Siam Commercial Bank President Kannikar Chalitaporn
These were the thoughts last week of some of the top executives at Siam Commercial Bank (SCB).
"The impact of the Map Ta Phut fiasco could be more severe to Thailand than the sub-prime crisis," senior executive vice president Arthid Nanthawithaya said in an interview.
"Despite a limited impact from the loans extended to the companies involved, a huge weight hangs in potential investors' minds. If this fiasco is not ended peacefully, the investment climate will be affected severely."
SCB has extended credit lines of Bt50 billion to the 76 industrial projects in question. The main borrowers are PTT, the Siam Cement Group and their subsidiaries. All Thai banks' combined credit line to the projects is estimated at Bt170 billion.
SCB president Kannikar Chalitaporn agreed the financial impact on the bank was limited, thanks to the liquidity of borrowers. Moreover, most of the projects are just expansions, which would not hurt the liquidity of the companies.
Yet, aside from the impact on the investment climate, as the projects involved are upstream and midstream petrochemical plants, the delay will affect employment and the supply chain. Without raw materials, many plants will have to look to imports at a higher price. And this will lead to higher prices for finished products and consequently the cost of living.
"The problem is not only in Map Ta Phut, but also with the chain reaction, because many projects there supply raw materials for other businesses in the supply chain," said Kannikar.
Given the ongoing discussion, she believes the problem will not be solved within six months. She said she understood the process would take time if all the rules had to be clarified. Then a body in charge would be named to enforce the laws. Evaluation will take place, with a number of committees appointed.
She said the four-party committee chaired by former Prime Minister Anand Panyarachun is only the beginning of the process, as its main task is to finalise recommendations. Then the recommendations will need to be implemented.
Industrialists now fear that gas leaks in Rayong in the past week would intensify pressure on industrial projects.
The Federation of Thai Industries earlier estimated that the delay in 65 industrial projects would affect 37,000 jobs. Labour Minister Paitoon Kaewthong said most of the affected workers are involved with the construction works, and so far about 80 workers have contacted the ministry's hotline centre.
Paitoon said the ministry had contacted the PTT Group suggesting the workers be shifted to places where there is demand. Moreover, he expected construction projects under the Thai Khemkhaeng stimulus package next year to ease the unemployment. The Skill Development Department is also launching training courses for farmers who are seeking industrial jobs in the off-harvest season.
Aside from the Map Ta Phut "fiasco", Kannikar said political turbulence at home would hold back Thailand if the conflict intensified next year. Asked if there was any country Thailand should be afraid of, she simply said: "Thailand itself."
However, Kannikar believes the local economy will fare better next year, thanks mainly to the severe slump this year.
The bank expects the economy to grow more than 3 per cent next year following the sharp contraction this year. SCB's loan growth this year is 1 per cent, against the 3-per-cent contraction in gross domestic product (GDP). The bank's loan growth normally expands 1.5 times GDP.
Rather than focusing on loan growth, Kannikar is more concerned with the bank's sources of income and cost controls as "operating a bank is different than it was 10 years ago, when business depended entirely on lending".
"Operating a bank is different than it was 10 years ago, when business depended entirely on lending. Now we must control costs and look for opportunities to increase revenue," she said.
While non-interest income was nil over a decade ago, it now accounts for 35 per cent of the total. And Kannikar is looking to increase the ratio further, through better services, which must be supported by efficient information technology. Each year, the bank spends more Bt1 billion on its information-technology (IT) system.
"It's difficult to increase the non-interest income, as that comes on an annual basis. Each year, we must renew the services to reap the income, unlike when we extend a loan, which generates interest income throughout the loan period. Without efficient IT, non-interest income cannot not be increased. I never feel sorry about investing in the system," she said.