Thailand: Sourcing After the Flood

With the world’s highest growth rate from 1985-1996, Thailand continued to grow consistently throughout the 2000s, and has become a new hot spot for sourcing and manufacturing. Considered to be a newly industrialized country, Thailand is a major manufacturer and world exporter.

However, this steady growth was interrupted by record-breaking floods that began in July 2011 and persisted until mid January 2012. Considered to be the worst disaster in Thailand in half a decade, the floods claimed hundreds of lives, displaced thousands of people, impacted countless businesses, and interrupted supply chains of electronics and auto parts. In fact, the floods of 2011 caused Thailand’s growth rate to drop from about 4% to about 0.6%, causing many to predict economic disaster. The World Bank estimated USD $45.7 billion in damages, much of which stems from the effect on the manufacturing industry, as seven major industrial regions were severely flooded. Employment was also affected because many workers were laid off when factories flooded and closed.

But where is Thailand now? In fact, Thailand is well on its road to recovery. Despite a predicted 0.5% contraction, the Thai economy actually grew 0.9% in the first quarter of 2012 with an increase in manufacturing production. The Thai government has began to spend approximately USD $15.7 billion on dikes and post-flood reconstruction, and plan to raise urban wages by 40%, to about $10 a day. However, a Bloomberg report states that “such government initiatives, on top of the chaos caused by the deluge, could inflict a big extra cost on Thai-based manufacturers, rice exporters and their customers worldwide.” Still, some predict the Thai economy will grow anywhere from 3-7% this year.

What does this mean for importers? While some might be wary to enter a recovering market, a recent Bloomberg report stated that after China, Thailand is the second best place for investment for emerging markets. Ford recently started its production of their all new Ford Focus in Raygong. If you’re looking for a new place to set up your manufacturing, Thailand is one place you should consider.

For an interesting article about Thailand, see Globial’s post, titled “Trade in Thailand.”