] gross domestic product. However, we fell below GDP for the first time last year," he said.

The value of the plastics industry last year was Bt500 billion, an annual increase of 3 per cent.

He said half the amount came from exports, which have been hard hit by the stronger baht. "The baht's strength has forced plastics manufacturers to find new plants in Vietnam," he said, adding that Vietnam could provide much more diligent labourers than Thailand.

According to Commerce Ministry figures, the country's overall exports in January were Bt374.215 billion, up 3 per cent year on year, but in dollar terms, the value of $10.488 billion amounted to a 17.7-per-cent increase.

Exports by the plastics industry in dollar terms rose 10 per cent, compared with only one per cent in baht terms to Bt4.686 billion in January.

Somsak said this suggested export value in the industry would also dramatically decline from last year. "If possible, the government should freeze the exchange rate of the baht to boost competitiveness in the export sector," he said.

Chalida Ekvitthayavechnukul

The Nation